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Registration No. 2-94157/811-4146
As filed with the Securities and Exchange Commission on September 17, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM N-1A
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 38
and
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 39
-------------------------
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 27, 1997.
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
_X_ on October 15, 1997 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date) pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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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 (Pacific Rim Emerging Markets Trust;
Science & Technology Trust; International
Small Cap Trust; Emerging Growth Trust;
Pilgrim Baxter Growth Trust; Small/Mid Cap
Trust; International Stock Trust; Worldwide
Growth Trust; Global Equity Trust; Growth
Trust; Equity Trust; Quantitative Equity
Trust; Equity Index Trust; Blue Chip Growth
Trust; Value Trust; International Growth and
Income Trust; Growth and Income Trust;
Equity-Income Trust; Real Estate Securities
Trust, Balanced Trust; High Yield Trust;
Automatic Asset Allocation Trusts, Strategic
Bond Trust; Global Government Bond Trust;
Investment Quality Bond Trust; Capital Growth
Bond Trust; U.S. Government Securities Trust;
Money Market Trust, The Lifestyle 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, Appendix III - Standard
& Poor's Disclaimers
5. Management of the Trust (Advisory Agreement;
Subadvisory Agreements; Expenses); General
Information (Custodian)
6. General Information (Shares of the Trust;
Taxes; Dividends)
7. General Information (Purchase and Redemption
of Shares)
8. General Information (Purchase and Redemption
of Shares)
9. Not Applicable
N-1A Item of Part B Caption in Part B
10. Cover Page
11. Table of Contents
12. Not Applicable
13. Investment Policies (Money Market
Instruments); Investment Restrictions;
Portfolio Turnover
14. Management of the Trust (Compensation of
Trustees)
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15. Organization of the Trust (Principal Holders
of Securities)
16. Investment Management Arrangements (The
Advisory Agreement; The Subadvisory
Agreements)
17. Investment Management Arrangements (Portfolio
Brokerage)
18. Organization of the Trust (Shares of the
Trust)
19. 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
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MANUFACTURERS INVESTMENT TRUST
116 Huntington Avenue Boston, Massachusetts 02116
Manufacturers Investment Trust (the "Trust"), formerly NASL Series 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 thirty-six separate investment
portfolios, each of which issues its own series of shares of beneficial
interest. The names of those portfolios are as follows:
PACIFIC RIM EMERGING MARKETS TRUST GROWTH AND INCOME TRUST
SCIENCE & TECHNOLOGY TRUST EQUITY-INCOME TRUST
INTERNATIONAL SMALL CAP TRUST BALANCED TRUST
EMERGING GROWTH TRUST AGGRESSIVE ASSET ALLOCATION
PILGRIM BAXTER GROWTH TRUST TRUST
SMALL/MID CAP TRUST HIGH YIELD TRUST
INTERNATIONAL STOCK TRUST MODERATE ASSET ALLOCATION TRUST
WORLDWIDE GROWTH TRUST CONSERVATIVE ASSET ALLOCATION
GLOBAL EQUITY TRUST TRUST
SMALL COMPANY VALUE TRUST STRATEGIC BOND TRUST
EQUITY TRUST GLOBAL GOVERNMENT BOND TRUST
GROWTH TRUST CAPITAL GROWTH BOND TRUST
QUANTITATIVE EQUITY TRUST INVESTMENT QUALITY BOND TRUST
EQUITY INDEX TRUST U.S. GOVERNMENT SECURITIES TRUST
BLUE CHIP GROWTH TRUST MONEY MARKET TRUST
REAL ESTATE SECURITIES TRUST LIFESTYLE AGGRESSIVE 1000 TRUST
VALUE TRUST LIFESTYLE GROWTH 820 TRUST
INTERNATIONAL GROWTH AND INCOME LIFESTYLE BALANCED 640 TRUST
TRUST LIFESTYLE MODERATE 460 TRUST
LIFESTYLE CONSERVATIVE 280 TRUST
The investment objectives and certain policies of each Trust are set forth
on the inside front cover. In pursuing their investment objectives, the
Strategic Bond and High Yield Trusts reserve the right to invest without
limitation, and the Investment Quality Bond and Equity-Income Trusts may invest
up to 20% and 10%, respectively, of their 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 above-named Trusts. 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) 266-6004 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. The Securities and Exchange Commission maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding registrants
that file electronically with the Commission. 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 October 1, 1997.
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The investment objectives and certain policies of each Trust are as
follows:
PACIFIC RIM EMERGING MARKETS TRUST -- The investment objective of the Pacific
Rim Emerging Markets Trust is to achieve long-term growth of capital.
Manufacturers Adviser Corporation ("MAC") manages the Pacific Rim Emerging
Markets Trust and seeks to achieve this investment objective by investing in a
diversified portfolio that is comprised primarily of common stocks and
equity-related securities of corporations domiciled in countries in the Pacific
Rim region.
SCIENCE & TECHNOLOGY TRUST -- The investment objective of the Science &
Technology Trust is long-term growth of capital. Current income is incidental to
the portfolio's objective. T. Rowe Price Associates, Inc. ("T. Rowe Price")
manages the Science & Technology Trust.
INTERNATIONAL SMALL CAP TRUST -- The investment objective of the International
Small Cap Trust is to seek long term capital appreciation. Founders Asset
Management, Inc. ("Founders") 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 or annual revenues of $1
billion or less. These securities may represent companies in both established
and emerging economies throughout the world.
EMERGING GROWTH TRUST -- The investment objective of the Emerging Growth Trust
is maximum capital appreciation. Warburg, Pincus Counsellors, Inc. ("Warburg")
manages the Emerging Growth Trust and will pursue this objective by investing
primarily in a portfolio of equity securities of domestic companies. The
Emerging Growth Trust ordinarily will invest at least 65% of its total assets in
common stocks or warrants of emerging growth companies that represent attractive
opportunities for maximum capital appreciation.
PILGRIM BAXTER GROWTH TRUST -- The investment objective of the Pilgrim Baxter
Growth Trust is capital appreciation. Pilgrim Baxter & Associates, Ltd. ("PBHG")
manages the Pilgrim Baxter Growth Trust and seeks to achieve its objective by
investing in companies believed by PBHG to have an outlook for strong earnings
growth and the potential for significant capital appreciation.
SMALL/MID CAP TRUST -- The investment objective of the Small/Mid Cap Trust is to
seek long term capital appreciation. Fred Alger Management, Inc. ("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.
INTERNATIONAL STOCK TRUST -- The investment objective of the International Stock
Trust is long-term growth of capital. Rowe Price-Fleming International, Inc.
("Price-Fleming") manages the International Stock Trust and seeks to attain this
objective by investing primarily in common stocks of established, non-U.S.
companies.
WORLDWIDE GROWTH TRUST -- The investment objective of the Worldwide Growth Trust
is long-term growth of capital. Founders manages the Worldwide Growth Trust and
seeks to attain this objective by normally investing at least 65% of its total
assets in equity securities of growth companies in a variety of markets
throughout the world.
GLOBAL EQUITY TRUST -- The investment objective of the Global Equity Trust is
long-term capital appreciation. Morgan Stanley Asset Management Inc. ("Morgan
Stanley") manages the Global Equity Trust and intends to pursue this objective
by investing primarily in equity securities of issuers throughout the world,
including U.S. issuers and emerging market countries.
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SMALL COMPANY VALUE TRUST -- The investment objective of the Small Company Value
Trust is to seek long term growth of capital. Rosenberg Institutional Equity
Management ("Rosenberg") manages the Small Company Value Trust and will pursue
this objective by investing in equity securities of smaller companies which are
traded principally in the markets of the United States. The Small Company Value
Trust is designed for long-term investors willing to assume above-average risk
in return for above-average capital growth potential.
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. Fidelity Management Trust Company
("FMTC") manages the Equity Trust and seeks to attain the foregoing objective by
investing primarily in common stocks of U. S. issuers or securities convertible
into or which carry the right to buy common stocks.
GROWTH TRUST -- The investment objective of the Growth Trust is to seek
long-term Growth of Capital. Founders manages the Growth Trust and will pursue
this objective by investing, under normal market conditions, at least 65% of its
total assets in common stocks of well-established, high-quality growth companies
that founders believes have the potential to increase earnings faster than the
rest of the market.
QUANTITATIVE EQUITY TRUST -- The investment objective of the Quantitative Equity
Trust (prior to December 31, 1996, the "Common Stock Trust") is to achieve
intermediate and long-term growth through capital appreciation and current
income by investing in common stocks and other equity securities of well
established companies with promising prospects for providing an above average
rate of return. MAC manages the Quantitative Equity Trust.
EQUITY INDEX TRUST -- The investment objective of the Equity Index Trust is to
achieve investment results which approximate the total return of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index. MAC manages the Equity Index Trust.
BLUE CHIP GROWTH TRUST -- The primary investment objective of the Blue Chip
Growth Trust (prior to October 1, 1996, the "Pasadena Growth Trust") is to
provide long-term growth of capital. Current income is a secondary objective,
and many of the stocks in the portfolio are expected to pay dividends. T. Rowe
Price manages the Blue Chip Growth Trust.
REAL ESTATE SECURITIES TRUST -- The investment objective of the Real Estate
Securities Trust is to achieve a combination of long-term capital appreciation
and satisfactory current income by investing in real estate related equity and
debt securities. MAC manages the Real Estate Securities Trust.
VALUE TRUST -- The investment objective of the Value Trust is to realize an
above-average total return over a market cycle of three to five years,
consistent with reasonable risk. Miller Anderson & Sherrerd, LLP ("MAS") manages
the Value Trust and seeks to attain this objective by investing primarily in
common and preferred stocks, convertible securities, rights and warrants to
purchase common stocks, ADRs and other equity securities of companies with
equity capitalizations usually greater than $300 million.
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 Investment Management Inc. ("J.P. Morgan") manages
the International Growth and Income Trust.
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GROWTH AND INCOME TRUST -- The investment objective of the Growth and Income
Trust is to provide long-term growth of capital and income consistent with
prudent investment risk. Wellington Management Company, LLP ("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.
EQUITY-INCOME TRUST -- The investment objective of the Equity-Income Trust
(prior to December 31, 1996, the "Value Equity Trust") is to provide substantial
dividend income and also long term capital appreciation. T. Rowe Price manages
the Equity-Income Trust and seeks to attain this objective by investing
primarily in dividend-paying common stocks, particularly of established
companies with favorable prospects for both increasing dividends and capital
appreciation.
BALANCED TRUST -- The investment objective of the Balanced Trust is current
income and capital appreciation. Founders is the manager of the Balanced Trust
and seeks to attain this objective by investing in a balanced portfolio of
common stocks, U.S. and foreign government obligations and a variety of
corporate fixed-income securities.
HIGH YIELD TRUST -- The investment objective of the High Yield Trust is to
realize an above-average total return over a market cycle of three to five
years, consistent with reasonable risk. MAS manages the High Yield Trust and
seeks to attain this objective by investing primarily in high yield debt
securities, including corporate bonds and other fixed-income securities.
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 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.
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, Salomon Brothers Asset Management Inc ("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.
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 Advisors, L.P. ("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.
CAPITAL GROWTH BOND TRUST -- The investment objective of the Capital Growth Bond
Trust is to achieve growth of capital by investing in medium-grade or better
debt securities, with income as a secondary consideration. MAC manages the
Capital Growth Bond Trust. The Capital Growth Bond Trust differs from most
"bond" funds in that its primary objective is capital appreciation, not income.
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.
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U.S. GOVERNMENT SECURITIES TRUST -- The investment objective of the U.S.
Government Securities Trust is to obtain a high level of current income
consistent with preservation of capital and maintenance of liquidity. SBAM
manages the U.S. Government Securities Trust and seeks to attain its objective
by investing a substantial portion of its assets in debt obligations and
mortgage backed securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and derivative securities such as collateralized
mortgage obligations backed by such securities.
MONEY MARKET TRUST -- The investment objective of the Money Market Trust is to
obtain maximum current income consistent with preservation of principal and
liquidity. MAC manages the Money Market Trust and seeks to achieve this
objective by investing in high quality, U.S. dollar denominated money market
instruments.
LIFESTYLE AGGRESSIVE 1000 TRUST -- The investment objective of the Lifestyle
Aggressive 1000 Trust is to provide long term growth of capital. Current income
is not a consideration. MAC manages the Lifestyle Aggressive 1000 Trust and
seeks to achieve this objective by investing 100% of the Lifestyle Trust's
assets in other portfolios of NASL Series Trust ("Underlying Portfolios") which
invest primarily in equity securities.
LIFESTYLE GROWTH 820 TRUST -- The investment objective of the Lifestyle Growth
820 Trust is to provide long term growth of capital with consideration also
given to current income. MAC manages the Lifestyle Growth 820 Trust and seeks to
achieve this objective by investing approximately 20% of the Lifestyle Trust's
assets in Underlying Portfolios which invest primarily in fixed income
securities and approximately 80% of its assets in Underlying Portfolios which
invest primarily in equity securities.
LIFESTYLE BALANCED 640 TRUST -- The investment objective of the Lifestyle
Balanced 640 Trust is to provide a balance between a high level of current
income and growth of capital with a greater emphasis given to capital growth.
MAC manages the Lifestyle Balanced 640 Trust and seeks to achieve this objective
by investing approximately 40% of the Lifestyle Trust's assets in Underlying
Portfolios which invest primarily in fixed income securities and approximately
60% of its assets in Underlying Portfolios which invest primarily in equity
securities.
LIFESTYLE MODERATE 460 TRUST -- The investment objective of the Lifestyle
Moderate 460 Trust is to provide a balance between a high level of current
income and growth of capital with a greater emphasis given to high income. MAC
manages the Lifestyle Moderate 460 Trust and seeks to achieve this objective by
investing approximately 60% of the Lifestyle Trust's assets in Underlying
Portfolios which invest primarily in fixed income securities and approximately
40% of its assets in Underlying Portfolios which invest primarily in equity
securities.
LIFESTYLE CONSERVATIVE 280 TRUST -- The investment objective of the Lifestyle
Conservative 280 Trust is to provide a high level of current income with some
consideration also given to growth of capital. MAC manages the Lifestyle
Conservative 280 Trust and seeks to achieve this objective by investing
approximately 80% of the Lifestyle Trust's assets in Underlying Portfolios which
invest primarily in fixed income securities and approximately 20% of its assets
in Underlying Portfolios which invest primarily in equity securities.
5
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MANUFACTURERS INVESTMENT TRUST
TABLE OF CONTENTS
SYNOPSIS................................................................ 8
FINANCIAL HIGHLIGHTS.................................................... 10
INVESTMENT OBJECTIVES AND POLICIES...................................... 47
Pacific Rim Emerging Markets Trust................................. 47
Science & Technology Trust......................................... 48
International Small Cap Trust...................................... 49
Emerging Growth Trust.............................................. 50
Pilgrim Baxter Growth Trust........................................ 51
Small/Mid Cap Trust................................................ 53
International Stock Trust.......................................... 53
Worldwide Growth Trust ............................................ 55
Global Equity Trust................................................ 56
Small Company Value Trust.......................................... 57
EQUITY TRUST....................................................... 58
Growth Trust....................................................... 58
Quantitative Equity Trust (formerly, the "Common Stock Trust")..... 59
Equity Index Trust................................................. 60
Blue Chip Growth Trust (formerly, "Pasadena Growth Trust")......... 61
Real Estate Securities Trust....................................... 63
VALUE TRUST........................................................ 64
International Growth and Income Trust.............................. 64
Growth and Income Trust ........................................... 66
Equity-Income Trust (formerly, "Value Equity Trust")............... 66
Balanced Trust..................................................... 68
HIGH YIELD TRUST................................................... 69
Automatic Asset Allocation Trusts.................................. 70
Strategic Bond Trust............................................... 73
Global Government Bond Trust....................................... 75
Capital Growth Bond Trust.......................................... 76
Investment Quality Bond Trust...................................... 77
U.S. Government Securities Trust................................... 78
Money Market Trust................................................. 80
The Lifestyle Trusts............................................... 81
RISK FACTORS............................................................ 82
Investment Restrictions Generally.................................. 82
High Yield (High Risk) Securities.................................. 83
Corporate Debt Securities.......................................... 84
Foreign Sovereign Debt Securities.................................. 84
Foreign Securities................................................. 85
Small Company and Emerging Growth Securities....................... 87
Warrants........................................................... 87
Lending Securities................................................. 86
When-Issued Securities ("Forward Commitments")..................... 87
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Repurchase Agreements and Reverse Repurchase Agreements............ 88
Mortgage Dollar Rolls.............................................. 88
Hedging and Other Strategic Transactions........................... 89
Illiquid Securities................................................ 89
MANAGEMENT OF THE TRUST................................................. 90
Advisory Arrangements.............................................. 90
Subadvisory Arrangements........................................... 93
EXPENSES........................................................... 103
PERFORMANCE DATA................................................... 105
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GENERAL INFORMATION........................................................ 105
Shares of the Trust................................................... 105
TAXES................................................................. 106
DIVIDENDS............................................................. 107
Purchase and Redemption of Shares..................................... 107
CUSTODIAN............................................................. 108
Appendix I - Debt Security Ratings......................................... 109
Appendix II - Strategic Bond and Investment Quality Bond Trust Debt Ratings 111
Appendix III - Standard & Poor's Disclaimers............................... 112
----------------------
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.
<PAGE> 13
SYNOPSIS
Manufacturers Investment Trust (the "Trust"), formerly NASL Series Trust,
is a series trust, which means that it has a number of portfolios, each with a
stated investment objective which it pursues through separate investment
policies. Currently, there are thirty-six such portfolios. The investment
objective of each portfolio is set forth below in the description of the
portfolio.
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 "RISK FACTORS."
The investment adviser of the Trust is Manufacturers Securities Services,
LLC (the "Adviser"), formerly NASL Financial Services, Inc. The Trust currently
has fifteen Subadvisers who manage all of the portfolios:
<TABLE>
<CAPTION>
SUBADVISER SUBADVISER TO
---------- -------------
<S> <C>
Fred Alger Management, Inc. ("Alger") Small/Mid Cap Trust
Founders Asset Management, Inc. ("Founders") Growth Trust
Worldwide Growth Trust
Balanced Trust
International Small Cap Trust
Oechsle International Advisors, L.P. Global Government Bond Trust
("Oechsle International")
Fidelity Management Trust Company Equity Trust
("FMTC") Conservative Asset Allocation Trust
Moderate Asset Allocation Trust
Aggressive Asset Allocation Trust
Wellington Management Company, LLP Growth and Income Trust
("Wellington Management") Investment Quality Bond Trust
Salomon Brothers Asset Management U.S. Government Securities Trust
("SBAM") Strategic Bond Trust
J.P. Morgan Investment Management Inc. International Growth and Income Trust
("J.P. Morgan")
T. Rowe Price Associates, Inc. Science & Technology Trust
("T. Rowe Price") Blue Chip Growth Trust
Equity-Income Trust
Rowe Price-Fleming International, Inc. International Stock Trust
("Price-Fleming")
Morgan Stanley Asset Management Inc. Global Equity Trust
("Morgan Stanley")
Miller Anderson & Sherrerd, LLP ("MAS") Value Trust
High Yield Trust
</TABLE>
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<TABLE>
<S> <C>
Warburg, Pincus Counsellors, Inc. ("Warburg") Emerging Growth Trust
Pilgrim Baxter & Associates, Ltd. ("PBHG") Pilgrim Baxter Growth Trust
Manufacturers Adviser Corporation ("MAC") Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Real Estate Securities Trust
Equity Index Trust
Capital Growth Bond Trust
Money Market Trust
Lifestyle Trusts
Rosenberg Institutional Equity Management Small Company Value Trust
("Rosenberg")
</TABLE>
The Adviser receives a fee from the Trust computed separately for each
portfolio, except for the Lifestyle Trusts, as indicated in the expense table
below. The Subadviser of each portfolio receives a fee from the Adviser computed
separately for each portfolio, which 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 The Manufacturers Life
Insurance Company of North America, ("Manulife North America"), formerly North
American Security Life Insurance Company, The Manufacturers Life Insurance
Company of New York ("Manulife New York"), formerly First North American Life
Assurance Company and The Manufacturers Life Insurance Company of America
("Manufacturers America"). The Trust may, however, be used for other purposes in
the future, such as funding annuity contracts issued by other insurance
companies. Manulife North America is controlled by The Manufacturers Life
Insurance Company ("Manulife Financial"), a mutual life insurance company based
in Toronto, Canada. Manulife New York is a wholly-owned subsidiary of Manulife
North America and Manufacturers America is a wholly owned subsidiary of Manulife
Financial. Currently, the Trust has three shareholders, Manulife North America,
MANULIFE New York and Manufacturers 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 Manulife North America, Manufacturers
America and Manulife New York.
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, as amended (the "1940 Act"), and each of the portfolios, except the Global
Government Bond Trust, the Emerging Growth Trust and the five Lifestyle Trusts,
is diversified for purposes of the 1940 Act. See "Global Government Bond Trust,"
"Emerging Growth Trust" and "The Lifestyle Trusts."
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.
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FINANCIAL HIGHLIGHTS
The tables below provide Financial Highlights for NASL Series Trust. In
the case of the Quantitative Equity, Pacific Rim Emerging Markets, Real Estate
Securities, Capital Growth Bond and Equity Index Trusts, the Financial
Highlights for each period shown below consist of financial information for the
predecessors to these portfolios. On December 31, 1996, the Common Stock,
Pacific Rim Emerging Markets, Real Estate Securities, Capital Growth Bond and
Equity Index portfolios of Manulife Series Fund, Inc. merged into the
Quantitative Equity, Pacific Rim Emerging Markets, Real Estate Securities,
Capital Growth Bond and Equity Index portfolios of NASL Series Trust,
respectively, each of which was created to be successors to the corresponding
portfolio of Manulife Series Fund, Inc. This information is supplemented by
financial statements and accompanying notes appearing in the NASL Series Trust
Annual Report to shareholders for the fiscal year ended December 31, 1996 as
well as the NASL Series Trust Semi-Annual Report to shareholders for the period
ended June 30, 1997 which have been incorporated by reference into the Statement
of Additional Information. The financial statements of the Trust at December 31,
1996 have been audited by Coopers & Lybrand L.L.P. independent accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon said report given on the authority of said firm as experts in
accounting and auditing.
11
<PAGE> 16
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PACIFIC RIM EMERGING MARKETS TRUST
(FORMERLY, THE PACIFIC RIM EMERGING MARKETS FUND)
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31, 10/04/94*
6/30/97 ---------------------------------- TO
(UNAUDITED) 1996 1995 12/31/94
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period ................................... $ 10.90 $ 10.36 $ 9.41 $10.00
Income from investment operations:
Net investment income ....................... 0.04 0.07 0.12 0.04
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions ............................. 0.32 0.94 0.96 (0.59)
------- ------- ------- ------
Total from investment
operations ........................... 0.36 1.01 1.08 (0.55)
Less distributions:
Dividends from net investment income ........ -- (0.07) (0.09) (0.04)
Dividends in excess of net investment income -- (0.01) -- --
Distributions from capital gains ............ -- (0.39) (0.04) --
------- ------- ------- ------
Total distributions .................... -- (0.47) (0.13) (0.04)
------- ------- ------- ------
Net asset value, end of period ................ $ 11.26 $ 10.90 $ 10.36 $ 9.41
======= ======= ======= ======
Total return ........................... 3.30%+ 9.81% 11.47% (5.63%)+
Net assets, end of period (000's) ............. $30,559 $23,241 $13,057 $7,657
Ratio of operating expenses to
average net assets .......................... 1.37%(A) 1.50% 1.50% 1.60%(A)
Ratio of net investment income to
average net assets .......................... 0.73%(A) 0.78% 1.01% 1.84%(A)
Portfolio turnover rate ....................... 72%(A) 48% 55% 0%(A)
Average commission rate per share (B) ......... $ 0.012 $ 0.015 N/A N/A
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
12
<PAGE> 17
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SCIENCE & TECHNOLOGY
TRUST
--------------------
01/01/97*
TO
06/30/97
(UNAUDITED)
--------------------
<S> <C>
Net asset value, beginning
of period......................... $ 12.50
Income from investment operations:
Net investment loss............... (0.01)
Net realized and unrealized gain
on investments.................. 1.31
-------
Total from investment
operations................. 1.30
Net asset value, end of period...... $ 13.80
=======
Total return................. 10.40%+
Net assets, end of period (000's)... $27,711
Ratio of operating expenses to
average net assets................ 1.29%(A)
Ratio of net investment loss to
average net assets................ (0.16%)(A)
Portfolio turnover rate............. 181%(A)
Average commission rate per share (B) $ 0.035
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
13
<PAGE> 18
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP TRUST
-----------------------------
SIX MONTHS
ENDED 03/04/96*
06/30/97 TO
(UNAUDITED) 12/31/96
----------- ----------
<S> <C> <C>
Net asset value, beginning
of period .............................. $ 13.60 $ 12.50
Income from investment operations:
Net investment income .................. 0.03 0.06
Net realized and unrealized gain
on investments and foreign currency
transactions ........................ 0.86 1.09
-------- -------
Total from investment
operations ...................... 0.89 1.15
Less distributions:
Dividends from net investment income .. -- (0.05)
-------- -------
Net asset value, end of period ........... $ 14.49 $ 13.60
======== =======
Total return ...................... 6.60%+ 9.20%+
Net assets, end of period (000's) ........ $130,708 $97,218
Ratio of operating expenses to
average net assets ..................... 1.28%(A) 1.29%(A)
Ratio of net investment income to
average net assets ..................... 0.61%(A) 0.93%(A)
Portfolio turnover rate .................. 35%(A) 50%(A)
Average commission rate per share (B) .... $ 0.013 $ 0.015
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
14
<PAGE> 19
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING GROWTH TRUST
---------------------
01/01/97*
TO
06/30/97
(UNAUDITED)
---------------------
<S> <C>
Net asset value, beginning
of period ............................... $ 20.60
Income from investment operations:
Net investment income ................... 0.02
Net realized and unrealized
gain on investments ................... 0.97
--------
Total from investment
operations ....................... 0.99
Net asset value, end of period ............ $ 21.59
========
Total return ....................... 5.78%+
Net assets, end of period (000's) ......... $217,779
Ratio of operating expenses to
average net assets ...................... 1.10%(A)
Ratio of net investment income to
average net assets ...................... 0.19%(A)
Portfolio turnover rate ................... 169%(A)
Average commission rate per share (B) ..... $ 0.056
</TABLE>
- ---------------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
15
<PAGE> 20
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PILGRIM BAXTER GROWTH
TRUST
---------------------
01/01/97*
TO
06/30/97
(UNAUDITED)
---------------------
<S> <C>
Net asset value, beginning
of period ................................. $ 12.50
Income from investment operations:
Net investment loss ....................... (0.01)
Net realized and unrealized loss
on investments .......................... (0.25)
-------
Total from investment
operations ......................... (0.26)
Net asset value, end of period .............. $ 12.24
=======
Total return ......................... (2.08%)+
Net assets, end of period (000's) ........... $48,209
Ratio of operating expenses to
average net assets ........................ 1.18%(A)
Ratio of net investment loss to
average net assets ........................ (0.15%)(A)
Portfolio turnover rate ..................... 60%(A)
Average commission rate per share (B) ....... $ 0.050
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
16
<PAGE> 21
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL/MID CAP TRUST
----------------------------
SIX MONTHS
ENDED 03/04/96*
06/30/97 TO
(UNAUDITED) 12/31/96
----------- ----------
<S> <C> <C>
Net asset value, beginning
of period ............................. $ 13.37 $ 12.50
Income from investment operations:
Net investment loss ................... (0.02) --
Net realized and unrealized gain
on investments ...................... 0.96 0.87
-------- --------
Total from investment
operations ..................... 0.94 0.87
Net asset value, end of period .......... $ 14.31 $ 13.37
======== ========
Total return ..................... 7.03%+ 6.96%+
Net assets, end of period (000's) ....... $201,052 $176,062
Ratio of operating expenses to
average net assets .................... 1.05%(A) 1.10%(A)
Ratio of net investment loss to
average net assets .................... (0.30%)(A) (0.02%)(A)
Portfolio turnover rate ................. 166%(A) 67%(A)
Average commission rate per share (B) ... $ 0.069 $ 0.069
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
17
<PAGE> 22
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL STOCK TRUST
-------------------------
01/01/97*
TO
06/30/97
(UNAUDITED)
-------------------------
<S> <C>
Net asset value, beginning
of period ................................ $ 11.47
Income from investment operations:
Net investment income .................... 0.07
Net realized and unrealized gain
on investments and foreign currency
transactions .......................... 1.13
-------
Total from investment
operations ........................ 1.20
Net asset value, end of period ............. $ 12.67
=======
Total return ........................ 11.83%+
Net assets, end of period (000's) .......... $80,575
Ratio of operating expenses to
average net assets ....................... 1.31%(A)
Ratio of net investment income to
average net assets ....................... 1.81%(A)
Portfolio turnover rate .................... 98%(A)
Average commission rate per share (B) ...... $ 0.020
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
18
<PAGE> 23
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WORLDWIDE GROWTH TRUST
----------------------
01/01/97*
TO
06/30/97
(UNAUDITED)
----------------------
<S> <C>
Net asset value, beginning
of period ................................ $ 12.50
Income from investment operations:
Net investment income .................... 0.03
Net realized and unrealized gain
on investments and foreign currency
transactions .......................... 1.44
-------
Total from investment
operations ........................ 1.47
Net asset value, end of period ............. $ 13.97
=======
Total return ........................ 11.76%+
Net assets, end of period (000's) .......... $11,770
Ratio of operating expenses to
average net assets ....................... 1.69%(A)
Ratio of net investment income to
average net assets ....................... 0.84%(A)
Portfolio turnover rate .................... 66%(A)
Average commission rate per share (B) ...... $ 0.046
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
19
<PAGE> 24
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY TRUST
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 --------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 17.84 $ 16.10 $ 15.74 $ 15.73 $ 12.00 $ 12.24
Income from investment operations:
Net investment income (loss) (B) ..... 0.14 0.12 0.29 0.05 0.12 0.10
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions ..... 2.35 1.89 0.84 0.22 3.79 (0.19)
-------- -------- -------- -------- -------- --------
Total from investment operations .. 2.49 2.01 1.13 0.27 3.91 (0.09)
Less distributions:
Dividends from net investment income . (0.27) (0.27) (0.08) (0.02) (0.18) (0.15)
Distributions from capital gains ..... (1.54) -- (0.69) (0.24) -- --
-------- -------- -------- -------- -------- --------
Total distributions ............... (1.81) (0.27) (0.77) (0.26) (0.18) (0.15)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ......... $ 18.52 $ 17.84 $ 16.10 $ 15.74 $ 15.73 $ 12.00
======== ======== ======== ======== ======== ========
Total return ...................... 15.44%+ 12.62% 7.68% 1.74% 32.89% (0.72%)
Net assets, end of period (000's) ...... $842,111 $726,842 $648,183 $616,138 $377,871 $116,731
Ratio of operating expenses to
average net assets(C) ................ 1.01%(A) 1.01% 1.05% 1.08% 1.16% 1.16%
Ratio of net investment income (loss) to
average net assets ................... 1.67%(A) 0.78% 0.61% 0.44% 0.77% 1.12%
Portfolio turnover rate ................ 32%(A) 169% 63% 52% 52% 69%
Average commission rate per share(D) ... $ 0.032 $ 0.015 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
GLOBAL EQUITY TRUST
---------------------------------------------
YEARS ENDED DECEMBER 31, 03/18/88*
-------------------------------- TO
1991 1990 1989 12/31/88
-------- ------- ------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 11.00 $ 12.57 $ 10.15 $10.03
Income from investment operations:
Net investment income (loss) (B) ..... 0.16 0.12 0.10 (0.05)
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions ..... 1.23 (1.41) 2.32 0.17
-------- ------- ------- ------
Total from investment operations .. 1.39 (1.29) 2.42 0.12
Less distributions:
Dividends from net investment income . (0.15) (0.04) -- --
Distributions from capital gains ..... -- (0.24) -- --
-------- ------- ------- ------
Total distributions ............... (0.15) (0.28) -- --
-------- ------- ------- ------
Net asset value, end of period ......... $ 12.24 $ 11.00 $ 12.57 $10.15
======== ======= ======= ======
Total return ...................... 12.80% (10.43%) 23.84% 1.20%+
Net assets, end of period (000's) ...... $ 89,003 $63,028 $26,223 $2,143
Ratio of operating expenses to
average net assets(C) ................ 1.23% 1.28% 1.62% 3.98%(A)
Ratio of net investment income (loss) to
average net assets ................... 1.47% 1.97% 1.82% (1.71%)(A)
Portfolio turnover rate ................ 74% 67% 109% 81%(A)
Average commission rate per share(D) ... N/A N/A N/A N/A
</TABLE>
- ---------------------------------
* Commencement of operations.
+ Non-annualized
(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.
(D) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share of all security trades on
which commissions are charged. In certain foreign markets the relationship
between the translated U.S. dollar price per share and commission paid per
share may vary from that of domestic markets.
20
<PAGE> 25
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH TRUST
----------------------------
SIX MONTHS
ENDED 07/15/96*
06/30/97 TO
(UNAUDITED) 12/31/96
----------- ----------
<S> <C> <C>
Net asset value, beginning
of period .............................. $ 13.73 $ 12.50
Income from investment operations:
Net investment income .................. 0.05 0.09
Net realized and unrealized gain
on investments and foreign currency
transactions ........................ 2.29 1.23
-------- -------
Total from investment
operations ...................... 2.34 1.32
Less distributions:
Dividends from net investment income .. -- (0.09)
-------- -------
Net asset value, end of period ........... $ 16.07 $ 13.73
======== =======
Total return ...................... 17.05%+ 10.53%+
Net assets, end of period (000's) ........ $104,981 $56,807
Ratio of operating expenses to
average net assets ..................... 0.95%(A) 1.01%(A)
Ratio of net investment income to
average net assets ..................... 0.85%(A) 2.57%(A)
Portfolio turnover rate .................. 175%(A) 215%(A)
Average commission rate per share (B) .... $ 0.063 $ 0.048
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
21
<PAGE> 26
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY TRUST
------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 --------------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993** 1992 1991
---------- ---------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................... $ 22.62 $ 20.79 $ 14.66 $ 15.57 $ 13.97 $ 13.12 $ 11.33
Income from investment operations:
Net investment income (B) ........... 0.05 0.13 0.10 0.11 0.07 0.64 0.14
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions ... 1.73 3.77 6.14 (0.18) 2.11 0.38 1.88
---------- ---------- -------- -------- -------- -------- -------
Total from investment
operations ..................... 1.78 3.90 6.24 (0.07) 2.18 1.02 2.02
Less distributions:
Dividends from net investment income (0.14) (0.09) (0.11) (0.05) (0.58) (0.17) (0.23)
Distributions from capital gains .... (4.37) (1.98) -- (0.79) -- -- --
---------- ---------- -------- -------- -------- -------- -------
Total distributions .............. (4.51) (2.07) (0.11) (0.84) (0.58) (0.17) (0.23)
---------- ---------- -------- -------- -------- -------- -------
Net asset value, end of period ........ $ 19.89 $ 22.62 $ 20.79 $ 14.66 $ 15.57 $ 13.97 $ 13.12
========== ========== ======== ======== ======== ======== =======
Total return ..................... 10.32%+ 20.14% 42.79% (0.53%) 16.31% 7.93% 17.94%
Net assets, end of period (000's) ..... $1,408,787 $1,345,461 $988,800 $534,562 $387,842 $192,626 $88,235
Ratio of operating expenses to
average net assets (C) .............. 0.79%(A) 0.80% 0.80% 0.84% 0.88% 0.95% 0.89%
Ratio of net investment income to
average net assets .................. 0.45%(A) 0.71% 0.63% 0.88% 0.50% 7.31% 2.23%
Portfolio turnover rate ............... 225%(A) 223% 88% 132% 173% 782% 172%
Average commission rate per share (D) . $0.041 $ 0.043 N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
EQUITY TRUST
-----------------------------
YEARS ENDED DECEMBER 31,
-----------------------------
1990 1989 1988
------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning
of period ........................... $ 19.14 $ 15.17 $ 12.57
Income from investment operations:
Net investment income (B) ........... 0.24 0.29 0.15
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions ... (1.95) 3.87 2.45
------- ------- --------
Total from investment
operations ..................... (1.71) 4.16 2.60
Less distributions:
Dividends from net investment income (0.29) (0.12) --
Distributions from capital gains .... (5.81) (0.07) --
------- ------- --------
Total distributions .............. (6.10) (0.19) --
------- ------- --------
Net asset value, end of period ........ $ 11.33 $ 19.14 $ 15.17
======= ======= ========
Total return ..................... (11.79%) 27.70% 20.71%
Net assets, end of period (000's) ..... $36,564 $32,108 $133,852
Ratio of operating expenses to
average net assets (C) .............. 0.97% 1.02% 1.08%
Ratio of net investment income to
average net assets .................. 2.74% 1.90% 1.80%
Portfolio turnover rate ............... 95% 111% 49%
Average commission rate per share (D) . N/A N/A N/A
</TABLE>
- --------------------------
** Net investment income per share was calculated using the average shares
method for fiscal year 1993.
+ Non-annualized
(A) Annualized
(B) After expense reimbursement per share of $0.02 in 1987.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser, was 1.30% in 1987.
(D) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
22
<PAGE> 27
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUANTITATIVE EQUITY TRUST
(FORMERLY, THE COMMON STOCK FUND)
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 ---------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992 1991
----------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .............................. $ 17.33 $ 17.27 $ 13.36 $ 14.68 $ 13.73 $13.33 $10.48
Income from investment operations:
Net investment income (B) .............. 0.13 0.26 0.24 0.20 0.19 0.18 0.21
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions ...... 3.01 2.83 3.67 (0.81) 1.64 0.61 2.94
-------- ------- ------- ------- ------- ------ ------
Total from investment
operations ........................ 3.14 3.09 3.91 (0.61) 1.83 0.79 3.15
Less distributions:
Dividends from net investment income ... -- (0.50) -- (0.20) (0.19) (0.18) (0.21)
Distributions from capital gains ....... -- (2.51) -- (0.51) (0.69) (0.21) (0.09)
Distributions in excess of capital gains -- (0.02) -- -- -- -- --
-------- ------- ------- ------- ------- ------ ------
Total distributions ................. -- (3.03) -- (0.71) (0.88) (0.39) (0.30)
-------- ------- ------- ------- ------- ------ ------
Net asset value, end of period ........... $ 20.47 $ 17.33 $ 17.27 $ 13.36 $ 14.68 $13.73 $13.33
======== ======= ======= ======= ======= ====== ======
Total return ........................ 18.12%+ 17.92% 29.23% (4.19%) 13.39% 6.07% 30.18%
Net assets, end of period (000's) ........ $131,951 $91,900 $60,996 $34,829 $21,651 $9,708 $5,480
Ratio of operating expenses to
average net assets (C) ................. 0.50%(A) 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income to
average net assets ..................... 1.59%(A) 1.81% 1.76% 1.53% 1.39% 1.51% 1.78%
Portfolio turnover rate .................. 110%(A) 105% 109% 85% 88% 48% 53%
Average commission rate per share (D) .... $ 0.060 $ 0.060 N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
QUANTITATIVE EQUITY TRUST
(FORMERLY, THE COMMON STOCK FUND)
---------------------------------
YEARS ENDED DECEMBER 31,
---------------------------------
1990 1989 1988
------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning
of period .............................. $11.25 $ 8.91 $ 8.36
Income from investment operations:
Net investment income (B) .............. 0.32 0.36 0.28
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions ...... (0.77) 2.34 0.56
------ ------ ------
Total from investment
operations ........................ (0.45) 2.70 0.84
Less distributions:
Dividends from net investment income ... (0.32) (0.36) (0.29)
Distributions from capital gains ....... -- -- --
Distributions in excess of capital gains -- -- --
------ ------ ------
Total distributions ................. (0.32) (0.36) (0.29)
------ ------ ------
Net asset value, end of period ........... $10.48 $11.25 $ 8.91
====== ====== ======
Total return ........................ (4.06%) 30.66% 9.86%
Net assets, end of period (000's) ........ $2,872 $2,138 $1,176
Ratio of operating expenses to
average net assets (C) ................. 0.50% 0.50% 0.50%
Ratio of net investment income to
average net assets ..................... 3.06% 3.48% 3.16%
Portfolio turnover rate .................. 121% 121% 172%
Average commission rate per share (D) .... N/A N/A N/A
</TABLE>
- --------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) After investment adviser expense reimbursement per share of $0.02 for the
six months ended June 30, 1997.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser, was 0.77% for the six months ended June 30, 1997.
(D) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
23
<PAGE> 28
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INDEX TRUST
(FORMERLY, THE EQUITY INDEX FUND)
----------------------------------
SIX MONTHS
ENDED 02/14/96*
06/30/97 TO
(UNAUDITED) 12/31/96
----------- ---------
<S> <C> <C>
Net asset value, beginning
of period ................................... $ 10.69 $10.00
Income from investment operations:
Net investment income (B) ................... 0.22 0.19
Net realized and unrealized gain
on investments ............................ 1.94 1.29
------- ------
Total from investment
operations ........................... 2.16 1.48
Less distributions:
Dividends from net investment income ....... -- (0.19)
Distributions from capital gains .......... -- (0.21)
Distributions in excess of capital gains ... -- (0.39)
------- ------
Total distributions .................... -- (0.79)
------- ------
Net asset value, end of period ................ $ 12.85 $10.69
======= ======
Total return ........................... 20.21%+ 14.86%+
Net assets, end of period (000's) ............. $17,106 $7,818
Ratio of operating expenses to
average net assets (C) ...................... 0.40%(A) 0.40%(A)
Ratio of net investment income to
average net assets .......................... 4.71%(A) 4.74%(A)
Portfolio turnover rate ....................... 0%(A) 27%(A)
Average commission rate per share (D) ......... $ 0.046 $ 0.041
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) After investment adviser expense reimbursement per share of $0.01 for the
six months ended June 30, 1997.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser, was 0.56% for the six months ended June 30, 1997.
(D) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
24
<PAGE> 29
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BLUE CHIP GROWTH TRUST
(FORMERLY, THE PASADENA GROWTH TRUST)
------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED 12/11/92*
06/30/97 ----------------------------------------------------- TO
(UNAUDITED) 1996 1995 1994 1993 12/31/92
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .. $ 14.31 $ 11.40 $ 9.05 $ 9.55 $ 9.93 $ 10.00
Income from investment operations:
Net investment income (B) .......... 0.05 0.03 0.03 0.04 0.05 0.00
Net realized and unrealized gain
(loss) on investments ............ 1.71 2.92 2.36 (0.50) (0.42) (0.07)
-------- -------- -------- -------- -------- --------
Total from investment operations 1.76 2.95 2.39 (0.46) (0.37) (0.07)
Less distributions:
Dividends from net investment income (0.03) (0.04) (0.04) (0.04) (0.01)
Distributions from capital gains .. (2.50) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions ............ (2.53) (0.04) (0.04) (0.04) (0.01) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period ........ $ 13.54 $ 14.31 $ 11.40 $ 9.05 $ 9.55 $ 9.93
======== ======== ======== ======== ======== ========
Total return ................... 14.58%+ 25.90% 26.53% (4.80%) (3.80%) (0.70%)+
Net assets, end of period (000's) ..... $558,282 $422,571 $277,674 $151,727 $104,966 $ 31,118
Ratio of operating expenses to
average net assets (C) .............. 0.97%(A) 0.975% 0.975% 0.975% 0.975% 1.06%(A)
Ratio of net investment income to
average net assets .................. 0.82%(A) 0.26% 0.42% 0.65% 0.75% 1.04%(A)
Portfolio turnover rate ............... 37%(A) 159% 57% 33% 12% 0%(A)
Average commission rate per share (D) . $ 0.036 $ 0.049 N/A N/A N/A N/A
</TABLE>
- ---------------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) After investment adviser and subadviser expense reimbursement per share of
$0.006, $0.004, $0.006 and $0.01 for the years ended December 31, 1996,
1995, 1994 and 1993, respectively.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser and subadviser, was 1.02%, 1.03%, 1.06% and 1.09% for the years
ended December 31,1996, 1995, 1994 and 1993, respectively.
(D) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
25
<PAGE> 30
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REAL ESTATE SECURITIES TRUST
(FORMERLY, THE REAL ESTATE SECURITIES FUND)
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 -----------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
-------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .............................. $ 16.95 $ 15.10 $ 13.34 $ 14.07 $ 12.75 $ 10.92
Income from investment operations:
Net investment income (B) .............. 0.38 0.74 0.67 0.55 0.47 0.45
Net realized and unrealized gain
(loss) on investments ................ 0.50 4.31 1.35 (0.93) 2.38 1.83
-------- -------- -------- ------------ ------------ ------------
Total from investment
operations ........................ 0.88 5.05 2.02 (0.38) 2.85 2.28
Less distributions:
Dividends from net investment income ... -- (1.39) (0.26) (0.27) (0.47) (0.45)
Distributions from capital gains ....... -- (1.77) -- (0.08) (1.06) --
Distributions in excess of capital gains -- (0.04) -- -- -- --
-------- -------- -------- ------------ ------------ ------------
Total distributions ................. -- (3.20) (0.26) (0.35) (1.53) (0.45)
-------- -------- -------- ------------ ------------ ------------
Net asset value, end of period ........... $ 17.83 $ 16.95 $ 15.10 $ 13.34 $ 14.07 $ 12.75
======== ======== ======== ============ ============ ============
Total return ........................ 5.19%+ 34.69% 15.14% (2.76%) 22.61% 21.29%
Net assets, end of period (000's) ........ $122,302 $ 76,220 $ 52,440 $ 42,571 $ 24,106 $ 7,273
Ratio of operating expenses to
average net assets (C) ................. 0.50%(A) 0.50% 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income to
average net assets ..................... 5.40%(A) 5.22% 5.06% 4.26% 3.93% 4.13%
Portfolio turnover rate .................. 170%(A) 231% 136% 36% 143% 71%
Average commission rate per share (D) .... $ 0.052 $ 0.059 N/A N/A N/A N/A
</TABLE>
- --------------------------
<TABLE>
<CAPTION>
REAL ESTATE SECURITIES TRUST
(FORMERLY, THE REAL ESTATE SECURITIES FUND)
------------------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1991 1990 1989 1988
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period .............................. $ 8.16 $ 9.24 $ 9.12 $ 8.76
Income from investment operations:
Net investment income (B) .............. 0.53 0.67 0.68 0.70
Net realized and unrealized gain
(loss) on investments ................ 2.76 (1.09) 0.15 0.37
--------- --------- --------- ---------
Total from investment
operations ........................ 3.29 (0.42) 0.83 1.07
Less distributions:
Dividends from net investment income ... (0.53) (0.66) (0.71) (0.71)
Distributions from capital gains ....... -- -- -- --
Distributions in excess of capital gains -- -- -- --
--------- --------- --------- ---------
Total distributions ................. (0.53) (0.66) (0.71) (0.71)
--------- --------- --------- ---------
Net asset value, end of period ........... $ 10.92 $ 8.16 $ 9.24 $ 9.12
========= ========= ========= =========
Total return ........................ 41.10% (4.53%) 9.23% 11.72%
Net assets, end of period (000's) ........ $ 4,120 $ 2,774 $ 2,874 $ 2,490
Ratio of operating expenses to
average net assets (C) ................. 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income to
average net assets ..................... 5.40% 7.74% 7.29% 7.18%
Portfolio turnover rate .................. 40% 24% 15% 23%
Average commission rate per share (D) .... N/A N/A N/A N/A
</TABLE>
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After investment adviser expense reimbursement per share of $0.02 for the
six months ended June 30, 1997.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser, was 0.76% for the six months ended June 30, 1997.
(D) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
26
<PAGE> 31
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE TRUST
----------
01/01/97*
TO
06/30/97
(UNAUDITED)
-----------
<S> <C>
Net asset value, beginning
of period ......................... $ 12.50
Income from investment operations:
Net investment income ............. 0.05
Net realized and unrealized gain
on investments .................. 1.92
-----------
Total from investment
operations ................. 1.97
Net asset value, end of period ...... $ 14.47
===========
Total return ................. 15.76%+
Net assets, end of period (000's) ... $ 63,667
Ratio of operating expenses to
average net assets ................ 0.91%(A)
Ratio of net investment income to
average net assets ................ 1.80%(A)
Portfolio turnover rate ............. 45%(A)
Average commission rate per share (B) $ 0.059
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
27
<PAGE> 32
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH AND INCOME TRUST
-----------------------------------------------------
SIX MONTHS
ENDED YEAR 01/09/95*
06/30/97 ENDED TO
(UNAUDITED) 12/31/96 12/31/95
------------ ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning
of period ........................... $ 11.77 $ 10.47 $ 10.00
Income from investment operations:
Net investment income .............. 0.12 0.17 0.11
Net realized and unrealized gain
on investments and foreign currency
transactions .................... 0.65 1.15 0.59
------------ ------------ ------------
Total from investment
operations ................... 0.77 1.32 0.70
Less distributions:
Dividends from net investment income (0.22) (0.02) (0.12)
Distributions from capital gains ... (0.51) -- (0.11)
------------ ------------ ------------
Total distributions ............ (0.73) (0.02) (0.23)
------------ ------------ ------------
Net asset value, end of period ........ $ 11.81 $ 11.77 $ 10.47
============ ============ ============
Total return ................... 7.18%+ 12.61% 6.98%+
Net assets, end of period (000's) ..... $ 223,481 $ 189,010 $ 88,638
Ratio of operating expenses to
average net assets .................. 1.08%(A) 1.11% 1.47%(A)
Ratio of net investment income to
average net assets .................. 2.35%(A) 1.82% 0.71%(A)
Portfolio turnover rate ............... 113%(A) 148% 112%(A)
Average commission rate per share (B) . $ 0.002 $ 0.028 N/A
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
28
<PAGE> 33
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND INCOME TRUST
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 -----------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................... $ 19.38 $ 16.37 $ 13.04 $ 13.05 $ 12.10
Income from investment operations:
Net investment income ............... 0.11 0.22 0.27 0.25 0.17
Net realized and unrealized gain
on investments and foreign currency
transactions ..................... 3.74 3.41 3.45 0.11 0.98
----------- ----------- ---------- ---------- ----------
Total from investment operations 3.85 3.63 3.72 0.36 1.15
Less distributions:
Dividends from net investment income (0.24) (0.26) (0.26) (0.19) (0.18)
Distributions from capital gains .... (1.20) (0.36) (0.13) (0.18) (0.02)
----------- ----------- ---------- ---------- ----------
Total distributions ............ (1.44) (0.62) (0.39) (0.37) (0.20)
----------- ----------- ---------- ---------- ----------
Net asset value, end of period ........ $ 21.79 $ 19.38 $ 16.37 $ 13.04 $ 13.05
=========== =========== ========== ========== ==========
Total return ................... 21.15%+ 22.84% 29.20% 2.85% 9.62%
Net assets, end of period (000's) ..... $ 1,364,558 $ 1,033,738 $ 669,387 $ 409,534 $ 288,765
Ratio of operating expenses to
average net assets .................. 0.78%(A) 0.80% 0.80% 0.82% 0.85%
Ratio of net investment income to
average net assets .................. 1.29%(A) 1.56% 2.23% 2.40% 2.29%
Portfolio turnover rate ............... 36%(A) 49% 39% 42% 39%
Average commission rate per share (B) . $ 0.054 $ 0.055 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND INCOME TRUST
----------------------------------------
YEARS ENDED DECEMBER 31, 04/23/91*
-------------- T0
1992 12/31/91
-------------- --------------
<S> <C> <C>
Net asset value, beginning
of period ........................... $ 11.08 $ 10.00
Income from investment operations:
Net investment income ............... 0.20 0.13
Net realized and unrealized gain
on investments and foreign currency
transactions ..................... 0.92 0.95
-------------- --------------
Total from investment operations 1.12 1.08
Less distributions:
Dividends from net investment income (0.10) --
Distributions from capital gains .... -- --
-------------- --------------
Total distributions ............ (0.10) --
-------------- --------------
Net asset value, end of period ........ $ 12.10 $ 11.08
============== ==============
Total return ................... 10.23% 10.80%+
Net assets, end of period (000's) ..... $ 130,984 $ 57,404
Ratio of operating expenses to
average net assets .................. 0.85% 0.98%(A)
Ratio of net investment income to
average net assets .................. 2.78% 2.92%(A)
Portfolio turnover rate ............... 44% 62%(A)
Average commission rate per share (B) . N/A N/A
</TABLE>
- ------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
29
<PAGE> 34
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY-INCOME TRUST
(FORMERLY, THE VALUE EQUITY TRUST)
---------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31, 02/19/93*
06/30/97 ----------------------------------------------- TO
(UNAUDITED) 1996 1995 1994** 12/31/93
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................... $ 15.41 $ 13.81 $ 11.33 $ 11.31 $ 10.00
Income from investment operations:
Net investment income .............. 0.16 0.21 0.17 0.12 0.07
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions ............. 1.94 2.39 2.49 (0.03) 1.24
------------ ------------ ------------ ------------ ------------
Total from investment
operations ................... 2.10 2.60 2.66 0.09 1.31
Less distributions:
Dividends from net investment income (0.21) (0.16) (0.08) (0.05) --
Distributions from capital gains ... (1.97) (0.84) (0.10) (0.02) --
------------ ------------ ------------ ------------ ------------
Total distributions ............ (2.18) (1.00) (0.18) (0.07) --
------------ ------------ ------------ ------------ ------------
Net asset value, end of period ........ $ 15.33 $ 15.41 $ 13.81 $ 11.33 $ 11.31
============ ============ ============ ============ ============
Total return ................... 15.34%+ 19.85% 23.69% 0.79% 13.10%+
Net assets, end of period (000's) ..... $ 779,145 $ 599,486 $ 396,827 $ 221,835 $ 86,472
Ratio of operating expenses to
average net assets .................. 0.84%(A) 0.85% 0.85% 0.87% 0.94%(A)
Ratio of net investment income to
average net assets .................. 2.59%(A) 1.78% 1.63% 1.08% 1.30%(A)
Portfolio turnover rate ............... 27%(A) 158% 52% 26% 33%(A)
Average commission rate per share (B) . $ 0.034 $ 0.052 N/A N/A N/A
</TABLE>
- -----------------------------
* Commencement of operations.
** Net investment income per share was calculated using the average shares
method for fiscal year 1994.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
30
<PAGE> 35
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED TRUST
-----------
01/01/97*
TO
06/30/97
(UNAUDITED)
------------
<S> <C>
Net asset value, beginning
of period ........................... $ 16.41
Income from investment operations:
Net investment income ............... 0.26
Net realized and unrealized
gain on investments ............... 1.66
------------
Total from investment
operations ................... 1.92
Net asset value, end of period ........ $ 18.33
============
Total return ................... 12.39%+
Net assets, end of period (000's) ..... $ 160,689
Ratio of operating expenses to
average net assets .................. 0.86%(A)
Ratio of net investment income to
average net assets .................. 3.07%(A)
Portfolio turnover rate ............... 270%(A)
Average commission rate per share (B).. $ 0.061
</TABLE>
- ---------------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
31
<PAGE> 36
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE ASSET ALLOCATION TRUST
----------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 ------------------------------------------------
(UNAUDITED) 1996 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 13.45 $ 12.85 $ 11.17 $ 12.03
Income from investment operations:
Net investment income ................ 0.17 0.36 0.35 0.31
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions .... 1.27 1.21 2.07 (0.41)
------------ ------------ ------------ ------------
Total from investment operations... 1.44 1.57 2.42 (0.10)
Less distributions:
Dividends from net investment income.. (0.38) (0.33) (0.33) (0.31)
Distributions from capital gains ..... (1.01) (0.64) (0.41) (0.45)
------------ ------------ ------------ ------------
Total distributions ............... (1.39) (0.97) (0.74) (0.76)
------------ ------------ ------------ ------------
Net asset value, end of period ......... $ 13.50 $ 13.45 $ 12.85 $ 11.17
============ ============ ============ ============
Total return ...................... 11.96%+ 13.00% 22.77% (0.69%)
Net assets, end of period (000's) ...... $ 237,473 $ 226,699 $ 211,757 $ 184,662
Ratio of operating expenses to
average net assets ................... 0.89%(A) 0.90% 0.91% 0.89%
Ratio of net investment income to
average net assets ................... 2.44%(A) 2.73% 2.76% 2.90%
Portfolio turnover rate ................ 114%(A) 75% 111% 136%
Average commission rate per share (B)... $ 0.021 $ 0.025 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE ASSET ALLOCATION TRUST
------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
08/03/89*
------------------------------------------------------------------ TO
1993 1992 1991 1990 12/31/89
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 11.25 $ 10.72 $ 9.08 $ 9.88 $ 10.00
Income from investment operations:
Net investment income ................ 0.34 0.30 0.36 0.36 0.08
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions .... 0.79 0.55 1.69 (1.07) (0.20)
------------ ------------ ------------ ------------ ------------
Total from investment operations... 1.13 0.85 2.05 (0.71) (0.12)
Less distributions:
Dividends from net investment income (0.30) (0.32) (0.41) (0.07) --
Distributions from capital gains ..... (0.05) -- -- (0.02) --
------------ ------------ ------------ ------------ ------------
Total distributions ............... (0.35) (0.32) (0.41) (0.09) --
------------ ------------ ------------ ------------ ------------
Net asset value, end of period ......... $ 12.03 $ 11.25 $ 10.72 $ 9.08 $ 9.88
============ ============ ============ ============ ============
Total return ...................... 10.30% 8.24% 22.96% (7.27%) (1.20%)+
Net assets, end of period (000's) ...... $ 174,448 $ 151,627 $ 124,632 $ 91,581 $ 87,301
Ratio of operating expenses to
average net assets ................... 0.86% 0.89% 0.88% 0.78% 0.89%(A)
Ratio of net investment income to
average net assets ................... 2.96% 3.08% 3.63% 4.08% 3.32%(A)
Portfolio turnover rate ................ 92% 123% 172% 82% 22%(A)
Average commission rate per share (B)... N/A N/A N/A N/A N/A
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
32
<PAGE> 37
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MODERATE ASSET ALLOCATION TRUST
---------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 ------------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 12.49 $ 12.39 $ 10.79 $ 11.76 $ 11.14
Income from investment operations:
Net investment income ................ 0.27 0.54 0.50 0.45 0.41
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions .... 0.76 0.60 1.65 (0.65) 0.67
------------ ------------ ------------ ------------ ------------
Total from investment operations... 1.03 1.14 2.15 (0.20) 1.08
Less distributions:
Dividends from net investment income.. (0.57) (0.52) (0.45) (0.40) (0.39)
Distributions from capital gains ..... (0.74) (0.52) (0.10) (0.37) (0.07)
------------ ------------ ------------ ------------ ------------
Total distributions ............... (1.31) (1.04) (0.55) (0.77) (0.46)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period ......... $ 12.21 $ 12.49 $ 12.39 $ 10.79 $ 11.76
============ ============ ============ ============ ============
Total return ...................... 9.25%+ 9.96% 20.68% (1.61%) 10.06%
Net assets, end of period (000's) ...... $ 614,588 $ 624,821 $ 650,136 $ 604,491 $ 644,257
Ratio of operating expenses to
average net assets ................... 0.83%(A) 0.84% 0.84% 0.85% 0.84%
Ratio of net investment income to
average net assets ................... 3.80%(A) 4.17% 4.09% 4.01% 4.02%
Portfolio turnover rate ................ 94%(A) 78% 129% 180% 135%
Average commission rate per share (B)... $ 0.023 $ 0.027 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
MODERATE ASSET ALLOCATION TRUST
-----------------------------------------------------------------
YEARS ENDED DECEMBER 31,
08/03/89*
------------------------------------------------ TO
1992 1991 1990 12/31/89
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 10.72 $ 9.29 $ 10.03 $ 10.00
Income from investment operations:
Net investment income ................ 0.41 0.42 0.48 0.11
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions .... 0.43 1.50 (1.10) (0.08)
------------ ------------ ------------ ------------
Total from investment operations... 0.84 1.92 (0.62) 0.03
Less distributions:
Dividends from net investment income.. (0.42) (0.49) (0.10) --
Distributions from capital gains ..... -- -- (0.02) --
------------ ------------ ------------ ------------
Total distributions ............... (0.42) (0.49) (0.12) --
------------ ------------ ------------ ------------
Net asset value, end of period ......... $ 11.14 $ 10.72 $ 9.29 $ 10.03
============ ============ ============ ============
Total return ...................... 8.30% 21.23% (6.23%) 0.30%+
Net assets, end of period (000's) ...... $ 505,967 $ 420,074 $ 327,328 $ 318,439
Ratio of operating expenses to
average net assets ................... 0.87% 0.86% 0.73% 0.79%(A)
Ratio of net investment income to
average net assets ................... 4.21% 4.38% 5.10% 4.51%(A)
Portfolio turnover rate ................ 169% 168% 76% 41%(A)
Average commission rate per share (B)... N/A N/A N/A N/A
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
33
<PAGE> 38
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONSERVATIVE ASSET ALLOCATION TRUST
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 ------------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 11.64 $ 11.59 $ 10.34 $ 11.26 $ 10.78
Income from investment operations:
Net investment income ................ 0.29 0.57 0.54 0.55 0.50
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions .... 0.33 0.20 1.26 (0.76) 0.44
------------ ------------ ------------ ------------ ------------
Total from investment operations... 0.62 0.77 1.80 (0.21) 0.94
Less distributions:
Dividends from net investment income.. (0.59) (0.56) (0.55) (0.46) (0.46)
Distributions from capital gains ..... (0.48) (0.16) -- (0.25)
------------ ------------ ------------ ------------ ------------
Total distributions ............... (1.07) (0.72) (0.55) (0.71) (0.46)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period ......... $ 11.19 $ 11.64 $ 11.59 $ 10.34 $ 11.26
============ ============ ============ ============ ============
Total return ...................... 5.86%+ 7.03% 18.07% (1.84%) 8.99%
Net assets, end of period (000's) ...... $ 199,448 $ 208,466 $ 224,390 $ 216,716 $ 250,117
Ratio of operating expenses to
average net assets ................... 0.88%(A) 0.87% 0.87% 0.87% 0.86%
Ratio of net investment income to
average net assets ................... 4.53%(A) 4.59% 4.68% 4.86% 4.78%
Portfolio turnover rate ................ 123%(A) 73% 110% 220% 170%
Average commission rate per share (B)... $ 0.021 $ 0.028 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE ASSET ALLOCATION TRUST
------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
08/03/89*
------------------------------------------------ TO
1992 1991 1990 12/31/89
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 10.63 $ 9.56 $ 10.11 $ 10.00
Income from investment operations:
Net investment income ................ 0.47 0.58 0.62 0.15
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions .... 0.26 1.15 (1.01) (0.04)
------------ ------------ ------------ ------------
Total from investment operations... 0.73 1.73 (0.39) 0.11
Less distributions:
Dividends from net investment income.. (0.58) (0.66) (0.13) --
Distributions from capital gains ..... -- -- (0.03) --
------------ ------------ ------------ ------------
Total distributions ............... (0.58) (0.66) (0.16) --
------------ ------------ ------------ ------------
Net asset value, end of period ......... $ 10.78 $ 10.63 $ 9.56 $ 10.11
============ ============ ============ ============
Total return ...................... 7.36% 18.80% (3.84%) 1.10%+
Net assets, end of period (000's) ...... $ 201,787 $ 165,167 $ 149,901 $ 141,191
Ratio of operating expenses to
average net assets ................... 0.89% 0.88% 0.76% 0.82%(A)
Ratio of net investment income to
average net assets ................... 4.99% 5.65% 6.68% 6.00%(A)
Portfolio turnover rate ................ 252% 211% 78% 85%(A)
Average commission rate per share (B)... N/A N/A N/A N/A
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
34
<PAGE> 39
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------
<TABLE>
HIGH YIELD TRUST
----------------
01/01/97*
TO
06/30/97
(UNAUDITED)
----------
<S> <C>
Net asset value, beginning
of period ........................... $ 12.50
Income from investment operations:
Net investment income ............... 0.22
Net realized and unrealized gain
on investments and foreign currency
transactions ..................... 0.50
----------
Total from investment
operations ................... 0.72
Net asset value, end of period ........ $ 13.22
==========
Total return ................... 5.76%+
Net assets, end of period (000's) ..... $ 36,544
Ratio of operating expenses to
average net assets .................. 0.93%(A)
Ratio of net investment income to
average net assets .................. 7.07%(A)
Portfolio turnover rate ............... 69%(A)
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
35
<PAGE> 40
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STRATEGIC BOND TRUST
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31, 02/19/93*
06/30/97 --------------------------------------------- TO
(UNAUDITED) 1996 1995 1994 12/31/93
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .............................. $ 11.94 $ 11.26 $ 9.91 $ 10.88 $ 10.00
Income from investment operations:
Net investment income ................. 0.36 0.62 0.78 0.57 0.33
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions ...................... 0.25 0.92 1.04 (1.22) 0.55
----------- ----------- ----------- ----------- -----------
Total from investment
operations ...................... 0.61 1.54 1.82 (0.65) 0.88
Less distributions:
Dividends from net investment income .. (0.71) (0.86) (0.47) (0.28) --
Distributions from capital gains ...... (0.09) -- -- (0.04) --
----------- ----------- ----------- ----------- -----------
Total distributions ............... (0.80) (0.86) (0.47) (0.32) --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ........... $ 11.75 $ 11.94 $ 11.26 $ 9.91 $ 10.88
=========== =========== =========== =========== ===========
Total return ...................... 5.33%+ 14.70% 19.22% (5.99%) 8.80%+
Net assets, end of period (000's) ........ $ 285,457 $ 221,277 $ 122,704 $ 84,433 $ 53,640
Ratio of operating expenses to
average net assets ..................... 0.86%(A) 0.86% 0.92% 0.91% 1.00%(A)
Ratio of net investment income to
average net assets ..................... 8.26%(A) 8.20% 8.76% 7.49% 6.56%(A)
Portfolio turnover rate .................. 154%(A) 165% 181% 197% 356%(A)
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
36
<PAGE> 41
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL GOVERNMENT BOND TRUST
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 --------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................... $ 14.97 $ 14.56 $ 12.47 $ 13.93 $ 12.47
Income from investment operations:
Net investment income ............... 0.45 0.93 1.16 0.74 0.59
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions ... (0.53) 0.79 1.62 (1.54) 1.67
----------- ----------- ----------- ----------- -----------
Total from investment operations.. (0.08) 1.72 2.78 (0.80) 2.26
Less distributions:
Dividends from net investment income (1.23) (1.31) (0.69) (0.30) (0.70)
Distributions from capital gains .... (0.03) -- -- (0.36) (0.10)
----------- ----------- ----------- ----------- -----------
Total distributions .............. (1.26) (1.31) (0.69) (0.66) (0.80)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ........ $ 13.63 $ 14.97 $ 14.56 $ 12.47 $ 13.93
=========== =========== =========== =========== ===========
Total return ..................... (0.27%)+ 13.01% 23.18% (5.75%) 18.99%
Net assets, end of period (000's) ..... $ 232,723 $ 249,793 $ 235,243 $ 208,513 $ 196,817
Ratio of operating expenses to
average net assets .................. 0.94%(A) 0.90% 0.93% 0.96% 1.06%
Ratio of net investment income to
average net assets .................. 5.79%(A) 6.38% 6.83% 6.10% 5.61%
Portfolio turnover rate ............... 150%(A) 167% 171% 157% 154%
</TABLE>
<TABLE>
<CAPTION>
GLOBAL GOVERNMENT BOND TRUST
-----------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 03/18/88*
-------------------------------------------------------------- TO
1992 1991 1990 1989 12/31/88
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................... $ 12.88 $ 11.59 $ 10.50 $ 10.21 $ 10.03
Income from investment operations:
Net investment income ............... 0.42 0.55 0.25 0.45 0.14
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions ... (0.16) 1.21 1.13 -- 0.04
----------- ----------- ----------- ----------- ---------
Total from investment operations.. 0.26 1.76 1.38 0.45 0.18
Less distributions:
Dividends from net investment income (0.43) (0.46) (0.24) (0.09) --
Distributions from capital gains .... (0.24) (0.01) (0.05) (0.07) --
----------- ----------- ----------- ----------- ---------
Total distributions .............. (0.67) (0.47) (0.29) (0.16) --
----------- ----------- ----------- ----------- ---------
Net asset value, end of period ........ $ 12.47 $ 12.88 $ 11.59 $ 10.50 $ 10.21
=========== =========== =========== =========== =========
Total return ..................... 2.27% 15.86% 13.49% 4.49% 1.79%+
Net assets, end of period (000's) ..... $ 67,859 $ 28,251 $ 11,582 $ 4,065 $ 1,355
Ratio of operating expenses to
average net assets .................. 1.05% 1.14% 1.21% 1.50% 3.39%(A)
Ratio of net investment income to
average net assets .................. 6.71% 17.28% 6.62% 7.15% 3.74%(A)
Portfolio turnover rate ............... 132% 164% 142% 50% 234%(A)
</TABLE>
- --------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
37
<PAGE> 42
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL GROWTH BOND TRUST
(FORMERLY, THE CAPITAL GROWTH BOND FUND)
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 ----------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................... $ 10.90 $ 11.30 $ 10.10 $ 11.33 $ 11.12
Income from investment operations:
Net investment income (B) ........... 0.33 0.68 0.72 0.72 0.65
Net realized and unrealized gain
(loss) on investments ............. (0.06) (0.40) 1.32 (1.22) 0.51
---------- ---------- ---------- ---------- ----------
Total from investment operations.. 0.27 0.28 2.04 (0.50) 1.16
Less distributions:
Dividends from net investment income -- (0.68) (0.72) (0.72) (0.65)
Distributions from capital gains .... -- -- (0.12) (0.01) (0.30)
----------
Total distributions .............. -- (0.68) (0.84) (0.73) (0.95)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ........ $ 11.17 $ 10.90 $ 11.30 $ 10.10 $ 11.33
========== ========== ========== ========== ==========
Total return ..................... 2.48%+ 2.48% 20.24% (4.49%) 10.56%
Net assets, end of period (000's) ..... $ 48,524 $ 45,393 $ 42,694 $ 33,618 $ 41,183
Ratio of operating expenses to
average net assets (C) .............. 0.50%(A) 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income to
average net assets .................. 6.30%(A) 6.15% 6.36% 6.29% 5.69%
Portfolio turnover rate ............... 85%(A) 58% 85% 79% 95%
</TABLE>
<TABLE>
<CAPTION>
CAPITAL GROWTH BOND TRUST
(FORMERLY, THE CAPITAL GROWTH BOND FUND)
----------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 11.47 $ 10.62 $ 10.82 $ 10.32 $ 10.53
Income from investment operations:
Net investment income (B) ............ 0.77 0.83 0.88 0.90 0.92
Net realized and unrealized gain
(loss) on investments .............. (0.11) 0.85 (0.21) 0.50 (0.17)
---------- ---------- ---------- ---------- ------
Total from investment operations... 0.66 1.68 0.67 1.40 0.75
Less distributions:
Dividends from net investment income.. (0.78) (0.83) (0.87) (0.90) (0.93)
Distributions from capital gains ..... (0.23) -- -- -- (0.03)
---------- ---------- ---------- ---------- ------
Total distributions ............... (1.01) (0.83) (0.87) (0.90) (0.96)
---------- ---------- ---------- ---------- ------
Net asset value, end of period ......... $ 11.12 $ 11.47 $ 10.62 $ 10.82 $ 10.32
========== ========== ========== ========== =======
Total return ...................... 5.89% 16.38% 6.58% 13.88% 7.14%
Net assets, end of period (000's) ...... $ 30,695 $ 29,326 $ 24,808 $ 2,278 $19,732
Ratio of operating expenses to
average net assets (C) ............... 0.50% 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income to
average net assets ................... 6.76% 7.54% 8.25% 8.34% 8.48%
Portfolio turnover rate ................ 153% 20% 41% 69% 29%
</TABLE>
- -----------------------------
+ Non-annualized
(A) Annualized
(B) After investment adviser expense reimbursement per share of $0.01 for the
six months ended June 30, 1997.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser, was 0.74% for the six months ended June 30, 1997.
38
<PAGE> 43
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT QUALITY BOND TRUST
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 --------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 11.89 $ 12.32 $ 11.01 $ 12.12 $ 11.58
Income from investment operations:
Net investment income (B) ............ 0.42 0.77 0.77 0.66 0.60
Net realized and unrealized gain
(loss) on investments .............. (0.08) (0.50) 1.28 (1.23) 0.53
----------- ----------- ----------- ----------- -----------
Total from investment operations... 0.34 0.27 2.05 (0.57) 1.13
Less distributions:
Dividends from net investment income.. (0.83) (0.70) (0.74) (0.54) (0.59)
----------- ----------- ----------- ----------- -----------
Total distributions ............... (0.83) (0.70) (0.74) (0.54) (0.59)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ......... $ 11.40 $ 11.89 $ 12.32 $ 11.01 $ 12.12
=========== =========== =========== =========== ===========
Total return ...................... 3.15%+ 2.58% 19.49% (4.64%) 10.01%
Net assets, end of period (000's) ...... $ 156,063 $ 152,961 $ 143,103 $ 111,423 $ 99,474
Ratio of operating expenses to
average net assets (C) ............... 0.73%(A) 0.73% 0.74% 0.76% 0.77%
Ratio of net investment income to
average net assets ................... 7.23%(A) 6.95% 6.91% 6.49% 6.03%
Portfolio turnover rate ................ 65%(A) 68% 137% 140% 33%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT QUALITY BOND TRUST
-------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1992 1991** 1990 1989 1988
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 11.33 $ 10.74 $ 12.37 $ 11.55 $ 10.79
Income from investment operations:
Net investment income (B) ............ 0.63 0.76 1.12 0.75 0.57
Net realized and unrealized gain
(loss) on investments .............. 0.15 0.85 (1.50) 0.51 0.19
----------- ----------- ----------- ----------- -----------
Total from investment operations... 0.78 1.61 (0.38) 1.26 0.76
Less distributions:
Dividends from net investment income.. (0.53) (1.02) (1.25) (0.44) --
----------- ----------- ----------- ----------- -----------
Total distributions ............... (0.53) (1.02) (1.25) (0.44) --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ......... $ 11.58 $ 11.33 $ 10.74 $ 12.37 $ 11.55
=========== =========== =========== =========== ===========
Total return ...................... 7.21% 16.07% (2.73%) 11.34% 7.09%
Net assets, end of period (000's) ...... $ 60,185 $ 38,896 $ 20,472 $ 26,965 $ 114,221
Ratio of operating expenses to
average net assets (C) ............... 0.80% 0.85% 0.70% 0.83% 0.89%
Ratio of net investment income to
average net assets ................... 6.96% 7.47% 8.41% 8.77% 7.97%
Portfolio turnover rate ................ 59% 115% 120% 351% 94%
</TABLE>
- --------------------------
** The Investment Quality Bond Trust is the successor to the Bond Trust
effective April 23, 1991.
+ Non-annualized
(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.
39
<PAGE> 44
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES TRUST
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 --------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .......................... $ 13.32 $ 13.65 $ 12.64 $ 13.48 $ 13.05
Income from investment operations:
Net investment income (B) .......... 0.42 0.83 0.89 0.77 0.48
Net realized and unrealized gain
(loss) on investments ............ (0.02) (0.41) 0.99 (0.95) 0.49
----------- ----------- ----------- ----------- -----------
Total from investment operations 0.40 0.42 1.88 (0.18) 0.97
Less distributions:
Dividends from net investment income (0.88) (0.75) (0.87) (0.51) (0.46)
Distributions from capital gains ... -- -- -- (0.15) (0.08)
----------- ----------- ----------- ----------- -----------
Total distributions ............. (0.88) (0.75) (0.87) (0.66) (0.54)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ....... $ 12.84 $ 13.32 $ 13.65 $ 12.64 $ 13.48
=========== =========== =========== =========== ===========
Total return .................... 3.17%+ 3.38% 15.57% (1.25%) 7.64%
Net assets, end of period (000's) .... $ 210,126 $ 204,053 $ 216,788 $ 188,813 $ 222,072
Ratio of operating expenses to
average net assets (C) ............. 0.71%(A) 0.71% 0.71% 0.73% 0.75%
Ratio of net investment income to
average net assets ................. 6.37%(A) 6.36% 6.46% 5.68% 5.05%
Portfolio turnover rate .............. 110%(A) 178% 212% 387% 213%
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES TRUST
-------------------------------------------------------------
YEARS ENDED DECEMBER 31, 03/18/88*
-------------------------------------------------------------- TO
1992 1991 1990 1989** 12/31/88
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .......................... $ 12.85 $ 11.83 $ 10.98 $ 9.81 $ 10.03
Income from investment operations:
Net investment income (B) .......... 0.10 0.19 1.07 0.20 0.07
Net realized and unrealized gain
(loss) on investments ............ 0.65 1.40 (0.13) 1.08 (0.29)
----------- ----------- ----------- ----------- -----------
Total from investment operations 0.75 1.59 0.94 1.28 (0.22)
Less distributions:
Dividends from net investment income (0.38) (0.53) (0.08) (0.11) --
Distributions from capital gains ... (0.17) (0.04) (0.01) -- --
----------- ----------- ----------- ----------- -----------
Total distributions ............. (0.55) (0.57) (0.09) (0.11) --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ....... $ 13.05 $ 12.85 $ 11.83 $ 10.98 $ 9.81
=========== =========== =========== =========== ===========
Total return .................... 6.19% 14.01% 8.63% 13.16% (2.19%)+
Net assets, end of period (000's) .... $ 125,945 $ 29,246 $ 10,469 $ 5,905 $ 344
Ratio of operating expenses to
average net assets (C) ............. 0.76% 0.87% 1.04% 0.90% 5.16%(A)
Ratio of net investment income to
average net assets ................. 6.12% 7.09% 7.70% 6.66% 1.16%(A)
Portfolio turnover rate .............. 141% 233% 284% 330% 156%(A)
</TABLE>
- -----------------------------
* Commencement of operations.
** The U.S. Government Securities Trust is the successor to the Convertible
Securities Trust effective May 1, 1989.
+ Non-annualized
(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.
40
<PAGE> 45
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET TRUST
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
06/30/97 --------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .......................... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from investment operations:
Net investment income (B) .......... 0.24 0.49 0.55 0.38 0.27
Less distributions:
Dividends from net investment income (0.24) (0.49) (0.55) (0.38) (0.27)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ....... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
=========== =========== =========== =========== ===========
Total return .................... 2.48%+ 5.05% 5.62% 3.78% 2.69%
Net assets, end of period (000's) .... $ 427,863 $ 363,566 $ 258,117 $ 276,674 $ 132,274
Ratio of operating expenses to
average net assets (C) ............. 0.53%(A) 0.55% 0.54% 0.57% 0.59%
Ratio of net investment income to
average net assets ................. 4.91%(A) 4.97% 5.48% 3.93% 2.66%
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET TRUST
-------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1992 1991 1990 1989 1988
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .......................... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from investment operations:
Net investment income (B) .......... 0.33 0.56 0.75 0.72 0.57
Less distributions:
Dividends from net investment income (0.33) (0.56) (0.75) (0.72) (0.57)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ....... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
=========== =========== =========== =========== ===========
Total return .................... 3.36% 5.71% 7.76% 8.56% 6.77%
Net assets, end of period (000's) .... $ 89,535 $ 79,069 $ 85,040 $ 19,403 $ 12,268
Ratio of operating expenses to
average net assets (C) ............. 0.60% 0.60% 0.57% 0.79% 0.99%
Ratio of net investment income to
average net assets ................. 3.28% 5.65% 7.27% 8.26% 6.68%
</TABLE>
- ---------------------------------
+ Non-annualized
(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.
41
<PAGE> 46
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIFESTYLE
AGGRESSIVE 1000 TRUST
---------------------
01/01/97*
TO
06/30/97
(UNAUDITED)
----------
<S> <C>
Net asset value, beginning
of period ........................... $ 12.50
Income from investment operations:
Net investment income (B) .......... 0.32
Net realized and unrealized gain
on investments ................... 0.57
----------
Total from investment
operations ................... 0.89
Less distributions:
Dividends from net investment income (0.32)
----------
Net asset value, end of period ........ $ 13.07
==========
Total return ................... 8.86%+
Net assets, end of period (000's) ..... $ 21,420
Ratio of operating expenses to
average net assets (C) .............. 0.00%(A)
Ratio of net investment income to
average net assets .................. 4.11%(A)
Portfolio turnover rate ............... 30%(A)
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) After investment adviser expense reimbursement per share of $0.001 for the
six months ended June 30, 1997.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser, was 0.02% for the six months ended June 30, 1997.
42
<PAGE> 47
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
LIFESTYLE
GROWTH 820 TRUST
----------------
01/01/97*
TO
06/30/97
(UNAUDITED)
-----------
<S> <C>
Net asset value, beginning
of period ........................... $ 12.50
Income from investment operations:
Net investment income (B) .......... 0.32
Net realized and unrealized gain
on investments ................... 0.77
----------
Total from investment
operations ................... 1.09
Less distributions:
Dividends from net investment income (0.32)
----------
Net asset value, end of period ........ $ 13.27
==========
Total return ................... 10.00%+
Net assets, end of period (000's) ..... $ 91,181
Ratio of operating expenses to
average net assets (C) .............. 0.00%(A)
Ratio of net investment income to
average net assets .................. 4.53%(A)
Portfolio turnover rate ............... 4%(A)
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) After investment adviser expense reimbursement per share of $0.001 for the
six months ended June 30, 1997.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser, was 0.01% for the six months ended June 30, 1997.
43
<PAGE> 48
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIFESTYLE
BALANCED 640 TRUST
------------------
01/01/97*
TO
06/30/97
(UNAUDITED)
----------
<S> <C>
Net asset value, beginning
of period ........................... $ 12.50
Income from investment operations:
Net investment income (B) .......... 0.52
Net realized and unrealized gain
on investments ................... 0.49
----------
Total from investment
operations ................... 1.01
Less distributions:
Dividends from net investment income (0.52)
----------
Net asset value, end of period ........ $ 12.99
==========
Total return ................... 9.29%+
Net assets, end of period (000's) ..... $ 70,925
Ratio of operating expenses to
average net assets (C) .............. 0.00%(A)
Ratio of net investment income to
average net assets .................. 8.10%(A)
Portfolio turnover rate ............... 9%(A)
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) After investment adviser expense reimbursement per share of $0.001 for the
six months ended June 30, 1997.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser, was 0.02% for the six months ended June 30, 1997.
44
<PAGE> 49
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIFESTYLE
MODERATE 460 TRUST
------------------
01/01/97*
TO
06/30/97
(UNAUDITED)
----------
<S> <C>
Net asset value, beginning
of period ........................... $ 12.50
Income from investment operations:
Net investment income (B) .......... 0.64
Net realized and unrealized gain
on investments ................... 0.30
----------
Total from investment
operations ................... 0.94
Less distributions:
Dividends from net investment income (0.64)
----------
Net asset value, end of period ........ $ 12.80
==========
Total return ................... 8.54%+
Net assets, end of period (000's) ..... $ 20,553
Ratio of operating expenses to
average net assets (C) .............. 0.00%(A)
Ratio of net investment income to
average net assets .................. 9.57%(A)
Portfolio turnover rate ............... 7%(A)
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) After investment adviser expense reimbursement per share of $0.001 for the
six months ended June 30, 1997.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser, was 0.02% for the six months ended June 30, 1997.
45
<PAGE> 50
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIFESTYLE
CONSERVATIVE 280 TRUST
----------------------
01/01/97*
TO
06/30/97
(UNAUDITED)
---------
<S> <C>
Net asset value, beginning
of period ........................... $ 12.50
Income from investment operations:
Net investment income (B) .......... 0.81
Net realized and unrealized loss
on investments ................... (0.11)
---------
Total from investment
operations ................... 0.70
Less distributions:
Dividends from net investment income (0.81)
---------
Net asset value, end of period ........ $ 12.39
=========
Total return ................... 6.43%+
Net assets, end of period (000's) ..... $ 7,615
Ratio of operating expenses to
average net assets (C) .............. 0.00%(A)
Ratio of net investment income to
average net assets .................. 15.29%(A)
Portfolio turnover rate ............... 13%(A)
</TABLE>
- -----------------------------
* Commencement of operations.
+ Non-annualized
(A) Annualized
(B) After investment adviser expense reimbursement per share of $0.002 for the
six months ended June 30, 1997.
(C) The ratio of operating expenses, before reimbursement from the investment
adviser, was 0.03% for the six months ended June 30, 1997.
46
<PAGE> 51
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
and certain other 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.
PACIFIC RIM EMERGING MARKETS TRUST
The investment objective of the Pacific Rim Emerging Markets Trust is to
achieve long-term growth of capital. MAC manages the Pacific Rim Emerging
Markets Trust and seeks to achieve this investment objective by investing in a
diversified portfolio that is comprised primarily of common stocks and
equity-related securities of corporations domiciled in countries in the Pacific
Rim region. Current income from dividends and interest will not be an important
consideration in the selection of portfolio securities.
In pursuit of its investment objective, the Pacific Rim Emerging Markets
Trust will vary the geographical distribution of its investments based upon the
continuous evaluation of political, economic and market trends throughout the
world. Investments will be shifted among the world's capital markets in
accordance with the ongoing analyses of trends and developments affecting such
markets and securities. The Pacific Rim Emerging Markets Trust will invest
primarily in companies domiciled in potentially all countries of the Pacific Rim
region. As used herein, the countries of the Pacific Rim region are India,
Pakistan, Japan, Hong Kong, Singapore, Malaysia, Thailand, Indonesia, Australia,
South Korea, Taiwan, Philippines, New Zealand and China.
The Pacific Rim Emerging Markets Trust will, under normal conditions,
invest at least 65% of its net assets in common stocks and equity-related
securities of established larger-capitalization non-U.S. companies located in
the Pacific Rim region that have attractive long-term prospects for growth of
capital. Equity-related securities in which the portfolio may invest include:
preferred stocks, warrants (see "RISK FACTORS -- Warrants" for further
information on warrants) and securities convertible into or exchangeable into
common stocks.
The Pacific Rim Emerging Markets Trust may, for defensive purposes, invest
all or a portion of its assets in non-convertible fixed income securities
denominated in U.S. and non-U.S. dollars. These non-convertible fixed income
securities will include debt of corporations, foreign governments and
supranational organizations. The portfolio may also maintain a portion of its
assets in cash or short term debt securities pending the selection of certain
long-term investments.
The Pacific Rim Emerging Markets Trust will be subject to special risks as
a result of its ability to invest up to 100% of its total assets in foreign
securities. These risks are described under the caption "RISK FACTORS -- Foreign
Securities" in this Prospectus. Moreover, substantial investments in foreign
securities may have adverse tax implications as described under "GENERAL
INFORMATION -- Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions
The Pacific Rim Emerging Markets Trust may also purchase and sell the
following equity-related financial instruments: exchange-listed call and put
options on equity indices, over-the-counter ("OTC") and exchange-listed equity
index futures, OTC and exchange-listed call and put options on various
47
<PAGE> 52
currencies in the portfolio, and OTC foreign currency futures contracts on
various currencies in the portfolio. (A call option gives the holder the right
to buy shares of the underlying security at a fixed price before a specified
date in the future. A put option gives the holder the right to sell a specified
number of shares of the underlying security at a particular price within a
specified time period.) The Statement of Additional Information contains a
description of these strategies and of certain risks associated therewith.
SCIENCE & TECHNOLOGY TRUST
The investment objective of the Science & Technology Trust is long-term
growth of capital. Current income is incidental to the portfolio's objective. T.
Rowe Price manages the Science & Technology Trust.
The Science & Technology Trust will invest at least 65% of its total
assets in the common stocks of companies expected to benefit from the
development, advancement, and use of science and technology. Industries likely
to be represented in the portfolio include computers and peripheral products,
software, electronic components and systems, telecommunications, media and
information services, pharmaceuticals, hospital supply and medical devices,
biotechnology, environmental services, chemicals and synthetic materials, and
defense and aerospace. Investments may also include companies that should
benefit from the commercialization of technological advances even if they are
not directly involved in research and development.
Most of the assets of the Science & Technology Trust will be invested in
U.S. common stocks. However, the portfolio may also purchase other types of
securities, for example, foreign securities, convertible stocks and bonds, and
warrants, when considered consistent with the portfolio's investment objective
and program. The portfolio will hold a certain portion of its assets in U.S. and
foreign dollar-denominated money market securities, including repurchase
agreements, in the two highest rating categories, maturing in one year or less.
For temporary, defensive purposes, the portfolio may invest without limitation
in such securities. This reserve position provides flexibility in meeting
redemptions, expenses, and the timing of new investments and serves as a
short-term defense during periods of unusual market volatility.
Stock selection for the portfolio is not based on company size but rather
on an assessment of the company's fundamental prospects. As a result, holdings
can range from small companies developing new technologies or pursuing
scientific breakthroughs to large, blue chip firms with established track
records of developing and marketing such advances.
Companies in the rapidly changing fields of science and technology face
special risks. For example, their products or services may not prove
commercially successful or may become obsolete quickly. Therefore, a portfolio
of these stocks will likely be more volatile in price than one with broader
diversification that includes investments in more economic sectors. The level of
risk will be increased to the extent that the portfolio has significant exposure
to smaller or unseasoned companies (those with less than a three-year operating
history). See "RISK FACTORS - Small Company and Emerging Growth Securities" for
a discussion of the risks involved with investing in these securities.
The Science & Technology Trust may also engage in a variety of investment
management practices, such as buying and selling futures and options. The
portfolio may invest up to 10% of its total assets in hybrid instruments, which
are a type of high-risk derivative which can combine the characteristics of
securities, futures and options. For example, the principal amount, redemption
or conversion terms of a security could be related to the market price of some
commodity, currency or securities index. Such securities may bear interest or
pay dividends at below market (or even relatively nominal) rates. The Statement
of Additional Information contains a fuller description of such instruments and
the risks associated therewith.
The Science & Technology Trust will be subject to special risks as a
result of its ability to invest up to 30% of its total assets in foreign
securities. These include non-dollar-denominated securities traded outside of
the U.S. and dollar-denominated securities of foreign issuers traded in the U.S.
(such as ADRs). See "RISK FACTORS -- Foreign Securities" in this Prospectus for
a description of these risks as well as a definition of ADRs. Moreover,
substantial investments in foreign securities may have adverse tax implications
as described under "GENERAL INFORMATION -- Taxes" in this Prospectus.
48
<PAGE> 53
Use of Hedging and Other Strategic Transactions
The Science & Technology 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.
INTERNATIONAL SMALL CAP TRUST
The investment objective of the International Small Cap Trust is to seek
long term capital appreciation. Founders 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 ("small company securities"). These securities
may represent companies in both established and emerging economies throughout
the world. For a discussion of the risks of investing in small company
securities see "RISK FACTORS - Small Company and Emerging Growth Securities."
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
capital appreciation.
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. At no time will the portfolio
have more than 5% of its total assets invested in any fixed-income securities
(excluding preferred stocks) which are unrated or are rated below investment
grade either at the time of purchase or as a result of a reduction in rating
after purchase. The portfolio is not required to dispose of debt securities
whose ratings are downgraded below these ratings subsequent to the portfolio's
purchase of the securities, unless such a disposition is necessary to reduce the
portfolio's holdings of such securities to less than 5% of its total assets. 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 up to 100% of its assets
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. The portfolio may
also acquire certificates of deposit and bankers' acceptances of banks which
meet criteria established by the Trust's Trustees. 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 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."
49
<PAGE> 54
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 issued
by 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, Australia, Austria, Belgium, Bolivia, Brazil, Chile, China, Colombia,
Costa Rica, Croatia, Czech Republic, Denmark, Ecuador, Egypt, Finland, Greece,
Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Jordan, Malaysia,
Mexico, Netherlands, New Zealand, Nigeria, North Korea, Norway, Pakistan,
Paraguay, Peru, Philippines, Poland, Portugal, Singapore, Slovak Republic. South
Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand,
Turkey, Uruguay, 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.
Since the International Small Cap Trust's assets will be invested
primarily in foreign securities and since substantially all of the portfolio's
revenues will be received in foreign currencies, the portfolio's net asset
values will be affected by changes in currency exchange rates. The portfolio
will pay dividends in dollars and will incur currency conversion costs.
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.
EMERGING GROWTH TRUST
The investment objective of the Emerging Growth Trust is maximum capital
appreciation. Warburg manages the Emerging Growth Trust and will pursue this
objective by investing primarily in a portfolio of equity securities of domestic
companies.
The Emerging Growth Trust ordinarily will invest at least 65% of its total
assets in common stocks or warrants of emerging growth companies that represent
attractive opportunities for maximum capital appreciation. Emerging growth
companies are small- or medium-sized companies that have passed their start-up
phase and that show positive earnings and prospects of achieving significant
profit and gain in a relatively short period of time.
The Emerging Growth Trust is classified as a non-diversified investment
company under the 1940 Act, which means that the portfolio is not limited by the
1940 Act in the proportion of its assets that it may invest in the obligations
of a single issuer. As a non-diversified investment company, the portfolio may
invest a greater proportion of its assets in the obligations of a small number
of issuers and, as a result, may be subject to greater risk with respect to
portfolio securities. To the extent that the portfolio assumes large positions
in the securities of a small number of issuers, its return may fluctuate to a
greater extent than that of a diversified company as a result of changes in the
financial condition or in the market's assessment of the issuers.
Although under current market conditions the Emerging Growth Trust expects
to invest in companies having stock market capitalizations of up to
approximately $500 million, the portfolio may invest in emerging growth
companies without regard to their market capitalization. Emerging growth
companies generally stand to benefit from new products or services,
technological developments or changes in management and other factors and
include smaller companies experiencing unusual developments affecting their
market value. These "special situation companies" include companies that are
involved in the following: an acquisition or consolidation; a reorganization; a
recapitalization; a merger, liquidation, or distribution of cash, securities or
other assets; a tender or exchange offer; a breakup or workout of a holding
company; litigation which, if resolved favorably, would improve the value of the
company's stock; or a change in corporate control. For a discussion of the risks
involved with investing in securities of emerging growth companies see "RISK
FACTORS - Small Company and Emerging Growth Securities."
50
<PAGE> 55
The Emerging Growth Trust may invest up to 20% of its total assets in
investment grade debt securities (other than money market obligations) and
preferred stocks that are not convertible into common stock for the purpose of
seeking capital appreciation. The interest income to be derived may be
considered as one factor in selecting debt securities for investment by Warburg.
Because the market value of debt obligations can be expected to vary inversely
to changes in prevailing interest rates, investing in debt obligations may
provide an opportunity for capital appreciation when interest rates are expected
to decline. The success of such a strategy is dependent upon Warburg's ability
to accurately forecast changes in interest rates. The market value of debt
obligations may also be expected to vary depending upon, among other factors,
the ability of the issuer to repay principal and interest, any change in
investment rating and general economic conditions.
A security will be deemed to be investment grade if it is rated within the
four highest grades by Moody's or S&P or, if unrated, is determined to be of
comparable quality by Warburg. Bonds rated in the fourth highest grade may have
speculative characteristics and 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. Subsequent to
its purchase by the portfolio, an issue of securities may cease to be rated or
its rating may be reduced below the minimum required for purchase by the
portfolio. Neither event will require sale of such securities, although Warburg
will consider such event in its determination of whether the portfolio should
continue to hold the securities.
When Warburg believes that a defensive posture is warranted, the Emerging
Growth Trust may invest temporarily without limit in investment grade debt
obligations and in domestic and foreign money market obligations, including
repurchase agreements.
The Emerging Growth Trust is authorized to invest, under normal market
conditions, up to 20% of its total assets in domestic and foreign short-term
(one year or less remaining to maturity) and medium-term (five years or less
remaining to maturity) money market obligations and for temporary defensive
purposes may invest in these securities without limit. These instruments consist
of obligations issued or guaranteed by the U.S. government or a foreign
government, their agencies or instrumentalities; bank obligations (including
certificates of deposit, time deposits and bankers' acceptances of domestic or
foreign banks, domestic savings and loans and similar institutions) that are
high quality investments or, if unrated, deemed by Warburg to be high quality
investments; commercial paper rated no lower than A-2 by S&P or Prime-2 by
Moody's or the equivalent from another major rating service or, if unrated, of
an issuer having an outstanding, unsecured debt issue then rated within the
three highest rating categories; and repurchase agreements with respect to the
foregoing.
The Emerging Growth Trust will be subject to certain risks as a result of
its ability to invest up to 20% of its total assets in the securities of foreign
issuers. These risks are described under the caption "RISK FACTORS -- Foreign
Securities" in this Prospectus. Moreover, substantial investments in foreign
securities may have adverse tax implications as described under "GENERAL
INFORMATION --Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions The Emerging Growth Trust
is currently authorized to use all of the investment strategies referred to
under "Hedging and Other Strategic Transactions." However, it is not presently
contemplated that any of these strategies will be used to a significant degree
by the portfolio.
PILGRIM BAXTER GROWTH TRUST
The investment objective of the Pilgrim Baxter Growth Trust is capital
appreciation. PBHG manages the Pilgrim Baxter Growth Trust and seeks to achieve
its objective by investing in companies believed by the Subadviser to have an
outlook for strong earnings growth and the potential for significant capital
appreciation.
The Pilgrim Baxter Growth Trust will normally be as fully invested as
practicable in common stocks and securities convertible into common stocks, but
also may invest up to 5% of its assets in warrants and rights to purchase common
stocks. In the opinion of PBHG, there may be times when the shareholders'
interests are best served and the investment objective is more likely to be
achieved by having varying amounts of the portfolio's assets invested in
convertible securities.
51
<PAGE> 56
Under normal market conditions, the Pilgrim Baxter Growth Trust will
invest at least 65% of its total assets in common stocks and convertible
securities of small and medium sized growth companies (market capitalization or
annual revenues up to $2 billion). At certain times that percentage may be
substantially higher. The average market capitalizations or annual revenues of
holdings in the portfolio may, however, fluctuate over time as a result of
market valuation levels and the availability of specific investment
opportunities. In addition, the portfolio may continue to hold securities of
companies whose market capitalizations or annual revenues grow above $2 billion
subsequent to purchase, if the company continues to satisfy the other investment
policies of the portfolio.
PBHG tries to keep the portfolio fully invested at all times. However, for
temporary defensive purposes, when PBHG determines that market conditions
warrant, each portfolio may invest up to 100% of its assets in cash and money
market instruments (consisting of securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; certificates of deposit, time
deposits and bankers' acceptances issued by banks or savings and loan
associations having net assets of at least $500 million as stated on their most
recently published financial statements; commercial paper rated in one of the
two highest rating categories by at least one nationally recognized statistical
rating organization ("NRSRO"); repurchase agreements involving such securities;
and, to the extent permitted by applicable law and the portfolio's investment
restrictions, shares of other investment companies investing solely in money
market securities). To the extent the portfolio is invested in temporary
defensive instruments, it will not be pursuing its investment objective.
PBHG's investment process in managing the assets of the Pilgrim Baxter
Growth Trust is both quantitative and fundamental, and is extremely focused on
quality earnings growth. In seeking to identify investment opportunities for the
portfolio, PBHG begins by creating a universe of rapidly growing companies with
market capitalizations within the parameters described above and that possess
certain quality characteristics. Using proprietary software and research models
that incorporate important attributes of successful growth, such as positive
earnings surprises, upward earnings estimate revisions, and accelerating sales
and earnings growth, PBHG creates a universe of growing companies. Then, using
fundamental research, PBHG evaluates each company's earnings quality and
assesses the sustainability of the company's current growth trends. Through this
highly disciplined process, the Subadviser seeks to construct an investment
portfolio that possesses strong growth characteristics.
While PBHG intends to invest in small capitalization companies that have
strong balance sheets and that PBHG's research indicates should exceed consensus
earnings expectations, any investment in small capitalization companies involves
greater risk and price volatility than that customarily associated with
investments in larger, more established companies. For information on the risks
associated with investing in securities of small capitalization companies see
"RISK FACTORS Small Company and Emerging Growth Securities."
Securities will be sold when PBHG believes that anticipated appreciation
is no longer probable, alternative investments offer superior appreciation
prospects, or the risk of a decline in market price is too great. Because of its
policy with respect to the sales of investments, the Pilgrim Baxter Growth Trust
may from time to time realize short-term gains or losses. The portfolio will
likely have somewhat greater volatility than the stock market in general, as
measured by the S&P 500 Index.
Normally, the Pilgrim Baxter Growth Trust will purchase only securities
traded in the United States or Canada on registered exchanges or in the
over-the-counter market. The portfolio may invest up to 15% of its total assets
in securities of foreign issuers (including ADRs). To the extent the portfolio
invests in foreign securities, it will be subject to certain risks as described
under the caption "RISK FACTORS -- Foreign Securities" in this Prospectus.
Use of Hedging and Other Strategic Transactions
The Pilgrim Baxter Growth Trust is currently authorized to use all of the
investment strategies referred to under "Hedging and Other Strategic
Transactions." With the exception of forward foreign currency contracts,
however, it is not presently contemplated that any of these strategies will be
used to a significant degree by the portfolio. (Forward foreign currency
contracts are the purchase of a fixed quantity of foreign currency at a future
date at a price set at the time of the contract.) The Statement of Additional
Information contains a description of these strategies and certain risks
associated therewith.
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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. For the risks associated with investing in
securities of small companies see "RISK FACTORS - Small Company and Emerging
Growth Securities."
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 of 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-denominated 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.
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 STOCK TRUST
The investment objective of the International Stock Trust is long-term
growth of capital. Price-Fleming manages the International Stock Trust and seeks
to attain this objective by investing primarily in common stocks of established,
non-U.S. companies. The portfolio expects to invest substantially all of its
assets outside the U.S. and to diversify broadly among countries throughout the
world -- developed, newly industrialized, and emerging. The portfolio will
invest in at least three countries outside the United States.
The International Stock Trust expects to invest substantially all of its
assets in common stocks. However, the portfolio may also invest in a variety of
other equity-related securities, such as preferred stocks, warrants and
convertible securities, as well as corporate and governmental debt securities,
when considered consistent with the portfolio's investment objectives and
program. Under normal market conditions, the portfolio's investment in
securities other than common stocks is limited to no more than 35% of total
assets. However, for temporary defensive purposes, the portfolio may invest all
or a
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significant portion of its assets in U.S. Government and corporate debt
obligations. The portfolio will not purchase any debt security which at the time
of purchase is rated below investment grade. This would not prevent the
portfolio from retaining a security downgraded to below investment grade after
purchase.
The International Stock Trust will hold a certain portion of its assets in
U.S. and foreign dollar-denominated money market securities, including
repurchase agreements, in the two highest rating categories, maturing in one
year or less. For temporary, defensive purposes, the portfolio may invest
without limitation in such securities. This reserve position provides
flexibility in meeting redemptions, expenses, and the timing of new investments
and serves as a short-term defense during periods of unusual market volatility.
Price-Fleming uses a "bottom-up" approach to stock selection based on
fundamental research. A company's prospects for achieving and sustaining
above-average, long-term earnings growth is generally the Subadviser's primary
focus. However, valuation factors, such as price/earnings, price/cash flow, and
price/book are also important considerations. In conjunction with identifying
potential stocks for investment, external factors are also reviewed. For
example, a country's or region's political, economic, and financial status helps
shape the outlook for individual stocks and also affects decisions regarding the
prudent level of overall exposure to particular areas.
It is the present intention of Price-Fleming to invest in companies based
in (or governments of or within) the Far East (for example, Japan, Hong Kong,
Singapore, and Malaysia), Europe (for example, United Kingdom, Germany, Hungary,
Poland, Netherlands, France, Spain, and Switzerland), South Africa, Australia,
Canada, Latin America, and such other areas and countries as Price-Fleming may
determine from time to time.
In determining the appropriate distribution of investments among various
countries and geographic regions, Price-Fleming ordinarily considers the
following factors: prospects for relative economic growth between foreign
countries; expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and the range of
individual investment opportunities available to international investors. In
analyzing companies for investment, Price-Fleming ordinarily looks for one or
more of the following characteristics: an above-average earnings growth per
share; high return on invested capital; healthy balance sheet; sound financial
and accounting policies and overall financial strength; strong competitive
advantages; effective research and product development and marketing; efficient
service; pricing flexibility; strength of management; and general operating
characteristics which will enable the companies to compete successfully in their
market place.
While current dividend income is not a prerequisite in the selection of
International Stock Trust companies, the companies in which the portfolio
invests normally will have a record of paying dividends, and will generally be
expected to increase the amounts of such dividends in future years as earnings
increase. It is expected that the portfolio's investments will ordinarily be
traded on exchanges located at least in the respective countries in which the
various issuers of such securities are principally based.
The International Stock Trust may purchase the securities of certain
foreign investment portfolios or trusts called passive foreign investment
companies. Such trusts have been the only or primary way to invest in certain
countries. In addition to bearing their proportionate share of the trust's
expenses (management fees and operating expenses), shareholders will also
indirectly bear similar expenses of such trusts. Capital gains on the sale of
such holdings are considered ordinary income regardless of how long the
portfolio held its investment. In addition, the portfolio may be subject to
corporate income tax and an interest charge on certain dividends and capital
gains earned from these investments, regardless of whether such income and gains
are distributed to shareholders. To avoid such tax and interest, the portfolio
intends to treat these securities as sold on the last day of its fiscal year and
recognize any gains for tax purposes at that time; losses will not be
recognized. Such gains will be considered ordinary income, which the portfolio
will be required to distribute even though it has not sold the security.
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The International Stock Trust may also engage in a variety of investment
management practices, such as buying and selling futures and options and
engaging in foreign currency exchange contracts. The portfolio may invest up to
10% of its total assets in hybrid instruments, which are a type of high-risk
derivative which can combine the characteristics of securities, futures and
options. For example, the principal amount, redemption or conversion terms of a
security could be related to the market price of some commodity, currency or
securities index. Such securities may bear interest or pay dividends at below
market (or even relatively nominal) rates. The Statement of Additional
Information contains a fuller description of such instruments and the risks
associated therewith.
The International Stock Trust will be subject to special risks as a result
of its ability to invest up to 100% of its total assets in foreign securities.
These include non-dollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
ADRs). These risks are described under the caption "RISK FACTORS -- Foreign
Securities" in this Prospectus. Moreover, substantial investments in foreign
securities may have adverse tax implications as described under "GENERAL
INFORMATION -- Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions
The International Stock 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.
WORLDWIDE GROWTH TRUST
The investment objective of the Worldwide Growth Trust is long-term growth
of capital. Founders manages the Worldwide Growth Trust and seeks to attain this
objective by normally investing at least 65% of its total assets in equity
securities of growth companies in a variety of markets throughout the world.
The Worldwide Growth Trust will emphasize common stocks of both emerging
and established growth companies that generally have proven performance records
and strong market positions. The portfolio's holdings will usually consist of
investments in companies in various countries throughout the world, but it will
always invest at least 65% of its total assets in three or more countries. The
portfolio will not invest more than 50% of its total assets in the securities of
any one foreign country.
The Worldwide Growth Trust has the ability to purchase securities in any
foreign country as well as in the United States. Foreign investments of the
portfolio 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 are expected to be more volatile and more
uncertain as to payments of interest and principal. 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.
Since the Worldwide Growth Trust's assets will be invested primarily in
foreign securities and since substantially all of the portfolio's revenues will
be received in foreign currencies, the portfolio's net asset values will be
affected by changes in currency exchange rates. The portfolio will pay dividends
in dollars and will incur currency conversion costs.
The Worldwide Growth Trust may invest in convertible securities, preferred
stocks, bonds, debentures, and other corporate obligations when Founders
believes that these investments offer opportunities for capital appreciation.
Current income will not be a substantial factor in the selection of these
securities.
The portfolio will only invest in bonds, debentures, and corporate
obligations -- other than convertible securities and preferred stocks -- rated
investment grade (BBB or higher) 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
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securities limits risk to a level similar to that of securities eligible for
purchase by the portfolio rated in categories no lower than B. At no time will
the portfolio have more than 5% of its total assets invested in any fixed-income
securities (excluding preferred stocks) which are unrated or are rated below
investment grade either at the time of purchase or as a result of a reduction in
rating after purchase. The portfolio is not required to dispose of debt
securities whose ratings are downgraded below these ratings subsequent to the
portfolio's purchase of the securities, unless such a disposition is necessary
to reduce the portfolio's holdings of such securities to less than 5% of its
total assets. 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.
Up to 100% of the assets of the Worldwide Growth Trust may be invested
temporarily in 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, in cash,
or in other cash equivalents, if Founders determines it to be appropriate for
purposes of enhancing liquidity or preserving capital in light of prevailing
market or economic conditions. The portfolio may also acquire certificates of
deposit and bankers' acceptances of banks which meet criteria established by the
Trust's Trustees. While 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 equity investments.
The Worldwide Growth Trust may invest in the securities of small and
medium-sized companies. The Subadviser considers small and medium-sized
companies to be 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 sized companies involve greater risk than is customarily
associated with more established companies. For a description of these risks see
"RISK FACTORS - Small Company and Emerging Growth Securities."
The Worldwide Growth Trust will be subject to special risks as a result of
its ability to invest up to 100% of its total assets in foreign securities.
These risks are described under the caption "RISK FACTORS -- Foreign Securities"
in this Prospectus. Moreover, substantial investments in foreign securities may
have adverse tax implications as described under "GENERAL INFORMATION -- Taxes"
in this Prospectus.
Use of Hedging and Other Strategic Transactions
The Worldwide Growth 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.
GLOBAL EQUITY TRUST
The investment objective of the Global Equity Trust is long-term capital
appreciation. Morgan Stanley manages the Global Equity Trust and seeks to attain
this objective by investing primarily in common and preferred stocks,
convertible securities, rights and warrants to purchase common stocks, American
and Global Depository Receipts and other equity securities of issuers throughout
the world, including issuers in the U.S. and emerging market countries.
Under normal circumstances, at least 65% of the value of the total assets
of the Global Equity Trust will be invested in equity securities and at least
20% of the value of the portfolio's total assets will be invested in the common
stocks of U.S. issuers. The portfolio may also invest in money market
instruments. Although the portfolio intends to invest primarily in securities
listed on stock exchanges, it will also invest in equity securities that are
traded over-the-counter or that are not admitted to listing on a stock exchange
or dealt in on a regulated market. As a result of the absence of a public
trading market, such securities may pose liquidity risks.
The Subadviser's approach is oriented to individual stock selection and is
value driven. In selecting stocks for the portfolio, the Subadviser initially
identifies those stocks that it believes to be undervalued in relation to the
issuer's assets, cash flow, earnings and revenues, and then evaluates the future
value of such stocks by running the results of an in-depth study of the issuer
through a dividend
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discount model. In selecting investments, the Subadviser utilizes the research
of a number of sources, including Morgan Stanley Capital International, an
affiliate of the Subadviser located in Geneva, Switzerland. Portfolio holdings
are regularly reviewed and subjected to fundamental analysis to determine
whether they continue to conform to the Subadviser's value criteria. Equity
securities which no longer conform to such investment criteria will be sold.
Although the portfolio will not invest for short-term trading purposes,
investment securities may be sold from time to time without regard to the length
of time they have been held.
The Global Equity Trust may engage in forward foreign currency exchanges
and when-issued or delayed delivery securities.
The Global Equity Trust will be subject to special risks as a result of
its ability to invest up to 100% of its total assets in foreign securities.
These risks, including the risks of the possible increased likelihood of
expropriation or the return to power of a communist regime which would institute
policies to expropriate, nationalize or otherwise confiscate investments, are
described under the caption "RISK FACTORS -- Foreign Securities" in this
Prospectus. Moreover, substantial investments in foreign securities may have
adverse tax implications as described under "GENERAL INFORMATION -- Taxes" in
this Prospectus.
Use of Hedging and Other Strategic Transactions
The 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.
SMALL COMPANY VALUE TRUST
The investment objective of the Small Company Value Trust is to seek long
term growth of capital. Rosenberg manages the Small Company Value Trust and will
pursue this objective by investing in equity securities of smaller companies
which are traded principally in the markets of the United States. Because the
companies in which the Small Company Value Trust invests typically do not
distribute significant amounts of company earnings to shareholders, the Small
Company Value Trust's objective will place relatively greater emphasis on
capital appreciation than on current income.
Rosenberg seeks long term growth of capital through a quantitative stock
selection process. Rosenberg also attempts to control risk in the portfolio
relative to the securities constituting its relevant benchmark (currently, the
Russell 2000 Index). Rosenberg identifies and purchases those stocks which are
undervalued (i.e., stocks which are currently cheaper than stocks with similar
characteristics). Rosenberg does not seek to achieve extraordinary returns by
timing the market but rather seeks to construct a portfolio with characteristics
similar to those of the Small Company Value Trust's benchmark. These
characteristics include market capitalization, historic volatility or "beta" (a
stock's relative volatility) and industry weightings. In managing the portfolio,
Rosenberg utilizes several computer models to assess a company's fundamental
value and earnings potential as well as investor sentiment about the company.
For additional information on Rosenberg's computer models, general investment
philosophy and strategy, see "Additional Information Regarding Subadvisers" in
the Statement of Additional Information.
It is currently expected that, under normal circumstances, most (at least
80%) of the Small Company Value Trust's assets will be invested in common stocks
of companies with total market capitalization of less than $1 billion ("small
capitalization securities"). Investments in issues of small capitalization
securities may present greater opportunities for capital appreciation but may
also involve greater risk as discussed in "RISK FACTORS - Small Company
Securities."
To meet redemptions or pending investment in common stocks, the Small
Company Value Trust may also temporarily hold a portion of its assets not
invested in small capitalization securities in full faith and credit obligations
of the United States government (e.g. U.S. Treasury Bills) and in short-term
notes, commercial paper or other money market instruments of high quality (i.e.,
rated at least "A-2" or "AA" by Standard & Poor's ("S&P") or Prime 2 or "Aa" by
Moody's Investors Service, Inc. ("Moody's")) issued by
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companies having an outstanding debt issue rated at least "AA" by S&P or at
least "Aa" by Moody's, or determined by Rosenberg to be of comparable quality to
any of the foregoing.
The Small Company Value Trust may invest without limit in common stocks of
foreign issuers which are listed on a United States securities exchange or trade
in the United States in the OTC market. Investment in common stocks of foreign
issuers may involve certain special risks due to foreign economic, political and
legal developments. These risks are described under the caption "RISK FACTORS --
Foreign Securities" in this Prospectus. The Small Company Value Trust will not
invest in securities which are principally traded outside of the United States.
The Small Company Value Trust is designed for long-term investors willing
to assume above-average risk in return for above-average capital growth
potential.
Use of Hedging and Other Strategic Transactions The Small Company Value
Trust is currently authorized to use all of the investment strategies referred
to under "Hedging and Other Strategic Transactions."
EQUITY TRUST
The principal investment objective of the Equity Trust is growth of
capital. Current income is a secondary consideration although growth of income
may accompany growth of capital.
FMTC manages the Equity Trust and seeks to attain the foregoing objective
by investing primarily in common stocks of United States issuers or securities
convertible into or which carry the right to buy common stocks. It may also
invest to a limited degree, normally not in excess of 15% of the value of the
Equity Trust's total assets, in non-convertible preferred stocks and debt
securities. Portfolio securities may be selected with a view toward either
short-term or long-term capital growth. When in FMTC's opinion market or
economic conditions warrant a defensive posture, the Equity Trust may place any
portion of its assets in investment grade debt securities (i.e., the four
highest bond ratings assigned by Moody's or S&P), preferred stocks, Government
securities or cash. The fourth highest category of investment grade bonds has
some speculative characteristics and instruments with such ratings are subject
to greater fluctuations in value than more highly rated instruments as economic
conditions change. The Equity Trust is not required to dispose of such
instruments in the event they are downgraded. It may also maintain amounts in
cash or short-term debt securities pending selection of investments in
accordance with its policies.
The Equity Trust will invest primarily in securities listed on national
securities exchanges, but from time to time it may also purchase securities
traded in the "over the counter" market. The Equity Trust will be subject to
certain risks as a result of its ability to invest up to 20% of its assets in
foreign securities. These risks are described under the caption "Foreign
Securities" in this Prospectus. Moreover, substantial investments in foreign
securities may have adverse tax implications as described under "Taxes" in this
Prospectus.
Use of Hedging and Other Strategic Transactions
The Equity Trust is currently authorized to use all of the various
investment strategies referred to under "RISK FACTORS -- Hedging and Other
Strategic Transactions." However, it is not presently anticipated that any of
these strategies will be used to a significant degree by the portfolio. The
Statement of Additional Information contains a description of these strategies
and of certain risks associated therewith.
GROWTH TRUST
The investment objective of the Growth Trust is to seek long-term growth
of capital. Founders manages the Growth Trust and will pursue this objective by
investing, under normal market conditions, at least 65% of its total assets in
common stocks of well-established, high-quality growth companies that Founders
believes have the potential to increase earnings faster than the rest of the
market. These companies tend to have strong performance records, solid market
positions and reasonable financial strength, and have continuous operating
records of three years or more.
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The Growth Trust may invest in convertible securities, preferred stocks,
bonds, debentures and other corporate obligations when Founders believes that
these investments offer opportunities for capital appreciation. Current income
will not be a substantial factor in the selection of these securities. The
Growth Trust will only invest in bonds, debentures and corporate
obligations--other than convertible securities and preferred stock--rated
investment-grade (Baa or higher by Moody's and BBB or higher by S&P) or, if
unrated, of comparable quality in the opinion of Founders at the time of
purchase. Convertible securities and preferred stocks purchased by the Trust may
be rated in medium and lower categories by Moody's or S&P (Ba or lower by
Moody's and BB or lower by S&P) but will not be rated lower than B. The Growth
Trust may also invest in unrated convertible securities and preferred stocks in
instances in which Founders believes that the financial condition of the issuer
or the protection afforded by the terms of the securities limits risk to a level
similar to that of securities rated in categories no lower than B. At no time
will the portfolio have more than 5% of its total assets invested in any
fixed-income securities (excluding preferred stocks) which are unrated or are
rated below investment grade either at the time of purchase or as a result of a
reduction in rating after purchase. The portfolio is not required to dispose of
debt securities whose ratings are downgraded below these ratings subsequent to
the portfolio's purchase of the securities, unless such a disposition is
necessary to reduce the portfolio's holdings of such securities to less than 5%
of its total assets. See "RISK FACTORS -- High Yield Securities."
The Growth Trust may invest up to 100% of its assets 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. The portfolio may also acquire certificates of
deposit and bankers' acceptances of banks which meet criteria established by the
Trust's Trustees. When the Growth Trust is in a defensive position, the
opportunity to achieve capital growth will be limited, and, to the extent that
this assessment of market conditions is incorrect, the Growth Trust will be
foregoing the opportunity to benefit from capital growth resulting from
increases in the value of equity investments and may not achieve its investment
objective.
Foreign Securities. The Growth Trust may invest without limit in ADRs and
up to 30% of its total assets in foreign securities (other than ADRs), with no
more than 25% invested in any one foreign country. The Growth Trust will be
subject to certain risks as a result of these investments. These risks are
described under the caption "RISK FACTORS -- Foreign Securities" in this
Prospectus. Moreover, substantial investments in foreign securities may have
adverse tax implications as described under "GENERAL INFORMATION -- Taxes" in
this Prospectus.
Use of Hedging and Other Strategic Transactions. The Growth Trust is
currently authorized to use all of the various investment strategies referred to
under "RISK FACTORS -- Hedging and Other Strategic Transactions." The Statement
of Additional Information contains a description of these strategies and of
certain risks associated therewith.
QUANTITATIVE EQUITY TRUST
The investment objective of the Quantitative Equity Trust (prior to
December 31, 1996, the "Common Stock Fund") is to achieve intermediate and
long-term growth through capital appreciation and current income by investing in
common stocks and other equity securities of well established companies with
promising prospects for providing an above average rate of return. MAC manages
the Quantitative Equity Trust.
In pursuit of its objective, the Quantitative Equity Trust will invest
principally in common stocks or in securities convertible into common stocks or
carrying rights or warrants to purchase common stock or to participate in
earnings. In selecting investments, emphasis will be placed on companies with
good financial resources, strong balance sheet, satisfactory rate of return on
capital, good industry position, superior management skills, and earnings that
tend to grow at above average rates. The Trust's investments are not limited to
any particular type or size of company, but high-quality growth and income
stocks are emphasized.
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Investments will be made primarily in securities listed on national
securities exchanges, but the Trust may purchase securities traded in the United
States over-the-counter market. When, in the opinion of management, market or
economic conditions warrant a defensive posture, the Trust may place all or a
portion of its assets in fixed-income securities. The Trust may also maintain a
portion of its assets in cash or short-term debt securities pending selection of
particular long-term investments. The Trust may purchase securities on a
forward-commitment, when-issued or delayed-delivery basis.
The Quantitative Equity Trust will be subject to certain risks as a result
of its ability to invest up to 100% of its total assets in the following types
of foreign securities: (i) U.S. dollar denominated obligations of foreign
branches of U.S. banks, (ii) securities represented by ADRs listed on a national
securities exchange or traded in the U.S. over-the-counter market, (iii)
securities of a corporation organized in a jurisdiction other than the U.S. and
listed on the New York Stock Exchange or NASDAQ or (iv) securities denominated
in U.S. dollars but issued by non U.S. issuers and issued under U.S. federal
securities regulations (for example, U.S. dollar denominated obligations issued
or guaranteed as to principal or interest by the Government of Canada or any
Canadian Crown agency). These risks are described under the caption "RISK
FACTORS -- Foreign Securities" in this Prospectus. Moreover, substantial
investments in foreign securities may have adverse tax implications as described
under "GENERAL INFORMATION -- Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions The Quantitative Equity
Trust does not presently use any of the investment strategies referred to under
"Hedging and Other Strategic Transactions."
EQUITY INDEX TRUST
The investment objective of the Equity Index Trust is to achieve
investment results which approximate the total return of publicly traded common
stocks in the aggregate, as represented by the Standard & Poor's 500 Composite
Stock Price Index (the "Index"). MAC manages the Equity Index Trust.
The Equity Index Trust is designed to provide an economical and convenient
means of maintaining a widely diversified investment in the United States equity
market as part of an overall investment strategy. The portfolio uses the Index
as its standard performance comparison because it represents more than 70% of
the total market value of all publicly traded common stocks in the United States
and is widely viewed among investors as representative of the performance of
publicly traded common stocks in the United States.
The Index is composed of 500 selected common stocks, over 95% of which are
listed on the New York Stock Exchange. The Index is an unmanaged index of common
stock prices. The performance of the Index is based on changes in the prices of
stocks comprising the Index and assumes the reinvestment of all dividends paid
on such stocks. Taxes, brokerage, commissions and other fees are disregarded in
computing the level of the Index. Standard & Poor's selects the stocks to be
included in the Index on a proprietary basis but does incorporate such factors
as the market capitalization and trading activity of each stock and its adequacy
as representative of stocks in a particular industry group. Stocks in the Index
are weighted according to their market capitalization (i.e., the number of
shares outstanding multiplied by the stock's current price).
The Index fluctuates in value with changes in the market value of the 500
stocks included in the Index at any point in time. An investment in the
Equity-Index Trust involves risks similar to the risks of investing directly in
the stocks included in the Index.
The Subadviser will not attempt to "manage" the Equity Index Trust in the
traditional portfolio management sense which generally involves the buying and
selling of securities based upon investment analysis of economic, financial and
market factors. Instead, the portfolio, utilizing a "passive" or "indexing"
investment approach, attempts to duplicate the performance of the Index. The
adverse financial situation of a company will not directly result in its
elimination from the portfolio unless, of course, the company in question is
removed from the Index. Conversely, the projected superior financial
- ----------
(1) "Standard & Poor's (R)", "S&P 500 (R)", "S&P (R)", "Standard & Poor's
500(R) and "500" are trademarks of McGraw-Hill, Inc.
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performance of a company would not normally lead to an increase in the
portfolio's holdings of the company. Under normal circumstances, the net assets
of the Equity Index Trust will be invested in any combination of the following
investments: 1) representative common stocks, 2) Standard & Poor's 500 Futures
Contracts and 3) Standard & Poor's Depository Receipts (R).
With regard to the portion of the Equity Index Trust invested in common
stocks, the method used to select investments for the portfolio involves
investing in common stocks in approximately the order of their respective market
value weightings in the Index, beginning with those having the highest
weightings. For diversification purposes, the portfolio can purchase stocks with
smaller weightings in order to represent other sectors of the Index. The
portfolio will invest only in those stocks, and in such amounts, as its
Subadviser deems necessary and appropriate in order for the portfolio to
approximate the performance of the Index.
There is no minimum or maximum number of stocks included in the Index
which the Equity Index Trust must hold. Under normal circumstances, it is
expected that the portion of the portfolio invested in stocks would hold between
300 and 500 different stocks included in the Index. The portfolio may compensate
for the omission of a stock that is included in the Index, or for purchasing
stocks in other than the same proportion that they are represented in the Index,
by purchasing stocks that are believed to have characteristics that correspond
to those of the omitted stocks. The portfolio may invest in short-term debt
securities to maintain liquidity or pending investment in stocks or Standard &
Poor's Stock Index Futures Contracts (S&P 500 Futures Contracts).
Tracking error is measured by the difference between the total return for
the Index and the total return for the portfolio after deductions of fees and
expenses. All tracking error deviations are reviewed to determine the
effectiveness of investment policies and techniques. Tracking error is reviewed
at least weekly and more frequently if such a review is indicated by significant
cash balance changes, market conditions or changes in the composition of the
Index. If deviation accuracy is not maintained, the Equity Index Trust will
rebalance its composition by selecting securities which, in the opinion of the
Subadviser, will provide a more representative sampling of the capitalization of
the securities in the Index as a whole or a more representative sampling of the
sector diversification in the Index.
S&P licenses certain trademarks and trade names to the Trust but disclaims
any responsibility or liability to the Trust and its shareholders. See Appendix
III for such disclaimer.
Use of Hedging and Other Strategic Transactions The Equity Index Trust may
(i) invest any portion of its net assets in S&P 500 Futures Contracts until the
portfolio reaches $25 million in net assets and (ii) once the portfolio reaches
$25 million in net assets, invest no more than 20% of its net assets in S&P 500
Futures Contracts. A description of this investment strategy appears under "RISK
FACTORS -- Hedging and Other Strategic Transactions" below in this Prospectus
and under "Hedging and Other Strategic Transactions" in the Statement of
Additional Information.
BLUE CHIP GROWTH TRUST
The primary investment objective of the Blue Chip Growth Trust (prior to
October 1, 1996, the "Pasadena Growth Trust") is to provide long-term growth of
capital. Current income is a secondary objective, and many of the stocks in the
portfolio are expected to pay dividends. T. Rowe Price manages the Blue Chip
Growth Trust.
The portfolio will invest at least 65% of its total assets in the common
stocks of large and medium-sized blue chip companies, as defined by T. Rowe
Price. These companies will be well established in their industries and have the
potential for above-average growth in earnings.
In identifying blue chip companies, T. Rowe Price will generally take the
following into consideration:
*Leading market positions. Blue chip companies often have leading market
positions that are expected to be maintained or enhanced over time. Strong
positions, particularly in growing industries, can give a company pricing
flexibility as well as the potential for good unit sales. These factors, in
turn, can lead to higher earnings growth and greater share price
appreciation.
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*Seasoned management teams. Seasoned management teams with a track record
of providing superior financial results are important for a company's
long-term growth prospects. T. Rowe Price analysts will evaluate the depth
and breadth of a company's management experience.
*Strong financial fundamentals. Companies should demonstrate faster
earnings growth than their competitors and the market in general; high
profit margins relative to competitors; strong cash flow; a healthy balance
sheet with relatively low debt; and a high return on equity with a
comparatively low dividend payout ratio.
Most of the assets of the portfolio will be invested in U.S. common
stocks. However, the portfolio may also purchase other types of securities, for
example, foreign securities, convertible stocks and bonds, and warrants, when
considered consistent with the portfolio's investment objective and program.
Investments in convertible securities, preferred stocks and debt securities are
limited to 25% of total assets. The portfolio will hold a certain portion of its
assets in U.S. and foreign dollar-denominated money market securities, including
repurchase agreements, in the two highest rating categories, maturing in one
year or less. For temporary, defensive purposes, the portfolio may invest
without limitation in such securities. This reserve position provides
flexibility in meeting redemptions, expenses, and the timing of new investments
and serves as a short-term defense during periods of unusual market volatility.
T. Rowe Price analysts evaluate the growth prospects of companies and the
industries in which they operate. This approach seeks to identify companies with
strong market franchises in industries that appear to be strategically poised
for long-term growth. The investment approach reflects T. Rowe Price's belief
that the combination of solid company fundamentals (with emphasis on the
potential for above-average growth in earnings) along with a positive outlook
for the overall industry will ultimately reward investors with a higher stock
price. While primary emphasis is placed on a company's prospects for future
growth, the portfolio will not purchase securities that, in T. Rowe Price's
opinion, are overvalued considering the underlying business fundamentals. In the
search for substantial capital appreciation, the portfolio looks for stocks
attractively priced relative to their anticipated long-term value.
The Blue Chip Growth Trust may invest in debt securities of any type
without regard to quality or rating. Such securities would be purchased in
companies which meet the investment criteria for the portfolio. The total return
and yield of lower-quality (high-yield/high-risk) bonds, commonly referred to as
"junk" bonds, can be expected to fluctuate more than the total return and yield
of higher-quality, shorter-term bonds, but not as much as common stocks. Junk
bonds (those rated below BBB or in default) are regarded as predominantly
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. The portfolio will not purchase a noninvestment-grade
debt security (or junk bond) if immediately after such purchase the portfolio
would have more than 5% of its total assets invested in such securities. See
"RISK FACTORS -- High Yield (High Risk) Securities" for further information.
The Blue Chip Growth Trust may also engage in a variety of investment
management practices, such as buying and selling futures and options. The
portfolio may invest up to 10% of its total assets in hybrid instruments, which
are a type of high-risk derivative which can combine the characteristics of
securities, futures and options. For example, the principal amount, redemption
or conversion terms of a security could be related to the market price of some
commodity, currency or securities index. Such securities may bear interest or
pay dividends at below market (or even relatively nominal) rates. The Statement
of Additional Information contains a fuller description of such instruments and
the risks associated therewith.
The Blue Chip Growth Trust will be subject to special risks as a result of
its ability to invest up to 20% of its total assets in foreign securities. These
include non-dollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
ADRs). 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.
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Use of Hedging and Other Strategic Transactions
The Blue Chip Growth 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.
REAL ESTATE SECURITIES TRUST
The investment objective of the Real Estate Securities Trust is to achieve
a combination of long-term capital appreciation and satisfactory current income
by investing in real estate related equity and debt securities. MAC manages the
Real Estate Securities Trust and seeks to attain this objective by investing
principally in real estate investment trust ("REIT") equity and debt securities
and other securities issued by companies which invest in real estate or
interests therein.
REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or interests. Investing in
REITs involves the risks associated with real estate investing, such as risks
relating to declines in real estate values, deterioration in general and local
economic conditions, overbuilding and increased competition, increases in
operating expenses and increases in interest rates, as well as certain unique
risks, such as risks relating to heavy cash flow dependency, defaults by
borrowers, self-liquidation and the possibility of failing to qualify for
exemption from tax for distributed income under the Code or failing to maintain
exemption from regulation under the 1940 Act. REITs are dependent on management
skills, are not diversified and are subject to the risks of financing projects.
They may have limited financial resources, trade less frequently and in a
limited volume and be subject to more abrupt or erratic price movements than
securities of larger issuers.
The Real Estate Securities Trust may also purchase the common stocks,
preferred stocks, convertible securities and bonds of companies operating in
industry groups relating to the real estate industry. This would include
companies engaged in the development of real estate, building and construction,
and other market segments related to real estate. The portfolio will not invest
directly in real property nor will it purchase mortgage notes directly.
Under normal circumstances, at least 65% of the value of the Real Estate
Securities Trust's total assets will be invested in real estate related equity
and debt securities. When, in the opinion of the Subadviser, market or economic
conditions warrant a defensive posture, the portfolio may place all or a portion
of its assets in fixed-income securities which may or may not be real estate
debt related securities. The portfolio may also maintain a portion of its assets
in cash or short-term debt securities pending selection of particular long-term
investments. The portfolio may purchase securities on a forward-commitment,
when-issued or delayed-delivery basis. For a discussion of these securities,
please see the discussion under "When-Issued Securities ("Forward Commitments")
below.
The Real Estate Securities Trust will be subject to certain risks as a
result of its ability to invest up to 100% of its total assets in the following
types of foreign securities: (i) U.S. dollar denominated obligations of foreign
branches of U.S. banks, (ii) securities represented by ADRs listed on a national
securities exchange or traded in the U.S. over-the-counter market, (iii)
securities of a corporation organized in a jurisdiction other than the U.S. and
listed on the New York Stock Exchange or NASDAQ or (iv) securities denominated
in U.S. dollars but issued by non U.S. issuers and issued under U.S. federal
securities regulations (for example, U.S. dollar denominated obligations issued
or guaranteed as to principal or interest by the Government of Canada or any
Canadian Crown agency). These risks are described under the caption "RISK
FACTORS -- Foreign Securities" in this Prospectus. Moreover, substantial
investments in foreign securities may have adverse tax implications as described
under "GENERAL INFORMATION -- Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions The Real Estate Securities
Trust does not presently use any of the investment strategies referred to under
"Hedging and Other Strategic Transactions."
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VALUE TRUST
The investment objective of the Value Trust is to realize an above-average
total return over a market cycle of three to five years, consistent with
reasonable risk. MAS manages the Value Trust and seeks to attain this objective
by investing primarily in common and preferred stocks, convertible securities,
rights and warrants to purchase common stocks, ADRs and other equity securities
of companies with equity capitalizations usually greater than $300 million.
Under normal circumstances, the Value Trust will invest at least 65% of
its total assets in equity securities. The portfolio may also invest in
obligations issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities, corporate bonds, foreign bonds, zero coupons, repurchase
agreements, cash equivalents, foreign currencies, investment company securities
and derivatives, including when-issued or delayed delivery securities, forward
foreign currency exchange contracts, futures, options and swaps. See "INVESTMENT
POLICIES -- Other Instruments" and "HEDGING AND OTHER STRATEGIC TRANSACTIONS" in
the Statement of Additional Information.
The Subadviser's approach is to select equity securities which are deemed
to be undervalued relative to the stock market in general as measured by the
Standard & Poor's 500 Index, based on value measures such as price/earnings
ratios and price/book ratios, as well as fundamental research. While capital
return will be emphasized somewhat more than income return, the Value Trust's
total return will consist of both capital and income returns. Stocks that are
deemed to be under-valued in the marketplace have, under most market conditions,
provided higher dividend income returns than stocks that are deemed to have
long-term earnings growth potential which normally sell at higher price/earnings
ratios.
The Value Trust may invest without limit in ADRs and up to 5% of its total
assets in foreign equities excluding ADRs. The risks associated with foreign
securities are described under the caption "RISK FACTORS -- Foreign Securities"
in this Prospectus.
Use of Hedging and Other Strategic Transactions
The Value 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.
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
although it may invest up to 15% of its assets in emerging market securities.
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.
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In pursuing the International Growth and Income Trust's objective, J.P.
Morgan will actively manage the assets of the portfolio through country
allocation and stock valuation and selection. Based on fundamental research,
quantitative valuation techniques and experienced judgment, J.P. Morgan uses a
structured decision-making process to allocate the portfolio primarily across
the developed countries of the world outside the United States. This universe is
typically represented by the Morgan Stanley Europe, Australia and Far East Index
(the "EAFE Index").
Using a dividend discount model and based on analysts' industry expertise,
securities within each country are ranked within economic sectors according to
their relative value. Based on this valuation, J.P. Morgan selects the
securities which appear the most attractive for the portfolio. J.P. Morgan
believes that under normal market conditions, economic sector weightings
generally will be similar to those of the relevant equity index.
Finally, J.P. Morgan actively manages currency exposure, in conjunction
with country and stock allocation, in an attempt to protect and possibly enhance
the International Growth and Income Trust's market value. Through the use of
forward currency exchange contracts, J.P. Morgan will adjust the portfolio's
foreign currency weightings to reduce its exposure to currencies that the
Subadviser deems unattractive and, in certain circumstances, increase exposure
to currencies deemed attractive, as market conditions warrant, based on
fundamental research, technical factors and the judgment of a team of
experienced currency managers.
The International Growth and Income Trust intends to manage its investment
portfolio actively in pursuit of its investment objective. The portfolio does
not expect to trade in securities for short-term profits; however, when
circumstances warrant, securities may be sold without regard to the length of
time held. See "GENERAL INFORMATION -- Taxes." To the extent the portfolio
engages in short-term trading, it may incur increased transaction costs.
The International Growth and Income Trust may also invest in securities on
a when-issued or delayed delivery basis, enter into repurchase agreements, loan
its portfolio securities and purchase certain privately placed securities. See
"RISK FACTORS."
The International Growth and Income Trust may make money market
investments pending other investments or settlement or for liquidity purposes.
In addition, when J.P. Morgan believes that investing for defensive purposes is
appropriate, such as during periods of 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, including up to 15% in emerging market securities. These risks are
described under the captions "RISK FACTORS -- Foreign Securities" and
"INTERNATIONAL SMALL CAP TRUST -- 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.
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GROWTH AND INCOME TRUST
The investment objective of the Growth and Income Trust is to provide
long-term growth of capital and income consistent with prudent investment risk.
Wellington Management manages the Growth and Income Trust and seeks to
achieve the Trust's objective by investing primarily in a diversified portfolio
of common stocks of U.S. issuers which Wellington Management believes are of
high quality. Wellington Management believes that high quality is evidenced by a
leadership position within an industry, a strong or improving balance sheet,
relatively high return on equity, steady or increasing dividend payout and
strong management skills. The Trust's investments will primarily emphasize
dividends paying stocks of larger companies. The Trust may also invest in
securities convertible into or which carry the right to buy common stocks,
including those convertible securities issued in the Euromarket, preferred
stocks and debt securities. When market or financial conditions warrant a
temporary defensive posture, the Trust may, in order to reduce risk and achieve
attractive total investment return, invest up to 100% of its assets in
securities which are authorized for purchase by the Investment Quality Bond
Trust (excluding non-investment grade securities) or the Money Market Trust. The
Subadviser expects that under normal market conditions the Growth and Income
Trust will consist primarily of equity securities.
Investments will be selected on the basis of fundamental analysis to
identify those securities that, in Wellington Management's judgment, provide the
potential for long-term growth of capital and income. Fundamental analysis
involves assessing a company and its business environment, management, balance
sheet, income statement, anticipated earnings and dividends and other related
measures of value. When selecting securities of issuers domiciled outside of the
United States, Wellington Management will also monitor and evaluate the economic
and political climate and the principal securities markets of the country in
which each company is located.
The Growth and Income Trust will invest primarily in securities listed on
national securities exchanges, but from time to time it may also purchase
securities traded in the "over the counter" market.
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.
EQUITY-INCOME TRUST
The investment objective of the Equity-Income Trust (prior to December 31,
1996, the "Value Equity Trust") is to provide substantial dividend income and
also long term capital appreciation. T. Rowe Price manages the Equity-Income
Trust and seeks to attain this objective by investing primarily in
dividend-paying common stocks, particularly of established companies with
favorable prospects for both increasing dividends and capital appreciation.
Under normal circumstances, the Equity-Income Trust will invest at least
65% of total assets in the common stocks of established companies paying
above-average dividends. T. Rowe Price believes that income can be a significant
contributor to total return over time and expects the portfolio's yield to be
above that of the Standard & Poor's 500 Stock Index.
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The Equity-Income Trust will generally consider companies with the
following characteristics:
-- Established operating histories;
-- Above-average current dividend yield relative to the average yield of
the S&P 500;
-- Low price/earnings ratios relative to the S&P 500;
-- Sound balance sheets and other financial characteristics;
-- Low stock price relative to a company's underlying value as measured
by assets, earnings, cash flow, or business franchises.
The Equity-Income Trust will tend to take a "value" approach and invest in
stocks and other securities that appear to be temporarily undervalued by various
measures, such as price/earnings ratios. Value investors seek to buy a stock (or
other security) when its price is low in relation to what they believe to be its
real worth or future prospects. By identifying companies whose stocks are
currently out of favor, value investors hope to realize significant appreciation
as other investors recognize the stock's intrinsic value and the price rises
accordingly. Finding undervalued stocks requires considerable research to
identify the particular stock, to analyze the company's underlying financial
condition and prospects, and to assess the likelihood that the stock's
underlying value will be recognized by the market and reflected in its price.
The Equity-Income Trust may also purchase other types of securities, for
example, foreign securities, preferred stocks, convertible stocks and bonds, and
warrants, when considered consistent with the portfolio's investment objective
and program. The portfolio will hold a certain portion of its assets in U.S. and
foreign dollar-denominated money market securities, including repurchase
agreements, in the two highest rating categories, maturing in one year or less.
For temporary, defensive purposes, the portfolio may invest without limitation
in such securities. This reserve position provides flexibility in meeting
redemptions, expenses, and the timing of new investments and serves as a
short-term defense during periods of unusual market volatility.
The Equity-Income Trust may also invest in debt securities of any type
including municipal securities without regard to quality or rating. The total
return and yield of lower-quality (high-yield/high-risk) bonds, commonly
referred to as "junk" bonds, can be expected to fluctuate more than the total
return and yield of higher-quality, shorter-term bonds, but not as much as
common stocks. Junk bonds (those rated below BBB or in default) are regarded as
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments. The portfolio will not purchase a
non-investment-grade debt security (or junk bond) if immediately after such
purchase the portfolio would have more than 10% of its total assets invested in
such securities.
The Equity-Income Trust may also engage in a variety of investment
management practices, such as buying and selling futures and options. The
portfolio may invest up to 10% of its total assets in hybrid instruments, which
are a type of high-risk derivative which can combine the characteristics of
securities, futures and options. For example, the principal amount, redemption
or conversion terms of a security could be related to the market price of some
commodity, currency or securities index. Such securities may bear interest or
pay dividends at below market (or even relatively nominal) rates. The Statement
of Additional Information contains a fuller description of such instruments and
the risks associated therewith.
The Equity-Income Trust will be subject to special risks as a result of
its ability to invest up to 25% of its total assets in foreign securities. These
include non-dollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
ADRs). 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.
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Use of Hedging and Other Strategic Transactions
The Equity-Income 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.
BALANCED TRUST
The investment objective of the Balanced Trust is current income and
capital appreciation. Founders is the manager of the Balanced Trust and seeks to
attain this objective by investing in a balanced portfolio of common stocks,
U.S. and foreign government obligations and a variety of corporate fixed-income
securities.
Normally, the Balanced Trust will invest a significant percentage (up to
75%) of its total assets in common stocks, convertible corporate obligations,
and preferred stocks. The portfolio emphasizes investment in dividend-paying
common stocks with the potential for increased dividends, as well as capital
appreciation. The portfolio also may invest in non-dividend-paying companies if,
in Founders' opinion, they offer better prospects for capital appreciation.
The Balanced Trust may invest in convertible securities, preferred stocks,
bonds, debentures, and other corporate obligations when Founders believes that
these investments offer opportunities for capital appreciation. Current income
is also a factor in the selection of these securities.
The Balanced Trust will maintain a minimum of 25% of its total assets in
fixed-income, investment-grade securities rated Baa or higher by Moody's or BBB
or higher by S&P. There is, however, no limit on the amount of straight debt
securities in which the portfolio may invest. Up to 5% of the Balanced Trust's
total assets may be invested in lower-grade (Ba or less by Moody's, BB or less
by S&P) or unrated straight debt securities, generally referred to as junk
bonds, where Founders determines that such securities present attractive
opportunities. The portfolio will not invest in securities rated lower than B.
Securities rated B generally lack characteristics of a desirable investment and
are deemed speculative with respect to the issuer's capacity to pay interest and
repay principal over a long period of time.
The Balanced Trust may also invest in convertible corporate obligations
and preferred stocks. 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 eligible for purchase by the portfolio
rated in categories no lower than B. At no time will the portfolio have more
than 5% of its total assets invested in any fixed-income securities (excluding
preferred stocks) which are unrated or are rated below investment grade either
at the time of purchase or as a result of a reduction in rating after purchase.
The portfolio is not required to dispose of debt securities whose ratings are
downgraded below these ratings subsequent to the portfolio's purchase of the
securities, unless such a disposition is necessary to reduce the portfolio's
holdings of such securities to less than 5% of its total assets. 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.
Up to 100% of the assets of the Balanced Trust may be invested temporarily
in 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, in cash, or in
other cash equivalents, if Founders determines it to be appropriate for purposes
of enhancing liquidity or preserving capital in light of prevailing market or
economic conditions. The portfolio may also acquire certificates of deposit and
bankers' acceptances of banks which meet criteria established by the Trust's
Board of Trustees. While 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 equity investments.
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The Balanced Trust may invest without limit in ADRs and up to 30% of its
total assets in foreign securities (other than ADRs). The portfolio will not
invest more than 25% of its total assets in the securities of any one country.
The Balanced Trust will be subject to special risks as a result of its
ability to invest up to 30% of its total assets in foreign securities, excluding
ADRs. These risks are described under the caption "RISK FACTORS -- Foreign
Securities" in this Prospectus. Moreover, substantial investments in foreign
securities may have adverse tax implications as described under "GENERAL
INFORMATION -- Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions
The Balanced 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.
HIGH YIELD TRUST
The investment objective of the High Yield Trust is to realize an
above-average total return over a market cycle of three to five years,
consistent with reasonable risk. MAS manages the High Yield Trust and seeks to
attain this objective by investing primarily in high yield debt securities,
including corporate bonds and other fixed-income securities.
The High Yield Trust expects to achieve its objective through maximizing
current income, although the portfolio may seek capital growth opportunities
when consistent with its objective. The portfolio's average weighted maturity
ordinarily will be greater than five years. Under normal circumstances, the
portfolio will invest at least 65% of the value of its total assets in high
yield debt securities.
High yield securities are generally considered to include corporate bonds,
preferred stocks and convertible securities rated Ba through C by Moody's or BB
through D by S&P, and unrated securities considered to be of equivalent quality.
Securities rated less than Baa by Moody's or BBB by S&P's are classified as
non-investment grade securities and are commonly referred to as junk bonds or
high yield securities. Such securities carry a high degree of risk and are
considered speculative by the major credit rating agencies.
While such securities offer high yields, they also normally carry with
them a greater degree of risk than securities with higher ratings. Lower-rated
bonds are considered speculative by traditional investment standards. High yield
securities may be issued as a consequence of corporate restructuring or similar
events. Also, high yield securities are often issued by smaller, less credit
worthy companies, or by highly leveraged (indebted) firms, which are generally
less able than more established or less leveraged firms to make scheduled
payments of interest and principal. The price movement of these securities is
influenced less by changes in interest rates and more by the financial and
business position of the issuing corporation when compared to investment grade
bonds. The risks posed by securities issued under such circumstances are
substantial. If a security held by the portfolio is down-graded, the portfolio
may retain the security. 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 Subadviser's approach is to use equity and fixed-income valuation
techniques and analyses of economic and industry trends to determine portfolio
structure. Individual securities are selected and monitored by fixed-income
portfolio managers who specialize in credit analysis of fixed-income securities
and use in-depth financial analysis to uncover opportunities in undervalued
issues. The Subadviser seeks to invest in high yield securities based on the
Subadviser's analysis of economic and industry trends and individual security
characteristics. The Subadviser conducts credit analysis for each security
considered for investment to evaluate its attractiveness relative to its risk. A
high level of diversification is also maintained to limit credit exposure to
individual issuers.
One of two primary components of the Subadviser's fixed-income strategy is
value investing, whereby the Subadviser seeks to identify undervalued sectors
and securities through analysis of credit quality, option characteristics and
liquidity. Quantitative models are used in conjunction with judgment and
experience to evaluate and select securities with embedded put or call options
(options which are
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part of the security) which are attractive on a risk- and option-adjusted basis.
Successful value investing will permit a portfolio to benefit from the price
appreciation of individual securities during periods when interest rates are
unchanged.
The other primary component of the Subadviser's fixed-income investment
strategy is maturity and duration management. The maturity and duration
structure of a portfolio investing in fixed-income securities is actively
managed in anticipation of cyclical interest rate changes. Adjustments are not
made in an effort to capture short-term, day-to-day movements in the market,
but instead are implemented in anticipation of longer term shifts in the levels
of interest rates. Adjustments made to shorten portfolio maturity and duration
are made to limit capital losses during periods when interest rates are expected
to rise. Conversely, adjustments made to lengthen maturity are intended to
produce capital appreciation in periods when interest rates are expected to
fall. The foundation for maturity and duration strategy lies in analysis of the
U.S. and global economies, focusing on levels of real interest rates, monetary
and fiscal policy actions, and cyclical indicators.
At times it is anticipated that greater than 50% of High Yield Trust's
assets may be invested in mortgage-backed securities. These include securities
which represent pools of mortgage loans made by lenders such as commercial
banks, savings and loan associations, mortgage bankers and others. The pools are
assembled by various Governmental, Government-related and private organizations.
It is expected that the portfolio's primary emphasis will be in mortgage-backed
securities issued by the various Government-related organizations. However, the
portfolio may invest, without limit, in mortgage-backed securities issued by
private issuers when the Subadviser deems that the quality of the investment,
the quality of the issuer, and market conditions warrant such investments.
Securities issued by private issuers will be rated investment grade by Moody's
or Standard & Poor's or be deemed by the Subadviser to be of comparable
investment quality. It is not anticipated that greater than 25% of a portfolio's
assets will be invested in mortgage pools comprised of private organizations.
See "INVESTMENT POLICIES -- Other Instruments" in the Statement of Additional
Information for a description of these investments and of certain risks
associated therewith.
The High Yield Trust will invest in foreign bonds and other fixed income
securities denominated in foreign currencies, where, in the opinion of the
Subadviser, the combination of current yield and currency value offer attractive
expected returns. Foreign securities in which the portfolio may invest include
emerging market securities. The Subadviser's approach to emerging markets
investing is based on the Subadviser's evaluation of both short-term and
long-term international economic trends and the relative attractiveness of
emerging markets and individual emerging market securities. Emerging markets
describes any country which is generally considered to be an emerging, or
developing country by the international financial community such as the
International Bank for Reconstruction and Development (more commonly known as
the World Bank) and the International Finance Corporation. Securities available
to the portfolio also include securities created through the Brady Plan, a
program under which heavily indebted countries have restructured their bank debt
into bonds.
The High Yield Trust will be subject to special risks as a result of its
ability to invest up to 100% of its total assets in foreign securities,
including emerging market securities. These risks, including the risks of the
possible increased likelihood of expropriation or the return to power of a
communist regime which would institute policies to expropriate, nationalize or
otherwise confiscate investments, are described under the caption "RISK FACTORS
- -- Foreign Securities" in this Prospectus. Moreover, substantial investments in
foreign securities may have adverse tax implications as described under "GENERAL
INFORMATION -- Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions
The High Yield 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.
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. Currently, the risk tolerance levels--aggressive, moderate and
conservative--of the Asset Allocation Trusts
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are defined in terms of limiting the decline in portfolio value in very adverse
market conditions. The definition of a risk tolerance level is not a fundamental
policy and, therefore, can be changed by the Trustees at any time. The Automatic
Asset Allocation Trusts are designed for:
* The investor who wants to maximize total return potential, but lacks
the time, temperament or expertise to do so effectively;
* The investor who does not want to monitor the financial markets in
order to make periodic exchanges among portfolios;
* The investor who wants the opportunity to improve on the return of an
income-oriented investment program, but wants to take advantage of the
risk management features of an asset allocation program; and
* Retirement program fiduciaries who have a responsibility to limit risk
in a meaningful way, while seeking the highest potential total return.
Each of the Automatic Asset Allocation Trusts may invest in a combination
of equity, fixed-income and money market securities. The amount of each
portfolio's assets invested in each category of securities is dependent upon the
judgment of FMTC as to what percentages of each portfolio's assets in each
category will contribute to the limitation of risk and the achievement of its
investment objective. Unlike many asset allocation and timing services offered
by competitors, the Automatic Asset Allocation Trusts permit FMTC to reallocate
each portfolio's assets among the categories of securities "automatically,"
without a delay for a request or response by the shareholder, whenever, in the
Subadviser's judgment, market or economic changes warrant such a reallocation.
FMTC reserves complete discretion to determine the allocations among the
categories of securities.
The investor chooses an Automatic Asset Allocation Trust by determining
which risk tolerance level most closely corresponds to the investor's individual
planning needs, objectives and comfort. Generally, the higher the portfolio's
level of risk tolerance, the higher is the expected total return for the
portfolio over the long-term and under favorable market conditions. Over the
long-term, it is expected that the total return of the Aggressive Asset
Allocation Trust will exceed that of the Moderate Asset Allocation Trust and
that the total return of the Moderate Asset Allocation Trust will exceed that of
the Conservative Asset Allocation Trust, although there is no assurance that
this will be the case. Moreover, as a general matter, the higher the risk
tolerance of a portfolio, the greater is the expected volatility of the
portfolio. In adverse market conditions, it is expected that the losses will be
greater in the Aggressive Asset Allocation Trust than in the Moderate Asset
Allocation Trust and greater in the Moderate Asset Allocation Trust than in the
Conservative Asset Allocation Trust, although again there is no assurance that
this will be the case.
FMTC attempts to limit the maximum amount of decline in value each
portfolio incurs under very adverse market conditions, to define the level of
risk tolerance -- aggressive, moderate or conservative. Very adverse market
conditions are defined as a substantial increase in long-term interest rates
accompanied by a similarly substantial decline in one or more commonly-followed
stock market indices over a three year period. Of course, FMTC cannot predict
with certainty when adverse market conditions will arise. Consequently, FMTC
must manage each of the Automatic Asset Allocation Trusts under all market
conditions with a view toward limiting risk and portfolio decline should very
adverse market conditions arise. For example, since the Conservative Asset
Allocation Trust has the lowest risk tolerance level, its assets under all
market conditions will be invested less aggressively (i.e., with greater
emphasis on fixed-income securities and money market instruments) than those of
the other Automatic Asset Allocation Trusts. In addition, when market conditions
deteriorate (the probability of very adverse market conditions rises), FMTC will
give greater emphasis to fixed-income securities and money market instruments in
an effort to limit overall declines in portfolio value.
An investor should select an Automatic Asset Allocation Trust depending on
his or her objective in terms of balancing the potential long-term total returns
of a portfolio against limiting risk and portfolio declines in very adverse
market conditions. There can be no assurance that actual declines in portfolio
value will not exceed the percentage limitations set forth below in the
description of each portfolio.
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THE AGGRESSIVE ASSET ALLOCATION TRUST
The investment objective of the Aggressive Asset Allocation Trust is to
seek the highest total return consistent with an aggressive level of risk
tolerance. This Trust attempts to limit the decline in portfolio value in very
adverse market conditions to 15% in any three year 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 three year 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 three year period. This Trust will tend
to invest a greater portion of its assets in fixed-income securities and money
market instruments than the Moderate and Aggressive Asset Allocation Trusts and
a lower percentage of its assets in equity and foreign securities than such
Trusts. FMTC will attempt to invest the Conservative Asset Allocation Trust's
assets in order to produce a higher total return than that which is available
from a bond or a money market portfolio alone, although there can be no
assurance that FMTC will be able to attain this objective.
The types and characteristics of equity securities to be purchased by the
Automatic Asset Allocation Trusts are set forth above in the discussion of
investment objectives and policies for the Equity Trust; the types and
characteristics of the fixed-income securities to be purchased are set forth in
the discussion of investment objectives and policies for the Investment Quality
Bond (the Automatic Asset Allocation Trusts may not invest in below investment
grade securities except as noted below) and U.S. Government Securities Trusts;
and the types and characteristics of the money market securities to be purchased
are set forth in the discussion of investment objectives of the Money Market
Trust. Potential investors should review the discussion therein in considering
an investment in shares of the Automatic Asset Allocation Trusts.
The Aggressive Asset Allocation Trust and the Moderate Asset Allocation
Trust may each invest up to 10% of their assets in domestic and foreign high
yield corporate and government debt securities, commonly known as "junk bonds"
(i.e., rated "Ba" or below by Moody's or "BB" or below by S & P, or if unrated,
of comparable quality as determined 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
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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."
STRATEGIC BOND TRUST
The investment objective of the Strategic Bond Trust is to seek a high
level of total return consistent with preservation of capital.
The Strategic Bond Trust seeks to achieve its objective by giving its
Subadviser, SBAM, broad discretion to deploy the Strategic Bond Trust's assets
among certain segments of the fixed-income market as SBAM believes will best
contribute to the achievement of the portfolio's objective. At any point in
time, the Subadviser will deploy the portfolio's assets based on the
Subadviser's analysis of current economic and market conditions and the relative
risks and opportunities present in the following market segments: U.S.
Government obligations, investment grade domestic corporate debt, high yield
(high risk) corporate debt securities, mortgage backed securities and investment
grade and high yield international debt securities. The Subadviser is an
affiliate of Salomon Brothers Inc. ("SBI"), and in making investment decisions
is able to draw on the research and market expertise of SBI with respect to
fixed-income securities.
In pursuing its investment objective, the Strategic Bond Trust may invest
without limitation in high yield (high risk) securities. High yield securities,
commonly known as "junk bonds", also present a high degree of risk.
High-yielding, lower-quality securities involve comparatively greater risks,
including price volatility and the risk of default in the timely payment of
interest and principal, than higher-quality securities. Due to the risks
inherent in certain of the securities in which the Strategic Bond Trust may
invest, an investment in the portfolio should not be considered as a complete
investment program and may not be appropriate for all investors. See "RISK
FACTORS -- High Yield (High Risk) Securities."
The Subadviser will determine the amount of assets to be allocated to each
type of security in which it invests based on its assessment of the maximum
level of total return that can be achieved from a portfolio which is invested in
these securities without incurring undue risks to principal value. In making
this determination, the Subadviser will rely in part on quantitative analytical
techniques that measure relative risks and opportunities of each type of
security based on current and historical economic, market, political and
technical data for each type of security, as well as on its own assessment of
economic and market conditions both on a global and local (country) basis. In
performing quantitative analysis, the Subadviser will employ prepayment analysis
and option adjusted spread technology to evaluate mortgage securities, mean
variance optimization models to evaluate international debt securities, and
total rate of return analysis to measure relative risks and opportunities in
other fixed-income markets. Economic factors considered will include current and
projected levels of growth and inflation, balance of payment status and monetary
policy. The allocation of assets to international debt securities will further
be influenced by current and expected currency relationships and political and
sovereign factors. The portfolio's assets may not always be allocated to the
highest yielding securities if the Subadviser feels that such investments would
impair the portfolio's ability to preserve shareholder capital. The Subadviser
will continuously review this allocation of assets and make such adjustments as
it deems appropriate. The portfolio does not plan to establish a minimum or a
maximum percentage of the assets which it will invest in any particular type of
fixed-income security.
In addition, the Subadviser will have discretion to select the range of
maturities of the various fixed-income securities in which the portfolio
invests. Such maturities may vary substantially from time to time depending on
economic and market conditions.
The types and characteristics of the U.S. Government obligations,
mortgage-backed securities, investment grade corporate debt securities and
investment grade international debt securities to be purchased are set forth in
the discussion of investment objectives and policies for the Investment Quality
Bond, U.S. Government Securities and Global Government Bond Trusts, and in the
section entitled "Other Investments" in the Statement of Additional Information;
and the types and characteristics of the money
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market securities to be purchased are set forth in the discussion of investment
objectives of the Money Market Trust. Potential investors should review the
discussion therein in considering an investment in shares of the Strategic Bond
Trust. As described below, the Strategic Bond Trust may also invest in high
yield domestic and foreign debt securities.
The Strategic Bond Trust will be subject to special risks as a result of
its ability to invest up to 100% of its assets in foreign securities. These
risks are described under the captions "RISK FACTORS -- High Yield (High Risk)
Securities" and "Foreign Securities" in this Prospectus. Moreover, substantial
investments in foreign securities may have adverse tax implications as described
under "Taxes" in this Prospectus. The ability to spread its investments among
the fixed-income markets in a number of different countries may, however, reduce
the overall level of market risk to the extent it may reduce the Strategic Bond
Trust's exposure to a single market. In order to comply with limitations imposed
by the State of California Insurance Department, the Strategic Bond Trust will
comply with the restrictions regarding foreign investments set forth under "RISK
FACTORS -- Additional Investment Restrictions on Borrowing and Foreign
Investing."
The Strategic Bond Trust currently intends to invest substantially all of
its assets in fixed-income securities. In order to maintain liquidity, however,
the Strategic Bond Trust may invest up to 20% of its assets in high-quality
short-term money market instruments. If at some future date, in the opinion of
the Subadviser, adverse conditions prevail in the market for fixed-income
securities, the Strategic Bond Trust for temporary defensive purposes may invest
its assets without limit in high-quality short-term money market instruments.
As discussed above, the Strategic Bond Trust may invest in U.S.
dollar-denominated securities issued by domestic issuers that are rated below
investment grade or of comparable quality. Although the Subadviser does not
anticipate investing in excess of 75% of the portfolio's assets in domestic and
developing country debt securities that are rated below investment grade, the
portfolio may invest a greater percentage in such securities when, in the
opinion of the Subadviser, the yield available from such securities outweighs
their additional risks. By investing a portion of the portfolio's assets in
securities rated below investment grade, as well as through investments in
mortgage securities and international debt securities, as described below, the
Subadviser expects to provide investors with a higher yield than a high-quality
domestic corporate bond fund while at the same time presenting less risk than a
fund that invests principally in securities rated below investment grade.
Certain of the debt securities in which the portfolio may invest may have, or be
considered comparable to securities having, the lowest ratings for
non-subordinated debt instruments assigned by Moody's or S&P (i.e., rated C by
Moody's or CCC or lower by S&P). See "RISK FACTORS -- High Yield (High Risk)
Securities--General."
In light of the risks associated with high yield corporate and sovereign
debt securities, the Subadviser will take various factors into consideration in
evaluating the credit worthiness of an issue. For corporate debt securities,
these will typically include the issuer's financial resources, its sensitivity
to economic conditions and trends, the operating history of the issuer, and the
experience and track record of the issuer's management. For sovereign debt
instruments, these will typically include the economic and political conditions
within the issuer's country, the issuer's overall and external debt levels and
debt service ratios, the issuer's access to capital markets and other sources of
funding, and the issuer's debt service payment history. The Subadviser will also
review the ratings, if any, assigned to the security by any recognized rating
agencies, although the Subadviser's judgment as to the quality of a debt
security may differ from that suggested by the rating published by a rating
service. The Strategic Bond Trust's ability to achieve its investment objective
may be more dependent on the Subadviser's credit analysis than would be the case
if it invested in higher quality debt securities.
A description of the ratings used by Moody's and S&P is set forth in
Appendix I to this Prospectus.
In addition to the types of international debt securities as set forth in
the discussion of investment objectives and policies of the Global Government
Bond Trust, the Strategic Bond Trust may also invest in international debt
securities that are below investment grade.
The high yield sovereign debt securities in which the Strategic Bond Trust
may invest are U.S. dollar-denominated and non-dollar-denominated debt
securities issued or guaranteed by governments or governmental entities of
developing and emerging countries. The Subadviser expects that these countries
will consist primarily of those which have issued or have announced plans to
issue Brady Bonds, but the portfolio is not limited to investing in the debt of
such countries. Brady Bonds are debt securities issued
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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 1940 Act. Due to its status as
non-diversified, the Global Government Bond Trust is not subject to the general
limitation under the 1940 Act 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 1940 Act, 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
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for common stocks. In addition, the Global Government Bond Trust will hold
short-term cash reserves (money market instruments maturing in a period of
thirteen months or less) as Oechsle International believes is advisable to
maintain liquidity or for temporary defensive purposes. Reserves may be held in
any currency deemed attractive by Oechsle International.
Oechsle International intends to invest in fixed-income securities in
countries where the combination of fixed-income market returns and exchange rate
movements is judged to be attractive. Oechsle International will actively manage
the Global Government Bond Trust's maturity structure according to its interest
rate outlook for each foreign economy. In response to rising interest rates and
falling prices, the Global Government Bond Trust may invest in securities with
shorter maturities to protect its principal value. Conversely, when certain
interest rates are falling and prices are rising, the Global Government Bond
Trust may invest in securities with longer maturities to take advantage of
higher yields and to seek capital appreciation. The Global Government Bond Trust
will seek to invest in countries having favorable currency and interest rate
trends. Investments in countries where the currency trend is unfavorable may be
made when the currency risk can be minimized through hedging. The Global
Government Bond Trust does not intend to invest in longer-term fixed income
securities in countries where the fixed income market is fundamentally
unattractive, regardless of the currency trend, but may invest in short-term
fixed income securities in such countries.
Use of Hedging and Other Strategic Transactions
The Global Government Bond Trust is currently authorized to use all of the
various investment strategies referred to under "Hedging and Other Strategic
Transactions." With the exception of currency transactions, however, it is not
presently anticipated that any of these strategies will be used to a significant
degree by the portfolio. The Statement of Additional Information contains a
description of these strategies and of certain risks associated therewith. The
Global Government Bond Trust will be subject to special risks as a result of its
ability to invest up to 100% of its assets in foreign securities. These risks
are described under the caption "Foreign Securities" in this Prospectus.
Moreover, substantial investments in foreign securities may have adverse tax
implications as described under "Taxes" in this 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."
CAPITAL GROWTH BOND TRUST
The investment objective of the Capital Growth Bond Trust is to achieve
growth of capital by investing in medium-grade or better debt securities, with
income as a secondary consideration. MAC manages the Capital Growth Bond Trust.
The Capital Growth Bond Trust differs from most "bond" funds in that its
primary objective is capital appreciation, not income. Opportunities for capital
appreciation will usually exist only when the levels of prevailing interest
rates are falling. During periods when MAC expects interest rates to decline,
the portfolio will invest primarily in intermediate-term and long-term corporate
and government debt securities. However, during periods when the Subadviser
expects interest rates to rise or believes that market or economic conditions
otherwise warrant such action, the portfolio may invest substantially all of its
assets in short-term debt securities to preserve capital and maintain income.
The portfolio may also maintain a portion of its assets temporarily in cash or
short-term debt securities pending selection of particular long-term
investments.
The Capital Growth Bond Trust will be carefully positioned in relation to
the term of debt obligations and the anticipated movement of interest rates. It
is contemplated that at least 75% of the value of the portfolio's total
investment in corporate debt securities, excluding commercial paper, will be
represented by debt securities which have, at the time of purchase, a rating
within the four highest grades as determined by Moody's (Aaa, Aa, A or Baa),
S&P's (AAA, AA, A or BBB), or Fitch's Investors Service ("Fitch's") (AAA, AA, A
or BBB) and debt securities of banks and other issuers which, although not rated
as a matter of policy by either Moody's, S&P's, or Fitch's, are considered by
the Subadviser to have investment quality comparable to securities receiving
ratings within such four highest grades. Although the portfolio does not intend
to acquire or hold debt securities of below investment-grade
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quality, shareholders should note that even bonds of the lowest categories of
investment-grade quality may have speculative characteristics, and 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. It should be further noted that should an obligation in the
portfolio drop below investment grade, the portfolio will make every effort to
dispose of it promptly so long as to do so would not be detrimental to the
portfolio.
Government obligations in which the Capital Growth Bond Trust may invest
include those of foreign governments provided they are denominated in U.S.
dollars. The portfolio may purchase securities on a forward-commitment,
when-issued or delayed-delivery basis. See "RISK FACTORS -- When-Issued
Securities" for additional information on this practice.
The Capital Growth Bond Trust may purchase corporate debt securities which
carry certain equity features, such as conversion or exchange rights or warrants
for the acquisition of stock of the same or a different issuer or participations
based on revenues, sales, or profits. The portfolio will not exercise any such
conversion, exchange or purchase rights if, at the time, the value of all equity
interests so owned would exceed 10% of the value of the portfolio's total
assets.
The Capital Growth Bond Trust will be subject to certain risks as a result
of its ability to invest up to 100% of its total assets in the following types
of foreign securities: (i) U.S. dollar denominated obligations of foreign
branches of U.S. banks, (ii) securities represented by American Depository
Receipts listed on a national securities exchange or traded in the U.S.
over-the-counter market, (iii) securities of a corporation organized in a
jurisdiction other than the U.S. and listed on the New York Stock Exchange or
NASDAQ ("Interlisted Securities") or (iv) securities denominated in U.S. dollars
but issued by non U.S. issuers and issued under U.S. federal securities
regulations (for example, U.S. dollar denominated obligations issued or
guaranteed as to principal or interest by the Government of Canada or any
Canadian Crown agency). These risks are described under the caption "RISK
FACTORS -- Foreign Securities" in this Prospectus. Moreover, substantial
investments in foreign securities may have adverse tax implications as described
under "GENERAL INFORMATION -- Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions The Capital Growth Bond
Trust is currently authorized to use all of the investment strategies referred
to under "Hedging and Other Strategic Transactions." However, it is not
presently contemplated that any of these strategies will be used to a
significant degree by the portfolio.
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.
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The balance of the Investment Quality Bond Trust's investments may
include: domestic and foreign debt securities rated below "A" by Moody's and S&P
(and unrated securities of comparable quality as determined by Wellington
Management), preferred stocks, convertible securities (including those issued in
the Euromarket) and securities carrying warrants to purchase equity securities,
privately placed debt securities, asset-backed securities and privately issued
mortgage securities. At least 65% of the Investment Quality Bond Trust's assets
will be invested in bonds and debentures.
In pursuing its investment objective, the Investment Quality Bond Trust
may invest up to 20% of its assets in domestic and foreign high yield (high
risk) corporate and government debt securities, commonly known as "junk bonds"
(i.e., rated "Ba" or below by Moody's or "BB" or below by S&P, or if unrated, of
comparable quality as determined by Wellington Management). The high yield
sovereign debt securities in which the portfolio will invest are described above
under "Strategic Bond Trust." No minimum rating standard is required for a
purchase by the portfolio. Domestic and foreign high yield debt securities
involve comparatively greater risks, including price volatility and risk of
default in the payment of interest and principal, than higher-quality
securities. See "RISK FACTORS -- High Yield (High Risk) Securities and Foreign
Sovereign Debt Securities."
The Investment Quality Bond Trust may also invest in debt securities
carrying the fourth highest quality rating ("Baa" by Moody's or "BBB" by S&P)
and unrated securities of comparable quality as determined by Wellington
Management. While such securities are considered as investment grade and are
viewed to have adequate capacity for payment of principal and interest,
investments in such securities involve a higher degree of risk than that
associated with investments in debt securities in the higher rating categories
and such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. For example, changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade bonds. While
the Investment Quality Bond Trust may only invest up to 20% of its assets in
bonds rated below "Baa" by Moody's or "BBB" by S&P (or, if unrated, of
comparable quality as determined by Wellington Management) at the time of
investment, it is not required to dispose of bonds owned that may be downgraded
causing the portfolio to exceed this 20% maximum.
Use of Hedging and Other Strategic Transactions
The Investment Quality Bond Trust is currently authorized to use all of
the various investment strategies referred to under "Hedging and Other Strategic
Transactions." The Statement of Additional Information contains a description of
these strategies and of certain risks associated therewith . The Investment
Quality Bond Trust will be subject to certain risks as a result of its ability
to invest up to 20% of its assets in foreign securities. These risks are
described under the caption "Foreign Securities" in this Prospectus. Moreover,
substantial investments in foreign securities may have adverse tax implications
as described under "Taxes" in this Prospectus.
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;
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(3) obligations issued or guaranteed by agencies or instrumentalities of the
U.S. Government which are backed by their own credit and may not be backed
by the full faith and credit of the U.S. Government;
(4) mortgage backed securities guaranteed by agencies or instrumentalities of
the U.S. Government which are supported by their own credit but not the
full faith and credit of the U.S. Government, such as the Federal Home
Loan Mortgage Corporation and the Federal National Mortgage Association;
and
(5) collateralized mortgage obligations issued by private issuers for which
the underlying mortgage backed securities serving as collateral are backed
(i) by the credit alone of the U.S. Government agency or instrumentality
which issues or guarantees the mortgage backed securities, or (ii) by the
full faith and credit of the U.S. Government.
The mortgage backed securities in which the U.S. Government Securities
Trust invests represent participating interests in pools of residential mortgage
loans which are guaranteed by the U.S. Government, its agencies or
instrumentalities. However, the guarantee of these types of securities runs only
to the principal and interest payments and not to the market value of such
securities. In addition, the guarantee only runs to the portfolio securities
held by the U.S. Government Securities Trust and not the purchase of shares of
the portfolio.
Mortgage backed securities are issued by lenders such as mortgage bankers,
commercial banks, and savings and loan associations. Such securities differ from
conventional debt securities which provide for periodic payment of interest in
fixed amounts (usually semiannually) with principal payments at maturity or
specified call dates. Mortgage backed securities provide monthly payments which
are, in effect, a "pass-through" of the monthly interest and principal payments
(including any prepayments) made by the individual borrowers on the pooled
mortgage loans. Principal prepayments result from the sale of the underlying
property or the refinancing or foreclosure of underlying mortgages.
The yield of mortgage-backed securities is based on the average life of
the underlying pool of mortgage loans, which is computed on the basis of the
maturities of the underlying instruments. The actual life of any particular pool
may be shortened by unscheduled or early payments of principal and interest. The
occurrence of prepayments is affected by a wide range of economic, demographic
and social factors and, accordingly, it is not possible to accurately predict
the average life of a particular pool. For pools of fixed rate 30-year
mortgages, it has been common practice to assume that prepayments will result in
a 12-year average life. The actual prepayment experience of a pool of mortgage
loans may cause the yield realized by the U.S. Government Securities Trust to
differ from the yield calculated on the basis of the average life of the pool.
In addition, if any of these mortgage backed securities are purchased at a
premium, the premium may be lost in the event of early prepayment which may
result in a loss to the portfolio.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. Reinvestment by the U.S. Government Securities Trust of scheduled
principal payments and unscheduled prepayments may occur at higher or lower
rates than the original investment, thus affecting the yield of this portfolio.
Monthly interest payments received by the portfolio have a compounding effect
which will increase the yield to shareholders as compared to debt obligations
that pay interest semiannually. Because of the reinvestment of prepayments of
principal at current rates, mortgage-backed securities may be less effective
than Treasury bonds of similar maturity at maintaining yields during periods of
declining interest rates. Also, although the value of debt securities may
increase as interest rates decline, the value of these pass-through type of
securities may not increase as much due to the prepayment feature.
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
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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. MAC
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 $100,000,000 if the principal amount of such
bank obligations is insured by the Federal Deposit Insurance Corporation
or the Saving Association Insurance Fund);
(3) commercial paper which at the date of investment is rated (or guaranteed
by a company whose commercial paper is rated) within the two highest
rating categories by any nationally recognized statistical rating
organization ("NRSRO") (such as "P-1" or "P-2" by Moody's or "A-1" or
"A-2" by S&P) or, if not rated, is issued by a company which MAC 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.
Commercial 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 MAC will monitor the creditworthiness of the
issuer and its earning power and cash flow, and will also consider situations in
which all holders of such notes would redeem at the same time. Variable amount
master demand notes are redeemable on demand.
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All of the Money Market Trust's investments will mature in 397 days or
less and the portfolio will maintain a dollar-weighted average portfolio
maturity of 90 days or less. By limiting the maturity of its investments, the
Money Market Trust seeks to lessen the changes in the value of its assets caused
by fluctuations in short-term interest rates. In addition, the Money Market
Trust will invest only in securities the Trustees determine to present minimal
credit risks and which at the time of purchase are "eligible securities" as
defined by Rule 2a-7 under the 1940 Act. 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 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 "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."
THE LIFESTYLE TRUSTS
There are five Lifestyle Trusts (each of which is a fund of funds) --
Aggressive, Growth, Balanced, Moderate and Conservative. The Lifestyle Trusts
differ from the portfolios previously described in that each Lifestyle Trust
invests in a number of the other portfolios of the Trust ("Underlying
Portfolios"). Each Lifestyle Trust has its own investment objective and
policies.
Lifestyle Aggressive 1000 Trust. The investment objective of the Lifestyle
Aggressive 1000 Trust is to provide long term growth of capital. Current income
is not a consideration. MAC seeks to achieve this objective by investing 100% of
the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in
equity securities.
Lifestyle Growth 820 Trust. The investment objective of the Lifestyle
Growth 820 Trust is to provide long term growth of capital with consideration
also given to current income. MAC seeks to achieve this objective by investing
approximately 20% of the Lifestyle Trust's assets in Underlying Portfolios which
invest primarily in fixed income securities and approximately 80% of its assets
in Underlying Portfolios which invest primarily in equity securities.
Lifestyle Balanced 640 Trust. The investment objective of the Lifestyle
Balanced 640 Trust is to provide a balance between a high level of current
income and growth of capital with a greater emphasis given to capital growth.
MAC seeks to achieve this objective by investing approximately 40% of the
Lifestyle Trust's assets in Underlying Portfolios which invest primarily in
fixed income securities and approximately 60% of its assets in Underlying
Portfolios which invest primarily in equity securities.
Lifestyle Moderate 460 Trust. The investment objective of the Lifestyle
Moderate 460 Trust is to provide a balance between a high level of current
income and growth of capital with a greater emphasis given to high income. MAC
seeks to achieve this objective by investing approximately 60% of the Lifestyle
Trust's assets in Underlying Portfolios which invest primarily in fixed income
securities and approximately 40% of its assets in Underlying Portfolios which
invest primarily in equity securities.
Lifestyle Conservative 280 Trust. The investment objective of the
Lifestyle Conservative 280 Trust is to provide a high level of current income
with some consideration also given to growth of capital. MAC seeks to achieve
this objective by investing approximately 80% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 20% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The Lifestyle Trusts are designed to provide a simple means of obtaining a
professionally-determined comprehensive investment program designed for
differing investment orientations. Each program is implemented by means of
selected long term investment allocations among the Underlying Portfolios.
The portfolios eligible for purchase by the Lifestyle Trusts consist of
all of the non-Lifestyle Trusts. The Underlying Portfolios are grouped according
to whether they invest primarily in fixed
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income securities or equity securities. The Underlying Portfolios investing
primarily in fixed income securities are the Strategic Bond, Global Government
Bond, Capital Growth Bond, Investment Quality Bond, U.S. Government Securities
and Money Market Trusts. The other Underlying Portfolios invest primarily in
equity securities.
The percentage allocations between the two types of Underlying Portfolios
specified for each Lifestyle Trust are approximate only. Variations in the
percentages are permitted up to 10% in either direction. Thus, for example, the
Lifestyle Conservative 280 Trust may have a fixed income/equity allocation of
10%/90% or 30%/70%. Variations beyond the permissible deviation range of 10% are
not permitted, unless the Adviser determines that in light of market or economic
conditions the normal percentage limitations should be exceeded to protect the
portfolio or to achieve the portfolio's objective.
The Adviser and MAC manage the Lifestyle Trusts at no cost, although they
reserve the right to seek compensation for services in the future. Within the
prescribed percentage allocations between the two types of Underlying Portfolio,
MAC will select the percentage levels to be maintained in specific portfolios.
On each valuation day, the assets of each Lifestyle Trust will be rebalanced to
maintain the selected percentage levels for the specific portfolios. MAC may
from time to time adjust the percent of assets invested in any specific
portfolios held by a Lifestyle Trust. Such adjustments may be made to increase
or decrease the Lifestyle Trust's holdings of particular assets classes, such as
common stocks of foreign issuers, or to adjust portfolio quality or the duration
of fixed income securities. Adjustments may also be made to increase or reduce
the percent of the Lifestyle Trust's assets subject to the management of a
particular Subadviser. In addition, changes may be made to reflect some
fundamental change in the investment environment.
Although substantially all of the assets of the Lifestyle Trusts will be
invested in shares of the Underlying Portfolios, the Lifestyle Trusts may invest
up to 100% of their assets in cash or in the money market instruments of the
type in which the Money Market Trust is authorized to invest for the purpose of
meeting redemption requests or making other anticipated cash payments or to
protect the portfolio in the event the Adviser determines that market or
economic conditions warrant a defensive posture. Because substantially all of
the securities in which the Lifestyle Trusts may invest are Underlying
Portfolios, each of the Lifestyle Trusts is non-diversified for purposes of the
1940 Act.
The Lifestyle Trusts are subject to the risks of the Underlying Portfolios
in which they invest. The Lifestyle Trusts are not authorized to use any of the
various investment strategies referred to under "Hedging and Other Strategic
Transactions."
Investors in the Lifestyle Trusts, in addition to bearing their
proportionate share of the expenses of a Lifestyle Trust, will indirectly bear
expenses of the Underlying Portfolio. Therefore, some investors may be able to
realize lower aggregate charges and expenses by investing directly in the
Underlying Portfolios rather than investing indirectly in the Underlying
Portfolio by investing in the Lifestyle Trusts. An investor who chose to invest
directly in the Underlying Portfolios rather than purchasing the Lifestyle
Trusts would, however, forego the asset allocation services provided by the MAC
in its management of the Lifestyle Trusts.
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, except the
Real Estate Securities Trust and the Lifestyle Trusts, in
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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 similar transactions) exceed 5%
of total assets. In addition, each of the portfolios except the Global
Government Bond, Emerging Growth and Lifestyle Trusts, 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) 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 (except that the applicable
percent is 33 1/3% in the case of the Small Company Value, Blue Chip Growth,
Equity-Income, International Stock and Science & Technology Trusts, 15% in the
case of the International Small Cap, Growth, Balanced and Worldwide Growth
Trusts and 50% in the case of the Value Trust), 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, except that the Lifestyle Trusts are not subject to this
restriction. 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 1940 Act. In order to comply with such
restrictions, the Money Market Trust will, inter alia, not purchase the
securities of any issuer if it would cause (i) more than 5% of its total assets
to be invested in the securities of any one issuer (excluding U.S. Government
securities and repurchase agreements fully collateralized by U.S. Government
securities), except as permitted by the Rule for certain securities for a period
of up to three business days after purchase, (ii) more than 5% of its total
assets to be invested in "second tier securities," as defined by the Rule, or
(iii) more than the greater of $1 million or 1% of its total net assets to be
invested in the second tier securities of that issuer.
* * *
There are also diversification and other requirements for all of the
portfolios imposed by the federal tax laws, as described under "Taxes" in this
Prospectus.
The following is a description of certain investment policies subject to
investment restrictions that may be of particular interest to contract owners.
HIGH YIELD (HIGH RISK) SECURITIES
GENERAL. The Strategic Bond and High Yield Trusts may invest without
limitation, the Investment Quality Bond Trust may invest up to 20% of its
assets, the Equity-Income, Aggressive Asset Allocation and Moderate Asset
Allocation Trusts may each invest up to 10% of its assets, and the Balanced,
International Small Cap, Growth, Blue Chip Growth and Worldwide Growth Trusts
may each invest up to 5% of its assets, in "high yield" (high risk) securities.
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
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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 and High Yield Trusts may invest without limitation in high yield
debt securities, an investment in those portfolios should not be considered as a
complete investment program for all investors.
Because the Strategic Bond, High Yield, 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 ability
of portfolios investing in high yield securities 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 a portfolio investing in high yield debt securities is not
able to obtain precise or accurate market quotations for a particular security,
it will become more difficult for the 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, High Yield and Investment Quality
Bond Trusts and other portfolios investing in such securities 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
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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 from foreign trade to service its external debt, it may need to depend
on continuing loans and aid from foreign governments, commercial banks, and
multilateral organizations, and inflows of foreign investment. The commitment on
the part of these foreign governments, multilateral organizations and others to
make such disbursements may be conditioned on the government's implementation of
economic reforms and/or economic performance and the timely service of its
obligations. Failure to implement such reforms, achieve such levels of economic
performance or repay principal or interest when due may result in the
cancellation of such third parties' commitments to lend funds, which may further
impair the obligor's ability or willingness to timely service its debts. The
cost of servicing external debt will also generally be adversely affected by
rising international interest rates, because many external debt obligations bear
interest at rates which are adjusted based upon international interest rates.
The ability to service external debt will also depend on the level of the
relevant government's international currency reserves and its access to foreign
exchange. Currency devaluations may affect the ability of a sovereign obligor to
obtain sufficient foreign exchange to service its external debt.
As a result of the foregoing, a governmental obligor may default on its
obligations. If such an event occurs, the portfolio 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, many of the
Trust's portfolios may 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 and
Equity Index Trusts, 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, Capital Growth Bond, Global
Equity, Global Government Bond, Worldwide Growth, High Yield, International
Growth and Income, International Stock, Strategic Bond, Real Estate Securities,
Quantitative Equity and Pacific Rim Emerging Markets 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 Small Company Value Trust
may invest without limit in common
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stocks of foreign issuers which are listed on a United States securities
exchange or traded in the United States in the OTC market, but will not invest
in securities which are principally traded outside of the United States. The
Aggressive Asset Allocation Trust may invest up to 35% of its assets, the
Growth, Balanced and Science & Technology Trusts each up to 30% of its assets,
the Moderate Asset Allocation and Equity-Income Trusts each up to 25% of its
assets, the Pilgrim Baxter Growth and Conservative Asset Allocation Trusts each
up to 15% of its assets, the Value Trust up to 5% of its assets, and each of the
other portfolios other than the U.S. Government Securities and Equity Index
Trusts up to 20% of its assets in securities issued by foreign entities and/or
denominated in foreign currencies. (In the case of the Small/Mid Cap, Growth,
Balanced and Value Trusts, ADRs and U.S. dollar denominated securities are not
included in the percentage 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.
Securities of foreign issuers also include EDRs and GDRs, which are
receipts evidencing an arrangement with a non-U.S. bank similar to that for ADRs
and are designed for use in non-U.S. securities markets. EDRs and GDRs are not
necessarily quoted in the same currency as the underlying security.
Foreign securities may be subject to foreign government taxes which reduce
their attractiveness. See "Taxes." In addition, investing in securities
denominated in foreign currencies and in the securities of foreign issuers,
particularly non-governmental issuers, involves risks which are not ordinarily
associated with investing in domestic issuers. These risks include political or
economic instability in the country involved and the possibility of imposition
of currency controls. Since certain portfolios may invest in securities
denominated or quoted in currencies other than the United States dollar, changes
in foreign currency exchange rates may affect the value of investments in the
portfolio and the unrealized appreciation or depreciation of investments insofar
as United States investors are concerned. Foreign currency exchange rates are
determined by forces of supply and demand on the foreign exchange markets. These
forces are, in turn, affected by the international balance of payments and other
economic and financial conditions, government intervention, speculation and
other factors. The portfolios may incur transaction charges in exchanging
foreign currencies.
There may be less publicly available information about a foreign issuer
than about a domestic issuer. Foreign issuers, including foreign branches of
U.S. banks, are subject to different accounting and reporting requirements which
are generally less extensive than the requirements applicable to domestic
issuers. Foreign stock markets (other than Japan) have substantially less volume
than the United States exchanges and securities of foreign issuers are generally
less liquid and more volatile than those of comparable domestic issuers. There
is frequently less governmental regulation of exchanges, broker-dealers and
issuers than in the United States, and brokerage costs may be higher. In
addition, investments in foreign companies may be subject to the possibility of
nationalization, withholding of dividends at the source, expropriation or
confiscatory taxation, currency blockage, political or economic instability or
diplomatic developments that could adversely affect the value of those
investments. Finally, in the event of a default on any foreign obligation, it
may be difficult for the Trust to obtain or to enforce a judgment against the
issuer.
Emerging Markets. 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
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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,
High Yield, Investment Quality Bond, Worldwide Growth, International Small Cap,
Growth, Balanced, Aggressive Asset Allocation and Moderate Asset Allocation
Trusts may also invest in foreign sovereign debt securities, which involve
certain additional risks. See "RISK FACTORS -- High Yield (High Risk)
Securities--Foreign Sovereign Debt Securities" above.
SMALL COMPANY AND EMERGING GROWTH SECURITIES
The Science & Technology, International Small Cap, Emerging Growth,
Pilgrim Baxter Growth, Small/Mid Cap, Worldwide Growth and Small Company Value
Trust may each invest in small-sized and emerging growth companies
(collectively, "small-sized companies"). Investing in securities of small-sized
companies may involve greater risks since these securities may have limited
marketability and, thus, may be more volatile. Because small-sized companies
normally have fewer shares outstanding than larger companies, it may be more
difficult to buy or sell significant amounts of such shares without an
unfavorable impact on prevailing prices. In addition, small-sized companies are
typically subject to a greater degree of changes in earnings and business
prospects than are larger, more established companies. There is typically less
publicly available information concerning small-sized companies than for larger,
more established companies. Companies with small market capitalizations may also
be dependent upon a single proprietary product or market niche, may have limited
product lines, markets or financial resources, or may depend on a limited
management group. Although investing in securities of small-sized companies
offers potential for above-average returns if the companies are successful, the
risk exists that the companies will not succeed and the prices of the companies'
shares could significantly decline in value. Therefore, an investment in a Trust
that invests in small-sized company securities may involve a greater degree of
risk than an investment in other mutual funds that seek capital appreciation by
investing in better-known, larger companies.
WARRANTS
Subject to certain restrictions, each of the Portfolios except the Money
Market Trust and the Lifestyle Trusts may purchase warrants, including warrants
traded independently of the underlying securities. Warrants are rights to
purchase securities at specific prices valid for a specific period of time.
Their prices do not necessarily move parallel to the prices of the underlying
securities, and warrant holders receive no dividends and have no voting rights
or rights with respect to the assets of an issuer. Warrants cease to have value
if not exercised prior to the expiration date.
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
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(referred to as "forward commitments"). It is expected that, under normal
circumstances, a portfolio purchasing securities on a when-issued or forward
delivery basis will take delivery of the securities, but the portfolio may sell
the securities before the settlement date, if such action is deemed advisable.
In general, a portfolio does not pay for the securities or start earning
interest on them until the obligations are scheduled to be settled, but it does,
in the meantime, record the transaction and reflect the value each day of the
securities in determining its net asset value. At the time delivery is made, the
value of when-issued or forward delivery securities may be more or less than the
transaction price, and the yields then available in the market may be higher
than those obtained in the transaction. While awaiting delivery of the
obligations purchased on such bases, a portfolio will establish a segregated
account consisting of cash or high quality debt securities equal to the amount
of the commitments to purchase when-issued or forward delivery securities. The
availability of liquid assets for this purpose and the effect of asset
segregation on a portfolio's ability to meet its current obligations, to honor
requests for redemption and to have its investment portfolio managed properly
will limit the extent to which the portfolio may purchase when-issued or forward
delivery securities. Except as may be imposed by these factors, there is no
limit on the percent of a portfolio's total assets that may be committed to such
transactions.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each of the Trust's portfolios may enter into repurchase agreements and
reverse repurchase agreements. Repurchase agreements involve the acquisition by
a portfolio of debt securities subject to an agreement to resell them at an
agreed-upon price. Under a repurchase agreement, at the time the portfolio
acquires a security, it agrees to resell it to the original seller (a financial
institution or broker/dealer which meets the guidelines established by the
Trustees) and must deliver the security (and/or securities that may be added to
or substituted for it under the repurchase agreement) to the original seller on
an agreed-upon date in the future. The repurchase price is in excess of the
purchase price. The arrangement is in economic effect a loan collateralized by
securities.
The Trustees have adopted procedures that establish certain
creditworthiness, asset and collateralization requirements for the
counterparties to a portfolio's repurchase agreements. The Trustees will
regularly monitor the use of repurchase agreements and the Subadvisers will,
pursuant to procedures adopted by the Trustees, continuously monitor the amount
of collateral held with respect to a repurchase transaction so that it equals or
exceeds the amount of the obligation.
A portfolio's risk in a repurchase transaction is limited to the ability
of the seller to pay the agreed-upon sum on the delivery date. In the event of
bankruptcy or other default by the seller, there may be possible delays and
expenses in liquidating the instrument purchased, decline in its value and loss
of interest. Securities subject to repurchase agreements will be valued every
business day and additional 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 and the
Lifestyle Trusts) 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
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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. Limitations on the portion of a portfolio's assets that
may be used in connection with the investment strategies described below are set
out in the Statement of Additional Information.
Subject to the constraints described above, an individual portfolio may
(if and to the extent so authorized) purchase and sell (or write)
exchange-listed and over-the-counter put and call options on securities,
financial futures contracts and fixed income indices and other financial
instruments, enter into financial futures contracts (including stock index
futures), 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. Investment in illiquid securities involves the risk that, because of
the lack of consistent market demand for such securities, the Trust may be
forced to sell them at a discount from the last offer price.
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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. Effective December 31, 1996, Manulife Series Fund, Inc., a
registered management investment company with nine portfolios, was merged into
the Trust. The net assets of four of the portfolios of Manulife Series Fund,
Inc. were transferred to comparable portfolios of the Trust, and the remaining
five portfolios -- the Pacific Rim Emerging Markets, Common Stock, Real Estate
Securities, Capital Growth and Equity Index Portfolios -- were transferred to
the Trust and reconstituted as new portfolios of the Trust.
ADVISORY ARRANGEMENTS
Manufacturers Securities Services, LLC (the "Adviser"),the successor to
NASL Financial Services, Inc., a Delaware limited liability company whose
principal offices are located at 73 Tremont Street, Boston, Massachusetts 02108,
is a subsidiary of Manulife North America, the ultimate parent of which is
Manulife Financial, a Canadian mutual life insurance company based in Toronto,
Canada. Prior to January 1, 1996, Manulife North America 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 Financial merged
with the combined company retaining the name Manulife Financial. The Adviser is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended, 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, The Adviser serves as principal underwriter of certain
contracts issued by Manulife North America.
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
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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, Worldwide
Growth, International Growth and Income, International Stock and Pacific Rim
Emerging Markets Trusts, .50% in the case of all other portfolios except for the
Equity Index Trust, or .15% in the case of the Equity Index Trust 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 a limited period of one year
ending December 31, 1997, the expense limitation applicable to the Real Estate
Securities, Quantitative Equity and Capital Growth Bond Trusts will include all
expenses of such portfolios, so that their total expenses for that year,
including advisory fees, will not exceed .50%.) 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, in the case of the Lifestyle Trusts, the Adviser has agreed to pay the
expenses of the Lifestyle Trusts (other than the expenses of the Underlying
Portfolios) for a period of one year commencing January 1, 1997. After this one
year period, this expense reimbursement may be terminated at any time.
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 all portfolios of the Trust.
(The Adviser does not manage any of the Trust portfolio assets.) 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. The Trust has received an order from the Securities and Exchange
Commission permitting the Adviser to appoint a subadviser or change a
subadvisory fee pursuant to an agreement that is not approved by shareholders.
The Trust, therefore, is able to change subadvisers or the fees paid to
subadvisers from time to time without the expense and delays associated with
obtaining shareholder approval of the change. This order does not permit the
Adviser to appoint a subadviser that is an affiliate of the Adviser or the Trust
(other than by reason of serving as subadviser to a portfolio) (an "Affiliated
Subadviser") or to change a subadvisory fee of an Affiliated Subadviser without
the approval of shareholders. Currently, MAC is an Affiliated Subadviser.
As compensation for its services, the Adviser receives a fee from the
Trust computed separately for each portfolio, except for the Lifestyle Trusts
for which the Adviser makes no charge. 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:
<TABLE>
<CAPTION>
PORTFOLIO
<S> <C>
Pacific Rim Emerging Markets Trust .............................. .850%
Science & Technology Trust ...................................... 1.100%
International Small Cap Trust ................................... 1.100%
Emerging Growth Trust ........................................... 1.050%
Pilgrim Baxter Growth Trust ..................................... 1.050%
Small/Mid Cap Trust ............................................. 1.000%
International Stock Trust ....................................... 1.050%
Worldwide Growth Trust .......................................... 1.000%
Global Equity Trust ............................................. .900%
Small Company Value Trust ....................................... 1.050%
Growth Trust .................................................... .850%
</TABLE>
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<TABLE>
<CAPTION>
PORTFOLIO
<S> <C>
Equity Trust ..................................................... .750%
Quantitative Equity Trust ........................................ .700%*
Equity Index Trust ............................................... .250%
Blue Chip Growth Trust ........................................... .925%
Real Estate Securities Trust ..................................... .700%*
Value Trust ...................................................... .800%
International Growth and Income Trust ............................ .950%
Growth and Income Trust .......................................... .750%
Equity-Income Trust .............................................. .800%
Balanced Trust ................................................... .800%
Aggressive Asset Allocation Trust ................................ .750%
High Yield Trust ................................................. .775%
Moderate Asset Allocation Trust .................................. .750%
Conservative Asset Allocation Trust .............................. .750%
Strategic Bond Trust ............................................. .775%
Global Government Bond Trust ..................................... .800%
Capital Growth Bond .............................................. .650%*
Investment Quality Bond Trust .................................... .650%
U.S. Government Securities Trust ................................. .650%
Money Market Trust ............................................... .500%
</TABLE>
* Because of the special one-year expense limitation described above, total fees
will not exceed .50%.
For the year ended December 31, 1996 the aggregate investment advisory
fees paid by the Trust was $46,515,018, allocated among the portfolios as
follows:
<TABLE>
<CAPTION>
Portfolio Amount of Advisory Fee
- --------- ----------------------
<S> <C>
International Small Cap Trust* $ 492,152
Small/Mid Cap Trust* 756,997
Global Equity Trust 6,234,116
Growth Trust* 119,620
Equity Trust 8,774,975
Blue Chip Growth Trust 3,317,165
International Growth and Income Trust 1,327,151
Growth and Income Trust 6,298,799
Equity-Income Trust 3,939,929
Aggressive Asset Allocation Trust 1,656,217
Moderate Asset Allocation Trust 4,764,110
Conservative Asset Allocation Trust 1,643,494
Strategic Bond Trust 1,298,996
Global Government Bond Trust 1,934,856
Investment Quality Bond Trust 965,766
U.S. Government Securities Trust 1,401,130
Money Market Trust 1,589,545
</TABLE>
*International Small Cap Trust - for the period March 4, 1996 (commencement of
operations) to December 31, 1996; Small/Mid Cap Trust - for the period March 4,
1996 (commencement of operations) to December 31, 1996; Growth Trust - for the
period July 15, 1996 (commencement of operations) to December 31, 1996.
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<PAGE> 97
For the year ended December 31, 1996 the net investment advisory fees
retained by the Adviser after payment of subadvisory fees was $30,416,538,
allocated among the portfolios as follows:
<TABLE>
<CAPTION>
$ Amount Annual % of
-------- portfolio net assets
--------------------
<S> <C> <C>
International Small Cap Trust* $ 207,749 .39%
Small/Mid Cap Trust* 371,533 .41%
Global Equity Trust 3,556,742 .51%
Growth Trust* 56,292 .19%
Equity Trust 6,518,610 .56%
Blue Chip Growth Trust 1,657,987 .48%
International Growth and Income Trust 673,432 .48%
Growth and Income Trust 4,536,529 .54%
Equity-Income Trust 2,704,263 .55%
Aggressive Asset Allocation Trust 1,033,959 .47%
Moderate Asset Allocation Trust 3,309,916 .52%
Conservative Asset Allocation Trust 1,025,103 .47%
Strategic Bond Trust 771,090 .46%
Global Government Bond Trust 1,085,650 .45%
Investment Quality Bond Trust 631,462 .43%
U.S. Government Securities Trust 927,345 .43%
Money Market Trust 1,348,876 .43%
</TABLE>
*International Small Cap Trust - for the period March 4, 1996 (commencement of
operations) to December 31, 1996; Small/Mid Cap Trust - for the period March 4,
1996 (commencement of operations) to December 31, 1996; Growth Trust - for the
period July 15, 1996 (commencement of operations) to December 31, 1996.
For the year ended December 31, 1996 the aggregate investment advisory
fees paid by the portfolios below to MAC under the fee schedule then in effect
was as follows:
<TABLE>
<CAPTION>
Portfolio Amount of Advisory Fee
- --------- ----------------------
<S> <C>
Pacific Rim Emerging Markets Trust $161,272
Common Stock 380,315
Equity Index Trust 11,227
Real Estate Securities Trust 292,384
Capital Growth Bond Trust 215,033
</TABLE>
SUBADVISORY ARRANGEMENTS
Each of the Trust's subadvisers, except FMTC, is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended.
Agreements with the subadvisers have heretofore been approved by the vote of a
majority of the then outstanding voting securities of each series of shares of
the portfolios to be managed by the subadviser. The Trust has received an order
from the Securities and Exchange Commission permitting the Adviser to appoint a
subadviser or change a subadvisory fee pursuant to an agreement that is not
approved by shareholders. The Trust, therefore, is able to change subadvisers or
the fees paid to subadvisers from time to time without the expense and delays
associated with obtaining shareholder approval of the change. This order does
not permit the Adviser to appoint an Affiliated Subadviser or to change a
subadvisory fee of an Affiliated Subadviser without the approval of
shareholders. Currently, MAC is an Affiliated Subadviser.
Fidelity Management Trust Company
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
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other institutional investors. As of October 31, 1996 FMTC had investment
management responsibility for approximately $39.3 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 December 31, 1996 had assets under
management exceeding $496.3 billion. Fidelity Investments maintains a staff of
over 100 in-house research analysts and follows some 7000 companies worldwide.
Katherine Collins and Richard B. Fentin have been responsible for the
day-to-day management of the Equity Trust since July 1, 1997. Scott D. Stewart
has had primary responsibility for the day-to-day management of the three Asset
Allocation Trusts since December 1991.
Katherine Collins joined Fidelity Investments in 1990 and is the
portfolio manager of Fidelity Mid-Cap Stock Fund and Fidelity Advisor Mid Cap
Fund. Ms. Collins previously served as sector leader of Fidelity's consumer
equity research group from 1996 to January 1997. She was named manager of
Fidelity Select Leisure, Fidelity Select Consumer Industries and Fidelity
Advisor Consumer Industries portfolios in 1996. From 1994 to 1995, Ms. Collins
was assistant director of research. From 1992 to 1994, she managed Fidelity
Select Construction and Housing Portfolio. Ms. Collins is a Chartered Financial
Analyst.
Richard B. Fentin, senior vice president, joined Fidelity Investments
in 1979 and is the portfolio manager of Fidelity Value Fund. He has managed the
Value Fund since March 1996, and previously managed the same fund during 1992.
Mr. Fentin also managed Fidelity Puritan Fund (1987 to 1996), Fidelity Growth
Company Fund (1983 to 1987), Fidelity Select Precious Metal Portfolio and
Fidelity Trust Portfolio: Growth Fund. Mr. Fentin also served as a research
assistant for the Fidelity Magellan Fund.
Scott Stewart joined Fidelity in 1987, and is Senior Vice President,
Portfolio Manager and head of the Structured Equity Group.
Oechsle International Advisors. L.P.
Oechsle International Advisors, L.P. ("Oechsle International"), the
subadviser to the Global Government Bond Trust, 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 December
31, 1996 managed approximately $9.2 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.
Astrid Vogler, Partner and Portfolio Manager, has been primarily
responsible for the day-to-day management of the Global Government Bond Trust
since March 1988. Ms. Vogler has been a Fixed Income Portfolio Manager at
Oechsle International in Frankfurt, Germany since 1988.
Wellington Management Company, LLP
Wellington Management Company, LLP ("Wellington Management"), the
subadviser to the Growth and Income and Investment Quality Bond Trusts, founded
in 1933, is a Massachusetts limited liability 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 February 28, 1997,
Wellington Management had investment management authority with respect to
approximately $139.6 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.
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Thomas L. Pappas, Senior Vice President of Wellington Management, has
served as portfolio manager to the Investment Quality Bond Trust since March
1994. Mr. Pappas also serves as portfolio manager to the North American Funds'
Investment Quality Bond Fund. Mr. Pappas has been a portfolio manager with
Wellington Management since 1987.
J.P. Morgan Investment Management Inc.
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 $208 billion as of
December 31, 1996. J.P. Morgan has managed international securities for
institutional investors since 1974. As of December 31, 1996, assets managed in
J.P. Morgan non-U.S. offices was approximately $73 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, 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 has been managing the International
Growth and Income Trust since the portfolio's inception (January, 1995) and Mr.
Fielding has been managing the portfolio since May, 1995.
Mr. Quinsee is primarily responsible for the day-to-day management of
several other institutional and investment company accounts that invest in
international securities constituting in excess of $5 billion of assets. Since
July 1994, Mr. Fielding has been responsible for the day-to-day management (in
some cases with another person) of both institutional and investment company
portfolios that invest primarily in international fixed income securities,
constituting approximately $3.3 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
Salomon Brothers Asset Management Inc ("SBAM"), the subadviser to the
U.S. Government Securities Trust and Strategic Bond Trust (collectively, the
"Funds") is a wholly-owned subsidiary of Salomon Brothers Holding Company Inc,
which is in turn wholly-owned by Salomon Inc ("SI"). SBAM was incorporated in
1987 and, together with affiliates in London, Frankfurt and Hong Kong, provides
a full range of fixed income and equity investment advisory services for
individual and institutional clients around the world, including European and
Far East central banks, pension funds, endowments, insurance companies, and
services as investment adviser to various investment companies. In providing
such investment advisory services, SBAM and it affiliates have access to SI's
more than 400 economists, mortgage, bond, sovereign and equity analysts. As of
March 31, 1997, SBAM and its worldwide investment advisory affiliates managed
approximately $20.8 billion in assets. SBAM's business offices are located at
Seven World Trade Center, New York, New York 10048.
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 with regard 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 Strategic Bond
Fund. SBAM Limited is a direct, wholly-owned subsidiary of Salomon Brothers
Holding Company Inc, which is in turn wholly-owned by SI. SBAM Limited is a
member of the Investment Management Regulatory Organization Limited in the
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United Kingdom and is registered as an investment adviser in the United States
pursuant to the Investment Advisers Act of 1940, as amended.
Steven Guterman and Roger Lavan have been jointly responsible for the
day-to-day management of the U.S. Government Securities Trust portfolio since
December 1991 and the Strategic Bond Trust portfolio since February 1993. Mr.
Guterman, who joined SBAM in 1990, is a Managing Director of Salomon Brothers
Inc and a managing Director and Senior Portfolio Manager of SBAM, responsible
for 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 two offshore mortgage funds and a number of
institutional clients. Mr. Guterman joined Salomon Brothers Inc in 1983 working
initially in the mortgage research group where he became a Research Director and
later traded derivative mortgage-backed securities.
Mr. Lavan joined SBAM in 1990 and is a Portfolio Manager and
Quantitative Fixed Income Analyst, 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. Prior to joining SBAM, Mr. Lavan spent four years analyzing
portfolios for Salomon Brothers' Fixed Income Sales Group and Product Support
Divisions.
Messrs. Guterman and Lavan have been assisted in the management of the
Strategic Bond Trust by Peter Wilby since February 1993 and David Scott since
January 1995. Mr. Wilby, who joined SBAM in 1989, is a Managing Director of
Salomon Brothers Inc and SBAM and a Senior Portfolio Manager of SBAM,
responsible for investment company and institutional portfolio investments in
high yield U.S. corporate debt securities and high yield foreign sovereign debt
securities. From 1984 to 1989, Mr. Wilby was employed by Prudential Capital
Management Group ("Prudential"), where he served as Director of Prudential's
credit research unit and as a corporate and sovereign credit analyst. Mr. Wilby
also managed high yield bonds and leveraged equities for Prudential mutual funds
and institutional portfolios.
David Scott is a Senior Portfolio Manager with SBAM Limited in London
with primary responsibility for managing long-term global bond portfolios. He
also plays an integral role in developing strategy. Mr. Scott manages currency
transactions and investments in non-dollar denominated securities for the
Strategic Bond Fund. Prior to joining SBAM in April 1994, Mr. Scott worked at
J.P. Morgan from 1990 to 1994 where he had responsibility for global and
non-dollar portfolios for clients including departments of various governments,
pension funds and insurance companies.
Fred Alger Management, Inc.
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 March 31, 1997 had approximately $6.4
billion under management, including $4.9 billion in mutual fund accounts and
$1.5 billion in other advisory accounts. Alger 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, has been primarily responsible for
the day-to-day management of the Small/Mid Cap Trust since the portfolio's
inception (March, 1996). 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 since the portfolio's inception 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.
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Founders Asset Management, Inc.
Investment decisions for the Growth, International Small Cap, Balanced
and Worldwide Growth Trusts 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, Chairman, Chief Executive Officer and Chief
Investment Officer of Founders, owns 100% of the voting stock of Founders. As of
February 28, 1997, Founders had over $5.2 billion of assets under management,
including approximately $3.8 billion in mutual fund accounts and $1.4 billion in
other advisory accounts.
Founders is a "growth-style" manager of equity portfolios and gives
priority to the selection of individual securities that have the potential to
provide superior results over time, despite short-term volatility. Under normal
circumstances, Founders' approach to investment management gives greater
emphasis to the fundamental financial, marketing and operating strengths of the
companies whose securities it buys, and is less concerned with the short-term
impact of changes in macroeconomic and market conditions. Founders focuses on
purchasing the stocks of companies with strong management and market positions
that have earnings prospects that are significantly above the average for their
market sectors.
To facilitate the day-to-day investment management of the Growth,
International Small Cap, Balanced and Worldwide Growth Trusts, 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, portfolio traders and research
analysts. Team members share responsibility for providing ideas, information,
knowledge and expertise in the management of the portfolios. 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, has been the lead
portfolio manager for the International Small Cap Trust and the Worldwide Growth
Trust since the portfolios' inception (March, 1996 and January, 1997,
respectively). Mr. Gerding is a chartered financial analyst who has been part of
Founders' investment department since 1990. Prior to joining Founders, Mr.
Gerding served as a portfolio manager and research analyst with NCNB Texas for
several years. Mr. Gerding earned a BBA in finance and an MBA from Texas
Christian University.
Edward F. Keely, Vice President of Investments, has been the lead
portfolio manager for the Growth Trust since the portfolio's inception (July,
1996). Mr. Keely is a chartered financial analyst who joined Founders in 1989. A
graduate of The Colorado College, Mr. Keely holds a Bachelor of Arts degree in
economics.
Brian F. Kelly, Vice President of Investments, is the lead portfolio
manager for the Balanced Trust, which commenced operations on January 1, 1997.
Mr. Kelly joined Founders in 1996. Prior to joining Founders, Mr. Kelly served
as portfolio manager for Invesco Trust Company (1993-1996) and as a senior
investment analyst for Sears Investment Management Company (1986-1993). A
graduate of the University of Notre Dame, Mr. Kelly received his MBA and JD from
the University of Iowa. He is also a Certified Public Accountant.
T. Rowe Price Associates, Inc.
T. Rowe Price Associates, Inc. ("T. Rowe Price"), whose address is at
100 East Pratt Street, Baltimore, Maryland 21202, is the subadviser for the Blue
Chip Growth, Equity-Income and Science & Technology Trusts. Founded in 1937 by
the late Thomas Rowe Price, Jr., T. Rowe Price and its affiliates managed over
$95 billion for over 4.5 million individual and institutional investor accounts
as of December 31, 1996.
The Blue Chip Growth Trust has an investment advisory committee
composed of the following members: Larry J. Puglia, Chairman, Brian W.H.
Berghuis, Thomas H. Broadus, Jr., Robert W. Smith, Thomas J. Huber, and William
J. Stromberg. The committee chairman has day-to-day responsibility for managing
the portfolio and works with the committee in developing and executing the
portfolio's investment program. Mr. Puglia joined T. Rowe Price in 1990 and has
been managing investments since 1993. He became chairman of the Blue Chip Growth
Trust investment advisory committee on October 1, 1996.
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<PAGE> 102
The investment advisory committee for the Science and Technology Trust
is composed of the following members: Charles A. Morris, Chairman, Lise J.
Buyer, Jill L. Hauser, Joseph Klein III, and Brian D. Stansky. Mr. Morris joined
T. Rowe Price in 1987, and has been managing investments since 1991. He has been
chairman of the investment advisory committee of T. Rowe Price Science &
Technology Fund, Inc. since 1991.
The investment advisory committee for the Equity-Income Trust is
comprised of the following members: Brian C. Rogers, Chairman, Stephen W.
Boesel, Richard P. Howard, Michael F. Sola and William J. Stromberg. Mr. Rogers
joined T. Rowe Price in 1982 and has been managing investments since 1983. He
has been chairman of the Equity Income Trust investment advisory committee since
October 1, 1996.
Rowe Price-Fleming International, Inc.
Rowe Price-Fleming International, Inc. ("Price-Fleming") is subadviser
to the International Stock Trust. Price Fleming's U.S. office is located at 100
East Pratt Street, Baltimore, Maryland 21202. Price-Fleming has offices in
Baltimore, London, Tokyo, Hong Kong and Singapore. Price-Fleming was
incorporated in Maryland in 1979 as a joint venture between T. Rowe Price and
Robert Fleming Holdings Limited (Flemings).
T. Rowe Price, Flemings, and Jardine Fleming are owners of
Price-Fleming. The common stock of Price-Fleming is 50% owned by a wholly owned
subsidiary of T. Rowe Price, 25% by a subsidiary of Flemings, and 25% by Jardine
Fleming Group Limited (Jardine Fleming). (Half of Jardine Fleming is owned by
Flemings and half by Jardine Matheson Holdings Limited) T. Rowe Price has the
right to elect a majority of the Board of Directors of Price Fleming, and
Flemings has the right to elect the remaining directors, one of whom will be
nominated by Jardine Fleming.
An investment advisory group has day to day responsibility for managing
the portfolio and developing and executing its investment program. The members
of the advisory group are as follows: Martin G. Wade, Christopher D. Alderson,
Peter B. Askew, Mark J.T. Edwards, John R. Ford, James B.M. Seddon, Benedict
R.F. Thomas, and David J.L. Warren.
Martin Wade joined Price-Fleming in 1979 and has 26 years of experience
with the Fleming Group in research, client service, and investment management.
(Fleming Group included Robert Fleming and/or Jardine Fleming.) Christopher
Alderson joined Price-Fleming in 1988 and has nine years of experience with the
Fleming Group in research and portfolio management. Peter Askew joined
Price-Fleming in 1988 and has 20 years of experience managing multi-currency
fixed income portfolios. Mark Edwards joined Price-Fleming in 1986 and has 14
years of experience in financial analysis. John Ford joined Price-Fleming in
1982 and has 15 years of experience with the Fleming Group in research and
portfolio management. James Seddon joined Price-Fleming in 1987 and has 10 year
of experience in portfolio management. Benedict Thomas joined Price-Fleming in
1988 and has six years of portfolio management experience. David Warren joined
Price-Fleming in 1984 and has 15 years of experience in equity research, fixed
income research, and portfolio management.
Morgan Stanley Asset Management Inc.
Morgan Stanley Asset Management Inc. ("Morgan Stanley"), with principal
offices at 1221 Avenue of the Americas, New York, New York 10020, has been the
subadviser to the Global Equity Trust since October 1, 1996. Morgan Stanley, a
wholly-owned subsidiary of Morgan Stanley Group Inc., conducts a worldwide
portfolio management business, providing a broad range of portfolio management
services to customers in the United States and abroad. At. December 31, 1996,
Morgan Stanley and its investment management affiliates had approximately &70.4
billion of combined assets under management as investment managers or as
fiduciary advisers. (This amount is exclusive of approximately $41.4 billion in
assets under management by Miller, Anderson & Sherrerd, LLP, which became
affiliated with Morgan Stanley in January 1996, and approximately $60 billion in
assets under management by Van Kampen American Capital, Inc., which became
affiliated with Morgan Stanley on October 31, 1996.)
On February 5, 1997, Morgan Stanley Group, Inc. and Dean Witter,
Discover & Co. announced that they had entered into an Agreement and Plan of
Merger to form Morgan Stanley, Dean Witter,
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<PAGE> 103
Discover & Co. Subject to certain conditions being met, it is currently
anticipated that the transaction will close in mid-1997. Thereafter, Morgan
Stanley will be a subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Dean Witter, Discover & Co. is a financial services company with three
major businesses: full service brokerage, credit services and asset management.
Frances Campion has been primarily responsible for the portfolio
management of the Global Equity Trust since January 1, 1997. Ms. Campion joined
Morgan Stanley in January 1990 as a global equity fund manager and is now a
Principal of Morgan Stanley & Co. Incorporated. Her responsibilities include day
to day management of the Global Equity Portfolio of Morgan Stanley Institutional
Fund, Inc. Prior to joining Morgan Stanley, Ms. Campion was a U.S. equity
analyst with Lombard Odler Limited where she had responsibility for the
management of global portfolios. Ms. Campion has ten years global investment
experience. She is a graduate of University of College, Dublin.
Miller Anderson & Sherrerd, LLP
Miller Anderson & Sherrerd, LLP ("MAS"), the subadviser to the Value
and High Yield Trusts, is a Pennsylvania limited liability partnership founded
in 1969 and is located at One Tower Bridge, West Conshohocken, PA 19428. MAS
provides investment services to employee benefit plans, endowment funds,
foundations and other institutional investors and as of December 31, 1996 had
approximately $41.4 billion in assets under management. As of January 1996, MAS
is also indirectly wholly-owned by Morgan Stanley Group Inc. Upon completion of
the merger of Morgan Stanley Group Inc. and Dean Witter, Discover & Co.
discussed above, MAS will be an indirectly wholly-owned subsidiary of Morgan
Stanley, Dean Witter, Discover & Co., Inc.
The investment professionals of MAS who are primarily responsible for
the day to day management of the Value Trust are Robert J. Marcin and Richard M.
Behler. Both have managed the portfolio since January 1, 1997. Robert J. Marcin,
Portfolio Manager, joined MAS in 1988 and Richard M Behler, Portfolio Manager,
joined MAS in 1995. Both Mr. Marcin and Mr. Behler have been portfolio managers
since joining MAS. Prior to joining MAS, Mr. Behler served as portfolio manager
from 1992-1995 for Moore Capital Management and Senior Vice President for
Merrill Lynch Economics from 1987 through 1992. Messrs. Marcin and Behler are
also primarily responsible for the management of the Value Portfolios of MAS
Funds, Morgan Stanley Fund, Inc. and Morgan Stanley Universal Funds, Inc. The
investment professionals primarily responsible for the High Yield Trust since
the Trust's inception are Robert E. Angevine, Thomas L. Bennett and Stephen F.
Esser. Robert E. Angevine, Portfolio Manager, joined Morgan Stanley in 1988 and
came to the MAS High Yield Portfolio Team in 1996, Thomas L. Bennett, Portfolio
Manager, joined MAS in 1984, and Stephen F. Esser, Portfolio Manager, joined MAS
in 1988. Messrs. Angevine, Bennett and Esser are also primarily responsible for
the management of the High Yield portfolios of MAS Funds and Morgan Stanley
Universal Funds.
Pilgrim Baxter & Associates, Ltd.
Pilgrim Baxter & Associates, Ltd. ("PBHG"), the sub-advisor to the
Pilgrim Baxter Growth Trust, is a professional investment management firm that
has been in business since its founding in 1982. The controlling shareholder of
PBHG is United Asset Management Corporation (UAM), a New York Stock Exchange
listed holding company principally engaged, through affiliated firms, in
providing institutional investment management services. UAM's corporate
headquarters are located at One International Place, Boston, Massachusetts
02110. PBHG currently has discretionary management authority with respect to
approximately $14 billion. In addition to advising the Pilgrim Baxter Growth
Trust, PBHG provides advisory services to the PBHG Funds, Inc. and to pension
and profit sharing plans, charitable institutions, corporations, individuals,
trust and estates and other investment companies. The principal business address
for PBHG is 1255 Drummers Lane, Wayne, Pennsylvania 19087.
Mr. Bruce J. Muzina and Mr. Gary L. Pilgrim, CFA serve as co-portfolio
managers of the Pilgrim Baxter Growth Trust which commenced operations on
December 31, 1996. Mr. Pilgrim has served as the Chief Investment Officer of
PBHG for the past six years and as the President since 1993. Mr. Pilgrim is also
the portfolio manager of the PBHG Growth Fund, a mutual fund available to the
general public. Mr. Muzina serves as the lead Mid-Cap portfolio manager for
institutional accounts at PBHG. Mr. Muzina has been with the firm since 1985.
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Manufacturers Adviser Corporation
Manufacturers Adviser Corporation ("MAC"), a Colorado corporation, is
the subadviser of the Money Market, Pacific Rim Emerging Markets, Capital Growth
Bond, Quantitative Equity, Real Estate Securities, Equity Index and Lifestyle
Trusts. Its principal business at the present time is to provide investment
management services to these portfolios and comparable portfolios of North
American Funds. MAC is an indirect wholly-owned subsidiary of Manulife
Financial. The address of MAC is 200 Bloor Street East, Toronto, Ontario, Canada
M4W 1E5. As of October 31, 1996, MAC together with Manulife Financial had
approximately $15 billion of assets under management.
Management of the above portfolios is provided by a team of investment
professionals each of whom plays an important role in the management process of
each portfolio. Team members work together to develop investment strategies and
select securities for a portfolio. They are supported by research analysts,
traders and other investment specialists who work alongside the investment
professionals in an effort to utilize all available resources to benefit the
shareholders.
The persons with primary responsibility for the day to day management
of the Real Estate Securities Trust are Mark Schmeer and Leslie Grober. Mr.
Schmeer joined MAC in 1995 and has managed the Real Estate Securities Trust
since then. He is an investment manager of U.S. Equities at Manulife Financial.
Prior to 1995 he was a Vice President of Sun Life Investment Management, where
he served from 1993 to 1995. Mr. Schmeer was a manager of U.S. Investments for
Ontario Hydro Corporation from 1986 to 1993. Mr. Grober also joined MAC in 1995
and has managed the Real Estate Securities Trust since then. He has been an
investment manager of U.S. Equities at Manulife Financial since 1994. Mr. Grober
was an investment representative of Toronto-Dominion Bank from 1991 to 1993.
Prior to that he was employed by the Bank of Montreal.
The persons with primary responsibility for the day to day management
of the Quantitative Equity Trust are Mark Schmeer and Rhonda Chang. Ms. Chang
joined MAC in 1995 and has managed the Quantitative Equity Trust since then. She
has been an investment manager at Manulife Financial since 1994. From 1990 to
1994, Ms. Chang was an investment analyst with American International Group.
Mark Schmeer has managed the Quantitative Equity Trust since 1995.
Catherine Addison has primary responsibility for the day to day
management of the Capital Growth Bond Trust. She has had such responsibility for
the predecessor portfolio of Manulife Series Fund, Inc., since 1988. She has
been an investment manager of U.S. Fixed Income at Manulife Financial since
1985.
The persons with primary responsibility for the day to day management
of the Pacific Rim Emerging Markets Trust are Stephen Hill, Richard James Crook
and Emilia Panadero-Perez. Mr. Hill joined MAC in 1995 and has managed the
Pacific Rim Emerging Market Trust since then. He is also an investment manager
at Manulife Financial. Prior to 1995, Mr. Hill was a director of INVESCO Asset
Management, where he served in 1993 and 1994. Mr. Hill was a director of Yasuda
Trust Europe from 1989 to 1992. Mr. Crook joined MAC in 1994 and has managed the
Pacific Rim Emerging Market Trust since then. He has been an investment manager
of Manulife Financial since 1975. Ms. Panadero-Perez joined MAC in 1995. She has
been an investment manager at Manulife Financial since 1989.
The Lifestyle Trusts are managed by an investment advisory committee
composed of the following members: Joseph Mounsey (chairman), Mark Schmeer,
Robert Laughton, Richard Crook, Steve Lewis. Joseph Mounsey has been President
of MAC since 1996 and has over twenty-six years of investment experience with
Manulife Financial.
Warburg, Pincus Counsellors, Inc.
Warburg, Pincus Counsellors, Inc. ("Warburg"), the subadviser of the
Emerging Growth Trust, is a professional investment counselling firm which
provides investment services to investment companies, employee benefit plans,
endowment funds, foundations and other institutions and individuals. As of
February 28, 1997, Warburg managed approximately $17.3 billion of assets,
including approximately $10.5 billion of investment company assets. Incorporated
in 1970, Warburg is a wholly owned subsidiary of Warburg, Pincus Counsellors
G.P. ("Warburg G.P."), a New York general partnership, which itself is
controlled by Warburg, Pincus & Co. ("WP & Co."), also a New York general
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partnership. Lionel I. Pincus, the managing partner of WP & Co., may be deemed
to control both WP & Co. and Warburg. Warburg G.P. has no business other than
being a holding company of Warburg and its subsidiaries. Warburg's address is
466 Lexington Avenue, New York, New York 10017-3147.
The co-portfolio managers of the Emerging Growth Trust are Elizabeth B.
Dater and Stephen J. Lurito (both have managed the Trust since its inception on
January 1, 1997). Ms. Dater has been portfolio manager of the Warburg Pincus
Emerging Growth Fund since its inception on January 21, 1988. She is a senior
managing director of Warburg and has been a portfolio manager of Warburg since
1978. Mr. Lurito has been a portfolio manager of the that Fund since 1990. He is
a managing director of Warburg and has been with Warburg since 1987, before
which time he was a research analyst at Sanford C. Bernstein & Company, Inc.
Rosenberg Institutional Equity Management
Rosenberg Institutional Equity Management ("Rosenberg"), the subadviser
to the Small Company Value Trust, is a professional investment management firm
which provides investment advisory services to a substantial number of
institutional investors. Rosenberg is a California limited partnership whose
principal business address is Four Orinda Way, Suite 300E, Orinda, CA 94563.
Rosenberg is part of a global group of investment adviser companies under common
ownership. The general partners of Rosenberg are Barr M. Rosenberg, Marlis S.
Fritz and Kenneth Reid. As of August 31, 1997, Rosenberg managed approximately
$4.218 billion of assets.
Management of the Small Company Value Trust is overseen by Dr.
Rosenberg and Dr. Reid who are responsible for design and maintenance of
Rosenberg's portfolio system, and by a portfolio manager who is responsible for
research and monitoring the Small Company Value Trust's performance against the
relevant benchmark and for monitoring cash balances.
Dr. Rosenberg, Dr. Reid and Floyd Coleman, the portfolio manager, are
responsible for the day-to-day management of the Small Company Value Trust.
Dr. Rosenberg has been employed by Rosenberg since the company's
inception in 1985. Dr. Rosenberg is Managing General Partner and Chief
Investment Officer for Rosenberg. As such, he has ultimate responsibility for
Rosenberg's securities valuation and portfolio optimization systems used to
manage the Small Company Value Trust and for the implementation of the decisions
developed therein. His area of special concentration is the design of
Rosenberg's proprietary securities valuation model. Dr. Rosenberg earned a B.A.
degree for the University of California, Berkeley, in 1963. Dr. Rosenberg earned
an M.Sc. from the London School of Economics in 1965, and a Ph.D. from Harvard
University, Cambridge, Massachusetts, in 1968.
Dr. Reid has been employed by Rosenberg for the past eleven years. Dr.
Reid is a General Partner and Director of Research for Rosenberg. His work is
focused on the design and estimation of Rosenberg's valuation models and he has
primary responsibility for analyzing the empirical evidence that validates and
supports the day-to-day recommendations of Rosenberg's securities valuation
models. Dr. Reid earned both a B.A. degree (1973) and an M.D.S. (1975) from
Georgia State University, Atlanta. In 1982, he earned a Ph.D. from the
University of California, Berkeley, where he was awarded the American Bankers
Association Fellowship.
Mr. Coleman has been a trader and portfolio manager for Rosenberg since
1988. He received a B.S. from Northwestern University in 1982, a M.S. from
Polytechnic Institute, Brooklyn in 1984 and a M.B.A. from Harvard Business
School in 1988.
* * *
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.
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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>
Pacific Rim Emerging Markets
Trust .400% .350% .275% .225%
Science & Technology Trust .600% .600% .600% .600%
International Small Cap Trust .650% .600% .500% .400%
Emerging Growth Trust .550% .550% .550% .550%
Pilgrim Baxter Growth Trust .600% .600% .500% .500%
Small/Mid Cap Trust .525% .500% .475% .450%
International Stock Trust .750%* .500% .500%* .450%*
Worldwide Growth Trust .600% .550% .450% .350%
Small Company Value Trust .600% .575% .525% .475%
Global Equity Trust .500% .450% .375% .325%
Growth Trust .450% .450% .350% .300%
Equity Trust .375% .325% .275% .200%
Quantitative Equity Trust .275% .225% .175% .150%
Equity Index Trust .100% .100% .100% .100%
Blue Chip Growth Trust .500% .450% .400% .325%
Real Estate Securities Trust .275% .225% .175% .150%
Value Trust .400% .300% .200% .200%
International Growth and
Income Trust .500% .450% .400% .350%
Growth and Income Trust .325% .275% .225% .150%
Equity-Income Trust .400% .300% .200% .200%
Balanced Trust .375% .325% .275% .225%
Aggressive Asset Allocation
Trust .400% .350% .300% .225%
High Yield Trust .350% .300% .250% .200%
Moderate Asset Allocation Trust .375% .325% .275% .200%
Conservative Asset Allocation
Trust .350% .300% .250% .175%
Strategic Bond Trust** .350% .300% .250% .200%
Global Government Bond Trust .375% .350% .300% .250%
Capital Growth Bond Trust .225% .225% .150% .100%
Investment Quality Bond Trust .225% .225% .150% .100%
U.S. Government Securities Trust .225% .225% .150% .100%
Money Market Trust .075% .075% .075% .020%
Lifestyle Trusts no subadvisory fee
</TABLE>
*.750% up to $20 million, .600% from $20 million up to $50 million, .50% from
$50 million up to $200 million of the current value of the net assets of the
Portfolio. When the current value of the net assets of the Portfolio equals or
exceeds $200 million, the fee is .500% of the current value of the net assets of
the Portfolio. When the current value of the net assets of the Portfolio equals
or exceeds $500 million, the fee is .450% of the current value of the net assets
of the Portfolio.
** 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
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<PAGE> 107
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, 1996, the Adviser paid aggregate
subadvisory fees of $15,882,911, allocated among the portfolios as follows:
<TABLE>
<CAPTION>
$ Amount % of Avg net assets
<S> <C> <C>
International Small Cap Trust $ 284,403 .64%
Small/Mid Cap 385,464 .51%
Global Equity Trust 2,677,373 .39%
Growth Trust 63,328 .45%
Equity Trust 2,256,365 .19%
Blue Chip Growth Trust 1,452,025 .42%
International Growth & Income Trust 653,719 .47%
Growth & Income Trust 1,761,319 .21%
Equity-Income Trust 1,235,667 .25%
Aggressive Asset Allocation Trust 622,181 .28%
Moderate Asset Allocation Trust 1,454,194 .23%
Conservative Asset Allocation Trust 618,391 .28%
Strategic Bond Trust 527,906* .32%
Global Government Bond Trust 845,379 .35%
Investment Quality Bond Trust 334,303 .23%
U.S. Government Securities Trust 473,786 .22%
Money Market Trust 237,108 .07%
</TABLE>
*$131,977 of this amount was paid to SBAM Limited
For the year ended December 31, 1996, the Adviser paid subadvisory fees
to MAC of $63,285 (.02% of average net assets) for services to the Money Market
Trust.
Above are brief summaries of the advisory agreement with The Adviser
("Advisory Agreement") and the subadvisory agreements with the subadvisers
("Subadvisory Agreements"). A more comprehensive statement of the terms of such
agreements appears in the Statement of Additional Information under the caption
"Investment Management Arrangements".
All or a portion of Trust brokerage commissions may be paid to
affiliates of SBAM, J.P. Morgan, Alger, Fidelity, Morgan Stanley and Oechsle
International. 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, 1996, 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 were as
follows:
<TABLE>
<S> <C>
International Small Cap Trust 1.29%*
Small/Mid Cap Trust 1.10%*
Global Equity Trust 1.01%
Growth Trust 1.01%*
Equity Trust .80%
Blue Chip Growth Trust .98%
</TABLE>
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<PAGE> 108
<TABLE>
<S> <C>
International Growth and Income Trust 1.11%
Growth and Income Trust .80%
Equity-Income Trust .85%
Aggressive Asset Allocation Trust .90%
Moderate Asset Allocation Trust .84%
Conservative Asset Allocation Trust .87%
Strategic Bond Trust .86%
Global Government Bond Trust .90%
Investment Quality Bond Trust .73%
U.S. Government Securities Trust .71%
Money Market Trust .55%
</TABLE>
* Annualized
For the year ended December 31, 1996, the expenses, including the
advisory fee then in effect paid to MAC but excluding portfolio brokerage
commissions, expressed as a percentage of average net assets, were as follows
for:
<TABLE>
<S> <C>
Pacific Rim Emerging Markets Trust 1.50%
Quantitative Equity Trust .50%
Equity Index Trust .40%*
Real Estate Securities Trust .50%
Capital Growth Bond Trust .50%
</TABLE>
* Annualized
For the year ended December 31, 1996, 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 were as follows:
<TABLE>
<S> <C>
International Small Cap Trust .19%*
Small/Mid Cap Trust .10%
Global Equity Trust .11%
Growth Trust .16%*
Equity Trust .05%
Blue Chip Growth Trust .05%
International Growth and Income Trust .16%
Growth and Income Trust .05%
Equity-Income Trust .05%
Aggressive Asset Allocation Trust .15%
Moderate Asset Allocation Trust .09%
Conservative Asset Allocation Trust .12%
Strategic Bond Trust .08%
Global Government Bond Trust .10%
Investment Quality Bond Trust .08%
U.S. Government Securities Trust .06%
Money Market Trust .05%
</TABLE>
* Annualized
For the year ended December 31, 1996, the expenses, excluding the
Adviser's fee and portfolio brokerage commissions, expressed as a percentage of
average net assets, were as follows for:
<TABLE>
<S> <C>
Pacific Rim Emerging Markets Trust .65%
Quantitative Equity Trust .00%
Equity Index Trust .15%*
Real Estate Securities Trust .00%
Capital Growth Bond Trust .00%
</TABLE>
* Annualized
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Each of the portfolios, except the Global Equity, Blue Chip Growth,
Equity, Equity-Income and Growth and Income Trusts, anticipates that its annual
portfolio turnover rate will exceed 100%. A high portfolio turnover rate
generally involves correspondingly greater brokerage commission expenses, which
must be borne directly by the portfolio. The portfolio turnover rate of each of
the Trust's portfolios may vary from year to year, as well as within a year. See
"Portfolio Turnover" in the Statement of Additional Information.
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. In the case of the Pacific Rim Emerging Markets, Real
Estate Securities, Quantitative Equity, Capital Growth Bond and Equity Index
Trusts, such quotations will be for periods that include the performance of the
predecessor portfolios of Manulife Series Trust, Inc. 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 Trust performance.
The Trust may also from time to time advertise the performance of
certain portfolios relative to that of unmanaged indices, including but not
limited to the Dow Jones Industrial Average, the Lehman Brothers Bond,
Government Corporate, Corporate and Aggregate Indices, the Standard and Poor's
500, the Value Line Composite and the Morgan Stanley Capital International
Europe, Australia and Far East ("EAFE") and World Indices. The Trust may also
advertise the performance rankings assigned certain portfolios or their
investment subadvisers by various statistical services, including but not
limited to SEI, Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis and Variable Insurance Products Performance Analysis, Variable Annuity
Research and Data Service, Intersec Research Survey of Non-U.S. Equity Fund
Returns and Frank Russell International Universe, and any other data which may
be presented from time to time by such analysts as Dow Jones, Morning Star,
Chase International Performance, Wilson Associates, Stanger, CDA Investment
Technology, the Consumer Price Index ("CPI"), The Bank Rate Monitor National
Index, IBC/Donaghue's Average U.S. Government and Agency, or as they appear in
various publications, including The Wall Street Journal, New York Times, Forbes,
Barrons, Fortune, Money Magazine, Financial World and Financial Services Week.
GENERAL INFORMATION
SHARES OF THE TRUST
The Trust's Declaration of Trust authorizes the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest having a
par value of $.01 per share, to divide such shares into an unlimited number of
series of shares and to designate the relative rights and preferences thereof,
all without shareholder approval. In addition, the Trustees are authorized to
divide any series of shares into separate classes, also without shareholder
approval. The Trust currently has thirty-six 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 1940 Act, 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.
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The Trust currently has three shareholders, Manulife North America,
Manufacturers America and Manulife New York. Manulife North America provided the
Trust with its initial capital. Currently, Manulife North America 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 Manulife North America, Trust shares owned beneficially by Manulife
North America in accordance with instructions received from contract owners.
Shares of the Trust may be sold to both variable annuity separate
accounts and variable life insurance separate accounts of affiliated insurance
companies. The Trust currently does not foresee any disadvantages to the owners
of variable annuity or variable life insurance contracts arising from the fact
that the interests of those owners may differ. Nevertheless, the Trust's Board
of Trustees will monitor events in order to identify any material irreconcilable
conflicts which may possibly arise due to differences of tax treatment or other
considerations and to determine what action, if any, should be taken in response
thereto. Such an action could include the withdrawal of a separate account from
participation in the Trust.
TAXES
TAX STATUS. The Trust believes that each portfolio will qualify as a
regulated investment company under Subchapter M, Chapter 1, Subtitle A of the
Internal Revenue Code (the "Code"), and the Trust intends to take the steps
necessary to so qualify each portfolio. As a result of qualifying as a regulated
investment company, each portfolio will not be subject to Federal income tax to
the extent that the portfolio distributes its net income, including its net
realized capital gains, to its shareholders. Accordingly, each portfolio intends
to distribute substantially all of its net income, including all of its net
realized capital gains, to its shareholders. Under current law, net income,
including net realized capital gain, is not taxed to a life insurance company to
the extent that it is applied to increase the reserves for the company's
variable annuity and life insurance contracts.
SOURCES OF GROSS INCOME. To qualify for treatment as a regulated
investment company, a portfolio must, among other things, derive its income from
certain sources. Specifically, in each taxable year a portfolio must derive at
least 90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities
or foreign currencies, or other income (including, but not limited to, gains
from options, futures or forward contracts) derived with respect to its business
of investing in stock, securities, or currencies. A portfolio must also derive
less than 30% of its gross income from the sale or other disposition of any of
the following which was held for less than three months: (1) stock or
securities, (2) options, futures, or forward contracts (other than options,
futures, or forward contracts on foreign currencies), or (3) foreign currencies
(or options, futures, or forward contracts on foreign currencies) but only if
such currencies (or options, futures, or forward contracts) are not directly
related to the portfolio's principal business of investing in stock or
securities (or options and futures with respect to stocks or securities). For
purposes of these tests, gross income generally is determined without regard to
losses from the sale or other disposition of stock or securities or other
portfolio assets. Compliance with these requirements may prevent a portfolio
from utilizing options, futures, and forward contracts as much as the subadviser
might otherwise believe to be desirable.
DIVERSIFICATION OF ASSETS. To qualify for treatment as a regulated
investment company, a portfolio must also satisfy certain requirements with
respect to the diversification of its assets. A portfolio must have, at the
close of each quarter of the taxable year, at least 50% of the value of its
total assets represented by cash, cash items, United States Government
securities, securities of other regulated investment companies, and other
securities which, in respect of any one issuer, do not represent more than 5% of
the value of the assets of the portfolio nor more than 10% of the voting
securities of that issuer. In addition, at those times not more than 25% of the
value of the portfolio's assets may be invested in securities (other than United
States Government securities or the securities of other regulated investment
companies) of any one issuer, or of two or more issuers which the portfolio
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses.
Because the Trust is established as an investment medium for insurance
company separate accounts, regulations under Subchapter L of the Code impose
additional diversification requirements on each portfolio. These requirements
generally are that no more than 55% of the value of the assets of a portfolio
may be represented by any one investment; no more than 70% by any two
investments; no more than 80% by any three investments; and no more than 90% by
any four investments. For these purposes,
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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 the shareholder 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.
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The net asset value of the shares of each portfolio is determined once
daily as of the close of regularly scheduled trading of the New York Stock
Exchange, Monday through Friday, except that no determination is required on (i)
days on which changes in the value of such portfolio's portfolio securities will
not materially affect the current net asset value of the shares of the
portfolio, (ii) days during which no shares of such portfolio are tendered for
redemption and no order to purchase or sell such shares is received by the
Trust, or (iii) the following business holidays or the days on which such
holidays are observed by the New York Stock Exchange: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Generally, trading in non-U.S. securities,
as well as U.S. Government securities and money market instruments, is
substantially completed each day at various times prior to the close of
regularly scheduled trading of the New York Stock Exchange. The values of such
securities used in computing the net asset value of a portfolio's shares are
generally determined as of such times. Occasionally, events which affect the
values of such securities may occur between the times at which they are
generally determined and the close of the New York Stock Exchange and would
therefore not be reflected in the computation of a portfolio's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as determined
in good faith by the subadvisers under procedures established and regularly
reviewed by the Trustees.
The net asset values per share of all portfolios other than the Money
Market Trust are computed by adding the sum of the value of the securities held
by each portfolio plus any cash or other assets it holds, subtracting all its
liabilities, and dividing the result by the total number of shares outstanding
of that portfolio at such time. Securities held by each of the portfolios other
than the Money Market Trust, except for money market instruments with remaining
maturities of 60 days or less and Underlying Portfolio shares held by the
Lifestyle Trusts, 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.
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APPENDIX I
DEBT SECURITY RATINGS
STANDARD & POOR'S RATINGS GROUP ("S&P")
Commercial Paper:
A-1 The rating A-1 is the highest rating assigned by S&P to commercial
paper. This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high for issuers
designated "A-1".
Bonds:
AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small
degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB-B-CCC
-CC Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
D Bonds rated D are in default. The D category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired. The D rating is also used upon
the filing of a bankruptcy petition if debt service payments are
jeopardized.
The ratings set forth above may be modified by the addition of a plus
or minus to show relative standing within the major rating categories.
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Commercial Paper:
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
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financial charges and high internal cash generation; and (5) well
established access to a range of financial markets and assured sources
of alternate liquidity.
P-2 Issuers rated P-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
Bonds:
Aaa Bonds which are rated Aaa by Moody's are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa by Moody's are judged to be of high quality by
all standards. Together with the Aaa group, they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long
term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A by Moody's possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa Bonds which are rated Baa by Moody's are considered as medium grade
obligations, that is, they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have
speculative characteristics as well.
B Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of
maintenance and other terms of the contract over any long period of
time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative in
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers "1", "2" and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
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APPENDIX II
STRATEGIC BOND TRUST DEBT RATINGS
The average distribution of investments in corporate and government
bonds by ratings for the fiscal year ended December 31, 1996, calculated monthly
on a dollar-weighted basis, for the Strategic Bond Trust, are as follows:
<TABLE>
<CAPTION>
UNRATED BUT OF
MOODY'S STANDARD & POOR'S COMPARABLE QUALITY PERCENTAGE*
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aaa AAA 0% 0%
Aa AA 0% 2%
A A 0% 1%
Baa BBB 0% 2%
Ba BB 11% 5%
B B 11% 28%
Caa CCC 0% 0%
Ca CC 0% 0%
C C 0% 0%
D 0% 0%
Unrated as a Group 22%
U.S. Government Securities* 40%
----
100%
</TABLE>
The actual distribution of the Strategic Bond Trust's corporate and
government bond investments by ratings on any given date will vary. In addition,
the distribution of the Trust's investments by ratings as set forth above should
not be considered as representative of the Trust's future portfolio composition.
*Obligations issued or guaranteed by the U.S. Government or its agencies,
authorities or instrumentalities.
INVESTMENT QUALITY BOND TRUST DEBT RATINGS
The average distribution of investments in corporate and government
bonds by ratings for the fiscal year ended December 31, 1996, calculated monthly
on a dollar-weighted basis, for the Investment Quality Bond Trust, are as
follows:
<TABLE>
<CAPTION>
UNRATED BUT OF
MOODY'S STANDARD & POOR'S COMPARABLE QUALITY PERCENTAGE*
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aaa AAA 0% 9%
Aa AA 0% 4%
A A 0% 13%
Baa BBB 0% 4%
Ba BB 0% 4%
B B 0% 9%
Caa CCC 0% 0%
Ca CC 0% 0%
C C 0% 0%
D 0% 0%
Unrated as a Group 0%
U.S. Government Securities* 57%
----
100%
</TABLE>
The actual distribution of the Investment Quality Bond Trust's
corporate and government bond investments by ratings on any given date will
vary. In addition, the distribution of the Trust's investments by ratings as set
forth above should not be considered as representative of the Trust's future
portfolio composition.
*Obligations issued or guaranteed by the U.S. Government or its agencies,
authorities or instrumentalities.
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APPENDIX III
STANDARD AND POOR'S DISCLAIMERS
The Equity Index Trust is not sponsored, endorsed, sold or promoted by
Standard & Poor's ("S&P"). S&P makes no representation or warranty, express or
implied, to the shareholders of the Equity Index Trust or any member of the
public regarding the advisability of investing in securities generally or in the
Equity Index Trust particularly or the ability of the S&P 500 Index to track
general stock market performance. S&P's only relationship to the Trust is the
licensing of certain trademarks and trade names of S&P and of the S&P 500 Index
which is determined, composed and calculated by S&P without regard to the Trust
or the Equity Index Trust. S&P has no obligation to take the needs of the Trust
or the shareholders of the Equity Index Trust into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for and has
not participated in the determination of the prices and amount of shares of the
Equity Index Trust or the timing of the issuance or sale of the shares of the
Equity Index Trust or in the determination or calculation of the equation by
which shares of the Equity Index Trust are to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the Equity Index Portfolio.
S&P does not guarantee the accuracy and/or the completeness of the S&P
500 Index or any data included therein and S&P shall have no liability for any
errors, omissions, or interruptions therein. S&P makes no warranty, express or
implied, as to results to be obtained by the Trust, shareholders of the Equity
Index Trust, or any other person or entity from the use of the S&P 500 Index or
any data included therein. S&P makes no express or implied warranties, and
expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the S&P 500 Index or any data included
therein. Without limiting any of the foregoing, in no event shall S&P have any
liability for any special, punitive, indirect, or consequential damages
(including lost profits), even if notified of the possibility of such damages.
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PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 118
STATEMENT OF ADDITIONAL INFORMATION
MANUFACTURERS INVESTMENT 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, 1997 which may
be obtained from Manufacturers Investment Trust, 116 Huntington Avenue, Boston,
Massachusetts, 02116.
The date of this Statement of Additional Information is October 1, 1997.
<PAGE> 119
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
INVESTMENT POLICIES ................................................................................... 3
Money Market Instruments ....................................................................... 3
Other Instruments .............................................................................. 5
HEDGING AND OTHER STRATEGIC TRANSACTIONS .............................................................. 13
General Characteristics of Options ............................................................. 13
General Characteristics of Futures Contracts and Options on Futures Contracts .................. 15
Options on Securities Indices and Other Financial Indices ...................................... 16
Currency Transactions .......................................................................... 16
Combined Transactions .......................................................................... 17
Swaps, Caps, Floors and Collars ................................................................ 17
Eurodollar Instruments ......................................................................... 18
Risk Factors ................................................................................... 18
Risks of Hedging and Other Strategic Transactions Outside the United States .................... 19
Use of Segregated and Other Special Accounts ................................................... 19
Other Limitations .............................................................................. 21
INVESTMENT RESTRICTIONS ............................................................................... 21
Fundamental .................................................................................... 21
Nonfundamental ................................................................................. 22
PORTFOLIO TURNOVER .................................................................................... 24
MANAGEMENT OF THE TRUST ............................................................................... 25
Compensation of Trustees ....................................................................... 26
INVESTMENT MANAGEMENT ARRANGEMENTS .................................................................... 27
The Advisory Agreement . ....................................................................... 29
The Subadvisory Agreements ..................................................................... 31
Agreement with Prior Subadviser ................................................................ 33
PORTFOLIO BROKERAGE ................................................................................... 33
PURCHASE AND REDEMPTION OF SHARES ..................................................................... 37
DETERMINATION OF NET ASSET VALUE ...................................................................... 38
PERFORMANCE DATA ...................................................................................... 39
ORGANIZATION OF THE TRUST ............................................................................. 41
Shares of the Trust ............................................................................ 41
Principal Holders of Securities ................................................................ 42
REPORTS TO SHAREHOLDERS ............................................................................... 42
INDEPENDENT ACCOUNTANTS ............................................................................... 43
LEGAL COUNSEL ......................................................................................... 43
ADDITIONAL INFORMATION REGARDING SUBADVISERS .......................................................... 43
</TABLE>
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<PAGE> 120
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 and
the Equity Index 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
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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.
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
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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 certain portfolios may invest.
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
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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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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, High Yield and Value Trusts 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.
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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, High Yield and Value Trusts 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.
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
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combination of such approaches. The Trust 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.
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
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companies and larger capitalization companies whose credit quality had declined
from investment grade. During the mid-1980's, participants in the U.S. high
yield market issued high yield securities principally in connection with
leveraged buyouts and other leveraged recapitalizations. In late 1989 and 1990,
the volume of new issues of high yield U.S. corporate debt declined
significantly and liquidity in the market decreased. Since early 1991, the
volume of new issues of high yield U.S. corporate debt securities has increased
substantially and secondary market liquidity has improved. During the same
periods, the U.S. high yield debt market exhibited strong returns, and it
continues to be an attractive market in terms of yield and yield spread over
U.S. Treasury securities. Currently, most new offerings of U.S. high yield
securities are being issued to refinance higher coupon debt and to raise funds
for general corporate purposes.
High yield U.S. corporate debt securities in which the portfolios may
invest include bonds, debentures, notes and commercial paper and will generally
be unsecured. Most of these debt securities will bear interest at fixed rates.
However, the portfolios may also invest in debt securities with variable rates
of interest or which involve equity features, such as contingent interest or
participations based on revenues, sales or profits (i.e., interest or other
payments, often in addition to a fixed rate of return, that are based on the
borrower's attainment of specified levels of revenues, sales or profits and thus
enable the holder of the security to share in the potential success of the
venture).
5. HIGH YIELD FOREIGN SOVEREIGN DEBT SECURITIES
The Strategic Bond, Investment Quality Bond and High Yield Trusts
expect that a significant portion of their emerging market governmental debt
obligations will consist of "Brady Bonds." In addition, the Worldwide Growth,
International Small Cap, Moderate Asset Allocation 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.
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
portfolios 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
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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.
6. HYBRID INSTRUMENTS
Hybrid instruments (a type of potentially high-risk derivative) have
been developed and combine the elements of futures contracts or options with
those of debt, preferred equity or a depository instrument (hereinafter "Hybrid
Instruments"). Generally, a Hybrid Instrument will be a debt security, preferred
stock, depository share, trust certificate, certificate of deposit or other
evidence of indebtedness on which a portion of or all interest payments, and/or
the principal or stated amount payable at maturity, redemption or retirement, is
determined by reference to prices, changes in prices, or differences between
prices, of securities, currencies, intangibles, goods, articles or commodities
(collectively "Underlying Assets") or by another objective index, economic
factor or other measure, such as interest rates, currency exchange rates,
commodity indices, and securities indices (collectively "Benchmarks"). Thus,
Hybrid Instruments may take a variety of forms, including, but not limited to,
debt instruments with interest or principal payments or redemption terms
determined by reference to the value of a currency or commodity or securities
index at a future point in time, preferred stock with dividend rates determined
by reference to the value of a currency, or convertible securities with the
conversion terms related to a particular commodity.
Hybrid Instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing total
return. For example, a portfolio may wish to take advantage of expected declines
in interest rates in several European countries, but avoid the transactions
costs associated with buying and currency-hedging the foreign bond positions.
One solution would be to purchase a U.S. dollar- denominated Hybrid Instrument
whose redemption price is linked to the average three year interest rate in a
designated group of countries. The redemption price formula would provide for
payoffs of greater than par if the average interest rate was lower than a
specified level, and payoffs of less than par if rates were above the specified
level. Furthermore, the portfolio could limit the downside risk of the security
by establishing a minimum redemption price so that the principal paid at
maturity could not be below a predetermined minimum level if interest rates were
to rise significantly. The purpose of this arrangement, known as a structured
security with an embedded put option, would be to give the portfolio the desired
European bond exposure while avoiding currency risk, limiting downside market
risk, and lowering transactions costs. Of course, there is no guarantee that the
strategy will be successful and the portfolio could lose money if, for example,
interest rates do not move as anticipated or credit problems develop with the
issuer of the Hybrid.
The risks of investing in Hybrid Instruments reflect a combination of
the risks of investing in securities, options, futures and currencies. Thus, an
investment in a Hybrid Instrument may entail significant risks that are not
associated with a similar investment in a traditional debt instrument that has a
fixed principal amount, is denominated in U.S. dollars or bears interest either
at a fixed rate or a floating rate determined by reference to a common,
nationally published Benchmark. The risks of a particular Hybrid Instrument
will, of course, depend upon the terms of the instrument, but may include,
without limitation, the possibility of significant changes in the Benchmarks or
the prices of Underlying Assets to which the instrument is linked. Such risks
generally depend upon factors which are unrelated to the operations or credit
quality of the issuer of the Hybrid Instrument and which may not be readily
foreseen by the purchaser, such as economic and political events, the supply and
demand for the Underlying Assets and interest rate movements. In recent years,
various Benchmarks and prices for Underlying Assets have been highly volatile,
and such volatility may be expected in the future.
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Reference is also made to the discussion below of futures, options, and forward
contracts for a description of certain risks associated with such investments.
Hybrid Instruments are potentially more volatile and carry greater
market risks than traditional debt instruments. Depending on the structure of
the particular Hybrid Instrument, changes in a Benchmark may be magnified by the
terms of the Hybrid Instrument and have an even more dramatic and substantial
effect upon the value of the Hybrid Instrument. Also, the prices of the Hybrid
Instrument and the Benchmark or Underlying Asset may not move in the same
direction or at the same time.
Hybrid Instruments may bear interest or pay preferred dividends at
below market (or even relatively nominal) rates. Alternatively, Hybrid
Instruments may bear interest at above market rates but bear an increased risk
of principal loss (or gain). The latter scenario may result if "leverage" is
used to structure the Hybrid Instrument. Leverage risk occurs when the Hybrid
Instrument is structured so that a given change in a Benchmark or Underlying
Asset is multiplied to produce a greater value change in the Hybrid Instrument,
thereby magnifying the risk of loss as well as the potential for gain.
Hybrid Instruments may also carry liquidity risk since the instruments
are often "customized" to meet the portfolio needs of a particular investor, and
therefore, the number of investors that are willing and able to buy such
instruments in the secondary market may be smaller than that for more
traditional debt securities. In addition, because the purchase and sale of
Hybrid Instruments could take place in an over-the-counter market without the
guarantee of a central clearing organization or in a transaction between the
portfolio and the issuer of the Hybrid Instrument, the creditworthiness of the
counter party or issuer of the Hybrid Instrument would be an additional risk
factor which the portfolio would have to consider and monitor. Hybrid
Instruments also may not be subject to regulation of the Commodities Futures
Trading Commission ("CFTC"), which generally regulates the trading of commodity
futures by U.S. persons, the SEC, which regulates the offer and sale of
securities by and to U.S. persons, or any other governmental regulatory
authority. The various risks discussed above, particularly the market risk of
such instruments, may in turn cause significant fluctuations in the net asset
value of the portfolio.
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 the 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."
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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.
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
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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 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 (including stock index futures contracts which are
described below) 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 to
attempt to increase income or gains. 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
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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".
Stock Index Futures. A stock index futures contract (an "Index
Futures") is a contract to buy an integral number of units of the relevant index
at a specified future date at a price agreed upon when the contract is made. A
unit is the value at a given time of the relevant index.
In connection with a portfolio's investment in common stocks, a
portfolio may invest in Index Futures while the subadviser seeks favorable terms
from brokers to effect transactions in common stocks selected for purchase. A
portfolio may also invest in Index Futures when a subadviser believes that there
are not enough attractive common stocks available to maintain the standards of
diversity and liquidity set for the portfolio's pending investment in such
stocks when they do become available. Through the use of Index Futures, a
portfolio may maintain a pool of assets with diversified risk without incurring
the substantial brokerage costs which may be associated with investment in
multiple issuers. This may permit a portfolio to avoid potential market and
liquidity problems (e.g., driving up or forcing down the price by quickly
purchasing or selling shares of a portfolio security) which may result from
increases or decreases in positions already held by a portfolio. A portfolio may
also invest in Index Futures in order to hedge its equity positions.
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
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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.
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
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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
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
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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.
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
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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
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<PAGE> 137
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> 138
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,
except that this restriction shall not apply to the Real Estate
Securities Trust and the Lifestyle Trusts. [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.
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<PAGE> 139
(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, the Emerging
Growth Trust and the Lifestyle Trusts are not subject to these
restrictions.
(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.
(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 (A) in reliance on
Section 12(d)(1)(G) of the 1940 Act or (B) 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
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<PAGE> 140
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 or in connection with the investment of
collateral received in connection with the lending of securities in the
Navigator Securities Lending Trust.* 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. This
restriction (13) shall not apply to the Lifestyle Trusts.
(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% (33 1/3% in the case
of the Small Company Value, Blue Chip Growth, Equity-Income,
International Stock and Science & Technology Trusts, 15% in the case of
the International Small Cap, Growth, Balanced and Worldwide Growth
Trusts and 50% in the case of the Value Trust) 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 Growth, Balanced and Science & Technology Trusts
may each invest up to 30% of its assets in such securities, (C) the
Equity-Income and Moderate Asset Allocation Trusts may each invest up
to 25% of its assets in such securities; (D) the Pilgrim Baxter Growth
and Conservative Asset Allocation Trusts each may invest up to 15% of
its assets in such securities; (E) the Value Trust may invest up to 5%
of its assets in foreign securities; (F) each other portfolio other
than the U.S. Government Securities and Equity Index Trusts may invest
up to 20% of its total assets in such securities (in the case of the
Small/Mid Cap, Growth, Balanced and Value Trusts, ADRs and U.S.
dollar-denominated securities are not included in the applicable
percentage limit); and (G) the foregoing restriction shall not apply to
the Small Company Value, International Small Cap, Worldwide Growth,
Global Equity, Pacific Rim Emerging Markets, International Stock, High
Yield, Global Government Bond, International Growth and Income,
Strategic Bond, Capital Growth Bond,. Real Estate Securities and
Quantitative Equity Trusts.
*State Street Bank and Trust Company ("State Street"), the Trust's custodian,
pursuant to an agreement with the Trust provides a security lending service to
the Trust. In connection with the service, collateral from securities lent may
be invested in the Navigator Trust. The Navigator Trust is a registered
investment company managed by State Street that is sold only to mutual fund
lending clients of State Street. In connection with the creation of the
Navigator Trust, State Street received from the Securities and Exchange
Commission exemption from certain provisions of the Investment Company Act of
1940 (the "1940 Act") in order to permit its mutual fund clients to invest in
the Navigator Trust. State Street received exemption from Section 12(d)(1) of
the 1940 Act and various provisions of Section 17 of the 1940 Act.
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. 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
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<PAGE> 141
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 (100% or more) 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 portfolio turnover rates
for the portfolios of the Trust for the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Pacific Rim Emerging Markets Trust ............. 48% 55%
International Small Cap Trust .................. 50%* N/A
Small/Mid Cap Trust ............................ 67%* N/A
Global Equity Trust ............................ 169% 63%
Growth Trust ................................... 215%* N/A
Equity Trust ................................... 223% 88%
Quantitative Equity Trust ...................... 105% 109%
Equity Index Trust ............................. 27%* N/A
Blue Chip Growth Trust ......................... 159% 57%
Real Estate Securities Trust ................... 231% 136%
International Growth and Income Trust .......... 148% 112%*
Growth and Income Trust ........................ 49% 39%
Equity-Income Trust ............................ 158% 52%
Aggressive Asset Allocation Trust .............. 75% 111%
Moderate Asset Allocation Trust ................ 78% 129%
Conservative Asset Allocation Trust ............ 73% 110%
Strategic Bond Trust ........................... 165% 181%
Global Government Bond Trust ................... 167% 171%
Capital Growth Bond Trust ...................... 58% 85%
Investment Quality Bond Trust .................. 68% 137%
U.S. Government Securities Trust ............... 178% 212%
</TABLE>
*Annualized
Portfolio turnover rates (based on normal circumstances) for newer portfolios
are not expected to exceed 200%.
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> 142
MANAGEMENT OF THE TRUST
The Trustees and officers of the Trust, together with information as to
their principal occupations during the past five years, are listed below:
<TABLE>
<CAPTION>
========================================================================================
NAME, ADDRESS AND AGE POSITION WITH PRINCIPAL OCCUPATION
THE TRUST DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Don B. Allen Trustee Senior Lecturer, William E. Simon
136 Knickerbocker Road Graduate School of Business
Pittsford, NY 14534 Administration, University of
Age: 69 Rochester
- ----------------------------------------------------------------------------------------
John D. DesPrez III President Vice President, Annuities, Manulife
73 Tremont Street Financial, September 1996 to present;
Boston, MA 02108 President and Director, Manulife
Age: 40 North America, September 1996 to
present; President, North American
Funds, March 1993 to September 1996;
Vice President and General Counsel,
Manulife North America, 1991 to 1994.
- ----------------------------------------------------------------------------------------
Charles L. Bardelis Trustee President and Executive Officer,
297 Dillingham Ave. Island Commuter Corp.(Marine
Falmouth, MA 02540 Transport)
Age: 56
- ----------------------------------------------------------------------------------------
Samuel Hoar** Trustee Senior Mediator, Judicial Arbitration
73 Tremont Street Mediation Services
Boston, MA 02108 "JAMS/Endispute," June 1, 1994 to
Age: 69 date; Partner, Goodwin, Proctor and
Hoar, prior to June 1, 1994
- ----------------------------------------------------------------------------------------
John D. Richardson* Chairman of Senior Vice President and General
200 Bloor Street East Trustees Manager, U.S. Operations, Manulife
Toronto, Ontario, Canada Financial, January 1995 to present;
M4W 1E5 Senior Vice President and General
Age: 59 Manager, Canadian Operations, Manulife
Financial, June 1992 to January 1995;
Senior Vice President, Financial
Services, Manulife Financial, prior
to June 1992
========================================================================================
</TABLE>
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<PAGE> 143
<TABLE>
<CAPTION>
========================================================================================
NAME, ADDRESS AND AGE POSITION WITH PRINCIPAL OCCUPATION
THE TRUST DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------
<S> <C> <C>
F. David Rolwing Trustee Chairman, President and CEO,
17810 Meeting House Road Montgomery Mutual Insurance
Sandy Spring, MD 20860 Company, 1991 to present
Age: 63
- ----------------------------------------------------------------------------------------
Robert J. Myers Trustee Consulting Actuary (self-employed),
9610 Wire Avenue April 1983 to date; Member,
Silver Springs, MD 20921 Prospective Payment Assessment
Age: 84 Commission, June 1993 to present;
Chairman, Commission on Railroad
Retirement Reform, 1988 to 1990.
- ----------------------------------------------------------------------------------------
John G. Vrysen Vice President Vice President, Chief Financial
73 Tremont Street Officer, U.S. Operations, of Manulife
Boston, MA 02108 Financial, January 1, 1996 to date;
Age: 42 Vice President and Actuary, January
1986 to date, Manulife North America.
- ----------------------------------------------------------------------------------------
James D. Gallagher Secretary Vice President, Legal Services, of
73 Tremont Street Manulife Financial, January 1, 1996
Boston, MA 02108 to date; Vice President, Secretary and
Age: 43 General Counsel, June 1994 to date,
Manulife North America; Vice President
and Associate General Counsel, 1990 to
1994, The Prudential Insurance Company
of America.
- ----------------------------------------------------------------------------------------
Richard C. Hirtle Vice President Vice President, Chief Financial
73 Tremont Street and Treasurer Officer, Annuities, of Manulife
Boston, MA 02108 Financial, January 1996 to date; Vice
Age: 41 President, Treasurer and Chief
Financial Officer, November 1988 to
date, Manulife North America.
========================================================================================
</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 $27,500, a fee of $6,875 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.
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<PAGE> 144
<TABLE>
<CAPTION>
=======================================================================================
NAMES OF PERSON, POSITION AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
FROM TRUST FOR PRIOR FISCAL TRUST COMPLEX FOR PRIOR
YEAR* FISCAL YEAR*#
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Don B. Allen, Trustee $40,200 $49,300
- ---------------------------------------------------------------------------------------
Charles L. Bardelis, Trustee $40,200 $49,300
- ---------------------------------------------------------------------------------------
Samuel Hoar, Trustee $40,200 $49,300
- ---------------------------------------------------------------------------------------
Robert J. Myers, Trustee $40,200 $49,300
- ---------------------------------------------------------------------------------------
John D. Richardson, Trustee $0 $0
- ---------------------------------------------------------------------------------------
F. David Rolwing, Trustee $0 $12,250
=======================================================================================
</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 Manufacturers Securities Services, LLC is the
investment adviser and all portfolios of Manulife Series Fund, Inc. of which
Manufacturers Adviser Corporation was the investment adviser.
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 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. Effective December 31, 1996, Manulife Series Fund, Inc., a registered
management investment company with nine portfolios, was merged into the Trust.
The net assets of four of the portfolios of Manulife Series Fund, Inc. were
transferred to comparable portfolios of the Trust, and the remaining five
portfolios -- the Pacific Rim Emerging Markets, Real Estate Securities, Common
Stock, Capital Growth and Equity Index Portfolios -- were transferred to the
Trust and reconstituted as new portfolios of the Trust.
Manufacturers Securities Services, LLC ("Manufacturers Securities" or
the "Adviser"), the successor to NASL Financial Services, Inc., is a Delaware
limited liability company whose principal offices are located at 73 Tremont
Street, Boston, Massachusetts 02108. Manufacturers Securities 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,
Manufacturers Securities serves as principal underwriter of certain contracts
issued by The Manufacturers Life Insurance Company of North America ("Manulife
North America").
The Advisory Agreement, each Subadvisory Agreement (except those
described below) 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 Manufacturers Securities as a result of
the merger of North American Life Assurance Company, the ultimate controlling
parent of Manufacturers Securities, with The Manufacturers Life Insurance
Company ("Manulife Financial") on January 1, 1996.
27
<PAGE> 145
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 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 Advisory
Agreement have been approved by the sole shareholder of the Small/Mid Cap Trust.
On December 15, 1995, the Trustees appointed Founders Asset Management,
Inc. ("Founders") pursuant to a new Subadvisory Agreement with Founders
("Founders Subadvisory Agreement") to manage the International Small Cap Trust
and on June 20, 1996, the Trustees appointed Founders pursuant to an amendment
to the Founders Subadvisory Agreement to manage the Growth Trust. The Founders
Subadvisory Agreement (and in the case of the Growth Trust, the amendment to the
Founders Subadvisory Agreement) and amendment to the Advisory Agreement, both to
provide for the management of the Growth and International Small Cap Trusts,
were approved by the Trustees, including a majority of the Trustees who are not
parties to the agreements or interested persons of any party to such agreements.
The Founders Subadvisory Agreement (and in the case of the Growth Trust, the
amendment to the Founders Subadvisory Agreement) and the related amendment to
the Advisory Agreement have been approved by the sole shareholders of the Growth
and International Small Cap Trusts.
Effective October 1, 1996, Oechsle International Advisors, L.P.
("Oechsle International"), Wellington Management Company, LLP, Goldman Sachs
Asset Management and Roger Engemann Management Co., Inc., the Subadvisers of the
Global Equity, Money Market, Equity-Income and Blue Chip Growth Trusts,
respectively, resigned their positions as Subadvisers of those portfolios. On
September 27, 1996, the Trustees (i) appointed Morgan Stanley Asset Management
Inc. ("Morgan Stanley") pursuant to a new Subadvisory Agreement with Morgan
Stanley ("Morgan Stanley Subadvisory Agreement") to manage the Global Equity
Trust, (ii) appointed T. Rowe Price Associates, Inc. ("T. Rowe Price") pursuant
to a new Subadvisory Agreement with T. Rowe Price ("T. Rowe Price Subadvisory
Agreement") to manage the Blue Chip Growth and Equity-Income Trusts, and (iii)
appointed Manufacturers Adviser Corporation ("MAC") pursuant to a new
Subadvisory Agreement with MAC ("MAC Subadvisory Agreement") to manage the Money
Market Trust. All such Subadvisory Agreements 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, on September 27, 1996 (with
an effective date of October 1, 1996) and by the shareholders of the respective
portfolios on December 20, 1996.
Also on September 27, 1996, the Trustees (i) appointed Miller Anderson
& Sherrerd, LLP ("MAS") pursuant to a new Subadvisory Agreement with MAS ("MAS
Subadvisory Agreement") to manage the Value and High Yield Trusts, (ii)
appointed Warburg Pincus Counsellors, Inc. ("Warburg") pursuant to an agreement
with Warburg ("Warburg Subadvisory Agreement") to manage the Emerging Growth
Trust, (iii) appointed T. Rowe Price pursuant to the T. Rowe Price Subadvisory
Agreement to also manage the Science & Technology Trust, (iv) appointed Rowe
Price-Fleming International, Inc. ("Price-Fleming") pursuant to a new
Subadvisory Agreement with Price Fleming ("Price-Fleming Subadvisory Agreement")
to manage the International Stock Trust, (v) appointed Founders pursuant to an
amendment to the Founders Subadvisory Agreement to manage the Worldwide Growth
and Balanced Trusts, (vi) appointed Pilgrim Baxter & Associates, Ltd. ("PBHG")
to manage the Pilgrim Baxter Growth Trust pursuant to an agreement with PBHG
("PBHG Subadvisory Agreement"), (vii) appointed MAC pursuant to the MAC
Subadvisory Agreement to also manage the Pacific Rim Emerging Markets, Real
Estate Securities, Quantitative Equity, Capital Growth Bond and Equity Index
Trusts and (viii) appointed the Adviser to manage the Lifestyle Trusts pursuant
to an amendment to the Advisory Agreement. Such Subadvisory Agreements or
amended Subadvisory Agreement and amendments to the Advisory Agreement, to
provide for the management of the newly-established portfolios, 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, on September
27, 1996.
On December 13, 1996, the Trustees appointed MAC pursuant to the
amended MAC Subadvisory Agreement to also manage each of the Lifestyle Trusts.
The amended MAC Subadvisory Agreement was
28
<PAGE> 146
approved by the Trustees, including a majority of the Trustees who are not
parties to the agreement or interested persons of any party to such agreement,
on December 13, 1996. The amended MAC Subadvisory Agreement was approved by the
sole shareholder of each of the Lifestyle Trusts.
On September 26, 1997, the Trustees appointed Rosenberg Institutional
Equity Management ("Rosenberg") to manage the Small Company Value Trust pursuant
to an agreement with Rosenberg. This subadvisory agreement and amendment to the
Advisory Agreement, both to provide for the management of the Small Company
Value Trust were approved by the Trustees, including a majority of the Trustees
who are not parties to the agreement or interested persons of any party to such
agreement, on September 26, 1997. The Rosenberg Subadvisory Agreement and
amendment to the Advisory Agreement were approved by the sole shareholder of the
Small Company Value 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 International Small Cap, Global Equity, Global Government
Bond, Worldwide Growth, International Growth and Income, International Stock and
Pacific Rim Emerging Markets Trusts, .50% in the case of all other portfolios
except for the Equity Index Trust, or .15% in the case of the Equity Index Trust
of the average annual net assets 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. (For a limited period of one
year ending December 31, 1997, the expense limitation applicable to the Real
Estate Securities, Quantitative Equity and Capital Growth Bond Trusts will
include all expenses of such portfolios, so that their total expenses for that
year, including advisory fees, will not exceed .50%.) In addition, in the case
of the Lifestyle Trusts, the Adviser has agreed to pay the expenses of the
Lifestyle Trusts (other than the expenses of the Underlying Trusts) for a period
of one year commencing January 1, 1997. After this one year period, this expense
reimbursement may be terminated at any time.
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, except
for the Lifestyle Trusts. 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 management fees each
portfolio currently is obligated to pay the Adviser is as set forth in the
Prospectus. No management fees are currently payable by the Lifestyle Trusts.
29
<PAGE> 147
For the years ended December 31, 1996, 1995 and 1994 the aggregate
investment advisory fee paid by the Trust under the fee schedule then in effect,
absent the expense limitation provision, was $46,515,018, $33,808,255 and
$27,076,438 allocated among the portfolios as follows:
<TABLE>
<CAPTION>
PORTFOLIO 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Small Cap Trust ..... $ 492,152* N/A N/A
Small/Mid Cap Trust ............... 756,997* N/A N/A
Global Equity Trust ............... 6,234,116 $5,513,312 $4,916,694
Growth Trust ...................... 119,620* N/A N/A
Equity Trust ...................... 8,774,975 5,643,363 3,483,279
Blue Chip Growth Trust ............ 3,317,165 2,115,434 1,255,314
International Growth & Income Trust 1,327,151 450,200* N/A
Growth and Income Trust ........... 6,298,799 3,922,671 2,670,229
Equity-Income Trust ............... 3,939,929 2,459,247 1,274,807
Aggressive Asset Allocation Trust . 1,656,217 1,463,421 1,354,682
Moderate Asset Allocation Trust ... 4,764,110 4,667,061 4,783,431
Conservative Asset Allocation Trust 1,643,494 1,639,903 1,788,821
Strategic Bond Trust .............. 1,298,996 767,448 588,051
Global Government Bond Trust ...... 1,934,856 1,757,909 1,742,811
Investment Quality Bond Trust ..... 965,766 798,045 709,069
U.S. Government Securities Trust .. 1,401,130 1,291,668 1,350,850
Money Market Trust ................ 1,589,545 1,318,573 1,158,400
</TABLE>
*International Small Cap Trust - for the period March 4, 1996 (commencement of
operations) to December 31, 1996; Small/Mid Cap Trust - for the period March 4,
1996 (commencement of operations) to December 31, 1996; Growth Trust - for the
period July 15, 1996 (commencement of operations) to December 31, 1996;
International Growth and Income Trust - for the period January 9, 1995
(commencement of operations) to December 31, 1995.
For the years ended December 31, 1996, 1995 and 1994, the aggregate
investment advisory fee paid by the portfolios below to MAC under the fee
schedule then in effect was as follows:
<TABLE>
<CAPTION>
PORTFOLIO 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets Trust $161,272 $ 95,770 $ 14,889
Quantitative Equity Trust ........ 380,315 232,477 145,196
Equity Index Trust ............... 11,227 N/A N/A
Real Estate Securities Trust ..... 292,384 232,449 177,268
Capital Growth Bond Trust ........ 215,033 198,316 199,327
</TABLE>
30
<PAGE> 148
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.
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 schedule of the management fees the Adviser
currently is obligated to pay the Subadvisers out of the advisory fee it
receives from each portfolio is as set forth in the Prospectus.
The prospectus refers to a subadvisory consulting agreement between
Salomon Brothers Asset Management, Inc. ("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, 1996, 1995 and 1994, the Adviser paid
aggregate subadvisory fees of $15,882,911, $12,007,940 and $9,905,072,
respectively, allocated among the portfolios as follows:
<TABLE>
<CAPTION>
PORTFOLIO 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Small Cap Trust .................. $ 284,403* N/A N/A
Small/Mid Cap Trust ............................ 385,464* N/A N/A
Global Equity Trust ............................ 2,677,373 $2,415,918 $2,192,713
Growth Trust ................................... 63,328* N/A N/A
Equity Trust ................................... 2,256,365 1,628,673 1,166,032
Blue Chip Growth Trust ......................... 1,452,025 978,146 558,057
International Growth & Income Trust ............ 653,719 232,320* N/A
Growth and Income Trust ........................ 1,761,319 1,267,236 926,068
Equity-Income Trust ............................ 1,235,667 864,812 525,739
</TABLE>
31
<PAGE> 149
<TABLE>
<S> <C> <C> <C>
Aggressive Asset Allocation Trust............... 622 181 560,019 521,717
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Moderate Asset Allocation Trust ........ $1,454,194 $1,433,417 $456,691
Conservative Asset Allocation Trust..... 618,391 616,971 661,646
Strategic Bond Trust ................... 527,906+ 322,077++ 252,633
Global Government Bond Trust ........... 845,379 771,716 766,324
Investment Quality Bond Trust .......... 334,303 276,246 245,447
U.S. Government Securities Trust ....... 473,786 442,603 458,245
Money Market Trust ..................... 237,108 197,786 173,760
</TABLE>
* International Small Cap Trust - for the period March 4, 1996 (commencement of
operations) to December 31, 1996; Small/Mid Cap Trust - for the period March 4,
1996 (commencement of operations) to December 31, 1996; Growth Trust - for the
period July 15, 1996 (commencement of operations) to December 31, 1996;
International Growth and Income Trust - for the period January 9, 1995
(commencement of operations) to December 31, 1995.
+ Of this amount, $131,977 was paid by SBAM to SBAM Limited under the
Subadvisory Consulting Agreement.
++ 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) may
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, the
compensation received 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 in respect of such portfolio, whichever is less. In the
case of
32
<PAGE> 150
the Subadvisers, the compensation received 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.
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.
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 (except as noted below) 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. As noted under "Subadvisory Arrangements" in the Prospectus, the
Trust has received an order from the Securities and Exchange Commission
permitting the Adviser to appoint a subadviser (other than an Affiliated
Subadviser) or change a subadvisory fee (other than for an Affiliated
Subadviser) pursuant to an agreement that is not approved by shareholders.
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
33
<PAGE> 151
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.
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.
34
<PAGE> 152
For the years ended December 31, 1996, 1995 and 1994, the Trust paid
brokerage commissions in connection with portfolio transactions of $13,006,480,
$6,609,957 and $5,510,656, respectively, allocated among the portfolios as
follows:
<TABLE>
<CAPTION>
PORTFOLIO 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Small Cap Trust ............ $ 349,869* N/A N/A
Small/Mid Cap Trust ...................... 237,777* N/A N/A
Global Equity Trust ...................... 2,398,805 $2,684,254 $2,358,799
Growth Trust ............................. 110,510* N/A N/A
Equity Trust ............................. 4,407,265 861,497 1,011,437
Blue Chip Growth Trust ................... 966,411 388,904 187,089
International Growth and Income Trust..... 871,203 374,962* N/A
Growth and Income Trust .................. 1,084,722 697,618 487,223
Equity-Income Trust ...................... 2,021,601 606,918 383,033
Aggressive Asset Allocation Trust ........ 177,940 286,517 280,679
Moderate Asset Allocation Trust .......... 320,288 604,766 682,814
Conservative Asset Allocation Trust ...... 60,089 104,521 119,582
</TABLE>
* International Small Cap Trust - for the period March 4, 1996 (commencement of
operations) to December 31, 1996; Small/Mid Cap Trust - for the period March 4,
1996 (commencement of operations) to December 31, 1996; Growth Trust - for the
period July 15, 1996 (commencement of operations) to December 31, 1996;
International Growth and Income Trust - for the period January 9, 1995
(commencement of operations) to December 31, 1995.
Goldman Sachs & Co., prior to October 1, 1996, was an affiliated broker
of the Equity-Income Trust due to the position of Goldman Sachs Asset Management
as subadviser to this Trust portfolio. Salomon Brothers Inc. is an affiliated
broker of the U.S. Government Securities and Strategic Bond Trusts due to the
position of Salomon Brothers Asset Management as subadviser to these Trust
portfolios. J.P. Morgan Securities Inc. and J.P. Morgan Securities Ltd. are
affiliated brokers of the International Growth and Income Trust due to the
position of J.P. Morgan Investment Management Inc. as subadviser to this Trust
portfolio. Dresdner Bank is an affiliated broker of the Global Equity (prior to
October 1, 1996) and Global Government Bond Trusts due to the position of
Oechsle International as subadviser to these Trust portfolios. Fidelity Capital
Markets is an affiliated broker of the Equity and Asset Allocation Trusts due to
the position of Fidelity Management Trust Company as subadviser to these Trust
portfolios. Morgan Stanley & Co. Incorporated and Morgan Stanley International
are affiliated brokers of the Global Equity Trust (since October 1, 1996) due to
the position of Morgan Stanley as subadviser to this Trust portfolio. Fred Alger
& Company is an affiliated broker of the Small/Mid Cap Trust due to the position
of Fred Alger Management, Inc. as the subadviser to the Small/Mid Cap Trust.
For the years ended December 31, 1996, 1995 and 1994, brokerage
commissions were paid to GOLDMAN, SACHS & CO. by the Equity-Income portfolio as
follows:
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
% of aggregate
% of Portfolio's Brokerage $ amount of
Commissions Represented transactions
</TABLE>
35
<PAGE> 153
<TABLE>
<CAPTION>
Portfolio Commissions for the period for the period
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity-Income Trust........ $75,615 3.74% 0.01%
</TABLE>
36
<PAGE> 154
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
% of aggregate
% of Portfolio's Brokerage $ amount of
Commissions Represented transactions
Portfolio Commissions for the period for the period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity-Income Trust......................... $63,836 10.52% 0.19%
</TABLE>
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
% of aggregate
% of Portfolio's Brokerage $ amount of
Commissions Represented transactions
Portfolio Commissions for the period for the period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity-Income Trust......................... $20,741 5.41% 3.98%
</TABLE>
For the years ended December 31, 1996, 1995 and 1994, no brokerage
commissions were paid to SALOMON BROTHERS INC. by either the U.S. Government
Securities or Strategic Bond portfolios.
For the years ended December 31, 1996 and 1995, brokerage commissions
were paid to J.P. MORGAN SECURITIES by the International Growth and Income
portfolio as follows:
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
% of aggregate
% of Portfolio's Brokerage $ amount of
Commissions Represented transactions
Portfolio Commissions for the period for the period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Growth and
Income Trust............................. N/A N/A N/A
</TABLE>
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
% of aggregate
% of Portfolio's Brokerage $ amount of
Commissions Represented transactions
Portfolio Commissions for the period for the period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Growth and
Income Trust............................. $554* 0.15% 0.41%
</TABLE>
For the years ended December 31, 1996, 1995 and 1994, no brokerage
commissions were paid to DRESDNER BANK by either the Global Equity (prior to
October 1, 1996) or the Global Government Bond portfolios.
37
<PAGE> 155
For the years ended December 31, 1996 and 1995, brokerage commissions
were paid to FIDELITY CAPITAL MARKETS by the Equity and Asset Allocation
portfolios as follows:
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
% of aggregate
% of Portfolio's Brokerage $ amount of
Commissions Represented transactions
Portfolio Commissions for the period for the period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Trust................................ N/A N/A N/A
Aggressive Asset Allocation Trust........... N/A N/A N/A
Moderate Asset Allocation Trust............. N/A N/A N/A
Conservative Asset Allocation Trust......... N/A N/A N/A
</TABLE>
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
% of Portfolio's Brokerage $ amount of
Commissions Represented transactions
Portfolio Commissions for the period for the period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Trust................................ N/A N/A N/A
Aggressive Asset Allocation Trust........... $3,240 1.13% 0.08%
Moderate Asset Allocation Trust............. 8,815 1.46% 0.07%
Conservative Asset Allocation Trust......... 1,920 1.84% 0.05%
</TABLE>
For the year ended December 31, 1996, brokerage commissions were paid
to MORGAN STANLEY by the Global Equity portfolio as follows:
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
% of aggregate
% of Portfolio's Brokerage $ amount of
Commissions Represented transactions
Portfolio Commissions for the period for the period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity Trust......................... $487,347 20.32% 0.02%
</TABLE>
From March 4, 1996 (commencement of operations of the Small/Mid Cap
Trust) to December 31, 1996, brokerage commissions were paid to Fred Alger &
Company as follows:
<TABLE>
<CAPTION>
% of aggregate
% of Portfolio's Brokerage $ amount of
Commissions Represented transactions
Portfolio Commissions for the period for the period
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Small/Mid Cap Trust...........$221,408 93.12% 0.02%
</TABLE>
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
38
<PAGE> 156
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.
39
<PAGE> 157
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, all debt instruments held by the Money
Market Trust and shares of the Underlying Portfolios held by the Lifestyle
Trusts, 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. Shares of the Underlying
Portfolios held by the Lifestyle Trusts are valued at their net asset value as
described in the Prospectus under "Purchase and Redemption of Shares."
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,
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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 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 Manulife North
America.
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. In the case of the Pacific Rim
Emerging Markets, Real Estate Securities, Quantitative Equity, Capital Growth
Bond and Equity Index Trusts, such quotations will be for periods that include
the performance of the predecessor portfolios of Manulife Series Trust, Inc.
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.
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TOTAL ANNUALIZED RETURN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Trust One Year Ended Five Years Ended Since Inception or 10 Years, Date first
06/30/97 06/30/97 whichever is shorter through Available
06/30/97
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emer'g Mar't # 5.98% N/A 6.77% 10/04/94
Science and Technology N/A N/A 10.40%* 01/01/97
International Small Cap 9.57% N/A 12.20% 03/04/96
Emerging Growth N/A N/A 5.78%* 01/01/97
Pilgrim Baxter Growth N/A N/A -2.08%* 01/01/97
Small/Mid Cap 8.99% N/A 10.79% 03/04/96
International Stock N/A N/A 11.83%* 01/01/97
Worldwide Growth N/A N/A 11.76%* 01/01/97
Global Equity 21.57% 12.94% 9.79% 03/18/88
Growth N/A N/A 29.37** 07/15/96
Equity 19.45% 20.58% 11.51%*** 06/18/85
Quantitative Equity # 28.44% 16.82% 11.88%*** 04/30/87
Equity Index # 33.15% N/A 26.41% 02/14/96
Blue Chip Growth 26.52% N/A 11.78% 12/11/92
Real Estate Securities # 33.63% 18.36% 13.48%*** 04/30/87
Value N/A N/A 15.76%* 01/01/97
International Growth and Income 14.06% N/A 10.89% 01/09/95
Growth and Income 36.99% 19.38% 17.05% 04/23/91
Equity-Income 27.96% N/A 16.53% 02/19/93
Balanced N/A N/A 12.39%* 01/01/97
Aggr. Asset Allocation 20.18% 12.74% 9.67% 08/03/89
High Yield N/A N/A 5.76%* 01/01/97
Mod. Asset Allocation 16.43% 10.79% 8.73% 08/03/89
Cons. Asset Allocation 11.51% 8.52% 7.53% 08/03/89
Strategic Bond 14.32% N/A 9.29% 02/19/93
Global Government Bond 9.77% 9.24% 9.01% 03/18/88
Capital Growth Bond # 7.49% 6.75% 8.10%*** 06/26/84
Investment Quality Bond 8.24% 6.73% 5.02%*** 06/18/85
</TABLE>
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Trust One Year Ended Five Years Ended Since Inception or 10 Years, Date first
06/30/97 06/30/97 whichever is shorter through Available
06/30/97
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Securities 7.95% 6.33% 7.07% 03/18/88
Money Market 5.06% 4.23% 5.50%*** 06/18/85
Lifestyle Aggressive 1000 N/A N/A 8.86%* 01/01/97
Lifestyle Growth 820 N/A N/A 10.00%* 01/01/97
Lifestyle Balanced 640 N/A N/A 9.29%* 01/01/97
Lifestyle Moderate 460 N/A N/A 8.54%* 01/01/97
Lifestyle Conservative 280 N/A N/A 6.43%* 01/01/97
</TABLE>
* Aggregate total return from January 1, 1997 (inception date) to June 30, 1997.
** Aggregate total return from July 15, 1996 to June 30, 1997.
*** 10 Years
#Performance presented for these Trust portfolios is based upon the performance
of their respective predecessor Manulife Financial portfolios for periods prior
to the consummation of the reorganization effective December 31, 1996.
Performance presented for each of these Trust portfolios is based on the
historical expenses and performance of its predecessor Manulife Financial
portfolio and, therefore, does not reflect for periods prior to December 31,
1996, the current Trust expenses that an investor would incur as a holder of
shares of such Trust portfolio.
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 thirty-five series of
shares as described in the Prospectus. 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.
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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.
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
The Trust currently has three shareholders: The Manufacturers Life
Insurance Company of America ("Manufacturers America"), Manulife North America
and The Manufacturers Life Insurance Company of New York. Each shareholder holds
Trust shares attributable to variable and variable life contracts in their
separate accounts. 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 Manulife North America, Manufacturers
America or of other insurance companies; (b) Manulife North America; (c)
Manufacturers Securities; (d) any corporation related in a manner specified in
section 267(b) of the Internal Revenue Code to Manulife North America or to
Manufacturers Securities, 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
The financial statements of the Trust (except the Emerging Growth,
International Stock and Balanced Trusts) at December 31, 1996 are incorporated
herein by reference from its annual report to shareholders filed with the
Securities and Exchange Commission pursuant to Section 30(b) of the Investment
Company Act of 1940 and Rule 30b2-1. The financial statements of the Trust at
June 30, 1997 are incorporated herein by reference from its semi-annual report
to shareholders filed with the Securities and Exchange Commission pursuant to
Section 30(b) of the Investment Company Act of 1940 and Rule 30b-2.
INDEPENDENT ACCOUNTANTS
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The financial statements of the Trust at December 31, 1996, including
the related Financial Highlights which appear in the Prospectus, have been
audited by Coopers & Lybrand L.L.P., independent accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon said
report given on the authority of said firm as experts in accounting and
auditing. Coopers & Lybrand has offices at One Post Office Square, Boston, MA
02109.
LEGAL COUNSEL
Messrs. Jones & Blouch L.L.P., 1025 Thomas Jefferson Street, N.W.,
Washington, DC 20007, have passed upon certain legal matters relating to the
federal securities laws.
ADDITIONAL INFORMATION REGARDING SUBADVISERS
ROSENBERG INSTITUTIONAL EQUITY MANAGEMENT
Investment Philosophy. Rosenberg Institutional Equity Management
("Rosenberg") believes that stock prices do not perfectly reflect the
"fundamental value" of companies but rather the market's assessment of how well
the company is positioned to generate future earnings and/or future cash flow.
Rosenberg identifies and purchases those stocks which are undervalued (i.e.,
stocks which are currently cheaper than similar stocks with the same
characteristics.) Rosenberg believes that the market will over time recognize
the "better value" and that the mispricing will be corrected as the stocks in
the Small Company Value Trust are purchased by other investors.
In determining whether or not a stock is attractive, Rosenberg
considers the company's current estimated fundamental value as determined by
Rosenberg's proprietary appraisal model, the company's future earnings, and
investor sentiment toward the stock. The Small Company Value Trust is composed
of undervalued stocks from every sector represented in the benchmark (currently,
the Russell 2000 Index).
Stock Selection. Fundamental valuation of stocks is key to Rosenberg's
investment process, and the heart of the valuation process lies in Rosenberg's
proprietary appraisal model.
An important feature of the appraisal model is the classification of
companies into one or more of 166 groups of "similar" businesses. Each company
is broken down into its individual business segments, and each segment is
compared with similar business operations of other companies. Rosenberg
appraises the company's assets, operating earnings and sales within each
business segment, accepting the market's valuation of that category of business
as fair. Rosenberg then integrates the segment appraisals into balance sheet,
income statement, and sales valuation models for the total company, and
simultaneously adjusts the segment appraisals to include appraisals for
variables which are declared only for the total company, such as taxes, capital
structure, and pension funding.
The difference between Rosenberg's appraisal and the market price is
believed to represent an opportunity for profit. For each stock, Rosenberg
develops "appraisal alphas" (i.e., the expected rate of extraordinary return) by
adjusting for the rate at which the market has corrected for such valuations in
the past.
A second sphere of analysis is captured by Rosenberg's proprietary
earnings change model, which analyzes more than 20 variables to predict
individual company earnings over a one year horizon. The value of the projected
earnings change is converted to an "earnings change alpha" by multiplying the
projected change by the market's historical response to changes of that
magnitude.
Finally, Rosenberg's proprietary investor sentiment model quantifies
investor sentiment about features of stocks which influence price. This model
measures company quality and also captures market enthusiasm towards individual
stocks by looking at broker recommendations and analyst estimates. Investor
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sentiment alphas are developed by multiplying the model's sentiment scores by
the market's historical response to such scores.
Each company's earnings change alpha and investor sentiment alpha is
added to its appraisal alpha to arrive at a total company alpha. Stocks with
large positive total company alphas are candidates for purchase. Stocks held in
a portfolio with total company alphas that are only slightly positive, zero or
negative are candidates for sale.
Before trading, Rosenberg systematically analyzes the short-term price
behavior of individual stocks to determine the timing of trades. Rosenberg
develops a "trading alpha" for each stock (i.e., the expected short-term
extraordinary return) which is designed to enable the Small Company Value Trust
to purchase stocks from supply and to sell stocks into demand, greatly reducing
trading costs.
Optimization. Rosenberg's portfolio optimization system seeks to
optimize the trade-off between risk and reward relative to the benchmark. It
exploits the information developed by Rosenberg's stock selection models to
maximize return relative to the benchmark. The optimizer recommends positions in
companies which in aggregate constitute the most efficient portfolio. The
optimizer simultaneously considers total company alphas, trading alphas, and
risk and quantifies the expected "net benefit" to the portfolio of each
recommended transaction. A stock is considered for sale when a higher alpha
stock with complementary risk characteristics has been identified. In the U.S.
markets, portfolios are reoptimized continuously throughout the day, allowing
Rosenberg to respond immediately to investment opportunities, subject to certain
limitations on short-term trading applicable by virtue of the Small Company
Value Trust's intention to qualify as a regulated investment company under the
Internal Revenue Code.
Trading. Rosenberg's trading system aggregates the recommended
transaction for the Small Company Value Trust and determines the feasibility of
each recommendation in light of the stock's liquidity, the expected transaction
costs, and general market conditions. Trades are executed through any one of
four trading strategies: traditional brokerage, networks, accommodation, and
package or "basket" trades designed to facilitate large volume trading with
little or no price disturbance.
Rosenberg continuously monitors trading costs to determine the impact
of commission and price disturbance on the Small Company Value Trust.
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PART C
OTHER INFORMATION
<PAGE> 165
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
NASL SERIES TRUST
(1) Audited Financials for the period ended December 31, 1996
Report of Independent Accountants, February 21, 1997 -- Part B
Statements of Assets and Liabilities, December 31, 1996 --
Part B Statements of Operations for the year ended December
31, 1996 -- Part B
Statements of Changes in Net Assets for the years ended
December 31, 1996 and December 31, 1995 -- Part B
Financial Highlights -- Parts A and B
Portfolios of Investments, December 31, 1996 -- Part B
Notes to Financial Statements, December 31, 1996 -- Part B
(2) Unaudited Financials for period ended June 30, 1997
Statements of Assets and Liabilities, June 30, 1997 -- Part B
Statements of Operations for the six months ended June 30,
1997 -- Part B
Statements of Changes in Net Assets -- Part B
Financial Highlights -- Parts A and B
Portfolios of Investments, June 30, 1997 -- Part B
Notes to Financial Statements, June 30, 1997 -- Part B
(b) Exhibits:
(1)(a) Agreement and Declaration of Trust dated September 29, 1988 --
previously filed as exhibit (1)(a) to post-effective amendment
no. 31 filed on February 28, 1996.
(1)(b) Establishment and Designation of Additional Series of Shares
of Beneficial Interest -Redesignation of the Series of Shares
known as the "Convertible Securities Trust" to the "U.S.
Government Bond Trust" dated May 1, 1989 -- previously filed
as exhibit (1)(b) to post-effective amendment no. 31 filed on
February 28, 1996.
(1)(c) Establishment and Designation of Additional Series of Shares
of Beneficial Interest Conservative, Moderate and Aggressive
Asset Allocation Trusts dated May 1, 1989 -- previously filed
as exhibit (1)(c) to post-effective amendment no. 31 filed on
February 28, 1996.
<PAGE> 166
(1)(d) Establishment and Designation of Additional Series of Shares
of Beneficial Interest - Growth & Income Trust dated February
1, 1991 -- previously filed as exhibit (1)(d) to
post-effective amendment no. 31 filed on February 28, 1996.
(1)(e) Establishment and Designation of Additional Series of Shares
of Beneficial Interest -Redesignation of the Series of Shares
known as the "Bond Trust" to the "Investment Quality Bond
Trust" dated April 16, 1991 -- previously filed as exhibit
(1)(e) to post-effective amendment no. 31 filed on February
28, 1996.
(1)(f) Establishment and Designation of Additional Series of Shares
of Beneficial Interest -Redesignation of the Series of Shares
known as the "U.S. Government Bond Trust" to the "U.S.
Government Securities Trust" dated June 14, 1991 -- previously
filed as exhibit (1)(f) to post-effective amendment no. 31
filed on February 28, 1996.
(1)(g) Establishment and Designation of Additional Series of Shares
of Beneficial Interest - Pasadena Growth Trust, Growth Trust
and Strategic Income Trust dated August 7, 1992 -- previously
filed as exhibit (1)(g) to post-effective amendment no. 31
filed on February 28, 1996.
(1)(h) Establishment and Designation of Additional Series of Shares
of Beneficial Interest -Redesignation of the Series of Shares
known as the "Strategic Income Trust" to the "Strategic Bond
Trust" and the Series of Shares known as the "Growth Trust" to
the "Value Equity Trust" dated April 4,1993 -- previously
filed as exhibit (1)(h) to post-effective amendment no. 31
filed on February 28, 1996.
(1)(i) Establishment and Designation of Additional Series of Shares
of Beneficial Interest International Growth and Income Trust
dated December 28, 1994 -- previously filed as exhibit (1)(i)
to post-effective amendment no. 31 filed on February 28, 1996.
(1)(j) Establishment and Designation of Additional Series of Shares
of Beneficial Interest - Small/Mid Cap Trust, dated February
1, 1996 -- previously filed as exhibit (1)(j) to
post-effective amendment no. 34 filed on October 4, 1996.
(1)(k) Establishment and Designation of Additional Series of
Shares of
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Beneficial Interest Growth Trust dated July 9, 1996
-- previously filed as exhibit (1)(l) to post-effective
amendment no. 34 filed on October 4, 1996.
(1)(l) Establishment and Designation of Additional Series of Shares
of Beneficial Interest - Growth Trust dated July 9, 1996 --
previously filed as exhibit (1)(l) to post-effective
amendment no. 34 filed on October 4, 1996.
(l)(m) Establishment and Designation of Additional Series of Shares
of Beneficial Interest - Value Trust, High Yield Trust,
International Stock Trust, Science & Technology Trust,
Balanced Trust, Worldwide Growth Trust, Emerging Growth Trust,
Pilgrim Baxter Growth Trust, Pacific Rim Emerging Markets
Trust, Real Estate Securities Trust, Capital Growth Bond
Trust, Equity Index Trust, Common Stock Trust, Lifestyle
Conservative 280 Trust, Lifestyle Moderate 460 Trust,
Lifestyle Balanced 640 Trust, Lifestyle Growth 820 Trust,
Lifestyle Aggressive 1000 Trust -- and Redesignation of the
Series of Shares known as the "Pasadena Growth Trust" to the
"Blue Chip Growth Trust" and the Series of Shares known as the
"Value Equity Trust" to the "Equity-Income Trust" --
previously filed as exhibit (1)(m) to post-effective amendment
no. 35 filed on December 18, 1996.
(2) By-laws of NASL Series Trust -- Filed herewith.
(4) Form of Specimen Share Certificate -- Filed herewith.
(5)(a)(1)Advisory Agreement between NASL Series Trust and NASL
Financial Services, Inc. -- previously filed as exhibit
(5)(a)(1) to post effective amendment no. 30 filed December
14, 1995.
(5)(a)(2)Amendment to Advisory Agreement between NASL Series Trust and
NASL Financial Services, Inc. adding the Growth Trust --
previously filed as exhibit (5)(a)(1) to post effective
amendment no. 30 filed December 14, 1995.
(5)(a)(3)Amendment to Advisory Agreement between NASL Series Trust and
NASL Financial Services, Inc. dated October 1, 1996, reducing
advisory fee for Blue Chip Growth Trust -- previously filed as
exhibit (5)(a)(3) to post-effective amendment no. 34 filed on
October 4,1996.
(5)(a)(4)Amendment to Advisory Agreement between NASL Series Trust and
NASL Financial Services, Inc. adding Emerging Growth Trust,
Pilgrim Baxter Growth Trust, Pacific Rim Emerging Markets
Trust, International
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Stock Trust, Worldwide Growth Trust, Science & Technology
Trust, Common Stock Trust, Real Estate Securities Trust, Value
Trust, Equity Index Trust, Balanced Trust, High Yield Trust,
Capital Growth Bond Trust, Lifestyle Conservative 280 Trust,
Lifestyle Moderate 460 Trust. Lifestyle Balanced 640 Trust,
Lifestyle Growth 820 Trust and Lifestyle Aggressive 1000 Trust
-- previously filed as exhibit (5)(a)(4) to post-effective
amendment no. 35 filed on December 18, 1996. .
(5)(b)(i)Subadvisory Agreement Between NASL Financial Services, Inc.
and Oechsle International Advisors, L.P. -- previously filed
as exhibit (5)(b)(i) to post-effective amendment no. 37 filed
on August 1, 1997.
(5)(b)(ii)Subadvisory Agreement Between NASL Financial Services, Inc.
and Wellington Management Company -- previously filed as
exhibit (5)(b)(ii) to post-effective amendment no. 37 filed on
August 1, 1997.
(5)(b)(iii)Subadvisory Agreement Between NASL Financial and Salomon
Brothers Asset Management Inc. - previously filed as exhibit
(5)(b)(iii) to post-effective amendment no. 37 filed on August
1, 1997.
(5)(b)(iv)Subadvisory Consulting Agreement Between Salomon Brothers
Asset Management Inc. and Salomon Brothers Asset Management
Limited - previously filed as exhibit (5)(b)(iv) to
post-effective amendment no. 37 filed on August 1, 1997.
(5)(b)(v)Subadvisory Agreement between NASL Financial Services, Inc.
and J.P. Morgan Investment Management Inc. -- previously filed
as exhibit (5)(b)(v) to post-effective amendment no. 37 filed
on August 1, 1997.
(5)(b)(v) Form of Subadvisory Agreement between NASL Financial
Services, Inc. and Fred Alger Management, Inc. -- previously
filed as exhibit (5)(b)(xi) to post effective amendment no. 30
filed December 14, 1995.
(5)(b)(vi)Form of Subadvisory Agreement between NASL Financial
Services, Inc. and Founders Asset Management, Inc. --
previously filed as exhibit (5)(b)(xii) to post effective
amendment no. 30 filed December 14, 1995.
(5)(b)(vii) Amendment to Subadvisory Agreement between NASL Financial
Services, Inc. and Founders Asset Management, Inc. adding the
Growth Trust -- previously filed as exhibit (5)(b)(xiii) to
post effective amendment no. 33 filed July 10, 1996.
4
<PAGE> 169
(5)(b)(viii)Form of Amendment to Subadvisory Agreement between NASL
Financial Services, Inc. and Founders Asset Management, Inc.
dated October 1, 1996 adding the Worldwide Growth and Balanced
Trusts -- previously filed as exhibit (5)(b)(xii) to
post-effective amendment no. 34 filed on October 4,1996.
(5)(b)(ix)Subadvisory Agreement between NASL Financial Services, Inc.
and T. Rowe Price Associates, Inc. dated October 1, 1996
providing for the Blue Chip Growth and Equity-Income Trusts --
previously filed as exhibit (5)(b)(xiii) to post-effective
amendment no. 35 filed on December 18, 1996.
(5)(b)(x)Form of Subadvisory Agreement between NASL Financial Services,
Inc. and Rowe Price-Fleming International, Inc. adding the
International Stock Trust -- previously filed as exhibit
(5)(b)(xiv) to post-effective amendment no. 34 filed on
October 4, 1996.
(5)(b)(xi)Subadvisory Agreement between NASL Financial Services, Inc.
and Morgan Stanley Asset Management, Inc. dated October 1,
1996 providing for the Global Equity Trust -- previously filed
as exhibit (5)(b)(xv) to post-effective amendment no. 35 filed
on December 18, 1996.
(5)(b)(xii)Subadvisory Agreement between NASL Financial Services, Inc.
and Miller Anderson & Sherrerd, LLP dated October 1, 1996
adding the Value and High Yield Trusts -- previously filed as
exhibit (5)(b)(xvi) to post-effective amendment no. 35 filed
on December 18, 1996.
(5)(b)(xiii)Form of Subadvisory Agreement between NASL Financial
Services, Inc. and Warburg Pincus Counsellors, Inc. adding the
Emerging Growth Trust -- previously filed as exhibit
(5)(b)(xvii) to post-effective amendment no. 34 filed on
October 4,1996.
(5)(b)(xvi)Form of Subadvisory Agreement between NASL Financial
Services, Inc. and Manufacturers Adviser Corporation dated
October 1, 1996 providing for the Money Market Trust --
previously filed as exhibit (5)(b)(xviii) to post-effective
amendment no. 34 filed on October 4,1996.
(5)(b)(xvii) Subadvisory Agreement between NASL Financial Services,
Inc. and Pilgrim Baxter & Associates, Inc. dated December 31,
1996 adding the Pilgrim Baxter Growth Trust -- previously
filed as exhibit (5)(b)(xix) to post-effective amendment no.
35 filed on December 18, 1996.
5
<PAGE> 170
(5)(b)(xviii) Form of Amendment to Subadvisory Agreement between NASL
Financial Services, Inc. and Manufacturers Adviser Corporation
dated December 31, 1996 adding the Pacific Rim Emerging
Markets, Common Stock, Real Estate Securities, Equity Index,
Capital Growth Bond, Lifestyle Conservative 280, Lifestyle
Moderate 460, Lifestyle Balanced 640, Lifestyle Growth 820 and
Lifestyle Aggressive 1000 Trusts -- previously filed as
exhibit (5)(b)(xx) to post-effective amendment no. 35 filed on
December 18, 1996.
(5)(b)(ixx) Subadvisory Agreement between NASL Financial Services, Inc.
and Fidelity Management Trust Company dated January 1, 1996 as
amended December 31, 1996 providing for the Equity,
Conservative Asset Allocation, Moderate Asset Allocation and
Aggressive Asset Allocation Trusts -- previously filed as
exhibit (5)(b)(xxi) to post-effective amendment no. 35 filed
on December 18, 1996.
(5)(b)(xx) Form of Amendment to Subadvisory Agreement between NASL
Financial Services, Inc. and T. Rowe Price Associates, Inc.
dated December 31, 1996 adding the Science & Technology Trust
-- previously filed as exhibit (5)(b)(xxii) to post-effective
amendment no. 35 filed on December 18, 1996.
(5)(b)(xxi) Form of Subadvisory Agreement between Manufacturers
Securities Services, LLC (formerly NASL Financial Services,
Inc.) and Rosenberg Institutional Equity Management regarding
the Small Company Value Trust - Filed herewith.
(8)(a) Custodian Agreement Between NASL Series Fund, Inc. and State
Street Bank and Trust Company dated March 24, 1988 -- Filed
herewith.
(10)(a)(i)Opinion and Consent of Ropes & Gray dated October 27, 1988.
Filed herewith.
(10)(a)(ii) Opinion and Consent of Tina M. Perrino, Esq. dated April
12, 1991. Filed herewith.
(10)(a)(iii) Opinion and Consent of Tina M. Perrino, Esq. dated October
22, 1992. Filed herewith.
6
<PAGE> 171
(10)(a)(iv) Opinion and Consent of Betsy A. Seel, Esq. dated October
19, 1994. Filed herewith.
(10)(a)(v) Opinion and Consent of Betsy A. Seel, Esq. -- previously
filed as exhibit (10)(a)(v) to post effective amendment no. 30
filed December 14,1995.
(10)(a)(vi) Opinion and Consent of Betsy A. Seel, Esq. -- previously filed
as exhibit (10)(a)(vi) to post effective amendment no. 33
filed July 10, 1996.
(10)(a)(vii) Opinion and Consent of Betsy Anne Seel, Esq. -- previously
filed as exhibit (10)(a)(vii) to post-effective amendment no.
35 filed on December 18, 1996.
(10)(b) Consent of Jones & Blouch L.L.P. -- Filed herewith
(11) Consent of Coopers & Lybrand L.L.P. -- Filed herewith
(16) Schedule of Computations - general formula -- previously filed
as exhibit (b)(16)(e) to post-effective amendment no. 31 filed
February 28, 1996.
(18)(a) Powers of Attorney -- Richard C. Hirtle, Vice President and
Treasurer dated September 23, 1994. Filed herewith.
(18)(b) Powers of Attorney -- Trustees dated September 27, 1996.
Filed herewith.
(18)(c) Power of Attorney -- John D. DesPrez, President -- previously
filed as exhibit (18)(e) to post-effective amendment no. 34
filed on October 4, 1996.
(18)(d) Power of Attorney -- John D. Richardson, Chairman of the Board
and F. David Rolwing, Trustee -- previously filed as exhibit
(18)(e) to post-effective amendment no. 36 filed on April 30,
1997.
(27) NASL Series Trust - Financial Data Schedules for December 31,
1996 and June 30, 1997 financial statements. -- Filed
herewith.
7
<PAGE> 172
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 and will solicit voting instructions from variable
contract owners and vote all shares held in proportion to the instructions
received.
8
<PAGE> 173
THE MANUFACTURERS LIFE INSURANCE COMPANY
Manulife Corporate Organization as at December 31, 1996
The Manufacturers Life Insurance Company (Canada)
1. 1198150 Ontario Limited - Ontario (100%)
1.1 Manulife Investment Management Corporation - Canada (100%)
1.1.1 159139 Canada Inc. - Canada (50%)
A. Altamira Management Ltd. - Ontario (60.96%)
i. 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%)
(i) AIS Securities (Partnership) - Ontario (100%)[95% by
by Altamira Investment Services Inc. and 5% by
Altamira Financial Services Inc.]
(ii) Altamira (Alberta) Ltd. - Alberta (100%)
(iii) Capital Growth Financial Services Inc. - Ontario
(100%)
B. ACI Limited - Cayman (100%)
1.2 1198183 Ontario Limited - Ontario (100%)
1.3 1198184 Ontario Limited - Ontario (100%)
2. ManuLife Holdings (Hong Kong) Limited - H.K. (100%)
3. ManuLife Financial Systems (Hong Kong) Limited - H.K. (100%)
4. P.T. Asuransi Jiwa Dharmala Manulife - Indonesia (51%)
5. WT (SW) Properties Ltd. - U.K. (100%)
6. OUB Manulife Pte. Ltd. - Singapore (50%)
7. Manulife (Malaysia) SDN. BHD. - Malaysia (100%)
8. Manulife (Thailand) Ltd. - Thailand (100%)
9. Young Poong Manulife Insurance Company - Korea (50%)
10. NAL Resources Limited - Alberta (100%)
11. Chinfon-Manulife Insurance Company Limited - Bermuda (60%)
12. Manulife International Capital Corporation Limited - Ontario
12.1 Regional Power Inc. - Ontario (98.5%)
13. 484551 Ontario Limited - Ontario (100%)
13.1 911164 Ontario Limited - Ontario (100%)
14. Peel-de Maisonneuve Investments Ltd. - Canada (50%)
14.1 2932121 Canada Inc. - Canada (100%)
15. Balmoral Developments Inc. - Canada (100%)
16. Townvest Inc. - Ontario (100%)
9
<PAGE> 174
17. Cantay Holdings Inc. - Ontario (100%)
18. Manufacturers Life Capital Corporation Inc. - Canada (100%)
19. 495603 Ontario Limited - Ontario (100%)
20. 994744 Ontario Inc.- Ontario (100%)
21. The North American Group Inc. - Ontario (100%)
22. 742166 Ontario Inc. - Ontario (100%)
23. Manulife International Investment Management Limited - U.K. (100%)
23.1 Manulife International Fund Management Limited - U.K. (100%)
24. Manulife (International) Limited - Bermuda (100%)
24.1 The Manufacturers (Pacific Asia) Insurance Company Limited
- Hong Kong (100%)
24.2 Newtime Consultants Limited - Hong Kong (100%)
24.3 Zhong Hong Life Insurance Co. Ltd. - China (51%)
25. Manulife Data Services Inc.- Barbados (100%)
(a) Manulife Funds Direct (Barbados) Limited - Barbados - (100%)
(i) Manulife Funds Direct (Hong Kong) Limited - Hong Kong (100%)
26. FNA Financial Inc. - Canada (100%)
26.1 Elliott & Page Limited - Ontario (100%)
26.2 Seamark Asset Management Ltd. - Canada (69.175%)
26.3 NAL Resources Management Limited - Canada (100%)
(i) NAL Energy Inc. - Alberta (100%)
27. ManuCab Ltd. - Canada (100%)
27.1 Plazcab Service Limited - Canada (100%)
28. The Manufacturers Investment Corporation - Michigan (100%)
A. Manulife Reinsurance Corporation (U.S.A.) - Michigan (100%)
A.I The Manufacturers Life Insurance Company (U.S.A.) - Michigan (100%)
a) The Manufacturers Life Insurance Company of America
- Michigan (100%)
(i) Manulife Holding Corporation - Delaware (100%)
ia. ManEquity, Inc. - Colorado (100%)
ib. Manulife Service Corporation - Colorado (100%)
ic. Manufacturers Adviser Corporation - Colorado (100%)
id Succession Planning International Inc. - Wisconsin (80.1%)
ie. Manufacturers Life Mortgage Securities Corporation
- Delaware (100%
if. Manulife Property Management of Washington, D.C., Inc.
- Washington, D.C. - 100%
b) Capitol Bankers Life Insurance Company - Michigan (100%)
10
<PAGE> 175
c) Ennal, Inc. - Ohio (100%)
d) First North America Realty, Inc. - Minnesota (100%)
e) NAWL Holding Company, Inc. - Delaware (65%) [20% by The
Manufacturers Life Insurance Company]
(i) Wood Logan Associates Inc. - Connecticut (100%)
i.a Wood Logan Distributors - Connecticut (100%)
(ii) North American Security Life Insurance Company - Delaware
(100%)
ii.a NASL Financial Services, Inc. - Massachusetts (100%)
ii.b First North American Life Assurance Company -
New York (100%)
A.II. Manulife Reinsurance Limited - Bermuda (100%)
29. NAWL Holding Company Inc. - Delaware (20%)
29.1 Wood Logan Associates Inc. - Connecticut (100%)
29.1.1 Wood Logan Distributors - Connecticut (100%)
29.2 North American Security Life Insurance Company - Delaware (100%)
29.2.1 NASL Financial Services, Inc. - Massachusetts (100%)
29.2.2 First North American Life Assurance Company - New York (100%)
30. Manulife (International) Reinsurance Limited - Bermuda (100%)
30.1 Manulife (International) P&C Limited - Bermuda (100%)
30.2 Manufacturers P&C Limited - Barbados (100%)
30.2.1 Manufacturers Life Reinsurance Limited - Barbados (100%)
31. Thos. N. Shea Investment Corporation Limited - Ontario (100%)
32. Family Realty First Corp. Limited - Ontario (100%)
33. Manulife Bank of Canada - Canada (100%)
33.1 Manulife Securities International Ltd. - Canada (100%)
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of August 31, 1997 the number of holders of the shares of beneficial
interest of each series of shares of the Registrant is as follows:
<TABLE>
<CAPTION>
Title of Series Number of Record Holders
--------------- ------------------------
<S> <C>
Global Equity Trust Shares of
Beneficial Interest 2
Blue Chip Growth Trust Shares of
Beneficial Interest 2
Equity Trust Shares of
Beneficial Interest 3
Equity-Income Trust Shares of
Beneficial Interest 3
Growth and Income Trust Shares
</TABLE>
11
<PAGE> 176
<TABLE>
<S> <C>
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
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
Growth Trust
Shares of Beneficial Interest 2
Pacific Rim Emerging Markets Trust
Shares of Beneficial Interest 3
Science & Technology Trust
Shares of Beneficial Interest 3
Emerging Growth Trust
Shares of Beneficial Interest 3
Pilgrim Baxter Growth Trust
Shares of Beneficial Interest 2
International Stock Trust
Shares of Beneficial Interest 3
Worldwide Growth Trust
Shares of Beneficial Interest 2
Quantitative Equity Trust
Shares of Beneficial Interest 3
Equity Index Trust
Shares of Beneficial Interest 1
</TABLE>
12
<PAGE> 177
<TABLE>
<S> <C>
Value Trust
Shares of Beneficial Interest 2
Real Estate Securities Trust
Shares of Beneficial Interest 3
Balanced Trust
Shares of Beneficial Interest 3
High Yield Trust
Shares of Beneficial Interest 2
Capital Growth Bond Trust
Shares of Beneficial Interest 3
Lifestyle Conservative 280 Trust
Shares of Beneficial Interest 2
Lifestyle Moderate 460 Trust
Shares of Beneficial Interest 2
Lifestyle Balanced 640 Trust
Shares of Beneficial Interest 2
Lifestyle Growth 820 Trust
Shares of Beneficial Interest 2
Lifestyle Aggressive 1000 Trust
Shares of Beneficial Interest 2
Small Company Value Trust
Shares of Beneficial Interest 0
</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
13
<PAGE> 178
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.
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 Government Bond Trust, at its
offices at One International Place, Boston, Massachusetts 02110, by Wellington
Management Company, the investment subadviser to the Growth and Income 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 Fred Alger
Management, Inc., the investment subadviser for the Small/Mid Cap Trust, at its
offices at 75 Maiden Lane, New York, NY 10038, by Founders Asset Management,
Inc., the investment subadviser for the Growth, International Small Cap,
Worldwide Growth and Balanced Trusts, at its offices at 2930 East Third Avenue,
Denver, Colorado 80206, 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 T. Rowe Price
Associates, Inc., the investment subadviser to the Blue Chip Growth, Science &
Technology and Equity-Income Trusts, at its offices at 100 East Pratt Street,
Baltimore, MD 21202, by Rowe Price-Fleming International, Inc., the investment
subadviser to the International Stock Trust, at its offices at 100 East Pratt
Street, Baltimore, MD 21202, by Morgan Stanley Asset Management, Inc., the
investment subadviser of the Global Equity Trust, at its offices at 1221 Avenue
of the Americas, New York, New York 10020, by Miller Anderson & Sherrerd, LLP,
the investment subadviser to the Value and High Yield Trusts, at its offices at
One Tower
14
<PAGE> 179
Bridge, Conshohocken PA 19428, by Warburg Pincus Counsellors, Inc., the
investment subadviser to the Emerging Growth Trust, at its offices at 466
Lexington Avenue, New York, New York 10017-3147, by Pilgrim Baxter & Associates,
Inc., the investment subadviser to the Pilgrim Baxter Growth Trust, at its
offices at 355 Lexington Avenue, New York, New York by Manufacturers Adviser
Corporation, the investment subadviser to the Pacific Rim Emerging Markets,
Common Stock, Real Estate Securities, Equity Index, Capital Growth Bond,
Lifestyle and Money Market Trusts, at its offices at 200 Bloor Street East,
Toronto, Ontario, Canada M4W lE5, by the Registrant at its principal business
office located at 116 Huntington Avenue, Boston, Massachusetts 02116, by
Rosenberg Institutional Equity Management, the investment subadviser to the
Small Company Value Trust, at its office located at Four Orinda Way, Suite 300E,
Orinda, CA 94563 or by State Street Bank and Trust Company, the custodian and
transfer agent for the Trust, at its offices at 225 Franklin Street, Boston,
Massachusetts 02110.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Previously given.
15
<PAGE> 180
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 this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Boston,
and Commonwealth of Massachusetts, on the 15th day of September, 1997.
NASL SERIES TRUST
-----------------
(Registrant)
By: /s/ JOHN D. DESPREZ III
------------------------------
John D. DesPrez III, President
Attest:
/s/ JAMES D. GALLAGHER
- -----------------------------
James D. Gallagher, Secretary
<PAGE> 181
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.
* Trustee September 15, 1997
- --------------------------- ------------------
Don B. Allen (Date)
/s/ JOHN D. DESPREZ III President - September 15, 1997
- --------------------------- (Chief Executive Officer) ------------------
John D. DesPrez III (Date)
* Trustee September 15, 1997
- --------------------------- ------------------
Charles L. Bardelis (Date)
* Trustee September 15, 1997
- --------------------------- ------------------
Samuel Hoar (Date)
* Trustee September 15, 1997
- --------------------------- ------------------
Robert J. Myers (Date)
* Trustee September 15, 1997
- --------------------------- and Chairman ------------------
John D. Richardson (Date)
* Trustee September 15, 1997
- --------------------------- ------------------
F. David Rolwing (Date)
/s/ RICHARD C. HIRTLE Vice President and September 15, 1997
- --------------------------- Treasurer (Prin- ------------------
Richard C. Hirtle cipal Financial and (Date)
Accounting Officer)
*By /s/ JAMES D. GALLAGHER September 15, 1997
---------------------- ------------------
James D. Gallagher (Date)
Attorney-in-Fact Pursuant to
Powers of Attorney
<PAGE> 182
EXHIBIT INDEX
Exhibit No. Description
(2) By-laws of NASL Series Trust
(4) Form of Specimen Share Certificate
(5)(b)(xxi) Form of Subadvisory Agreement between Manufacturers
Securities Services, LLC (the successor to NASL Financial
Services, Inc.) and Rosenberg Institutional Equity
Management regarding the Small Company Value Trust
(8)(a) Custodian Agreement Between NASL Series Fund, Inc. and State
Street Bank and Trust Company dated March 24, 1988
(10)(a)(i) Opinion and Consent of Ropes & Gray dated October 27, 1988
(10)(a)(ii) Opinion and Consent of Tina M. Perrino, Esq. dated April
12, 1991
(10)(a)(iii) Opinion and Consent of Tina M. Perrino, Esq. dated October
22, 1992
(10)(a)(iv) Opinion and Consent of Betsy A. Seel, Esq. dated October
19, 1994
(10)(b) Consent of Jones & Blouch L.L.P.
(11) Consent of Coopers & Lybrand L.L.P.
(18)(a) Powers of Attorney -- Richard C. Hirtle, Vice President and
Treasurer dated September 23, 1994
(18)(b) Powers of Attorney -- Trustees dated September 27, 1996
(27) NASL Series Trust - Financial Data Schedules for December
31,1996 and June 30, 1997 financial statements
<PAGE> 1
NASL SERIES TRUST
BY-LAWS
<PAGE> 2
BY-LAWS
OF
NASL SERIES TRUST
Table of Contents
-----------------
ARTICLE 1 Agreement and Declaration of Trust and Principal Office..........2
ARTICLE 2 Shareholders.....................................................2
ARTICLE 3 Trustees.........................................................3
ARTICLE 4 Officers.........................................................4
ARTICLE 5 Resignations and Removals........................................5
ARTICLE 6 Reports..........................................................5
ARTICLE 7 Seal.............................................................5
ARTICLE 8 Execution of Papers..............................................6
ARTICLE 9 Issuance of Share Certificates...................................6
ARTICLE 10 Custody of Securities and Cash...................................7
ARTICLE 11 Dealings with Trustees and Officers..............................8
ARTICLE 12 Amendments to the By-Laws........................................8
ARTICLE 13 Declaration of Trust.............................................8
1
<PAGE> 3
BY-LAWS
OF
NASL SERIES TRUST
ARTICLE 1
Agreement and Declaration of Trust
and Principal Office
----------------------------------
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject
to the Declaration of Trust, as from time to time in effect, of NASL Series
Trust, the Massachusetts business trust established by the Declaration of Trust.
Unless otherwise required by the context or specifically provided, the terms
used in these By-Laws shall have the meanings given in the Declaration of Trust.
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust
shall be located in Boston, Massachusetts.
ARTICLE 2
Shareholders
------------
2.1 MEETINGS. Meetings of the Shareholders of the Trust or of any
Series of Shares may be called at any time by the Trustees, by the President or,
if Trustees and the President shall fail to call any meeting of Shareholders for
a period of 30 days after written application of one or more Shareholders who
hold at least 25% of all shares issued and outstanding and entitled to vote at
the meeting, then such Shareholders may call such meeting. The preceding
sentence shall apply upon written application by Shareholders holding at least
10% of the Shares issued and outstanding, and entitled to vote at the meeting,
when the purpose of the meeting is to vote upon the question of the removal of
one or more Trustees. Whenever Shareholders meeting the requirements and
complying with the conditions set forth in Section 16(c) of the 1940 Act apply
to the Trustees in writing stating that they wish to communicate with other
Shareholders with a view to obtaining signatures to a request for a meeting for
such purpose, the Trustees shall provide the assistance referred to in that
section. Whenever a meeting is a meeting of the Shareholders of the Trust, then
only the Shareholders of such one or more Series of Shares shall be entitled to
notice of and to vote at the meeting.
2.2 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.
2.3 NOTICE OF MEETINGS. A written notice of each meeting of
Shareholders, stating the place, date and hour and the purposes of the meeting,
shall be given at least seven days before the meeting to each Shareholder
entitled to vote thereat by leaving such notice with him or at his residence or
usual place of business or by mailing it, postage prepaid, and addressed to such
Shareholder at his address as it appears in the records of the Trust. Such
notice shall be given by the Secretary or an Assistant Secretary or by an
2
<PAGE> 4
officer designated by the Trustees. No notice of any meeting of Shareholders
need be given to a Shareholder if a written waiver of notice, executed before or
after the meeting by such Shareholder or his attorney thereunto duly authorized,
is filed with the records of the meeting.
2.4 BALLOTS. No ballot shall be required for any election unless
requested by a Shareholder present or represented at the meeting and entitled to
vote in the election.
2.5 PROXIES. Proxies must be in writing and dated not more than six
months before the meeting named therein. Unless otherwise specifically limited
by their terms, such proxies shall entitle the holders thereof to vote at any
adjournment of such meeting but shall not be valid after the final adjournment
of such meeting.
2.6 ELIGIBLE SHAREHOLDERS. Only Eligible Shareholders may purchase
Shares. Eligible Shareholders are: (a) separate accounts of North American
Security Life Insurance Company or of other insurance companies; (b) North
American Security Life Insurance Company; (c) NASL Financial Services, Inc.; (d)
any corporation related in a manner specified in section 267(b) of the Internal
Revenue Code to North American Security Life Insurance Company or to NASL
Financial Services, Inc.; and (e) any trustee of a qualified pension or
retirement plan. Shares may be transferred to Eligible Shareholders. Shares may
not be transferred to someone other than an Eligible Shareholder, and when the
Trust is requested to make such a transfer, it may elect to purchase such Shares
at their net asset value next determined following receipt of the request for
transfer.
ARTICLE 3
Trustees
--------
3.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
3.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Trustees, the President or the Secretary or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer or the Trustees calling the meeting.
3.3 NOTICE. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hour before the meeting addressed to the Trustee at his usual
or last known business or residence address or to give notice to him in person
or by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any Trustee if a written waiver of notice, executed
by him before or after the meeting, is filed with records of the meeting, or to
any Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. Neither notice of a meeting nor a waiver
of a notice need specify the purposes of the meeting.
3.4 QUORUM. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
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<PAGE> 5
3.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees may
participate in a meeting of the Trustees or of any committee thereof by means of
a conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Except as
otherwise provided by law, participation by such means shall constitute presence
in person at a meeting.
3.6 ACTION BY WRITTEN CONSENT. Any action by the Trustees may be taken
without a meeting if a written consent thereto is signed by a majority of the
Trustees and filed with the records of the Trustees' meetings. Such consent
shall be treated as a vote of the Trustees for all purposes. If any action is
taken by the Trustees by a written consent of less than all of the Trustees,
then prompt notice of any such action shall be furnished to each Trustee who did
not execute such written consent, provided that the effectiveness of such action
shall not be impaired by any delay or failure to furnish such notice.
3.7 COMMITTEES. The Trustees, by action of a majority of the Trustees
then in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-Laws for the Trustees
themselves. All members such committees shall hold such offices at the pleasure
of the Trustees. The Trustees may abolish any such committee at any time. Any
committee to which the Trustees delegate any of their powers or duties shall
keep records of its meetings and shall report its action to the Trustees. The
Trustees shall have power to rescind any action of any committee, but no such
rescission shall have retroactive effect.
ARTICLE 4
Officers
--------
4.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
Chairman of the Trustees, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, if any, as the Trustees from time to time
may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time in their discretion may appoint. The chairman of the
Trustees shall be a Trustee and may but need not be a Shareholder. Any other
officer may but need not be a Trustee or a Shareholder. Any two or more offices
may be held by the same person.
4.2 ELECTION. The Chairman of the Trustees, the President, the
Treasurer, the Secretary and other officers, if any, may be elected or appointed
by the Trustees at any time. Vacancies in any office may be filled at any time.
4.3 TENURE. The Chairman of the Trustees, the President, the Treasurer
and the Secretary shall hold office in each case until his respective successor
is chosen and qualified, or until he sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
4.4 POWERS. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may from
time to time designate.
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<PAGE> 6
4.5 CHAIRMAN; PRESIDENT. Unless the Trustees otherwise provide, the
Chairman of the Trustees, or, if there is none, or in the absence of the
Chairman, the President shall preside at all meetings of the Shareholders and of
the Trustees. The President shall be the chief executive officer of the Trust
and, subject to the Trustees, shall have general supervision over the business
and policies of the Trust.
4.6 TREASURER. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
4.7 SECRETARY. The Secretary shall record all proceedings of the
Shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the Shareholders or Trustees, an Assistant
Secretary, or if there be none or if he is absent, a temporary secretary chosen
at such meeting, shall record the proceedings thereof in the aforesaid books.
ARTICLE 5
Resignations and Removals
-------------------------
Any Trustee or officer may resign at any time by written instrument
signed by him and delivered to the Chairman, the President or the Secretary or
to a meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. The Trustees, by action of
a majority of the Trustees then in office, may remove any officer with or
without cause. Except to the extent expressly provided in a written agreement
with the Trust, no Trustee or officer resigning and no officer removed shall
have any right to any compensation for any period following his resignation or
removal, or any right to damages on account of such removal.
ARTICLE 6
Reports
-------
The Trustees and officers shall render reports at the time and in the
manner required by the Declaration of Trust or any applicable law. Officers and
committees shall render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
ARTICLE 7
Seal
----
The seal of the Trust shall consist of a flat-faced die with the word
"Massachusetts," together with the name of the Trust and the year of its
organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its
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<PAGE> 7
absence shall not impair the validity of, any document, instrument or other
paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution Of Papers
-------------------
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, contracts, notes and
other obligations made by the Trustees shall be signed by the President, any
Vice President, the Secretary or the Treasurer and need not bear the seal of the
Trust.
ARTICLE 9
Issuance of Share Certificates
------------------------------
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for Shares,
the Trustees or the transfer agent may either issue receipts therefor or may
keep accounts upon the books of the Trust for the record holders of such Shares,
who shall in either case be deemed, for all purposes hereunder, to be the
holders of certificates for such Shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each Shareholder of record of any Series of Shares
shall be entitled to a certificate stating the number of Shares of the Series of
Shares owned by him, in such form as shall be prescribed from time to time by
the Trustees. Such certificates shall be signed by the President or a Vice
President and by the Treasurer or any Assistant Treasurer of the Trust. Such
signatures may be facsimiles if the certificate is signed by a transfer agent or
a registrar. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall cease to be such officer before such
certificate is issued, it may be issued by the Trust with the same effect as if
he were such officer at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction
or the mutilation of a share certificate, a duplicate certificate may be issued
in place thereof, upon such terms as the Trustees shall prescribe.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. If the Trustees shall have
authorized the issuance of certificates, a pledgee of Shares transferred as
collateral security shall be entitled to a new certificate if the instrument of
transfer substantially describes the debt or duty that is intended to be secured
thereby. Such new certificate shall express on its face that it is held as
collateral security, and the name of the pledgor shall be stated thereon, who
alone shall be liable as a Shareholder, and entitled to vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at
any time discontinue the issuance of share certificates and may, by written
notice to each Shareholder, require the surrender of share certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect the
ownership of Shares in the Trust.
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<PAGE> 8
ARTICLE 10
Custody of Securities and Cash
------------------------------
10.1 EMPLOYMENT OF A CUSTODIAN. The Trust shall place and at all times
maintain in the custody of a Custodian (including any subcustodian for the
Custodian) all funds, securities, and similar investments owned by the Trust.
The Custodian shall be a bank that meets the qualifications for custodians for
portfolio securities contained in the 1940 Act. Subject to the 1940 Act, the
Trust's Custodian may deposit all or a part of the securities, cash or other
property owned by the Trust for the benefit of any of its Series of Shares in a
sub-custodian or sub-custodians situated within or without the United States.
The Custodian shall be appointed and its remuneration fixed by the Trustees.
10.2 CENTRAL CERTIFICATE SERVICE. Subject to the 1940 Act, the Trust's
Custodian and sub-custodians may deposit all or any part of the securities owned
by the Trust for the benefit of any of its Series of Shares in a system for the
central handling of securities established by a national securities exchange or
national securities association registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, or such other person,
domestic or foreign, as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act, pursuant to which system all securities of any
particular class or series of any issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities.
10.3 CASH ASSETS. The cash proceeds from the sale of securities and
similar investments and other cash assets of the Trust for the benefit of any of
its Series of Shares shall be kept in the custody of a bank or banks appointed
pursuant to Section 10.1 hereof, or in accordance with such rules and
regulations or orders as the Securities and Exchange Commission may from time to
time prescribe for the protection of investors, except that the Trust may
maintain a checking account or accounts in a bank or banks, of not less than
$10,000,000, provided that the balance of such account or the aggregate balances
of such accounts shall at no time exceed the amount of the fidelity bond,
maintained pursuant to the requirements of the 1940 Act, covering the officers
or employees authorized to draw on such account or accounts.
10.4 FREE CASH ACCOUNTS. The Trust may, upon resolution of its
Trustees, maintain a petty cash account free of the foregoing requirements of
this Article 10 in an amount not to exceed $500, provided that such account is
operated under the imprest system and is maintained subject to adequate controls
approved by the Trustees over disbursements and reimbursements including, but
not limited to, fidelity bond coverage for persons having access to such funds.
10.5 ACTION UPON TERMINATION OF CUSTODIAN AGREEMENT. Upon resignation
of a Custodian of the Trust or inability of a Custodian to continue to serve,
the Trustees shall promptly appoint a successor Custodian, but in the event no
successor Custodian can be found who has the required qualifications and is
willing to serve, the Trustees shall call as promptly as possible a special
meeting of the Shareholders to determine whether the Trust shall function
without a Custodian or shall be liquidated. If so directed by vote of the
holders of a majority of the outstanding Shares of the Trust, the Custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
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<PAGE> 9
ARTICLE 11
Dealings with Trustees and Officers
-----------------------------------
Any Trustee, officer or other agent of the Trust may acquire, own and
dispose of Shares of the Trust to the same extent as if he were not a Trustee,
officer or agent; and the Trustees may accept subscriptions to Shares or
repurchase or redeem Shares from any firm or company in which he is interested.
ARTICLE 12
Amendments to the By-laws
-------------------------
These By-Laws may be amended or repealed, in whole or in part, by the
Trustees.
ARTICLE 13
Declaration of Trust
--------------------
The Agreement and Declaration of Trust establishing NASL Series Trust
dated 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 the name "NASL Series Trust" refers to the Trustees under the
Declaration of Trust collectively as Trustees, but not as individuals or
personally; and no Trustee, Shareholder, officer, employee or agent of NASL
Series Trust shall be held to any personal liability, nor shall resort be had to
their private property, for the satisfaction of any obligation or claim or
otherwise, in connection with the affairs of NASL Series Trust or any Series of
Shares thereof, but only the assets belonging to the Trust, or to the particular
Series of Shares with which the obligation or claim arose, shall be liable.
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<PAGE> 1
SPECIMEN
--------
Organized as a Voluntary Association
Under the Laws of the
Commonwealth of Massachusetts
NASL SERIES TRUST
_______________ TRUST
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF BENEFICIAL INTEREST, $0.01 PAR VALUE, OF
NASL SERIES TRUST
in accordance with, and subject to all the provisions of, an Agreement and
Declaration of Trust dated September 28, 1988, including any amendments thereto,
a copy of which has been filed with the Secretary of the Commonwealth of
Massachusetts, to all of which provisions every shareholder agrees by the
acceptance of a share certificate.
The Declaration of Trust provides that the name "NASL Series Trust"
refers to the Trustees under the Declaration of Trust collectively as Trustees,
but not as individuals or personally; and no Trustee, shareholder, officer,
employee or agent of the trust may be held to any personal liability, nor may
resort be had to their private property, for the satisfaction of any obligation
or claim or otherwise in connection with the affairs or to the particular series
of shares with respect to which such obligation or claim arose, may be liable.
IN WITNESS WHEREOF, the Trustees under said Declaration of Trust, acting not
individually, but as such Trustees have caused to be affixed to this certificate
the facsimile Seal of the Trust and the facsimile signatures of duly authorized
officers of the Trust, acting not individually but as such officers.
- ----------------------------- -----------------------------
TREASURER PRESIDENT
<PAGE> 1
NASL SERIES TRUST
SUBADVISORY AGREEMENT
AGREEMENT made this ___ day of ______, 1997, between Manufacturers
Securities Services, LLC, a Delaware limited liability company (the "Adviser"),
and Rosenberg Institutional Equity Management, a California limited partnership
(the "Subadviser"). In consideration of the mutual covenants contained herein,
the parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and,
subject to the supervision of the Trustees of NASL Series Trust (the "Trust")
and the terms of this Agreement, to manage the investment and reinvestment of
the assets of the Portfolios specified in Appendix A to this Agreement as it
shall be amended by the Adviser and the Subadviser from time to time (the
"Portfolios"). The Subadviser will be an independent contractor and will have no
authority to act for or represent the Trust or Adviser in any way except as
expressly authorized in this Agreement or another writing by the Trust and
Adviser.
2. SERVICES TO BE RENDERED BY THE SUBADVISER TO THE TRUST
a. Subject always to the direction and control of the Trustees of the
Trust, the Subadviser will manage the investments and determine the
composition of the assets of the Portfolios in accordance with the
Portfolios' registration statement, as amended. In fulfilling its
obligations to manage the investments and reinvestments of the assets
of the Portfolios, the Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial
and other information affecting the economy generally and
individual companies or industries the securities of which are
included in the Portfolios or are under consideration for
inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for
each Portfolio consistent with the investment objectives and
related investment policies for each such Portfolio as
described in the Trust's registration statement, as amended;
iii. take whatever steps are necessary to implement these
investment programs by the purchase and sale of securities
including the placing of orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to
the implementation of these investment programs; and
v. provide assistance to the Trust's Custodian regarding the fair
value of securities held by the Portfolios for which market
quotations are not readily available.
b. The Subadviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel
required for it to execute its duties faithfully, and (ii)
administrative facilities, including bookkeeping, clerical personnel
and equipment necessary for the efficient conduct of the investment
affairs of the Portfolios (excluding determination of net asset value
and shareholder accounting services).
c. The Subadviser will select brokers and dealers to effect all
transactions subject to the following conditions: The Subadviser will
place all orders with brokers, dealers, or issuers, and will negotiate
brokerage commissions if applicable. The Subadviser is directed at all
times to seek to execute brokerage transactions for the Portfolios in
accordance with such policies or practices as may be established by the
Trustees and described in the Trust's registration statement as
amended. The Subadviser may pay a broker-dealer which provides research
and brokerage services a higher spread or commission for a particular
transaction than otherwise might have been charged by another
broker-dealer, if the Subadviser determines that the higher
<PAGE> 2
spread or commission is reasonable in relation to the value of the
brokerage and research services that such broker-dealer provides,
viewed in terms of either the particular transaction or the
Subadviser's overall responsibilities with respect to accounts managed
by the Subadviser. The Subadviser may use for the benefit of the
Subadviser's other clients, or make available to companies affiliated
with the Subadviser or to its directors for the benefit of its clients,
any such brokerage and research services that the Subadviser obtains
from brokers or dealers.
d. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other
clients of the Subadviser, the Subadviser to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation
to, aggregate the securities to be purchased or sold to attempt to
obtain a more favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Subadviser in the manner the Subadviser considers
to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.
e. The Subadviser will maintain all accounts, books and records with
respect to the Portfolios as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act of
1940 (the "Investment Company Act") and Investment Advisers Act of 1940
(the "Investment Advisers Act") and the rules thereunder.
3. COMPENSATION OF SUBADVISER
The Adviser will pay the Subadviser with respect to each Portfolio the
compensation specified in Appendix A to this Agreement.
4. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its employees or partners shall be
liable to the Adviser or Trust for any loss suffered by the Adviser or Trust
resulting from any error of judgment made in the good faith exercise of the
Subadviser's investment discretion in connection with selecting Portfolio
investments except for losses resulting from willful misfeasance, bad faith or
gross negligence of, or from reckless disregard of, the duties of the Subadviser
or any of its partners or employees; and neither the Subadviser nor any of its
employees or partners shall be liable to the Adviser or Trust for any loss
suffered by the Adviser or Trust resulting from any other matters to which this
Agreement relates (i.e., those other matters specified in Sections 2 and 7 of
this Agreement), except for losses resulting from willful misfeasance, bad
faith, or gross negligence in the performance of, or from disregard of, the
duties of the Subadviser or any of its partners or employees.
5. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of
the Trust are or may be interested in the Subadviser as trustees, officers,
partners or otherwise; that employees, agents and partners of the Subadviser are
or may be interested in the Trust as trustees, officers, shareholders or
otherwise; that the Subadviser may be interested in the Trust; and that the
existence of any such dual interest shall not affect the validity hereof or of
any transactions hereunder except as otherwise provided in the Agreement and
Declaration of Trust of the Trust and the partnership agreement of the
Subadviser, respectively, or by specific provision of applicable law.
6. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
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<PAGE> 3
7. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on
the later of (i) its execution, (ii) the effective date of the registration
statement of the Portfolio and (iii) with respect to each Portfolio, the date of
the meeting of the shareholder(s) of the Portfolio, at which meeting this
Agreement is approved by the vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Portfolio. The
Agreement will continue in effect for a period more than two years from the date
of its execution only so long as such continuance is specifically approved at
least annually either by the Trustees of the Trust or by a majority of the
outstanding voting securities of each of the Portfolios, provided that in either
event such continuance shall also be approved by the vote of a majority of the
Trustees of the Trust who are not interested persons (as defined in the
Investment Company Act) of any party to this Agreement cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval of the Agreement or of any continuance of the Agreement
shall be effective with respect to any Portfolio if a majority of the
outstanding voting securities of the series (as defined in Rule 18f-2(h) under
the Investment Company Act) of shares of that Portfolio votes to approve the
Agreement or its continuance, notwithstanding that the Agreement or its
continuance may not have been approved by a majority of the outstanding voting
securities of (a) any other Portfolio affected by the Agreement or (b) all the
portfolios of the Trust.
If the shareholders of any Portfolio fail to approve the Agreement or
any continuance of the Agreement, the Subadviser will continue to act as
investment subadviser with respect to such Portfolio pending the required
approval of the Agreement or its continuance or of any contract with the
Subadviser or a different adviser or subadviser or other definitive action;
provided, that the compensation received by the Subadviser in respect of such
Portfolio during such period is in compliance with Rule 15a-4 under the
Investment Company Act.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Trustees of the Trust, 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 such Portfolio,
on sixty days' written notice to the Adviser and the Subadviser, or by the
Adviser or Subadviser on sixty days' written notice to the Trust and the other
party. This agreement will automatically terminate, without the payment of any
penalty, in the event of its assignment (as defined in the Investment Company
Act) or in the event the Advisory Agreement between the Adviser and the Trust
terminates for any reason.
8. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
The Subadviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
a. the Subadviser fails to be registered as an investment adviser under
the Investment Advisers Act or under the laws of any jurisdiction in
which the Subadviser is required to be registered as an investment
adviser in order to perform its obligations under this Agreement;
b. the Subadviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation, at law or in equity, before
or by any court, public board or body, involving the affairs of the
Trust; and
c. any change in actual control or management of the Subadviser or the
portfolio manager of any Portfolio.
9. SERVICES TO OTHER CLIENTS
The Adviser understand, and has advised the Trust's Board of Trustees,
that the Subadviser now acts, or may in the future act, as an investment adviser
to fiduciary and other managed accounts and as investment adviser or subadviser
to other investment companies. Further, the Adviser understands, and has advised
the Trust's Board of Trustees that the Subadviser and its affiliates may give
advice and take action for its accounts, including investment companies, which
differs from advice given on the timing or nature of action taken for the
Portfolio. The Subadviser is not obligated to initiate transaction for a
Portfolio in any security which the Subadviser, its partners, affiliates or
employees may purchase or sell for their own accounts or other clients.
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<PAGE> 4
10. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of each of the Portfolios affected by the amendment and by the vote
of a majority of the Trustees of the Trust who are not interested persons of any
party to this Agreement cast in person at a meeting called for the purpose of
voting on such approval. The required shareholder approval 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 (a) any other Portfolio affected by the amendment or (b) all the
portfolios of the Trust.
11. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
12. HEADINGS
The headings in the sections of this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.
13. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
14. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void
in law or in equity, the Agreement shall be construed, insofar as is possible,
as if such portion had never been contained herein.
15. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the laws
of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
16. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust dated September 28, 1988, a copy
of which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of The Commonwealth of Massachusetts, provides
that the name "NASL Series Trust" refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of the Trust shall be held to any
personal liability, nor shall resort be had to their private property, for the
satisfaction of any obligation or claim, in connection with the affairs of the
Trust or any portfolio thereof, but only the assets belonging to the Trust, or
to the particular portfolio with which the obligee or claimant dealt, shall be
liable.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
[SEAL] Manufacturers Securities Services, LLC
by: _________________
by: __________________
[SEAL] Rosenberg Institutional Equity Management
by: _________________
5
<PAGE> 6
APPENDIX A
The Subadviser shall serve as investment subadviser for the following
portfolio of the Trust. The Adviser will pay the Subadviser, as full
compensation for all services provided under this Agreement, the fee computed
separately for each such Portfolio at an annual rate as follows (the "Subadviser
Percentage Fee"):
Small Company Value Portfolio: .600% of the first $50,000,000, .575%
between $50,000,000 and $200,000,000, .525% between $200,000,000 and
$500,000,000 and .475% on the excess over $500,000,000 of the current
value of the net assets of the Portfolio.
The Subadviser Percentage Fee for each Portfolio shall be accrued for
each calendar day and the sum of the daily fee accruals shall be paid monthly to
the Subadviser. The daily fee accruals will be computed by multiplying the
fraction of one over the number of calendar days in the year by the applicable
annual rate described in the preceding paragraph, and multiplying this product
by the net assets of the Portfolio as determined in accordance with the Trust's
prospectus and statement of additional information as of the close of business
on the previous business day on which the Trust was open for business.
If this Agreement becomes effective or terminates before the end of any
month, the fee (if any) for the period from the effective date to the end of
such month or from the beginning of such month to the date of termination, as
the case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6
<PAGE> 1
CUSTODIAN CONTRACT
Between
NASL SERIES FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Custodian and Property to be Held By It..................4
2. Duties of the Custodian with Respect to Property of the Fund
Held by the Custodian in the United States.............................5
2.1 Holding Securities..........................................5
2.2 Delivery of Securities......................................6
2.3 Registration of Securities.................................10
2.4 Bank Accounts..............................................11
2.5 Availability of Federal Funds..............................12
2.6 Collection of Income.......................................12
2.7 Payment of Fund Monies.....................................13
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased.......................................15
2.9 Appointment of Agents......................................15
2.10 Deposit of Fund Assets in Securities System................16
2.10A Fund Assets Held in the Custodian's Direct Paper System...............18
2.11 Segregated Account.........................................20
2.12 Ownership Certificates for Tax Purposes....................21
2.13 Proxies....................................................21
2.14 Communications Relating to Portfolio Securities............21
3. Duties of the Custodian with Respect to Property of the Fund
Held Outside of the United States.....................................22
3.1 Appointment of Foreign Sub-Custodians......................22
3.2 Assets to be Held..........................................23
3.3 Foreign Securities Depositories............................23
3.4 Segregation of Securities..................................23
3.5 Agreements with Foreign Banking Institutions...............24
3.6 Access of Independent Accountants of the Fund..............24
2
<PAGE> 3
3.7 Reports by Custodian.......................................25
3.8 Transactions in Foreign Custody Account....................25
3.9 Liability of Foreign Sub-Custodians........................26
3.10 Liability of Custodian.....................................26
3.11 Reimbursement for Advances.................................27
3.12 Monitoring Responsibilities................................28
3.13 Branches of U.S. Banks.....................................28
4. Payments for Sales or Repurchase or Redemptions of Shares
of the Fund...........................................................29
5. Proper Instructions...................................................29
6. Actions Permitted Without Express Authority...........................30
7. Evidence of Authority.................................................31
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income.....................31
8.1 Employment of Custodian as Bookkeeping Agent,
Transfer Agent and Dividend Disbursing Agent...............31
8.2 Share Accounts.............................................32
8.3 Confirmation of Share Transactions.........................33
8.4 Notice of Distribution and Reinvestment....................33
8.5 Tax Reporting..............................................34
9. Records ..............................................................34
10. Opinion of Fund's Independent Public Accountants......................34
11. Reports to Fund by Independent Public Accountants.....................35
12. Compensation of Custodian.............................................35
13. Responsibility of Custodian...........................................35
14. Effective Period, Termination and Amendment...........................37
15. Successor Custodian...................................................39
16. Interpretive and Additional Provisions................................40
17. Additional Funds......................................................41
18. Massachusetts Law to Apply............................................41
3
<PAGE> 4
CUSTODIAN CONTRACT
------------------
This Contract between NASL Series Fund, Inc., a corporation organized and
existing under the laws of Maryland, having its principal place of business at
675 Atlantic Avenue, Boston, Massachusetts 02111 hereinafter called the "Fund",
and State Street Bank and Trust Company, a Massachusetts trust company, having
its principal place of business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in six series, the
Equity, Bond, Money Market, Global Equity, Global Government Guaranteed Bond and
Convertible Securities Portfolios (such series together with all other series
subsequently established by the Fund and made subject to this Contract in
accordance with paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and
4
<PAGE> 5
securities it desires to be held outside the United States ("foreign
securities"). The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolio(s), and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of the Fund
representing interests in the Portfolio(s), ("Shares") as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of a
Portfolio held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors of the Fund
("Board") on behalf of the applicable Portfolio(s), and provided that the
Custodian shall have no more or less responsibility or liability to the Fund on
account of any actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian. The Custodian may employ as
sub-custodian for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions and foreign securities
depositories designated in Schedule A hereto but only in accordance with the
provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held by the
------------------------------------------------------------------------
Custodian in the United States
- ------------------------------
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United
5
<PAGE> 6
States including all domestic securities owned by such Portfolio, other
than (a) securities which are maintained pursuant to Section 2.10 in a
clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury, collectively
referred to herein as "Securities System" and (b) commercial paper of an
issuer for which State Street Bank and Trust Company acts as issuing and
paying agent ("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian pursuant to Section 2.10A.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Portfolio;
3) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.10 hereof;
6
<PAGE> 7
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.9 or into the
name or nominee name of any sub-custodian appointed
pursuant to Article l; or for exchange for a different
number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; PROVIDED that, in any such case, the new securities
are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
7
<PAGE> 8
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities
made by the Portfolio, BUT ONLY against receipt of adequate
collateral as agreed upon from time to time by the
Custodian and the Fund on behalf of the Portfolio, which
may be in the form of cash or obligations issued by the
United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
8
<PAGE> 9
11) For delivery as security in connection with any borrowings
by the Fund on behalf of the Portfolio requiring a pledge
of assets by the Fund on behalf of the Portfolio, BUT ONLY
against receipt of accounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection
with transactions by the Portfolio of the Fund;
9
<PAGE> 10
14) Upon receipt of instructions from the Fund for delivery to
the holders of shares in connection with distributions in
kind, as may be described from time to time in the
currently effective prospectus and statement of additional
information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon
receipt of, in addition to Proper Instructions from the
Fund on behalf of the applicable Portfolio, a certified
copy of a resolution of the Board or of the Executive
Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, specifying the
securities of the Portfolio to be delivered, setting forth
the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed
10
<PAGE> 11
pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Contract
shall be in "street name" or other good delivery form.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from
or for the account of the Portfolio, other than cash maintained by the
Portfolio in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; PROVIDED, however, that every such bank or trust company shall
be qualified to act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of each
applicable Portfolio be approved by vote of a majority of the Board of
the Fund. Such funds shall be deposited by the Custodian in its capacity
as Custodian and shall be withdrawable by the Custodian only in that
capacity.
11
<PAGE> 12
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf of
a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of such
Portfolio which are deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. The Custodian shall collect on a timely basis all
income and other payments with respect to registered domestic securities
held hereunder to which each Portfolio shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to bearer
domestic securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and shall
credit such income, as collected, to such Portfolio's custodian account.
Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items
requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. The risk of collection of
income due each Portfolio on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the Fund. The
Custodian wall have no duty or responsibility in connection therewith,
other than to arrange for the timely deliver to the Custodian of the
income to which the Portfolio is properly entitled.
12
<PAGE> 13
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic or foreign securities,
options on securities or securities indices or foreign
currencies, futures contracts on financial instruments or
securities indices or foreign currencies or options on such
futures contracts and forward currency contracts for the
account of the Portfolio but only (a) against the delivery
of such securities or evidence of title to such options or
contracts to the Custodian (or any bank, banking firm or
trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of
1940, as amended, to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in the name of a
nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.10
hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth
in Section 2.10A; (d) in the case of repurchase agreements
entered into between the Fund on
13
<PAGE> 14
behalf of the Portfolio and the Custodian, or another bank,
or a broker-dealer which is a member of NASD, (i) against
delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the
Portfolio of securities owned by the Custodian along with
written evidence of the agreement by the Custodian to
repurchase such securities from the Portfolio;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section
2.2 hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following
payments for the account of the Portfolio: interest, taxes,
management, accounting, transfer agent and legal fees, and
operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect
of securities sold short;
14
<PAGE> 15
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of
the Portfolio, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee of the Fund
signed by an officer of the Fund and certified by its
Secretary or an Assistant Secretary, specifying the amount
of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom
such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In
any and every case where payment for purchase of domestic securities for
the account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance or unless specifically authorized by this contract to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; PROVIDED, however, that the appointment
15
<PAGE> 16
of any agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "Securities Systems" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall
not include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the Securities
Systems that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer
16
<PAGE> 17
for the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i) receipt
of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Portfolio. Copies of
all advices from the Securities System of transfers of securities
for the account of the Portfolio shall identify the Portfolio, be
maintained for the Portfolio by the Custodian and be provided to
the Fund. The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account of
the Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or
17
<PAGE> 18
damage to the Portfolio resulting from use of the Securities
Systems by reason of any negligence, malfeasance or misconduct of
the Custodian or any of its agents or of any of its or their
employee or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the
Securities Systems; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any other
person which the Custodian may have as a consequence of any such
loss or damage if and to the extent that the Portfolio has not
been made whole for any such loss or damage.
2.10A FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the procedures outlined in the
Securities and Exchange Commission's response dated July 8, 1985 to the
Custodian's request for a "no-action" letter and the following
provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which
shall not include any assets
18
<PAGE> 19
of the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from account of the Portfolio,
in the form of a written advice or notice, of Direct Paper on the
next business day following such transfer and shall furnish to the
Fund on behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transaction in the Securities System for the
account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonable request from time to time.
19
<PAGE> 20
2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf
of each such Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio,
the Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a
20
<PAGE> 21
resolution of the Board or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfer of securities.
2.13 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio or such other persons as may be
designated by the Board such proxies, all proxy soliciting materials and
all notices relating to such securities.
2.14 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. The Custodian shall
transmit promptly to the Fund for each Portfolio all written information
(including, without limitation, pendency of calls and maturities of
domestic securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund on behalf
of the Portfolio and the maturity of futures contracts purchased or sold
by the Portfolio) received by the Custodian from issuers of the
securities being held for the Portfolio. With respect to tender or
exchange offers,
21
<PAGE> 22
the Custodian shall transmit promptly to the Portfolio or such other
persons as may be designated by the Board all written information
received by the Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents) making the tender
or exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior
to the date on which the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside
-------------------------------------------------------------------------
of the United States
- --------------------
3.1 Appointment of Foreign Sub-Custodians
-------------------------------------
The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Portfolio's securities and other assets maintained
outside the United States the foreign banking institutions and foreign
securities depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a certified resolution of the
Fund's Board, the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as foreign
sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct
the Custodian to cease the employment of any one or more such foreign
sub-custodians for maintaining custody of the Portfolio's assets.
22
<PAGE> 23
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(l) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalent in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions.
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Portfolios shall
be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.5 hereof.
3.4 Segregation of Securities
-------------------------
The Custodian shall identify on its books as belonging to each applicable
Portfolio of the Fund, the foreign securities of such Portfolios held by
each foreign sub-custodian. Each agreement pursuant to which the
Custodian employs a foreign banking institution shall require that such
institution establish a custody account for the Custodian on behalf of
the Fund for each applicable Portfolio of the Fund and physically
segregate in each account, securities and other assets of that Portfolio,
and, in the event that such institution deposits the securities of one or
more of the Portfolios in a foreign securities depository, that it shall
identify on its
23
<PAGE> 24
books as belonging to the Custodian, as agent for each applicable
Portfolio, the securities so deposited.
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall be substantially in the form set forth
in Exhibit 1 hereto and shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or
its creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for customer or administration; (c) adequate records
will be maintained identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian; and (e)
assets of the Portfolios held by the foreign sub-custodian will be
subject only to the instruction of the Custodian or its agents.
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian, or
if requested by the Fund to be provided with confirmation of the contents
of such books and records, insofar as
24
<PAGE> 25
such books and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities
and other assets of the Portfolio(s) held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of the Portfolio(s) securities and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian on
behalf of each applicable Portfolio indicating, as to securities acquired
for a Portfolio, the identity of the entity having physical possession of
such securities.
3.8 Transactions in Foreign Custody Account.
---------------------------------------
(a) Except as otherwise provided in paragraph (b) of this Section 3.8,
the provision of Sections 2.2 and 2.7 of this Contract shall apply,
MUTATIS MUTANDI to the foreign securities of the Fund held outside the
United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
the customer established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities
to the purchaser thereof or to a dealer therefor (or an agent for such
purchaser or
25
<PAGE> 26
dealer) against a receipt with the expectation of receiving later payment
for such securities from such purchaser or dealer.
(c) Securities maintained in the customer of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent as
set forth in Section 2.3 of this Contract, and the Fund agrees to hold
any such nominee harmless from any liability as a holder of record of
such securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians in paragraph 1 of this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.13 hereof,
26
<PAGE> 27
the Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any other
circumstance where the Custodian and its agent exercised reasonable care.
Notwithstanding the foregoing provisions of this paragraph 3.10, in
delegating custody duties to State Street London Ltd., the Custodian
shall not be relieved of any responsibility to the Fund for any loss due
to such delegation, except such loss as may result from (a) political
risk (including, but not limited to, exchange control restrictions,
confiscation, expropriation, nationalization, insurrection, civil strife
or armed hostilities) or (b) other risk of loss (excluding a bankruptcy
or insolvency of State Street London Ltd. not caused by political risk)
for which neither the Custodian nor State Street London Ltd. would be
liable (including, but not limited to, losses due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care).
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to advance
cash or securities for any purpose for the benefit of a Portfolio
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio shall be security
therefor and should the
27
<PAGE> 28
Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolios
assets to the extent necessary to obtain reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund of any material change in circumstances
surrounding the foreign custody arrangements or any loss of the assets of
the Fund or, in the case of any foreign sub-custodian not the subject of
an exemptive order from the Securities and Exchange Commission, there
appears to be a substantial likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in each
case computed in accordance with generally accepted U.S. accounting
principles). The Custodian shall supply the Fund on a continuous basis
with all information readily available to it which is relevant to the
Fund's compliance with Rule 17f-5 under the Investment Company Act of
1940.
3.13 Branches of U.S. Banks.
----------------------
(a) Except as otherwise set forth in this Contract, the provisions hereof
shall not apply where the custody of the Portfolios assets are maintained
in a foreign branch of a banking institution which is a "bank" as defined
by Section 2(a)(5) of the Investment Company Act of 1940 meeting the
qualification set forth in Section
28
<PAGE> 29
26(a) of said Act. The appointment of any such branch as a sub-custodian
shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund
with the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND.
The Custodian shall receive from the holders of Shares and deposit into the
account of the appropriate Portfolio such payments as are received for Shares of
that Portfolio issued or sold from time to time by the Fund. The Custodian will
provide timely notification to the Fund on behalf of each such Portfolio of any
receipt by it of payments for Shares of such Portfolio. From such funds as may
be available for the purpose but subject to the limitations of any applicable
votes of the Board, of the Fund, the Custodian shall, upon receipt of
instructions from the Fund, make funds available for payment to holders of
Shares who have delivered to the Fund a request for redemption or repurchase of
their Shares. In connection with the redemption or repurchase of Shares of a
Portfolio, the Custodian is authorized upon receipt of instructions from holders
of Shares to wire funds to or through a commercial bank designated by the
redeeming shareholders.
5. PROPER INSTRUCTIONS. Proper Instructions as used throughout this Contract
means a writing signed or initialed by one or more person or persons as the
Board shall have from time to time authorized. Each such writing shall set forth
the specific transaction or type of transaction involved, including a specific
statement of the purpose for which such
29
<PAGE> 30
action is requested. Oral instructions will be considered Proper Instructions if
the Custodian reasonably believes them to have been given by a person authorized
to give such instructions with respect to the transaction involved. The Fund
shall cause all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of the Fund accompanied by a detailed description of procedures
approved by the Board, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Board and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.11.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in its
discretion, without express authority from the Fund on behalf of each applicable
Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
PROVIDED that all such payments shall be accounted for to the Fund on behalf of
the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
30
<PAGE> 31
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Portfolio except as otherwise directed
by the Board of the Fund.
7. EVIDENCE OF AUTHORITY. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other instrument or
paper reasonably believed by it to be genuine and to have been properly executed
by or on behalf of the Fund. The Custodian may receive and accept a certified
copy of a vote of the Board of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board as described in such vote, and such
vote may be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation
------------------------------------------------------------------------
of Net Asset Value and Net Income.
- ---------------------------------
8.1 EMPLOYMENT OF CUSTODIAN AS BOOKKEEPING AGENT, TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT. The Fund hereby employs the Custodian as Bookkeeping
Agent, Transfer Agent and Dividend Disbursing Agent for each Portfolio.
The Custodian shall keep the books of account and records of each
Portfolio. The Custodian shall compute the net asset value per share of
the outstanding shares of each Portfolio. In computing the value of
securities held in a Portfolio the Custodian shall use the State Street
Bank automated pricing system. The Custodian shall also calculate daily
the net income and realized gains of the Portfolio as described in the
Fund's currently effective prospectus related to such
31
<PAGE> 32
Portfolio and shall advise the Fund daily of the total amounts of such
net income and realized gains and, shall advise the Fund and the holders
of Shares periodically of the division of such net income and realized
gains among its various components. The calculations of the net asset
value per share and the daily net income and realized gains of each
Portfolio shall be made at the time or times described from time to time
in the Fund's currently effective prospectus related to such Portfolio
and the Custodian shall use its best efforts to advise the Fund of such
calculations on a daily basis by no later than 5:30 p.m. eastern time on
the day for which such calculations are made. The Custodian agrees to
provide, from the effective date of this Contract forward, the Fund and
the holders of Shares with copies of reports and other information
necessary for the preparation of tax returns, audited financial
statements, Form N-SAR and any other reports or returns that the Fund or
its holders of Shares files with any state or federal authority from time
to time.
8.2 SHARE ACCOUNTS. For each holder of Shares of any Portfolio, the Custodian
shall maintain one or more Share accounts as requested by such holder of
Shares, provided the Fund gives the Custodian the name and address of the
holder of Shares, showing the following information for each such
account:
1) name and address;
2) number of Shares held; and
32
<PAGE> 33
3) historical information, from the effective date of this
Contract forward, including dividends paid and date and
price of all Share transactions.
8.3 CONFIRMATION OF SHARE TRANSACTIONS. The Custodian shall provide the Fund
written confirmation of all Share transactions affecting a Share account,
including payments, redemptions and reinvestments by initialing the Share
transaction reports provided by the Fund. The written confirmation for
each Share transaction shall include the number of Shares purchased,
redeemed or reinvested and, the net asset value per Share at the time of
the transaction. The total Shares outstanding in the Share account
immediately following the Share transaction will be provided to the Fund
on a daily basis. The Custodian shall provide such confirmation.
8.4 NOTICE OF DISTRIBUTION AND REINVESTMENT. The Fund shall promptly notify
the Custodian of the declaration of any dividend or distribution
(collectively, "distributions") with respect to each Portfolio. The
Custodian shall distribute and/or reinvest such distributions in
accordance with instructions received from the Fund and the terms of the
Fund's most recent prospectus. Upon reinvestment of such distributions,
the Bank shall credit the Share accounts of the holders of Shares with
the numbers of Shares as a result of such reinvestment and shall promptly
provide a confirmation of said reinvestment to the Fund. In no case will
the Custodian be liable to the Fund for the failure to perform under
paragraph 8.2, 8.3 or 8.4 of this contract.
33
<PAGE> 34
8.5 TAX REPORTING. The Custodian shall prepare, for the Fund information
returns required to be filed by the Fund under Federal income tax laws,
rules and regulations for reporting dividends and distributions paid, but
responsibility for and liability for filing such returns shall remain
with the Fund.
9. Records
-------
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder, applicable federal and state tax laws and any other
law or administrative rules or procedures which may be applicable to the Fund.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by each Portfolio
and held by the Custodian and shall, when requested to do so by the Fund,
include certificate numbers in such tabulations. The Custodian shall also
provide the Fund with access to the Fund's books and records through the
"Horizon Plus" system or a similar system.
10. Opinion of Fund's Independent Public Accountants
------------------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
it activities hereunder in
34
<PAGE> 35
connection with the preparation of the Fund's Form N-lA, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
11. Reports To Fund By Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, options on securities or securities
indices or foreign currencies, futures contracts on financial instruments or
securities indices or foreign currencies, options on such futures contracts and
forward currency contracts, including securities deposited and/or maintained in
a Securities System, relating to the services provided by the Custodian under
this Contract; such reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to the compensation for its services and
expenses as Custodian as set forth in Schedules B and C which are herein
incorporated and made apart of the Contract, or as shall be agreed upon from
time to time between the Fund on behalf of each applicable Portfolio and the
Custodian.
13. RESPONSIBILITY OF CUSTODIAN. So long as and to the extent that it is in
the exercise of reasonable care, the Custodian shall not be responsible for the
title, validity or
35
<PAGE> 36
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence except as
hereinafter provided with respect to sub-custodian located in the United States
or foreign sub-custodian. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.10)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.11 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody or any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism.
36
<PAGE> 37
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian to advance cash or securities for any
purpose for the benefit of a Portfolio including the purchase or sale of foreign
exchange or of contracts for foreign exchange or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective on the later of the effective date
or post-effective amendment number under the Securities Act of 1933 and
amendment number 7 under the Investment Company Act of 1940 of the Fund's
registration statement and the date of its execution, shall continue in full
force and effect until terminated as hereinafter
37
<PAGE> 38
provided, may be amended at any time by mutual agreement of the parties hereto
and may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than sixty (60) days after the date of such delivery or mailing;
PROVIDED, however that the Custodian shall not with respect to a Portfolio act
under Section 2.10 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of the Fund has approved
the initial use of a particular Securities System by such Portfolio and the
receipt of an annual certificate of the Secretary or an Assistant Secretary that
the Board has reviewed the use by such Portfolio of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940, as
amended and that the Custodian shall not with respect to a Portfolio act under
Section 2.10A hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board has approved the initial use
of the Direct Paper System by such Portfolio and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board has
reviewed the use by such Portfolio of the Direct Paper System; PROVIDED FURTHER,
however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, and further
provided, that the Fund on behalf of one or more of the Portfolios may at any
time by action of its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the
38
<PAGE> 39
Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
-------------------
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of the Fund, the Custodian shall, upon
termination, deliver to such successor custodian at the office of the Custodian,
duly endorsed and in the form for transfer, all securities and other property of
each applicable Portfolio then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of each such Portfolio
held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of the
Fund, deliver at the office of the Custodian and transfer such securities, funds
and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board shall have been delivered to the Custodian
on or before the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the Investment Company Act of 1940, doing business in
Boston, Massachusetts, of its own selection,
39
<PAGE> 40
having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $25,000,000, all securities, funds and
other properties held by the Custodian on behalf of each applicable Portfolio
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of each applicable Portfolio
and to transfer to an account of such successor custodian all of the securities
of each such Portfolio held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretative or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable
40
<PAGE> 41
federal or state regulations. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Contract.
17. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to the Equity, Bond, Money Market, Global Equity, Global Government
Guaranteed Bond and Convertible Securities Portfolios with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provision thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 24th day of March, 1988.
ATTEST NASL SERIES FUND, INC.
RUTH ANN FLEMING By KENNETH CONRAD
- ------------------------- --------------------------------
Secretary Vice President & Treasurer
ATTEST STATE STREET BANK AND TRUST COMPANY
BARRY HOFFMAN By JOHN O. FLORENCE
- ------------------------- --------------------------------
Assistant Secretary Vice President
41
<PAGE> 42
Schedule A
----------
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of NASL Series Fund, Inc. for use
as sub-custodians for the Fund's securities and other assets:
42
<PAGE> 43
AMENDMENT TO CUSTODIAN CONTRACT
AMENDMENT made this 31st day of December, 1988, to the Custodian Contract dated
March 24, 1988 ("Contract") between NASL Series Fund, Inc., a Maryland
corporation (the "Fund"), and State Street Bank and Trust Company ("State
Street"). In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. CHANGE IN PARTY AND TERMS
a. On the effective date of this Amendment, NASL Series Trust will
succeed the Fund as a party under the Contract and, unless the context otherwise
requires, the following terms in the Contract will be changed as follows: (i)
"NASL Series Fund, Inc." will be changed to "NASL Series Trust"; (ii) "Maryland
corporation," with reference to the Fund, will be changed to "Massachusetts
business trust"; (iii) "Board of Directors" and "Directors," when referring to
the Fund, will be changed to "Trustees"; (iv) "Articles of Incorporation," with
reference to the Fund, will be changed to "Agreement and Declaration of Trust";
and (v) "capital stock" will be changed to "shares."
b. A paragraph in substantially the following form will be inserted as
the last section of the Contract:
Limitation of Liability
-----------------------
The Agreement and Declaration of Trust establishing the Trust,
dated September 28, 1988, a copy of which, together with all amendments thereto
(the "Declaration of Trust"), is on file in the office of the Secretary of The
Commonwealth of Massachusetts, provides that the name "NASL Series Trust" refers
to the Trustees under the Declaration of Trust collectively as Trustees, but not
as individuals or personally; and no Trustee, shareholder, officer, employee or
agent of the Trust shall be held to any personal liability, nor shall resort be
had to their private property, for the satisfaction any obligation or claim, in
connection with the affairs of the Trust or any Portfolio thereof, but only the
assets belonging to the Trust, or to the particular Series of Shares with
respect to which the obligation or claim arose, shall be liable.
2. CUSTODIAN CONTRACT
In all other respects the Contract is confirmed and remains in full force
and effect.
3. EFFECTIVE DATE
This Amendment shall become effective on the later of its execution or
the effective date of the post-effective amendment to the registration statement
of NASL Series Fund, Inc. under the Securities Act of 1933 and the Investment
Company Act whereby NASL Series Trust succeeds the Fund as the registrant.
43
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
STATE STREET BANK AND TRUST COMPANY
[SEAL] By: THOMAS E. SWEDLUND
---------------------------------
Title: Vice President
NASL SERIES FUND, INC.
[SEAL] By: KENNETH CONRAD
---------------------------------
Title: Vice President
44
<PAGE> 45
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and NASL Series Trust (formerly NASL Series Fund, Inc.) (the
"Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated March 24, 1988 as amended December 31, 1988 (the "Custodian Contract")
governing the terms and conditions under which the Custodian maintains custody
of the securities and other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions under which the Custodian maintains the Fund's securities and other
non-cash property in the custody of certain foreign sub-custodians in conformity
with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the
Custodian Contract, the Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, PROVIDED HOWEVER, that (i) the
records of the Custodian with respect to securities and other non-cash property
of the Fund which are maintained in such account shall identify by book-entry
those securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
2. Except as specifically superseded or modified herein, the terms
and provisions of the Custodian Contract shall continue to apply with full force
and effect.
IN WITNESS WHEREOF, each of the parties had caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative this 1st day of July, 1996.
NASL SERIES TRUST
By: RICH HIRTLE
---------------------------------
Title: Vice President & CFO
STATE STREET BANK AND TRUST COMPANY
By: MICHAEL E. HAGERTY
---------------------------------
Title: Vice President
45
<PAGE> 1
[ROPES & GRAY LETTERHEAD]
October 27, 1988
NASL Series Trust
695 Atlantic Avenue
Boston, Massachusetts 02111
Gentlemen:
We have acted as Massachusetts counsel to NASL Series Trust (the "Trust")
in connection with its organization as a Massachusetts business trust.
In connection with this opinion, we have examined:
(i) A copy of the Agreement and Declaration of Trust of the Trust
dated September 29, 1988 certified by the Secretary of State of
The Commonwealth of Massachusetts.
(ii) A certificate of the Secretary of State of The Commonwealth of
Massachusetts dated October 25, 1988 as to the Trust documents on
file, and certifying as to the authority of the Trust to exercise
in The Commonwealth of Massachusetts all of the powers recited in
the Agreement and Declaration of Trust, and to transact business
in said Commonwealth.
(iii) A copy of the Agreement and Declaration of Trust of the Trust
dated September 29, 1988 certified by the Clerk of the City of
Boston.
(iv) A certificate of the Clerk of the City of Boston dated October 25,
1988 as to the Trust documents on file.
(v) A copy of the Bylaws of the Trust certified by the Secretary of
the Trust.
<PAGE> 2
ROPES & GRAY
NASL Series Trust -2- October 27, 1988
(vi) A certificate of the Secretary of the Trust dated October 27,
1988, as to certain actions of the Trustees of the Trust, and
certifying, among other things, that the initial shareholder of
the Trust was, at the time of issuance of the initial share of
beneficial interest of the Trust to her, a resident of The
Commonwealth of Massachusetts, that the Agreement and Declaration
of Trust of the Trust was executed within The Commonwealth of
Massachusetts, that the initial meeting of the Trustees of the
Trust was held within The Commonwealth of Massachusetts, and that
the Trust has maintained an office within the Commonwealth of
Massachusetts since its organization.
(vii) Such other certificates, documents, and records as we have deemed
necessary for the purpose of this opinion.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents.
We have made such examination of Massachusetts Law as we have deemed
relevant for purposes of this opinion. We express no opinion as to the effect of
laws, rules, and regulations of any state or jurisdiction other than The
Commonwealth of Massachusetts. In giving this opinion, we are not passing on the
compliance by the Trust or by any person with applicable federal or state
securities laws, including without limitation Massachusetts "Blue Sky" laws, in
connection with the sale of shares of beneficial interest of the Trust.
Based on, and subject to, the foregoing, it is our opinion that the Trust
is, under the laws of The Commonwealth of Massachusetts, a duly established and
validly existing unincorporated voluntary association with transferable shares
(commonly known as a "Massachusetts business trust").
You have advised us that the Trust is about to file with the Securities
and Exchange Commission a post-effective amendment (the "Amendment") to the
registration statement of NASL Series Fund, Inc. under the Securities Act of
1933, as amended (the "1933 Act"), relating to the issuance of shares of
beneficial interest (the "Shares") of six series of Shares
<PAGE> 3
ROPES & GRAY
NASL Series Trust -3- October 27, 1988
of the Trust, namely, the Equity Trust, the Bond Trust, the Money Market Trust,
the Global Equity Trust, the Global Government Bond Trust, and the Convertible
Securities Trust. Based upon and subject to the foregoing and such advice, we
are of the opinion that the Trust is authorized to issue an unlimited number of
Shares of each such series, and that when the Shares are issued and sold for the
consideration described in the Amendment and equal to at least the par value
thereof, they will be validly issued, fully paid, and nonassessable by the
Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of a Massachusetts
business trust could, under certain circumstances, be held personally liable for
the obligations of the trust. However, the Agreement and Declaration of Trust of
the Trust disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each note, bond,
contract, instrument, certificate, and undertaking made or issued by the
Trustees or officers of the Trust. The Agreement and Declaration of Trust
provides for indemnification out of the property of the particular series of
Shares for all loss and expense of any shareholder of that series held
personally liable solely by reason of his being or having been a shareholder.
Thus, the risk of a shareholder's incurring financial loss on account of
shareholder liability is limited to circumstances in which that series of Shares
itself would be unable to meet its obligations.
We consent to the filing of this opinion as an exhibit to the Amendment.
Very truly yours,
/s/ Ropes & Gray
----------------------------
Ropes & Gray
<PAGE> 1
[NASL SERIES TRUST LETTERHEAD]
April 12, 1991
To whom it may concern:
This opinion is written in reference to the shares of beneficial interest, $.01
par value (the "Shares") of the Growth and Income Trust, Conservative Asset
Allocation Trust, Moderate Asset Allocation Trust and Aggressive Asset
Allocation Trust of NASL Series Trust, a Massachusetts business trust (the
"Trust"), to be offered and sold pursuant to a Registration Statement
(no. 2-94157) (the "Registration Statement") filed by the Trust pursuant to the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended. In accordance with Rule 24f-2 under Investment Company Act of 1940, as
amended, the Registration Statement relates to an indefinite amount of shares.
I, as Assistant Counsel to NASL Series Trust, have examined such records and
documents and reviewed such questions of law as I deemed necessary for purposes
of this opinion.
1. The Trust has been duly recorded under the laws of the
Commonwealth of Massachusetts and is a validly existing Massachusetts
business trust.
2. The 10,000 shares of presently issued and outstanding beneficial
shares of the Growth and Income Trust and outstanding shares of each of
the Conservative, Moderate and Aggressive Asset Allocation Trusts have
been duly authorized and legally issued and are fully paid and
non-assessable.
3. The Shares have been duly authorized and, when sold, issued and
paid for in the manner contemplated by the Registration Statement, will
be legally issued, fully paid and non-assessable.
I consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement.
Very truly yours,
/s/ Christina M. Perrino
- --------------------------------------
Christina M. Perrino, Esq.
<PAGE> 1
[NASL SERIES TRUST LETTERHEAD]
October 22, 1992
To Whom it may concern:
This opinion is written in reference to the shares of beneficial interest, $.01
par value (the "Shares") of the Growth Trust, Strategic Bond Trust and Pasadena
Growth Trust of NASL Series Trust, a Massachusetts business trust (the "Trust"),
to be offered and sold pursuant to a Registration Statement on Form N-1A
(registration no. 2-94157) (the "Registration Statement") filed by the Trust
pursuant to the Securities Act of 1933.
I have examined such records and documents and reviewed such questions of law as
I deemed necessary for purposes of this opinion.
1. The Trust has been duly recorded under the laws of the
Commonwealth of Massachusetts and is a validly existing Massachusetts
business trust.
2. The Shares have been duly authorized and, when sold, issued and
paid for in the manner contemplated by the Registration Statement, will
be legally issued, fully paid and non-assessable.
I consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement.
Very truly yours,
/s/ Christina M. Perrino
- -----------------------------------
Christina M. Perrino, Esq.
<PAGE> 1
[NASL SERIES TRUST LETTERHEAD]
October 19, 1994
To Whom it may concern:
This opinion is written in reference to the shares of beneficial interest, $.01
par value (the "Shares") of the International Growth and Income Trust of NASL
Series Trust, a Massachusetts business trust (the "Trust"), to be offered and
sold pursuant to a Registration Statement on Form N-1A (registration no.
2-94157) (the "Registration Statement") filed by the Trust pursuant to the
Securities Act of 1933.
I have examined such records and documents and reviewed such questions of law as
I deemed necessary for purposes of this opinion.
1. The Trust has been duly recorded under the laws of the
Commonwealth of Massachusetts and is a validly existing Massachusetts
business trust.
2. The Shares have been duly authorized and, when sold, issued and
paid for in the manner contemplated by the Registration Statement, will
be legally issued, fully paid and non-assessable.
I consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement.
Very truly yours,
/s/ Betsy Anne Seel
- ------------------------------------
Betsy Anne Seel, Esq.
<PAGE> 1
Jones & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007-0805
September 15, 1997
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. 38 under the Securities Act of 1933 and
Amendment No. 39 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,
Jones & Blouch L.L.P.
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the inclusion in and incorporation by reference into this
Post-Effective Amendment No. 38 under the Securities Act of 1933 and Amendment
No. 39 under the Investment Company Act of 1940 to the Registration Statement on
Form N-1A (File No. 2-94157/811-4146) of our report dated February 21, 1997, on
our audits of the financial statements and financial highlights of NASL Series
Trust, which are included in the Registration Statement. We also consent to the
reference to our Firm as "Experts" under the captions "Financial Highlights" in
Part A and "Independent Accountants" in Part B of the Registration Statement.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 16, 1997
<PAGE> 1
[NASL SERIES TRUST LETTERHEAD]
POWER OF ATTORNEY
I, Richard C. Hirtle, Vice President and Treasurer of NASL Series Trust, do
hereby constitute and appoint William J. Atherton, James D. Gallagher, Richard
C. Hirtle, Brian L. Moore, John G. Vrysen, or any of them, to sign Registration
Statements to be filed with the Securities and Exchange Commission and to do any
and all acts and things and to execute any and all instruments for me and in my
name in my capacity as Vice President and Treasurer of NASL Series Trust which
said persons may deem necessary or advisable to enable NASL Series Trust to
comply with the Securities Act of 1933, as amended, and any rules, regulations,
and requirements of the Securities and Exchange Commission in connection with
such Registration Statements, including specifically, but without limitation,
power and authority to sign for me in my name and in my capacity as Vice
President and Treasurer of NASL Series Trust any and all amendments (including
post-effective amendments); and I do hereby ratify and confirm all that the said
persons, or any of them, shall do or cause to be done by virtue of this power of
attorney.
September 23, 1994 /s/ Richard C. Hirtle
- ------------------ ---------------------------------
Date Richard C. Hirtle
Vice President and Treasurer
<PAGE> 1
NASL SERIES TRUST
POWER OF ATTORNEY
The undersigned do hereby constitute and appoint John D. DesPrez III, James
D. Gallagher, Richard C. Hirtle, Brian L. Moore, John G. Vyrsen and registration
statements to be filed with the Securities and Exchange Commission under the
Securities Act of 1993, as amended (the "1993 Act") and/or the Investment
Company Act of 1940, as amended (the "1940 Act"), and to do any and all acts and
things and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorney, may deem necessary or advisable
to enable NASL Series Trust (the "Trust") to comply with the 1993 Act and the
1940 Act, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with such registration statement, including
specifically but without limitation, power and authority to sign for us or any
of us in our names and in the capacities indicate below, any and all amendments
(including post-effective amendments); and we do hereby ratify and confirm all
that the said attorneys, or any of them, shall do or cause to be done by virtue
of this power of attorney.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Don B. Allen Trustee September 27, 1996
- -------------------------- ------------------
Don B. Allen
/s/ Charles L. Bardelis Trustee September 27, 1996
- -------------------------- ------------------
Charles L. Bardelis
/s/ Samuel Hoar Trustee September 27, 1996
- -------------------------- ------------------
Samuel Hoar
/s/ Brian L. Moore Trustee and Chairman September 27, 1996
- -------------------------- ------------------
Brian L. Moore
/s/ Robert J. Myers Trustee September 27, 1996
- -------------------------- ------------------
Robert J. Myers
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 1
<NAME> EQUITY TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,243,012,349
<INVESTMENTS-AT-VALUE> 1,360,044,605
<RECEIVABLES> 7,335,065
<ASSETS-OTHER> 4,410
<OTHER-ITEMS-ASSETS> 21,552
<TOTAL-ASSETS> 1,367,405,632
<PAYABLE-FOR-SECURITIES> 21,788,073
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 156,169
<TOTAL-LIABILITIES> 21,944,242
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 972,183,451
<SHARES-COMMON-STOCK> 59,492,706
<SHARES-COMMON-PRIOR> 47,562,040
<ACCUMULATED-NII-CURRENT> 8,208,496
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 248,037,167
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 117,032,276
<NET-ASSETS> 1,345,461,390
<DIVIDEND-INCOME> 12,990,579
<INTEREST-INCOME> 4,615,767
<OTHER-INCOME> 0
<EXPENSES-NET> 9,368,176
<NET-INVESTMENT-INCOME> 8,238,170
<REALIZED-GAINS-CURRENT> 250,388,407
<APPREC-INCREASE-CURRENT> (48,494,409)
<NET-CHANGE-FROM-OPS> 210,132,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,695,040)
<DISTRIBUTIONS-OF-GAINS> (98,365,329)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,006,152
<NUMBER-OF-SHARES-REDEEMED> 9,259,609
<SHARES-REINVESTED> 5,184,123
<NET-CHANGE-IN-ASSETS> 356,661,185
<ACCUMULATED-NII-PRIOR> 4,695,040
<ACCUMULATED-GAINS-PRIOR> 95,984,414
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,774,975
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,368,176
<AVERAGE-NET-ASSETS> 1,166,800,038
<PER-SHARE-NAV-BEGIN> 20.79
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> 3.77
<PER-SHARE-DIVIDEND> (.09)
<PER-SHARE-DISTRIBUTIONS> (1.98)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.62
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 2
<NAME> INVESTMENT QUALITY BOND TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 149,532,673
<INVESTMENTS-AT-VALUE> 150,171,437
<RECEIVABLES> 4,713,881
<ASSETS-OTHER> 569
<OTHER-ITEMS-ASSETS> 40,975
<TOTAL-ASSETS> 154,926,862
<PAYABLE-FOR-SECURITIES> 1,942,135
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,895
<TOTAL-LIABILITIES> 1,966,030
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 145,526,237
<SHARES-COMMON-STOCK> 12,866,102
<SHARES-COMMON-PRIOR> 11,618,055
<ACCUMULATED-NII-CURRENT> 10,356,725
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,560,894)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 638,764
<NET-ASSETS> 152,960,832
<DIVIDEND-INCOME> 1,310
<INTEREST-INCOME> 11,364,547
<OTHER-INCOME> 0
<EXPENSES-NET> 1,074,474
<NET-INVESTMENT-INCOME> 10,291,383
<REALIZED-GAINS-CURRENT> 1,165,169
<APPREC-INCREASE-CURRENT> (7,470,195)
<NET-CHANGE-FROM-OPS> 3,986,357
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,478,262)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,547,279
<NUMBER-OF-SHARES-REDEEMED> 3,056,220
<SHARES-REINVESTED> 756,988
<NET-CHANGE-IN-ASSETS> 9,858,228
<ACCUMULATED-NII-PRIOR> 8,478,262
<ACCUMULATED-GAINS-PRIOR> (4,660,721)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 965,766
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,074,474
<AVERAGE-NET-ASSETS> 148,173,377
<PER-SHARE-NAV-BEGIN> 12.32
<PER-SHARE-NII> .77
<PER-SHARE-GAIN-APPREC> (.50)
<PER-SHARE-DIVIDEND> (.70)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.89
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 3
<NAME> MONEY MARKET TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 345,047,774
<INVESTMENTS-AT-VALUE> 345,047,774
<RECEIVABLES> 4,805,667
<ASSETS-OTHER> 4,238
<OTHER-ITEMS-ASSETS> 13,981,381
<TOTAL-ASSETS> 363,839,060
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 273,263
<TOTAL-LIABILITIES> 273,263
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 363,565,797
<SHARES-COMMON-STOCK> 36,356,580
<SHARES-COMMON-PRIOR> 25,811,696
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 363,565,797
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,386,509
<OTHER-INCOME> 0
<EXPENSES-NET> 1,740,835
<NET-INVESTMENT-INCOME> 15,645,674
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 15,645,674
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15,645,674)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53,588,220<F1>
<NUMBER-OF-SHARES-REDEEMED> 44,607,903
<SHARES-REINVESTED> 1,564,567
<NET-CHANGE-IN-ASSETS> 105,448,834
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,589,545
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,740,835
<AVERAGE-NET-ASSETS> 315,001,229
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .49
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.49)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>INCLUDES SHARES FROM MERGER.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 4
<NAME> GLOBAL EQUITY TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 655,436,596
<INVESTMENTS-AT-VALUE> 706,906,855
<RECEIVABLES> 2,283,784
<ASSETS-OTHER> 2,983
<OTHER-ITEMS-ASSETS> 54,769,056
<TOTAL-ASSETS> 763,962,678
<PAYABLE-FOR-SECURITIES> 36,839,308
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 280,969
<TOTAL-LIABILITIES> 37,120,277
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 603,800,513
<SHARES-COMMON-STOCK> 40,739,977
<SHARES-COMMON-PRIOR> 40,249,612
<ACCUMULATED-NII-CURRENT> 10,924,122
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 61,470,931
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 50,646,835
<NET-ASSETS> 726,842,401
<DIVIDEND-INCOME> 10,624,353
<INTEREST-INCOME> 1,733,522
<OTHER-INCOME> 0
<EXPENSES-NET> 6,998,201
<NET-INVESTMENT-INCOME> 5,359,674
<REALIZED-GAINS-CURRENT> 85,118,508
<APPREC-INCREASE-CURRENT> (9,857,976)
<NET-CHANGE-FROM-OPS> 80,620,206
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,270,400)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,742,922
<NUMBER-OF-SHARES-REDEEMED> (5,929,052)
<SHARES-REINVESTED> 676,495
<NET-CHANGE-IN-ASSETS> 78,659,763
<ACCUMULATED-NII-PRIOR> 11,144,253
<ACCUMULATED-GAINS-PRIOR> (17,623,479)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,234,116
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,998,201
<AVERAGE-NET-ASSETS> 690,787,019
<PER-SHARE-NAV-BEGIN> 16.10
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 1.89
<PER-SHARE-DIVIDEND> (.27)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.84
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 5
<NAME> GLOBAL GOVERNMENT BOND TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 231,105,215
<INVESTMENTS-AT-VALUE> 244,686,265
<RECEIVABLES> 5,028,495
<ASSETS-OTHER> 1,050
<OTHER-ITEMS-ASSETS> 37,375,780
<TOTAL-ASSETS> 287,091,590
<PAYABLE-FOR-SECURITIES> 37,135,097
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 163,183
<TOTAL-LIABILITIES> 37,298,280
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 215,848,352
<SHARES-COMMON-STOCK> 16,685,598
<SHARES-COMMON-PRIOR> 16,160,124
<ACCUMULATED-NII-CURRENT> 19,668,247
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 510,564
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,766,147
<NET-ASSETS> 249,793,310
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,546,599
<OTHER-INCOME> 0
<EXPENSES-NET> 2,159,847
<NET-INVESTMENT-INCOME> 15,386,752
<REALIZED-GAINS-CURRENT> 13,012,735
<APPREC-INCREASE-CURRENT> 1,537,319
<NET-CHANGE-FROM-OPS> 29,936,806
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21,062,640)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,067,512
<NUMBER-OF-SHARES-REDEEMED> 3,137,693
<SHARES-REINVESTED> 1,595,655
<NET-CHANGE-IN-ASSETS> 14,550,376
<ACCUMULATED-NII-PRIOR> 20,496,692
<ACCUMULATED-GAINS-PRIOR> (7,654,732)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,934,856
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,159,847
<AVERAGE-NET-ASSETS> 240,550,080
<PER-SHARE-NAV-BEGIN> 14.56
<PER-SHARE-NII> .93
<PER-SHARE-GAIN-APPREC> .79
<PER-SHARE-DIVIDEND> (1.31)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.97
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 6
<NAME> U.S. GOVERNMENT SECURITIES TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 256,406,794
<INVESTMENTS-AT-VALUE> 254,510,925
<RECEIVABLES> 8,249,960
<ASSETS-OTHER> 980
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 262,761,865
<PAYABLE-FOR-SECURITIES> 58,637,625
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 71,624
<TOTAL-LIABILITIES> 58,709,249
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 195,422,729
<SHARES-COMMON-STOCK> 15,316,916
<SHARES-COMMON-PRIOR> 15,880,625
<ACCUMULATED-NII-CURRENT> 13,081,027
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,555,271)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,895,869)
<NET-ASSETS> 204,052,616
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,215,834
<OTHER-INCOME> 0
<EXPENSES-NET> 1,536,181
<NET-INVESTMENT-INCOME> 13,679,653
<REALIZED-GAINS-CURRENT> (464,497)
<APPREC-INCREASE-CURRENT> (6,682,550)
<NET-CHANGE-FROM-OPS> 6,532,606
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,847,931)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,666,316
<NUMBER-OF-SHARES-REDEEMED> 5,249,702
<SHARES-REINVESTED> 1,019,677
<NET-CHANGE-IN-ASSETS> (12,735,803)
<ACCUMULATED-NII-PRIOR> 12,847,931
<ACCUMULATED-GAINS-PRIOR> (2,689,400)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,401,130
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,536,181
<AVERAGE-NET-ASSETS> 214,969,693
<PER-SHARE-NAV-BEGIN> 13.65
<PER-SHARE-NII> .83
<PER-SHARE-GAIN-APPREC> (.41)
<PER-SHARE-DIVIDEND> (.75)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.32
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 7
<NAME> CONSERVATIVE ASSET ALLOCATION TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 193,657,700
<INVESTMENTS-AT-VALUE> 205,027,420
<RECEIVABLES> 6,781,433
<ASSETS-OTHER> 782
<OTHER-ITEMS-ASSETS> 135,101
<TOTAL-ASSETS> 211,944,736
<PAYABLE-FOR-SECURITIES> 3,279,562
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 199,520
<TOTAL-LIABILITIES> 3,479,082
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 178,976,866
<SHARES-COMMON-STOCK> 17,907,959
<SHARES-COMMON-PRIOR> 19,363,198
<ACCUMULATED-NII-CURRENT> 10,062,867
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,074,045
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,351,876
<NET-ASSETS> 208,465,654
<DIVIDEND-INCOME> 1,041,926
<INTEREST-INCOME> 10,889,669
<OTHER-INCOME> 0
<EXPENSES-NET> 1,911,544
<NET-INVESTMENT-INCOME> 10,020,051
<REALIZED-GAINS-CURRENT> 8,211,314
<APPREC-INCREASE-CURRENT> (3,434,750)
<NET-CHANGE-FROM-OPS> 14,796,615
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,622,367)
<DISTRIBUTIONS-OF-GAINS> (3,004,794)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,172,502
<NUMBER-OF-SHARES-REDEEMED> 3,882,544
<SHARES-REINVESTED> 1,254,803
<NET-CHANGE-IN-ASSETS> (15,924,346)
<ACCUMULATED-NII-PRIOR> 10,622,367
<ACCUMULATED-GAINS-PRIOR> 2,923,461
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,643,494
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,911,544
<AVERAGE-NET-ASSETS> 218,533,784
<PER-SHARE-NAV-BEGIN> 11.59
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> .20
<PER-SHARE-DIVIDEND> (.56)
<PER-SHARE-DISTRIBUTIONS> (.16)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.64
<EXPENSE-RATIO> 0.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
NASL SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 8
<NAME> MODERATE ASSET ALLOCATION TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 558,745,839
<INVESTMENTS-AT-VALUE> 616,957,095
<RECEIVABLES> 22,355,958
<ASSETS-OTHER> 1,702
<OTHER-ITEMS-ASSETS> 565,805
<TOTAL-ASSETS> 639,880,560
<PAYABLE-FOR-SECURITIES> 14,866,947
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 192,565
<TOTAL-LIABILITIES> 15,059,512
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 505,783,983
<SHARES-COMMON-STOCK> 50,021,359
<SHARES-COMMON-PRIOR> 52,461,717
<ACCUMULATED-NII-CURRENT> 26,584,959
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 34,355,001
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 58,097,105
<NET-ASSETS> 624,821,048
<DIVIDEND-INCOME> 5,104,055
<INTEREST-INCOME> 26,651,369
<OTHER-INCOME> 0
<EXPENSES-NET> 5,312,580
<NET-INVESTMENT-INCOME> 26,442,844
<REALIZED-GAINS-CURRENT> 34,805,679
<APPREC-INCREASE-CURRENT> (1,414,262)
<NET-CHANGE-FROM-OPS> 59,834,261
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (26,460,562)
<DISTRIBUTIONS-OF-GAINS> (26,425,885)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 867,810
<NUMBER-OF-SHARES-REDEEMED> 7,919,019
<SHARES-REINVESTED> 4,610,851
<NET-CHANGE-IN-ASSETS> (25,315,089)
<ACCUMULATED-NII-PRIOR> 26,460,562
<ACCUMULATED-GAINS-PRIOR> 26,127,969
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,764,110
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,312,580
<AVERAGE-NET-ASSETS> 633,477,689
<PER-SHARE-NAV-BEGIN> 12.39
<PER-SHARE-NII> .54
<PER-SHARE-GAIN-APPREC> .60
<PER-SHARE-DIVIDEND> (.52)
<PER-SHARE-DISTRIBUTIONS> (.52)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.49
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
NASL SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 9
<NAME> AGGRESSIVE ASSET ALLOCATION TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 194,593,200
<INVESTMENTS-AT-VALUE> 224,446,829
<RECEIVABLES> 7,523,044
<ASSETS-OTHER> 710
<OTHER-ITEMS-ASSETS> 469,111
<TOTAL-ASSETS> 232,439,694
<PAYABLE-FOR-SECURITIES> 5,639,141
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101,315
<TOTAL-LIABILITIES> 5,740,456
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 174,419,832
<SHARES-COMMON-STOCK> 16,857,857
<SHARES-COMMON-PRIOR> 16,484,402
<ACCUMULATED-NII-CURRENT> 6,081,059
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16,384,235
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,814,112
<NET-ASSETS> 226,699,238
<DIVIDEND-INCOME> 2,759,751
<INTEREST-INCOME> 5,234,726
<OTHER-INCOME> 0
<EXPENSES-NET> 1,986,381
<NET-INVESTMENT-INCOME> 6,008,096
<REALIZED-GAINS-CURRENT> 16,576,329
<APPREC-INCREASE-CURRENT> 4,495,858
<NET-CHANGE-FROM-OPS> 27,080,283
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,427,633)
<DISTRIBUTIONS-OF-GAINS> (10,578,038)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,234,265
<NUMBER-OF-SHARES-REDEEMED> 2,173,826
<SHARES-REINVESTED> 1,313,016
<NET-CHANGE-IN-ASSETS> 14,942,286
<ACCUMULATED-NII-PRIOR> 5,427,633
<ACCUMULATED-GAINS-PRIOR> 10,450,155
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,656,217
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,986,381
<AVERAGE-NET-ASSETS> 220,213,857
<PER-SHARE-NAV-BEGIN> 12.85
<PER-SHARE-NII> .36
<PER-SHARE-GAIN-APPREC> 1.21
<PER-SHARE-DIVIDEND> (.33)
<PER-SHARE-DISTRIBUTIONS> (.64)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.45
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 10
<NAME> GROWTH AND INCOME TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 817,343,903
<INVESTMENTS-AT-VALUE> 1,036,553,791
<RECEIVABLES> 2,210,205
<ASSETS-OTHER> 5,701
<OTHER-ITEMS-ASSETS> 11,101
<TOTAL-ASSETS> 1,038,780,798
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,042,804
<TOTAL-LIABILITIES> 5,042,804
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 735,106,565
<SHARES-COMMON-STOCK> 53,329,350
<SHARES-COMMON-PRIOR> 40,893,098
<ACCUMULATED-NII-CURRENT> 13,165,084
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 66,257,481
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 219,208,864
<NET-ASSETS> 1,033,737,994
<DIVIDEND-INCOME> 18,406,498
<INTEREST-INCOME> 1,319,738
<OTHER-INCOME> 0
<EXPENSES-NET> 6,670,452
<NET-INVESTMENT-INCOME> 13,055,784
<REALIZED-GAINS-CURRENT> 66,366,781
<APPREC-INCREASE-CURRENT> 98,170,869
<NET-CHANGE-FROM-OPS> 177,593,434
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,667,389)
<DISTRIBUTIONS-OF-GAINS> (15,781,628)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,559,557
<NUMBER-OF-SHARES-REDEEMED> 1,792,954
<SHARES-REINVESTED> 1,669,649
<NET-CHANGE-IN-ASSETS> 364,350,750
<ACCUMULATED-NII-PRIOR> 11,667,389
<ACCUMULATED-GAINS-PRIOR> 15,781,628
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,298,799
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,670,452
<AVERAGE-NET-ASSETS> 837,671,452
<PER-SHARE-NAV-BEGIN> 16.37
<PER-SHARE-NII> .22
<PER-SHARE-GAIN-APPREC> 3.41
<PER-SHARE-DIVIDEND> (.26)
<PER-SHARE-DISTRIBUTIONS> (.36)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.38
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 11
<NAME> BLUE CHIP GROWTH TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 384,744,752
<INVESTMENTS-AT-VALUE> 425,283,868
<RECEIVABLES> 965,542
<ASSETS-OTHER> 1,215
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 426,250,625
<PAYABLE-FOR-SECURITIES> 3,538,300
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,497
<TOTAL-LIABILITIES> 3,679,797
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 304,979,440
<SHARES-COMMON-STOCK> 29,538,092
<SHARES-COMMON-PRIOR> 24,363,208
<ACCUMULATED-NII-CURRENT> 898,962
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 76,153,310
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 40,539,116
<NET-ASSETS> 422,570,828
<DIVIDEND-INCOME> 3,366,047
<INTEREST-INCOME> 901,537
<OTHER-INCOME> 0
<EXPENSES-NET> 3,368,622
<NET-INVESTMENT-INCOME> 898,962
<REALIZED-GAINS-CURRENT> 86,714,103
<APPREC-INCREASE-CURRENT> (9,894,420)
<NET-CHANGE-FROM-OPS> 77,718,645
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (908,877)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,553,145
<NUMBER-OF-SHARES-REDEEMED> 5,454,064
<SHARES-REINVESTED> 75,803
<NET-CHANGE-IN-ASSETS> 144,896,635
<ACCUMULATED-NII-PRIOR> 908,877
<ACCUMULATED-GAINS-PRIOR> (10,560,793)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,317,165
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,510,307
<AVERAGE-NET-ASSETS> 344,474,071
<PER-SHARE-NAV-BEGIN> 11.40
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 2.92
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.31
<EXPENSE-RATIO> 0.975
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 12
<NAME> EQUITY INCOME TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 569,934,346
<INVESTMENTS-AT-VALUE> 600,195,012
<RECEIVABLES> 1,902,453
<ASSETS-OTHER> 1,605
<OTHER-ITEMS-ASSETS> 196
<TOTAL-ASSETS> 602,099,266
<PAYABLE-FOR-SECURITIES> 2,494,989
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 118,656
<TOTAL-LIABILITIES> 2,613,645
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 480,269,543
<SHARES-COMMON-STOCK> 38,904,143
<SHARES-COMMON-PRIOR> 28,733,585
<ACCUMULATED-NII-CURRENT> 8,655,530
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80,300,067
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 30,260,481
<NET-ASSETS> 599,485,621
<DIVIDEND-INCOME> 10,528,486
<INTEREST-INCOME> 2,375,997
<OTHER-INCOME> 0
<EXPENSES-NET> 4,159,838
<NET-INVESTMENT-INCOME> 8,744,645
<REALIZED-GAINS-CURRENT> 80,302,134
<APPREC-INCREASE-CURRENT> 395,287
<NET-CHANGE-FROM-OPS> 89,442,066
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,009,152)
<DISTRIBUTIONS-OF-GAINS> (25,904,015)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,589,483
<NUMBER-OF-SHARES-REDEEMED> 2,705,402
<SHARES-REINVESTED> 2,286,477
<NET-CHANGE-IN-ASSETS> 202,659,065
<ACCUMULATED-NII-PRIOR> 5,009,152
<ACCUMULATED-GAINS-PRIOR> 25,890,743
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,939,929
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,159,838
<AVERAGE-NET-ASSETS> 491,145,530
<PER-SHARE-NAV-BEGIN> 13.81
<PER-SHARE-NII> .21
<PER-SHARE-GAIN-APPREC> 2.39
<PER-SHARE-DIVIDEND> (.16)
<PER-SHARE-DISTRIBUTIONS> (.84)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.41
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 13
<NAME> STRATEGIC BOND TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 241,761,555
<INVESTMENTS-AT-VALUE> 247,055,494
<RECEIVABLES> 4,161,454
<ASSETS-OTHER> 4,151
<OTHER-ITEMS-ASSETS> 86,279,249
<TOTAL-ASSETS> 337,500,348
<PAYABLE-FOR-SECURITIES> 115,514,618
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 708,249
<TOTAL-LIABILITIES> 116,222,867
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 200,131,952
<SHARES-COMMON-STOCK> 18,529,230
<SHARES-COMMON-PRIOR> 10,898,515
<ACCUMULATED-NII-CURRENT> 14,378,392
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,671,226
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,095,911
<NET-ASSETS> 221,277,481
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,141,123
<OTHER-INCOME> 0
<EXPENSES-NET> 1,442,744
<NET-INVESTMENT-INCOME> 13,698,379
<REALIZED-GAINS-CURRENT> 6,148,922
<APPREC-INCREASE-CURRENT> 3,135,027
<NET-CHANGE-FROM-OPS> 22,982,328
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,621,746)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,197,190
<NUMBER-OF-SHARES-REDEEMED> 2,569,473
<SHARES-REINVESTED> 1,002,998
<NET-CHANGE-IN-ASSETS> 98,573,305
<ACCUMULATED-NII-PRIOR> 10,644,655
<ACCUMULATED-GAINS-PRIOR> (3,633,638)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,298,996
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,442,744
<AVERAGE-NET-ASSETS> 167,154,422
<PER-SHARE-NAV-BEGIN> 11.26
<PER-SHARE-NII> .62
<PER-SHARE-GAIN-APPREC> .92
<PER-SHARE-DIVIDEND> (.86)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.94
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
NASL SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 14
<NAME> INTERNATIONAL GROWTH & INCOME TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 173,393,960
<INVESTMENTS-AT-VALUE> 181,526,435
<RECEIVABLES> 997,377
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 43,618,905
<TOTAL-ASSETS> 226,142,717
<PAYABLE-FOR-SECURITIES> 37,046,638
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 86,002
<TOTAL-LIABILITIES> 37,132,640
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169,092,052
<SHARES-COMMON-STOCK> 16,061,451
<SHARES-COMMON-PRIOR> 8,462,125
<ACCUMULATED-NII-CURRENT> 3,194,285
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,102,503
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,621,237
<NET-ASSETS> 189,010,077
<DIVIDEND-INCOME> 2,805,027
<INTEREST-INCOME> 1,275,443
<OTHER-INCOME> 0
<EXPENSES-NET> 1,548,836
<NET-INVESTMENT-INCOME> 2,531,634
<REALIZED-GAINS-CURRENT> 9,272,600
<APPREC-INCREASE-CURRENT> 5,867,646
<NET-CHANGE-FROM-OPS> 17,671,880
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (203,407)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,548,633
<NUMBER-OF-SHARES-REDEEMED> 3,968,176
<SHARES-REINVESTED> 18,869
<NET-CHANGE-IN-ASSETS> 100,372,043
<ACCUMULATED-NII-PRIOR> (70,205)
<ACCUMULATED-GAINS-PRIOR> (233,834)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,327,151
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,548,836
<AVERAGE-NET-ASSETS> 139,318,395
<PER-SHARE-NAV-BEGIN> 10.47
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 1.15
<PER-SHARE-DIVIDEND> (.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.77
<EXPENSE-RATIO> 1.11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
NASL SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 15
<NAME> SMALL/MID CAP TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-04-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 165,477,021
<INVESTMENTS-AT-VALUE> 176,050,649
<RECEIVABLES> 2,079,799
<ASSETS-OTHER> 298
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178,130,746
<PAYABLE-FOR-SECURITIES> 2,011,505
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57,676
<TOTAL-LIABILITIES> 2,069,181
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 172,439,777
<SHARES-COMMON-STOCK> 13,163,725
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,951,840)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,573,628
<NET-ASSETS> 176,061,565
<DIVIDEND-INCOME> 129,002
<INTEREST-INCOME> 686,465
<OTHER-INCOME> 0
<EXPENSES-NET> 830,186
<NET-INVESTMENT-INCOME> (14,719)
<REALIZED-GAINS-CURRENT> (6,951,840)
<APPREC-INCREASE-CURRENT> 10,573,628
<NET-CHANGE-FROM-OPS> 3,607,069
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,996,896
<NUMBER-OF-SHARES-REDEEMED> (833,171)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 176,061,565
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 756,997
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 830,186
<AVERAGE-NET-ASSETS> 91,189,366
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> .87
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.37
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
NASL SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 16
<NAME> INTERNATIONAL SMALL CAP TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-04-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 91,733,295
<INVESTMENTS-AT-VALUE> 96,912,575
<RECEIVABLES> 434,182
<ASSETS-OTHER> 192
<OTHER-ITEMS-ASSETS> 716,855
<TOTAL-ASSETS> 98,063,804
<PAYABLE-FOR-SECURITIES> 824,885
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,026
<TOTAL-LIABILITIES> 845,911
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 92,888,297
<SHARES-COMMON-STOCK> 7,148,328
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (4,890)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (845,359)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,179,845
<NET-ASSETS> 97,217,893
<DIVIDEND-INCOME> 369,899
<INTEREST-INCOME> 619,249
<OTHER-INCOME> 0
<EXPENSES-NET> 576,064
<NET-INVESTMENT-INCOME> 413,084
<REALIZED-GAINS-CURRENT> (906,827)
<APPREC-INCREASE-CURRENT> 5,179,845
<NET-CHANGE-FROM-OPS> 4,686,102
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (356,506)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,584,332
<NUMBER-OF-SHARES-REDEEMED> 462,218
<SHARES-REINVESTED> 26,214
<NET-CHANGE-IN-ASSETS> 97,217,893
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 492,152
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 576,064
<AVERAGE-NET-ASSETS> 53,896,019
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 1.09
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.60
<EXPENSE-RATIO> 1.29
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
NASL SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 17
<NAME> GROWTH TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-15-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 55,453,579
<INVESTMENTS-AT-VALUE> 57,748,239
<RECEIVABLES> 422,390
<ASSETS-OTHER> 22
<OTHER-ITEMS-ASSETS> 361
<TOTAL-ASSETS> 58,171,012
<PAYABLE-FOR-SECURITIES> 1,266,573
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 97,700
<TOTAL-LIABILITIES> 1,364,273
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55,304,065
<SHARES-COMMON-STOCK> 4,136,954
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,288
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (794,265)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,294,651
<NET-ASSETS> 56,806,739
<DIVIDEND-INCOME> 330,151
<INTEREST-INCOME> 173,599
<OTHER-INCOME> 0
<EXPENSES-NET> 142,107
<NET-INVESTMENT-INCOME> 361,643
<REALIZED-GAINS-CURRENT> (797,169)
<APPREC-INCREASE-CURRENT> 2,294,651
<NET-CHANGE-FROM-OPS> 1,859,125
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (356,451)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,351,868
<NUMBER-OF-SHARES-REDEEMED> 240,875
<SHARES-REINVESTED> 25,961
<NET-CHANGE-IN-ASSETS> 56,806,739
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 119,620
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 142,107
<AVERAGE-NET-ASSETS> 30,215,448
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> 1.23
<PER-SHARE-DIVIDEND> (.09)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.73
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
NASL SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 19
<NAME> QUANTITATIVE EQUITY TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 81,528,027
<INVESTMENTS-AT-VALUE> 91,420,298
<RECEIVABLES> 517,576
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 693
<TOTAL-ASSETS> 91,938,567
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,870
<TOTAL-LIABILITIES> 38,870
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82,061,055
<SHARES-COMMON-STOCK> 5,303,145
<SHARES-COMMON-PRIOR> 3,532,074
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (53,629)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,892,271
<NET-ASSETS> 91,899,697
<DIVIDEND-INCOME> 1,469,133
<INTEREST-INCOME> 301,285
<OTHER-INCOME> 0
<EXPENSES-NET> 380,315
<NET-INVESTMENT-INCOME> 1,390,103
<REALIZED-GAINS-CURRENT> 10,029,581
<APPREC-INCREASE-CURRENT> 1,171,645
<NET-CHANGE-FROM-OPS> 12,591,329
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,224,864)
<DISTRIBUTIONS-OF-GAINS> (11,633,229)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,409,487
<NUMBER-OF-SHARES-REDEEMED> 421,538
<SHARES-REINVESTED> 783,122
<NET-CHANGE-IN-ASSETS> 30,903,769
<ACCUMULATED-NII-PRIOR> 834,761
<ACCUMULATED-GAINS-PRIOR> 1,506,587
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 380,315
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 380,315
<AVERAGE-NET-ASSETS> 76,825,770
<PER-SHARE-NAV-BEGIN> 17.27
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> 2.83
<PER-SHARE-DIVIDEND> (.50)
<PER-SHARE-DISTRIBUTIONS> (2.53)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.33
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 21
<NAME> REAL ESTATE SECURITIES TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 64,200,658
<INVESTMENTS-AT-VALUE> 75,816,476
<RECEIVABLES> 429,817
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3,382
<TOTAL-ASSETS> 76,249,675
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,021
<TOTAL-LIABILITIES> 30,021
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64,603,836
<SHARES-COMMON-STOCK> 4,497,087
<SHARES-COMMON-PRIOR> 3,472,861
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,615,818
<NET-ASSETS> 76,219,654
<DIVIDEND-INCOME> 3,179,039
<INTEREST-INCOME> 182,702
<OTHER-INCOME> 0
<EXPENSES-NET> 292,384
<NET-INVESTMENT-INCOME> 3,069,357
<REALIZED-GAINS-CURRENT> 6,093,674
<APPREC-INCREASE-CURRENT> 10,015,576
<NET-CHANGE-FROM-OPS> 19,178,607
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,275,859)
<DISTRIBUTIONS-OF-GAINS> (7,099,908)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 764,798
<NUMBER-OF-SHARES-REDEEMED> 482,962
<SHARES-REINVESTED> 742,390
<NET-CHANGE-IN-ASSETS> 23,779,537
<ACCUMULATED-NII-PRIOR> 2,365,861
<ACCUMULATED-GAINS-PRIOR> 839,886
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 292,384
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 292,384
<AVERAGE-NET-ASSETS> 58,749,222
<PER-SHARE-NAV-BEGIN> 15.10
<PER-SHARE-NII> .74
<PER-SHARE-GAIN-APPREC> 4.31
<PER-SHARE-DIVIDEND> (1.39)
<PER-SHARE-DISTRIBUTIONS> (1.81)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.95
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 22
<NAME> CAPITAL GROWTH BOND TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 43,691,754
<INVESTMENTS-AT-VALUE> 44,355,727
<RECEIVABLES> 1,051,009
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 6,877
<TOTAL-ASSETS> 45,413,613
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20,184
<TOTAL-LIABILITIES> 20,184
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,693,113
<SHARES-COMMON-STOCK> 4,165,078
<SHARES-COMMON-PRIOR> 3,779,382
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (963,657)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 663,973
<NET-ASSETS> 45,393,429
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,851,447
<OTHER-INCOME> 0
<EXPENSES-NET> 215,033
<NET-INVESTMENT-INCOME> 2,636,414
<REALIZED-GAINS-CURRENT> (211,323)
<APPREC-INCREASE-CURRENT> (1,348,717)
<NET-CHANGE-FROM-OPS> 1,076,374
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,638,011)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,073,078
<NUMBER-OF-SHARES-REDEEMED> 929,398
<SHARES-REINVESTED> 242,016
<NET-CHANGE-IN-ASSETS> 2,699,643
<ACCUMULATED-NII-PRIOR> 1,597
<ACCUMULATED-GAINS-PRIOR> (1,060,038)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 215,033
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 215,033
<AVERAGE-NET-ASSETS> 43,011,377
<PER-SHARE-NAV-BEGIN> 11.30
<PER-SHARE-NII> .68
<PER-SHARE-GAIN-APPREC> (.40)
<PER-SHARE-DIVIDEND> (.68)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.90
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
NASL SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 23
<NAME> PACIFIC RIM EMERGING MARKETS TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 20,905,310
<INVESTMENTS-AT-VALUE> 22,170,812
<RECEIVABLES> 1,146,300
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23,317,112
<PAYABLE-FOR-SECURITIES> 44,093
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,815
<TOTAL-LIABILITIES> 75,908
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,981,583
<SHARES-COMMON-STOCK> 2,132,377
<SHARES-COMMON-PRIOR> 1,260,885
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,259,621
<NET-ASSETS> 23,241,204
<DIVIDEND-INCOME> 323,754
<INTEREST-INCOME> 111,368
<OTHER-INCOME> 0
<EXPENSES-NET> 284,598
<NET-INVESTMENT-INCOME> 150,524
<REALIZED-GAINS-CURRENT> 768,081
<APPREC-INCREASE-CURRENT> 634,568
<NET-CHANGE-FROM-OPS> 1,553,173
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 171,172
<DISTRIBUTIONS-OF-GAINS> 787,434
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 987,628
<NUMBER-OF-SHARES-REDEEMED> 204,067
<SHARES-REINVESTED> 87,931
<NET-CHANGE-IN-ASSETS> 10,184,105
<ACCUMULATED-NII-PRIOR> 397
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 161,272
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 284,598
<AVERAGE-NET-ASSETS> 19,260,678
<PER-SHARE-NAV-BEGIN> 10.36
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> .94
<PER-SHARE-DIVIDEND> (.08)
<PER-SHARE-DISTRIBUTIONS> (.39)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.90
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NASL
SERIES TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 25
<NAME> EQUITY INDEX TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-14-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 7,817,531
<INVESTMENTS-AT-VALUE> 7,961,600
<RECEIVABLES> 24,355
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,472
<TOTAL-ASSETS> 7,988,427
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 170,896
<TOTAL-LIABILITIES> 170,896
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,794,785
<SHARES-COMMON-STOCK> 731,587
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (266,874)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 289,620
<NET-ASSETS> 7,817,531
<DIVIDEND-INCOME> 3,323
<INTEREST-INCOME> 140,302
<OTHER-INCOME> 0
<EXPENSES-NET> 11,227
<NET-INVESTMENT-INCOME> 132,398
<REALIZED-GAINS-CURRENT> 143,672
<APPREC-INCREASE-CURRENT> 289,620
<NET-CHANGE-FROM-OPS> 565,690
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (132,206)
<DISTRIBUTIONS-OF-GAINS> (410,738)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,006,398
<NUMBER-OF-SHARES-REDEEMED> 325,601
<SHARES-REINVESTED> 50,790
<NET-CHANGE-IN-ASSETS> 7,817,531
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,227
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,227
<AVERAGE-NET-ASSETS> 3,177,879
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> 1.29
<PER-SHARE-DIVIDEND> (.19)
<PER-SHARE-DISTRIBUTIONS> (.60)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.69
<EXPENSE-RATIO> 0.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 1
<NAME> EQUITY TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,244,012,923
<INVESTMENTS-AT-VALUE> 1,404,500,724
<RECEIVABLES> 10,075,122
<ASSETS-OTHER> 9,394
<OTHER-ITEMS-ASSETS> 31,577
<TOTAL-ASSETS> 1,414,616,817
<PAYABLE-FOR-SECURITIES> 5,710,807
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 118,736
<TOTAL-LIABILITIES> 5,829,543
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,162,230,333
<SHARES-COMMON-STOCK> 70,821,030
<SHARES-COMMON-PRIOR> 59,492,706
<ACCUMULATED-NII-CURRENT> 3,032,525
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 83,036,575
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 160,487,841
<NET-ASSETS> 1,408,787,274
<DIVIDEND-INCOME> 6,603,545
<INTEREST-INCOME> 1,796,668
<OTHER-INCOME> 0
<EXPENSES-NET> 5,367,688
<NET-INVESTMENT-INCOME> 3,032,525
<REALIZED-GAINS-CURRENT> 85,024,240
<APPREC-INCREASE-CURRENT> 43,455,563
<NET-CHANGE-FROM-OPS> 131,512,328
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,208,495
<DISTRIBUTIONS-OF-GAINS> 250,024,832
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,572,818
<NUMBER-OF-SHARES-REDEEMED> 6,825,709
<SHARES-REINVESTED> 14,581,215
<NET-CHANGE-IN-ASSETS> 63,325,884
<ACCUMULATED-NII-PRIOR> 8,208,495
<ACCUMULATED-GAINS-PRIOR> 248,037,167
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,035,573
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,367,688
<AVERAGE-NET-ASSETS> 1,353,947,749
<PER-SHARE-NAV-BEGIN> 22.62
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 1.73
<PER-SHARE-DIVIDEND> 0.14
<PER-SHARE-DISTRIBUTIONS> 4.37
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.89
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 2
<NAME> INVESTMENT QUALITY BOND TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 153,665,284
<INVESTMENTS-AT-VALUE> 153,514,321
<RECEIVABLES> 2,839,088
<ASSETS-OTHER> 1,026
<OTHER-ITEMS-ASSETS> 195
<TOTAL-ASSETS> 156,354,630
<PAYABLE-FOR-SECURITIES> 289,816
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,638
<TOTAL-LIABILITIES> 291,454
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 154,205,237
<SHARES-COMMON-STOCK> 13,683,785
<SHARES-COMMON-PRIOR> 12,866,102
<ACCUMULATED-NII-CURRENT> 5,454,294
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,445,392)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (150,963)
<NET-ASSETS> 156,063,176
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,015,042
<OTHER-INCOME> 0
<EXPENSES-NET> 549,048
<NET-INVESTMENT-INCOME> 5,465,994
<REALIZED-GAINS-CURRENT> 115,502
<APPREC-INCREASE-CURRENT> (789,727)
<NET-CHANGE-FROM-OPS> 4,791,769
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,368,425
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,142,547
<NUMBER-OF-SHARES-REDEEMED> 1,269,165
<SHARES-REINVESTED> 944,301
<NET-CHANGE-IN-ASSETS> 3,102,344
<ACCUMULATED-NII-PRIOR> 10,356,725
<ACCUMULATED-GAINS-PRIOR> (3,560,894)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 487,245
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 549,048
<AVERAGE-NET-ASSETS> 151,164,017
<PER-SHARE-NAV-BEGIN> 11.89
<PER-SHARE-NII> 0.42
<PER-SHARE-GAIN-APPREC> (0.08)
<PER-SHARE-DIVIDEND> 0.83
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.40
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 3
<NAME> MONEY MARKET TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 427,928,020
<INVESTMENTS-AT-VALUE> 427,928,020
<RECEIVABLES> 128,818
<ASSETS-OTHER> 5,654
<OTHER-ITEMS-ASSETS> 250
<TOTAL-ASSETS> 428,062,742
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 200,103
<TOTAL-LIABILITIES> 200,103
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 427,862,639
<SHARES-COMMON-STOCK> 42,786,264
<SHARES-COMMON-PRIOR> 36,356,580
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 427,862,639
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,187,307
<OTHER-INCOME> 0
<EXPENSES-NET> 1,096,607
<NET-INVESTMENT-INCOME> 10,090,700
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 10,090,700
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,090,700
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 37,550,412
<NUMBER-OF-SHARES-REDEEMED> 32,111,720
<SHARES-REINVESTED> 990,992
<NET-CHANGE-IN-ASSETS> 64,296,842
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,019,946
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,096,607
<AVERAGE-NET-ASSETS> 411,359,332
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.24
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 4
<NAME> GLOBAL EQUITY TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 699,286,345
<INVESTMENTS-AT-VALUE> 832,954,354
<RECEIVABLES> 3,099,074
<ASSETS-OTHER> 5,589
<OTHER-ITEMS-ASSETS> 81,536,049
<TOTAL-ASSETS> 917,595,066
<PAYABLE-FOR-SECURITIES> 75,220,716
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 263,523
<TOTAL-LIABILITIES> 75,484,239
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 680,157,194
<SHARES-COMMON-STOCK> 45,478,283
<SHARES-COMMON-PRIOR> 40,739,977
<ACCUMULATED-NII-CURRENT> 6,539,253
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,750,283
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 139,664,097
<NET-ASSETS> 842,110,827
<DIVIDEND-INCOME> 9,763,936
<INTEREST-INCOME> 388,070
<OTHER-INCOME> 0
<EXPENSES-NET> 3,834,030
<NET-INVESTMENT-INCOME> 6,317,976
<REALIZED-GAINS-CURRENT> 16,503,186
<APPREC-INCREASE-CURRENT> 89,017,262
<NET-CHANGE-FROM-OPS> 111,838,424
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,702,845
<DISTRIBUTIONS-OF-GAINS> 62,223,834
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,656,596
<NUMBER-OF-SHARES-REDEEMED> 2,428,289
<SHARES-REINVESTED> 4,509,999
<NET-CHANGE-IN-ASSETS> 115,268,426
<ACCUMULATED-NII-PRIOR> 10,924,122
<ACCUMULATED-GAINS-PRIOR> 61,470,931
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,380,978
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,834,030
<AVERAGE-NET-ASSETS> 757,554,944
<PER-SHARE-NAV-BEGIN> 17.84
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> 2.35
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 1.54
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.52
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 5
<NAME> GLOBAL GOVERNMENT BOND TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 230,131,374
<INVESTMENTS-AT-VALUE> 231,732,050
<RECEIVABLES> 3,500,588
<ASSETS-OTHER> 1,675
<OTHER-ITEMS-ASSETS> 267,762,319
<TOTAL-ASSETS> 502,996,632
<PAYABLE-FOR-SECURITIES> 270,196,667
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 76,625
<TOTAL-LIABILITIES> 270,273,292
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 219,952,911
<SHARES-COMMON-STOCK> 17,074,181
<SHARES-COMMON-PRIOR> 16,685,598
<ACCUMULATED-NII-CURRENT> 6,853,888
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,096,366
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 820,175
<NET-ASSETS> 232,723,340
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,963,554
<OTHER-INCOME> 0
<EXPENSES-NET> 1,109,666
<NET-INVESTMENT-INCOME> 6,853,888
<REALIZED-GAINS-CURRENT> 5,098,793
<APPREC-INCREASE-CURRENT> 12,945,972
<NET-CHANGE-FROM-OPS> (993,291)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19,668,247
<DISTRIBUTIONS-OF-GAINS> 512,991
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 294,606
<NUMBER-OF-SHARES-REDEEMED> 1,436,064
<SHARES-REINVESTED> 1,530,041
<NET-CHANGE-IN-ASSETS> (17,069,970)
<ACCUMULATED-NII-PRIOR> 19,668,247
<ACCUMULATED-GAINS-PRIOR> 510,560
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 939,427
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,109,666
<AVERAGE-NET-ASSETS> 236,803,034
<PER-SHARE-NAV-BEGIN> 14.97
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> (0.53)
<PER-SHARE-DIVIDEND> 1.23
<PER-SHARE-DISTRIBUTIONS> 0.03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.63
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30 ,1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 6
<NAME> U.S. GOVERNMENT SECURITIES TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 266,926,796
<INVESTMENTS-AT-VALUE> 265,804,242
<RECEIVABLES> 1,060,509
<ASSETS-OTHER> 1,473
<OTHER-ITEMS-ASSETS> 386
<TOTAL-ASSETS> 266,866,610
<PAYABLE-FOR-SECURITIES> 56,659,407
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 81,449
<TOTAL-LIABILITIES> 56,740,856
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 208,288,757
<SHARES-COMMON-STOCK> 16,365,397
<SHARES-COMMON-PRIOR> 15,316,916
<ACCUMULATED-NII-CURRENT> 6,435,961
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,476,410)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,122,554)
<NET-ASSETS> 210,125,754
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,193,001
<OTHER-INCOME> 0
<EXPENSES-NET> 719,565
<NET-INVESTMENT-INCOME> 6,473,436
<REALIZED-GAINS-CURRENT> (921,139)
<APPREC-INCREASE-CURRENT> 773,315
<NET-CHANGE-FROM-OPS> 6,325,612
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,118,502
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,935,548
<NUMBER-OF-SHARES-REDEEMED> 1,937,387
<SHARES-REINVESTED> 1,050,320
<NET-CHANGE-IN-ASSETS> 6,073,138
<ACCUMULATED-NII-PRIOR> 13,081,027
<ACCUMULATED-GAINS-PRIOR> (2,555,271)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 654,898
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 719,565
<AVERAGE-NET-ASSETS> 203,177,136
<PER-SHARE-NAV-BEGIN> 13.32
<PER-SHARE-NII> 0.42
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0.88
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.84
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 7
<NAME> CONSERVATIVE ASSET ALLOCATION TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 185,659,893
<INVESTMENTS-AT-VALUE> 199,234,013
<RECEIVABLES> 1,650,349
<ASSETS-OTHER> 1,409
<OTHER-ITEMS-ASSETS> 72,491
<TOTAL-ASSETS> 200,958,262
<PAYABLE-FOR-SECURITIES> 1,479,687
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,193
<TOTAL-LIABILITIES> 1,509,880
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 176,786,470
<SHARES-COMMON-STOCK> 17,828,309
<SHARES-COMMON-PRIOR> 17,907,959
<ACCUMULATED-NII-CURRENT> 4,577,444
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,424,870
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,659,598
<NET-ASSETS> 199,448,382
<DIVIDEND-INCOME> 440,814
<INTEREST-INCOME> 5,025,162
<OTHER-INCOME> 0
<EXPENSES-NET> 888,532
<NET-INVESTMENT-INCOME> 4,577,444
<REALIZED-GAINS-CURRENT> 4,448,596
<APPREC-INCREASE-CURRENT> 2,307,722
<NET-CHANGE-FROM-OPS> 11,333,762
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,062,867
<DISTRIBUTIONS-OF-GAINS> 8,097,771
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 144,657
<NUMBER-OF-SHARES-REDEEMED> 1,937,575
<SHARES-REINVESTED> 1,713,268
<NET-CHANGE-IN-ASSETS> (9,017,272)
<ACCUMULATED-NII-PRIOR> 10,062,867
<ACCUMULATED-GAINS-PRIOR> 8,074,045
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 751,620
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 888,532
<AVERAGE-NET-ASSETS> 202,093,040
<PER-SHARE-NAV-BEGIN> 11.64
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> 0.59
<PER-SHARE-DISTRIBUTIONS> 0.48
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.19
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30 ,1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 8
<NAME> MODERATE ASSET ALLOCATION TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 529,230,966
<INVESTMENTS-AT-VALUE> 610,320,597
<RECEIVABLES> 5,092,333
<ASSETS-OTHER> 2,511
<OTHER-ITEMS-ASSETS> 357,824
<TOTAL-ASSETS> 615,773,265
<PAYABLE-FOR-SECURITIES> 1,079,772
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105,077
<TOTAL-LIABILITIES> 1,184,849
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 503,109,274
<SHARES-COMMON-STOCK> 50,339,965
<SHARES-COMMON-PRIOR> 50,021,359
<ACCUMULATED-NII-CURRENT> 11,500,896
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,209,307
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 81,768,939
<NET-ASSETS> 614,588,416
<DIVIDEND-INCOME> 2,505,277
<INTEREST-INCOME> 11,521,031
<OTHER-INCOME> 0
<EXPENSES-NET> 2,525,412
<NET-INVESTMENT-INCOME> 11,500,896
<REALIZED-GAINS-CURRENT> 18,418,073
<APPREC-INCREASE-CURRENT> 23,671,834
<NET-CHANGE-FROM-OPS> 53,590,803
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26,584,959
<DISTRIBUTIONS-OF-GAINS> 34,563,767
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 452,447
<NUMBER-OF-SHARES-REDEEMED> 5,608,212
<SHARES-REINVESTED> 5,474,371
<NET-CHANGE-IN-ASSETS> (10,232,632)
<ACCUMULATED-NII-PRIOR> 26,584,959
<ACCUMULATED-GAINS-PRIOR> 34,355,001
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,250,795
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,525,412
<AVERAGE-NET-ASSETS> 605,170,280
<PER-SHARE-NAV-BEGIN> 12.49
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.76
<PER-SHARE-DIVIDEND> 0.57
<PER-SHARE-DISTRIBUTIONS> 0.74
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.21
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 9
<NAME> AGGRESSIVE ASSET ALLOCATION TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 193,021,479
<INVESTMENTS-AT-VALUE> 235,886,223
<RECEIVABLES> 1,404,514
<ASSETS-OTHER> 1,532
<OTHER-ITEMS-ASSETS> 259,968
<TOTAL-ASSETS> 237,552,237
<PAYABLE-FOR-SECURITIES> 15,593
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 63,934
<TOTAL-LIABILITIES> 79,527
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 181,833,848
<SHARES-COMMON-STOCK> 17,590,995
<SHARES-COMMON-PRIOR> 16,857,857
<ACCUMULATED-NII-CURRENT> 2,766,689
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,295,210
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 43,576,963
<NET-ASSETS> 237,472,710
<DIVIDEND-INCOME> 1,375,390
<INTEREST-INCOME> 2,406,162
<OTHER-INCOME> 0
<EXPENSES-NET> 1,014,863
<NET-INVESTMENT-INCOME> 2,766,689
<REALIZED-GAINS-CURRENT> 9,356,113
<APPREC-INCREASE-CURRENT> 13,762,851
<NET-CHANGE-FROM-OPS> 25,885,653
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,081,059
<DISTRIBUTIONS-OF-GAINS> 16,445,138
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 264,396
<NUMBER-OF-SHARES-REDEEMED> 1,402,205
<SHARES-REINVESTED> 1,870,947
<NET-CHANGE-IN-ASSETS> 10,773,472
<ACCUMULATED-NII-PRIOR> 6,081,059
<ACCUMULATED-GAINS-PRIOR> 16,384,235
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 843,960
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,014,863
<AVERAGE-NET-ASSETS> 226,921,197
<PER-SHARE-NAV-BEGIN> 13.45
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 1.27
<PER-SHARE-DIVIDEND> 0.38
<PER-SHARE-DISTRIBUTIONS> 1.01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.50
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 10
<NAME> GROWTH AND INCOME TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 961,086,020
<INVESTMENTS-AT-VALUE> 1,362,767,826
<RECEIVABLES> 2,667,021
<ASSETS-OTHER> 10,594
<OTHER-ITEMS-ASSETS> 12,003
<TOTAL-ASSETS> 1,365,457,444
<PAYABLE-FOR-SECURITIES> 823,700
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 75,986
<TOTAL-LIABILITIES> 899,686
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 916,079,527
<SHARES-COMMON-STOCK> 62,620,973
<SHARES-COMMON-PRIOR> 53,329,350
<ACCUMULATED-NII-CURRENT> 7,560,067
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 39,237,278
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 401,680,886
<NET-ASSETS> 1,364,557,758
<DIVIDEND-INCOME> 11,521,662
<INTEREST-INCOME> 630,397
<OTHER-INCOME> 0
<EXPENSES-NET> 4,591,992
<NET-INVESTMENT-INCOME> 7,560,067
<REALIZED-GAINS-CURRENT> 39,237,278
<APPREC-INCREASE-CURRENT> 182,472,022
<NET-CHANGE-FROM-OPS> 229,269,367
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,165,084
<DISTRIBUTIONS-OF-GAINS> 66,257,481
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,857,718
<NUMBER-OF-SHARES-REDEEMED> 1,833,831
<SHARES-REINVESTED> 4,267,736
<NET-CHANGE-IN-ASSETS> 330,819,764
<ACCUMULATED-NII-PRIOR> 13,165,084
<ACCUMULATED-GAINS-PRIOR> 66,257,481
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,363,670
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,591,992
<AVERAGE-NET-ASSETS> 1,173,288,816
<PER-SHARE-NAV-BEGIN> 19.38
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 3.74
<PER-SHARE-DIVIDEND> 0.24
<PER-SHARE-DISTRIBUTIONS> 1.20
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.79
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 11
<NAME> BLUE CHIP GROWTH TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 456,131,836
<INVESTMENTS-AT-VALUE> 560,961,542
<RECEIVABLES> 600,246
<ASSETS-OTHER> 3,299
<OTHER-ITEMS-ASSETS> 590
<TOTAL-ASSETS> 561,565,677
<PAYABLE-FOR-SECURITIES> 3,170,921
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 112,539
<TOTAL-LIABILITIES> 3,283,460
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 452,038,104
<SHARES-COMMON-STOCK> 41,242,993
<SHARES-COMMON-PRIOR> 29,538,092
<ACCUMULATED-NII-CURRENT> 1,950,529
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (536,122)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 104,829,706
<NET-ASSETS> 558,282,217
<DIVIDEND-INCOME> 2,853,328
<INTEREST-INCOME> 1,393,698
<OTHER-INCOME> 0
<EXPENSES-NET> 2,296,497
<NET-INVESTMENT-INCOME> 1,950,529
<REALIZED-GAINS-CURRENT> (131,268)
<APPREC-INCREASE-CURRENT> 64,290,322
<NET-CHANGE-FROM-OPS> 66,109,851
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 898,962
<DISTRIBUTIONS-OF-GAINS> 76,558,164
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,245,635
<NUMBER-OF-SHARES-REDEEMED> 3,006,271
<SHARES-REINVESTED> 6,465,537
<NET-CHANGE-IN-ASSETS> 135,711,389
<ACCUMULATED-NII-PRIOR> 898,962
<ACCUMULATED-GAINS-PRIOR> 76,153,310
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,179,560
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,296,497
<AVERAGE-NET-ASSETS> 475,161,561
<PER-SHARE-NAV-BEGIN> 14.31
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 1.71
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 2.50
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.54
<EXPENSE-RATIO> 0.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30 ,1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 12
<NAME> EQUITY-INCOME TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 681,972,830
<INVESTMENTS-AT-VALUE> 781,477,841
<RECEIVABLES> 1,683,433
<ASSETS-OTHER> 4,801
<OTHER-ITEMS-ASSETS> 484,656
<TOTAL-ASSETS> 783,650,731
<PAYABLE-FOR-SECURITIES> 4,461,062
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44,934
<TOTAL-LIABILITIES> 4,505,996
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 651,182,014
<SHARES-COMMON-STOCK> 50,810,844
<SHARES-COMMON-PRIOR> 38,904,143
<ACCUMULATED-NII-CURRENT> 8,768,587
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 19,689,929
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 99,504,205
<NET-ASSETS> 779,144,735
<DIVIDEND-INCOME> 9,755,397
<INTEREST-INCOME> 1,848,716
<OTHER-INCOME> 0
<EXPENSES-NET> 2,835,526
<NET-INVESTMENT-INCOME> 8,768,587
<REALIZED-GAINS-CURRENT> 20,214,986
<APPREC-INCREASE-CURRENT> 69,243,724
<NET-CHANGE-FROM-OPS> 98,227,297
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,655,530
<DISTRIBUTIONS-OF-GAINS> 80,825,124
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,393,550
<NUMBER-OF-SHARES-REDEEMED> 2,008,763
<SHARES-REINVESTED> 6,521,914
<NET-CHANGE-IN-ASSETS> 179,659,114
<ACCUMULATED-NII-PRIOR> 8,655,530
<ACCUMULATED-GAINS-PRIOR> 80,300,067
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,687,278
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,835,526
<AVERAGE-NET-ASSETS> 677,387,064
<PER-SHARE-NAV-BEGIN> 15.14
<PER-SHARE-NII> 0.16
<PER-SHARE-GAIN-APPREC> 1.94
<PER-SHARE-DIVIDEND> 0.21
<PER-SHARE-DISTRIBUTIONS> 1.97
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.33
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 13
<NAME> STRATEGIC BOND TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 281,432,152
<INVESTMENTS-AT-VALUE> 288,969,662
<RECEIVABLES> 27,112,937
<ASSETS-OTHER> 1,774
<OTHER-ITEMS-ASSETS> 26,203,162
<TOTAL-ASSETS> 342,287,535
<PAYABLE-FOR-SECURITIES> 56,752,366
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78,438
<TOTAL-LIABILITIES> 56,830,804
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 267,037,168
<SHARES-COMMON-STOCK> 24,299,934
<SHARES-COMMON-PRIOR> 18,529,230
<ACCUMULATED-NII-CURRENT> 10,317,324
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 475,987
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,626,252
<NET-ASSETS> 285,456,731
<DIVIDEND-INCOME> 4,381
<INTEREST-INCOME> 11,452,689
<OTHER-INCOME> 0
<EXPENSES-NET> 1,081,623
<NET-INVESTMENT-INCOME> 10,375,447
<REALIZED-GAINS-CURRENT> 614,034
<APPREC-INCREASE-CURRENT> 2,530,341
<NET-CHANGE-FROM-OPS> 13,519,822
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,436,515
<DISTRIBUTIONS-OF-GAINS> 1,809,273
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,625,331
<NUMBER-OF-SHARES-REDEEMED> 1,307,739
<SHARES-REINVESTED> 1,453,112
<NET-CHANGE-IN-ASSETS> 64,179,250
<ACCUMULATED-NII-PRIOR> 14,378,392
<ACCUMULATED-GAINS-PRIOR> 1,671,226
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 965,598
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,081,623
<AVERAGE-NET-ASSETS> 251,251,431
<PER-SHARE-NAV-BEGIN> 11.94
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 0.25
<PER-SHARE-DIVIDEND> 0.71
<PER-SHARE-DISTRIBUTIONS> 0.09
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.75
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 14
<NAME> INTERNATIONAL GROWTH & INCOME TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 202,826,902
<INVESTMENTS-AT-VALUE> 216,877,317
<RECEIVABLES> 2,167,211
<ASSETS-OTHER> 600
<OTHER-ITEMS-ASSETS> 62,999,544
<TOTAL-ASSETS> 282,044,672
<PAYABLE-FOR-SECURITIES> 58,456,435
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107,387
<TOTAL-LIABILITIES> 58,563,822
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 200,654,800
<SHARES-COMMON-STOCK> 18,922,061
<SHARES-COMMON-PRIOR> 16,061,451
<ACCUMULATED-NII-CURRENT> 1,902,685
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,743,383
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,179,982
<NET-ASSETS> 223,480,850
<DIVIDEND-INCOME> 2,150,628
<INTEREST-INCOME> 1,279,507
<OTHER-INCOME> 0
<EXPENSES-NET> 1,081,565
<NET-INVESTMENT-INCOME> 2,348,570
<REALIZED-GAINS-CURRENT> 6,983,664
<APPREC-INCREASE-CURRENT> 5,558,745
<NET-CHANGE-FROM-OPS> 14,890,979
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,640,170
<DISTRIBUTIONS-OF-GAINS> 8,342,784
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,739,094
<NUMBER-OF-SHARES-REDEEMED> 2,994,215
<SHARES-REINVESTED> 1,115,731
<NET-CHANGE-IN-ASSETS> 34,470,773
<ACCUMULATED-NII-PRIOR> 3,194,285
<ACCUMULATED-GAINS-PRIOR> 8,102,503
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 940,703
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,081,565
<AVERAGE-NET-ASSETS> 199,684,006
<PER-SHARE-NAV-BEGIN> 11.77
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 0.65
<PER-SHARE-DIVIDEND> 0.22
<PER-SHARE-DISTRIBUTIONS> 0.51
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.81
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 15
<NAME> SMALL/MID CAP TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 177,412,411
<INVESTMENTS-AT-VALUE> 203,509,416
<RECEIVABLES> 46,262
<ASSETS-OTHER> 1,258
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 203,556,936
<PAYABLE-FOR-SECURITIES> 2,480,233
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,990
<TOTAL-LIABILITIES> 2,505,223
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 183,962,996
<SHARES-COMMON-STOCK> 14,046,701
<SHARES-COMMON-PRIOR> 13,163,725
<ACCUMULATED-NII-CURRENT> (264,220)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,744,068)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,097,005
<NET-ASSETS> 201,051,713
<DIVIDEND-INCOME> 304,004
<INTEREST-INCOME> 370,361
<OTHER-INCOME> 0
<EXPENSES-NET> 938,585
<NET-INVESTMENT-INCOME> (264,220)
<REALIZED-GAINS-CURRENT> (1,792,228)
<APPREC-INCREASE-CURRENT> 15,523,377
<NET-CHANGE-FROM-OPS> 13,466,929
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,816,582
<NUMBER-OF-SHARES-REDEEMED> 1,935,606
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 24,990,148
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (6,951,840)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 886,480
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 938,585
<AVERAGE-NET-ASSETS> 178,765,337
<PER-SHARE-NAV-BEGIN> 13.37
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 0.96
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.31
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30 ,1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 16
<NAME> INTERNATIONAL SMALL CAP TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 116,909,460
<INVESTMENTS-AT-VALUE> 131,753,999
<RECEIVABLES> 1,326,835
<ASSETS-OTHER> 822
<OTHER-ITEMS-ASSETS> 2,154,270
<TOTAL-ASSETS> 135,235,926
<PAYABLE-FOR-SECURITIES> 4,509,737
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,329
<TOTAL-LIABILITIES> 4,528,066
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 119,021,855
<SHARES-COMMON-STOCK> 9,018,822
<SHARES-COMMON-PRIOR> 7,148,328
<ACCUMULATED-NII-CURRENT> 286,248
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,438,052)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,837,809
<NET-ASSETS> 130,707,860
<DIVIDEND-INCOME> 461,367
<INTEREST-INCOME> 614,969
<OTHER-INCOME> 0
<EXPENSES-NET> 728,570
<NET-INVESTMENT-INCOME> 347,766
<REALIZED-GAINS-CURRENT> (2,592,693)
<APPREC-INCREASE-CURRENT> 9,657,964
<NET-CHANGE-FROM-OPS> 7,413,037
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 56,628
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,802,133
<NUMBER-OF-SHARES-REDEEMED> 935,803
<SHARES-REINVESTED> 4,164
<NET-CHANGE-IN-ASSETS> 33,489,967
<ACCUMULATED-NII-PRIOR> (4,890)
<ACCUMULATED-GAINS-PRIOR> (845,359)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 622,737
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 728,570
<AVERAGE-NET-ASSETS> 114,163,313
<PER-SHARE-NAV-BEGIN> 13.60
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.86
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.49
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 17
<NAME> GROWTH TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 90,138,828
<INVESTMENTS-AT-VALUE> 103,792,897
<RECEIVABLES> 1,349,938
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 28,705
<TOTAL-ASSETS> 105,171,540
<PAYABLE-FOR-SECURITIES> 185,217
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,216
<TOTAL-LIABILITIES> 190,433
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 90,543,757
<SHARES-COMMON-STOCK> 6,531,985
<SHARES-COMMON-PRIOR> 4,136,954
<ACCUMULATED-NII-CURRENT> 330,193
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 453,460
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,653,697
<NET-ASSETS> 104,981,107
<DIVIDEND-INCOME> 319,654
<INTEREST-INCOME> 380,571
<OTHER-INCOME> 0
<EXPENSES-NET> 370,032
<NET-INVESTMENT-INCOME> 330,193
<REALIZED-GAINS-CURRENT> 1,247,725
<APPREC-INCREASE-CURRENT> 11,359,046
<NET-CHANGE-FROM-OPS> 12,936,964
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,288
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,837,696
<NUMBER-OF-SHARES-REDEEMED> 442,827
<SHARES-REINVESTED> 162
<NET-CHANGE-IN-ASSETS> 48,174,368
<ACCUMULATED-NII-PRIOR> 2,288
<ACCUMULATED-GAINS-PRIOR> (794,265)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 328,126
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 370,032
<AVERAGE-NET-ASSETS> 77,845,900
<PER-SHARE-NAV-BEGIN> 13,73
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 2.29
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.07
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30 ,1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 18
<NAME> EMERGING GROWTH TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 190,970,642
<INVESTMENTS-AT-VALUE> 216,235,036
<RECEIVABLES> 2,506,800
<ASSETS-OTHER> 1,319
<OTHER-ITEMS-ASSETS> 740
<TOTAL-ASSETS> 218,743,895
<PAYABLE-FOR-SECURITIES> 949,563
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,135
<TOTAL-LIABILITIES> 964,698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 196,845,959
<SHARES-COMMON-STOCK> 10,086,026
<SHARES-COMMON-PRIOR> 9,296,125
<ACCUMULATED-NII-CURRENT> 186,762
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,517,918)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,264,394
<NET-ASSETS> 217,779,197
<DIVIDEND-INCOME> 234,180
<INTEREST-INCOME> 1,006,292
<OTHER-INCOME> 0
<EXPENSES-NET> 1,053,710
<NET-INVESTMENT-INCOME> 186,762
<REALIZED-GAINS-CURRENT> (4,505,805)
<APPREC-INCREASE-CURRENT> 14,823,806
<NET-CHANGE-FROM-OPS> 10,504,763
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,808,767
<NUMBER-OF-SHARES-REDEEMED> 1,018,866
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 26,267,589
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (12,113)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 998,446
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,053,710
<AVERAGE-NET-ASSETS> 191,756,338
<PER-SHARE-NAV-BEGIN> 20.60
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.97
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.59
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 19
<NAME> QUANTITATIVE EQUITY TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 110,022,580
<INVESTMENTS-AT-VALUE> 130,760,704
<RECEIVABLES> 2,102,708
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 32,358
<TOTAL-ASSETS> 132,895,770
<PAYABLE-FOR-SECURITIES> 931,727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,307
<TOTAL-LIABILITIES> 945,034
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103,654,407
<SHARES-COMMON-STOCK> 6,447,465
<SHARES-COMMON-PRIOR> 5,303,145
<ACCUMULATED-NII-CURRENT> 862,234
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,695,971
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,738,124
<NET-ASSETS> 131,950,736
<DIVIDEND-INCOME> 951,065
<INTEREST-INCOME> 179,818
<OTHER-INCOME> 0
<EXPENSES-NET> 268,649
<NET-INVESTMENT-INCOME> 862,234
<REALIZED-GAINS-CURRENT> 6,749,600
<APPREC-INCREASE-CURRENT> 10,845,853
<NET-CHANGE-FROM-OPS> 18,457,687
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,427,109
<NUMBER-OF-SHARES-REDEEMED> 282,789
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 18,457,687
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (53,629)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 376,052
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 414,387
<AVERAGE-NET-ASSETS> 108,333,868
<PER-SHARE-NAV-BEGIN> 17.33
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 3.01
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.47
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 20
<NAME> BALANCED TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 151,514,149
<INVESTMENTS-AT-VALUE> 161,526,846
<RECEIVABLES> 1,095,858
<ASSETS-OTHER> 1,057
<OTHER-ITEMS-ASSETS> 78,891
<TOTAL-ASSETS> 162,702,652
<PAYABLE-FOR-SECURITIES> 1,998,748
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,175
<TOTAL-LIABILITIES> 2,013,923
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 133,780,368
<SHARES-COMMON-STOCK> 8,768,488
<SHARES-COMMON-PRIOR> 8,216,455
<ACCUMULATED-NII-CURRENT> 2,262,437
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,635,179
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,010,745
<NET-ASSETS> 160,688,729
<DIVIDEND-INCOME> 981,392
<INTEREST-INCOME> 1,917,804
<OTHER-INCOME> 0
<EXPENSES-NET> 636,759
<NET-INVESTMENT-INCOME> 2,262,437
<REALIZED-GAINS-CURRENT> 14,715,295
<APPREC-INCREASE-CURRENT> (479,565)
<NET-CHANGE-FROM-OPS> 16,498,167
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,130,000
<NUMBER-OF-SHARES-REDEEMED> 577,967
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 25,882,187
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (80,116)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 584,160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 636,759
<AVERAGE-NET-ASSETS> 147,250,170
<PER-SHARE-NAV-BEGIN> 16.41
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 1.66
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.33
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 21
<NAME> REAL ESTATE SECURITIES TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 115,356,151
<INVESTMENTS-AT-VALUE> 122,093,168
<RECEIVABLES> 640,046
<ASSETS-OTHER> 707
<OTHER-ITEMS-ASSETS> 28,517
<TOTAL-ASSETS> 122,762,438
<PAYABLE-FOR-SECURITIES> 453,342
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,475
<TOTAL-LIABILITIES> 460,817
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 104,529,709
<SHARES-COMMON-STOCK> 6,859,185
<SHARES-COMMON-PRIOR> 4,497,087
<ACCUMULATED-NII-CURRENT> 2,579,845
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,455,050
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,737,017
<NET-ASSETS> 122,301,621
<DIVIDEND-INCOME> 2,755,672
<INTEREST-INCOME> 61,276
<OTHER-INCOME> 0
<EXPENSES-NET> 237,103
<NET-INVESTMENT-INCOME> 2,579,845
<REALIZED-GAINS-CURRENT> 8,455,050
<APPREC-INCREASE-CURRENT> (4,878,801)
<NET-CHANGE-FROM-OPS> 6,156,094
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,611,411
<NUMBER-OF-SHARES-REDEEMED> 249,313
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 46,081,967
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 331,424
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 361,831
<AVERAGE-NET-ASSETS> 95,477,233
<PER-SHARE-NAV-BEGIN> 16.95
<PER-SHARE-NII> 0.38
<PER-SHARE-GAIN-APPREC> 0.50
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.83
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 22
<NAME> CAPITAL GROWTH BOND TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 47,182,040
<INVESTMENTS-AT-VALUE> 47,676,683
<RECEIVABLES> 843,779
<ASSETS-OTHER> 327
<OTHER-ITEMS-ASSETS> 12,831
<TOTAL-ASSETS> 48,533,620
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,412
<TOTAL-LIABILITIES> 9,412
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47,644,680
<SHARES-COMMON-STOCK> 4,342,927
<SHARES-COMMON-PRIOR> 4,165,078
<ACCUMULATED-NII-CURRENT> 1,451,041
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,066,156)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 494,643
<NET-ASSETS> 48,524,208
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,565,296
<OTHER-INCOME> 0
<EXPENSES-NET> 114,255
<NET-INVESTMENT-INCOME> 1,451,041
<REALIZED-GAINS-CURRENT> (102,499)
<APPREC-INCREASE-CURRENT> (169,330)
<NET-CHANGE-FROM-OPS> 1,179,212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 529,264
<NUMBER-OF-SHARES-REDEEMED> 351,415
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,130,779
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (963,657)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 148,528
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 170,104
<AVERAGE-NET-ASSETS> 46,079,615
<PER-SHARE-NAV-BEGIN> 10.90
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.17
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 23
<NAME> PACIFIC RIM EMERGING MARKETS TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 25,809,571
<INVESTMENTS-AT-VALUE> 27,414,219
<RECEIVABLES> 670,404
<ASSETS-OTHER> 186
<OTHER-ITEMS-ASSETS> 3,211,566
<TOTAL-ASSETS> 31,296,375
<PAYABLE-FOR-SECURITIES> 717,358
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20,175
<TOTAL-LIABILITIES> 737,533
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,226,026
<SHARES-COMMON-STOCK> 2,713,803
<SHARES-COMMON-PRIOR> 2,132,377
<ACCUMULATED-NII-CURRENT> 95,936
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 634,001
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,602,879
<NET-ASSETS> 30,558,842
<DIVIDEND-INCOME> 203,180
<INTEREST-INCOME> 73,000
<OTHER-INCOME> 0
<EXPENSES-NET> 180,244
<NET-INVESTMENT-INCOME> 95,936
<REALIZED-GAINS-CURRENT> 634,001
<APPREC-INCREASE-CURRENT> 343,258
<NET-CHANGE-FROM-OPS> 1,073,195
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,144,471
<NUMBER-OF-SHARES-REDEEMED> 563,045
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,317,638
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 111,009
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 180,244
<AVERAGE-NET-ASSETS> 26,336,263
<PER-SHARE-NAV-BEGIN> 10.90
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.32
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.26
<EXPENSE-RATIO> 1.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 24
<NAME> INTERNATIONAL STOCK TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 71,856,025
<INVESTMENTS-AT-VALUE> 79,848,123
<RECEIVABLES> 434,158
<ASSETS-OTHER> 353
<OTHER-ITEMS-ASSETS> 574,993
<TOTAL-ASSETS> 80,857,627
<PAYABLE-FOR-SECURITIES> 259,968
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,801
<TOTAL-LIABILITIES> 282,769
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70,590,556
<SHARES-COMMON-STOCK> 6,359,782
<SHARES-COMMON-PRIOR> 2,890,613
<ACCUMULATED-NII-CURRENT> 468,355
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,521,302
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,994,645
<NET-ASSETS> 80,574,858
<DIVIDEND-INCOME> 679,924
<INTEREST-INCOME> 127,457
<OTHER-INCOME> 0
<EXPENSES-NET> 339,026
<NET-INVESTMENT-INCOME> 468,355
<REALIZED-GAINS-CURRENT> 1,521,302
<APPREC-INCREASE-CURRENT> 5,071,606
<NET-CHANGE-FROM-OPS> 7,061,263
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,701,962
<NUMBER-OF-SHARES-REDEEMED> 232,793
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 74,431,937
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 269,816
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 339,026
<AVERAGE-NET-ASSETS> 51,819,416
<PER-SHARE-NAV-BEGIN> 11.47
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 1.13
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.67
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 25
<NAME> EQUITY INDEX TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 17,131,406
<INVESTMENTS-AT-VALUE> 17,229,389
<RECEIVABLES> 12,316
<ASSETS-OTHER> 87
<OTHER-ITEMS-ASSETS> 28
<TOTAL-ASSETS> 17,241,820
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 136,197
<TOTAL-LIABILITIES> 136,197
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,739,825
<SHARES-COMMON-STOCK> 1,330,720
<SHARES-COMMON-PRIOR> 731,587
<ACCUMULATED-NII-CURRENT> 294,284
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 897,026
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,174,488
<NET-ASSETS> 17,105,623
<DIVIDEND-INCOME> 3,885
<INTEREST-INCOME> 315,660
<OTHER-INCOME> 0
<EXPENSES-NET> 25,261
<NET-INVESTMENT-INCOME> 294,284
<REALIZED-GAINS-CURRENT> 1,163,900
<APPREC-INCREASE-CURRENT> 884,868
<NET-CHANGE-FROM-OPS> 2,343,052
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,001,421
<NUMBER-OF-SHARES-REDEEMED> 402,288
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,288,092
<ACCUMULATED-NII-PRIOR> 8,208,495
<ACCUMULATED-GAINS-PRIOR> 248,037,167
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,496
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 35,306
<AVERAGE-NET-ASSETS> 12,499,468
<PER-SHARE-NAV-BEGIN> 10.69
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 1.94
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.85
<EXPENSE-RATIO> 0.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 26
<NAME> SCIENCE & TECHNOLOGY TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 26,703,119
<INVESTMENTS-AT-VALUE> 29,158,553
<RECEIVABLES> 1,243,392
<ASSETS-OTHER> 108
<OTHER-ITEMS-ASSETS> 843
<TOTAL-ASSETS> 30,402,896
<PAYABLE-FOR-SECURITIES> 2,691,365
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 681
<TOTAL-LIABILITIES> 2,692,046
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,756,882
<SHARES-COMMON-STOCK> 2,008,554
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (11,360)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (490,106)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,455,434
<NET-ASSETS> 27,710,850
<DIVIDEND-INCOME> 11,848
<INTEREST-INCOME> 69,054
<OTHER-INCOME> 0
<EXPENSES-NET> 92,262
<NET-INVESTMENT-INCOME> (11,360)
<REALIZED-GAINS-CURRENT> (490,106)
<APPREC-INCREASE-CURRENT> 2,455,434
<NET-CHANGE-FROM-OPS> 1,953,968
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,245,555
<NUMBER-OF-SHARES-REDEEMED> 237,001
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 27,710,850
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 78,770
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 92,262
<AVERAGE-NET-ASSETS> 14,440,496
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 1.31
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.80
<EXPENSE-RATIO> 1.29
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 27
<NAME> PILGRIM BAXTER GROWTH TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 43,757,285
<INVESTMENTS-AT-VALUE> 48,247,081
<RECEIVABLES> 2,753
<ASSETS-OTHER> 130
<OTHER-ITEMS-ASSETS> 234
<TOTAL-ASSETS> 48,250,198
<PAYABLE-FOR-SECURITIES> 41,383
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 41,383
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,426,993
<SHARES-COMMON-STOCK> 3,940,040
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (16,285)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,691,689)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,489,796
<NET-ASSETS> 48,208,815
<DIVIDEND-INCOME> 7,453
<INTEREST-INCOME> 101,334
<OTHER-INCOME> 0
<EXPENSES-NET> 125,072
<NET-INVESTMENT-INCOME> (16,285)
<REALIZED-GAINS-CURRENT> (1,691,689)
<APPREC-INCREASE-CURRENT> 4,489,796
<NET-CHANGE-FROM-OPS> 2,781,822
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,144,976
<NUMBER-OF-SHARES-REDEEMED> 204,936
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 48,208,815
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 111,116
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 125,072
<AVERAGE-NET-ASSETS> 21,340,401
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> (0.25)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.24
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 28
<NAME> WORLDWIDE GROWTH TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 10,942,538
<INVESTMENTS-AT-VALUE> 11,749,215
<RECEIVABLES> 57,611
<ASSETS-OTHER> 32
<OTHER-ITEMS-ASSETS> 94,957
<TOTAL-ASSETS> 11,901,815
<PAYABLE-FOR-SECURITIES> 84,224
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47,966
<TOTAL-LIABILITIES> 132,190
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,909,668
<SHARES-COMMON-STOCK> 842,258
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 24,673
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 28,703
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 806,581
<NET-ASSETS> 11,769,625
<DIVIDEND-INCOME> 37,095
<INTEREST-INCOME> 37,068
<OTHER-INCOME> 0
<EXPENSES-NET> 49,490
<NET-INVESTMENT-INCOME> 24,673
<REALIZED-GAINS-CURRENT> 28,703
<APPREC-INCREASE-CURRENT> 806,581
<NET-CHANGE-FROM-OPS> 859,957
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 846,102
<NUMBER-OF-SHARES-REDEEMED> 3,844
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,769,625
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 29,032
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 49,490
<AVERAGE-NET-ASSETS> 5,854,459
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 1.44
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.97
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 29
<NAME> VALUE TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 59,405,228
<INVESTMENTS-AT-VALUE> 63,646,261
<RECEIVABLES> 454,461
<ASSETS-OTHER> 142
<OTHER-ITEMS-ASSETS> 471
<TOTAL-ASSETS> 64,101,335
<PAYABLE-FOR-SECURITIES> 434,055
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 631
<TOTAL-LIABILITIES> 434,686
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,818,500
<SHARES-COMMON-STOCK> 4,399,324
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 223,593
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 383,523
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,241,033
<NET-ASSETS> 63,666,649
<DIVIDEND-INCOME> 214,025
<INTEREST-INCOME> 122,116
<OTHER-INCOME> 0
<EXPENSES-NET> 112,548
<NET-INVESTMENT-INCOME> 223,593
<REALIZED-GAINS-CURRENT> 383,523
<APPREC-INCREASE-CURRENT> 4,241,033
<NET-CHANGE-FROM-OPS> 4,848,149
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,404,110
<NUMBER-OF-SHARES-REDEEMED> 4,786
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 63,666,649
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 98,502
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 112,548
<AVERAGE-NET-ASSETS> 24,829,630
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 1.92
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.47
<EXPENSE-RATIO> 0.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NALS SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 30
<NAME> HIGH YIELD TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 36,541,822
<INVESTMENTS-AT-VALUE> 37,170,676
<RECEIVABLES> 689,168
<ASSETS-OTHER> 116
<OTHER-ITEMS-ASSETS> 522,151
<TOTAL-ASSETS> 38,382,111
<PAYABLE-FOR-SECURITIES> 1,830,795
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,760
<TOTAL-LIABILITIES> 1,838,555
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35,207,986
<SHARES-COMMON-STOCK> 2,764,866
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 618,100
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 76,355
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 641,115
<NET-ASSETS> 36,543,556
<DIVIDEND-INCOME> 11,725
<INTEREST-INCOME> 687,356
<OTHER-INCOME> 0
<EXPENSES-NET> 80,981
<NET-INVESTMENT-INCOME> 618,100
<REALIZED-GAINS-CURRENT> 88,616
<APPREC-INCREASE-CURRENT> 628,854
<NET-CHANGE-FROM-OPS> 1,335,570
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,931,717
<NUMBER-OF-SHARES-REDEEMED> 166,851
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 36,543,556
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 67,214
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 80,981
<AVERAGE-NET-ASSETS> 17,489,393
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 0.50
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.22
<EXPENSE-RATIO> 0.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 31
<NAME> LIFESTYLE CONSERVATIVE 280 TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 7,628,882
<INVESTMENTS-AT-VALUE> 7,615,468
<RECEIVABLES> 1,555
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,617,043
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,575
<TOTAL-LIABILITIES> 1,575
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,634,690
<SHARES-COMMON-STOCK> 614,538
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,808)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (13,414)
<NET-ASSETS> 7,615,468
<DIVIDEND-INCOME> 198,745
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 198,745
<REALIZED-GAINS-CURRENT> (5,808)
<APPREC-INCREASE-CURRENT> (13,414)
<NET-CHANGE-FROM-OPS> 179,523
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 198,745
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 601,510
<NUMBER-OF-SHARES-REDEEMED> 3,561
<SHARES-REINVESTED> 16,589
<NET-CHANGE-IN-ASSETS> 7,615,468
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 429
<AVERAGE-NET-ASSETS> 2,599,999
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> 0.81
<PER-SHARE-GAIN-APPREC> (0.11)
<PER-SHARE-DIVIDEND> 0.81
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.39
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 32
<NAME> LIFESTYLE MODERATE 460 TRUST
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 20,095,295
<INVESTMENTS-AT-VALUE> 20,553,387
<RECEIVABLES> 2,465
<ASSETS-OTHER> 39
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,555,891
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,504
<TOTAL-LIABILITIES> 2,504
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,099,659
<SHARES-COMMON-STOCK> 1,605,339
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,364)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 458,092
<NET-ASSETS> 20,553,387
<DIVIDEND-INCOME> 346,110
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 346,110
<REALIZED-GAINS-CURRENT> (4,364)
<APPREC-INCREASE-CURRENT> 458,092
<NET-CHANGE-FROM-OPS> 799,838
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 346,110
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,592,148
<NUMBER-OF-SHARES-REDEEMED> 15,407
<SHARES-REINVESTED> 28,598
<NET-CHANGE-IN-ASSETS> 20,553,387
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 727
<AVERAGE-NET-ASSETS> 7,234,941
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> 0.64
<PER-SHARE-GAIN-APPREC> 0.30
<PER-SHARE-DIVIDEND> 0.64
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.80
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL
SERIES TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 33
<NAME> LIFESTYLE BALANCED 640 TRUST
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 68,172,863
<INVESTMENTS-AT-VALUE> 70,925,122
<RECEIVABLES> 5,080
<ASSETS-OTHER> 133
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 70,930,335
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,213
<TOTAL-LIABILITIES> 5,213
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 68,195,995
<SHARES-COMMON-STOCK> 5,458,131
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (23,132)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,752,259
<NET-ASSETS> 70,925,122
<DIVIDEND-INCOME> 1,044,809
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 1,044,809
<REALIZED-GAINS-CURRENT> (23,132)
<APPREC-INCREASE-CURRENT> 2,752,259
<NET-CHANGE-FROM-OPS> 3,773,936
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,044,809
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,446,894
<NUMBER-OF-SHARES-REDEEMED> 75,629
<SHARES-REINVESTED> 86,866
<NET-CHANGE-IN-ASSETS> 70,925,122
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,085
<AVERAGE-NET-ASSETS> 25,783,435
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.49
<PER-SHARE-DIVIDEND> 0.52
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.99
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 34
<NAME> LIFESTYLE GROWTH 820 TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 86,345,695
<INVESTMENTS-AT-VALUE> 91,181,219
<RECEIVABLES> 2,037
<ASSETS-OTHER> 175
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 91,183,431
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,212
<TOTAL-LIABILITIES> 2,212
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86,347,518
<SHARES-COMMON-STOCK> 6,871,835
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,823)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,835,524
<NET-ASSETS> 91,181,219
<DIVIDEND-INCOME> 751,477
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 751,477
<REALIZED-GAINS-CURRENT> (1,823)
<APPREC-INCREASE-CURRENT> 4,835,524
<NET-CHANGE-FROM-OPS> 5,585,178
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 751,477
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,816,312
<NUMBER-OF-SHARES-REDEEMED> 6,944
<SHARES-REINVESTED> 62,467
<NET-CHANGE-IN-ASSETS> 91,181,219
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,034
<AVERAGE-NET-ASSETS> 33,176,977
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 0.77
<PER-SHARE-DIVIDEND> 0.32
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.27
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST SEMI ANNUAL REPORT DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 35
<NAME> LIFESTYLE AGGRESSIVE 1000 TRUST
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 19,994,565
<INVESTMENTS-AT-VALUE> 21,419,926
<RECEIVABLES> 768
<ASSETS-OTHER> 42
<OTHER-ITEMS-ASSETS> 438
<TOTAL-ASSETS> 21,421,174
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 808
<TOTAL-LIABILITIES> 808
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,014,370
<SHARES-COMMON-STOCK> 1,638,732
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (19,365)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,425,361
<NET-ASSETS> 21,420,366
<DIVIDEND-INCOME> 176,018
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 176,018
<REALIZED-GAINS-CURRENT> (19,365)
<APPREC-INCREASE-CURRENT> 1,425,361
<NET-CHANGE-FROM-OPS> 1,582,014
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 176,018
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,701,002
<NUMBER-OF-SHARES-REDEEMED> 77,250
<SHARES-REINVESTED> 14,980
<NET-CHANGE-IN-ASSETS> 21,420,366
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 768
<AVERAGE-NET-ASSETS> 8,575,717
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 0.57
<PER-SHARE-DIVIDEND> 0.32
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.07
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
