As filed with the Securities & Exchange Commission on April 30, 1997
File No. 33-20957
File No. 811-05451
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 11
(Check appropriate box or boxes)
USLICO Series Fund
(Exact Name of Registrant as Specified in Charter)
4601 North Fairfax Drive, Arlington, Virginia 22203
(Address of Principal Executive Offices) (Zip Code)
Registrants's Telephone Number: (800) 338-7737
Robert B. Saginaw, Esquire
20 Washington Avenue South
Minneapolis, Minnesota 55401
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
(check appropriate box)
[X] Immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] On (date), pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
The Registrant has chosen to register an indefinite number of shares under the
Securities Act of 1933, pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Rule 24f-2 was filed on February 20, 1997.
CROSS REFERENCE SHEET
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ITEM NO.
FORM N-1A PART A HEADING IN PROSPECTUS
<S> <C>
Item 1.............................Cover Page
Item 2.............................Synopsis - Not Applicable
Item 3.............................Condensed Financial Information
Item 4.............................General Description of the Fund; Investment Objectives
and Policies; Investment Strategies and Performance;
Description of Securities and Investment Techniques;
Investment Restrictions; Risk Factors and Special
Considerations
Item 5.............................Management of the Fund
Item 5A............................Management's Discussion of Fund Performance
Item 6.............................Description of the Fund's Shares; Dividends, Distribution and Taxes
Item 7.............................Purchase of Shares; Net Asset Value Exchanges; Investment Performance
Item 8.............................Redemption or Shares
Item 9.............................Legal Proceedings - Not Applicable
PART B HEADING IN STATEMENT OF ADDITIONAL INFORMATION
Item 10............................Cover Page
Item 11............................Table of Contents
Item 12............................Introduction; General Information and History
Item 13............................Description of Securities and Investment Techniques
Item 14............................Management of the Fund; Trustees; Compensation of Trustees;
Custodian; Administrative Services Agreement
Item 15............................Control Persons and Principal Holders of Securities
Item 16............................Investment Adviser, Subadvisor, and Other Services
Item 17............................Portfolio Transactions and Brokerage
Item 18............................Capital Stock and other Securities
Item 19............................Purchase and Redemption; Net Asset Value
Item 20............................Taxation
Item 21............................Distribution of Fund Shares
Item 22............................Calculation of Performance Data; Performance Comparisons
Item 23............................Financial Statements; Independent Auditors' Report
PART C HEADING - OTHER INFORMATION
Item 24............................Financial Statements and Exhibits
Item 25............................Persons Controlled by or Under Common Control With Registrant
Item 26............................Number of Holders of Securities
Item 27............................Indemnification
Item 28............................Business and Other Connections with the Investment Adviser
Item 29............................Principal Underwriters
Item 30............................Location of Accounts and Records
Item 31............................Management Undertakings
Item 32............................Undertakings
</TABLE>
USLICO SERIES FUND
4601 NORTH FAIRFAX DRIVE
ARLINGTON, VIRGINIA 22203
(800) 338-7737
USLICO Series Fund (the "Fund") is an open-end, diversified management
investment company currently consisting of four separate series (the
"Portfolios"), each of which has its own investment objective and policies. As
of the date of this Prospectus, shares of the Portfolios are sold to separate
accounts of ReliaStar United Services Life Insurance Company and ReliaStar
Bankers Security Life Insurance Company to serve as the investment medium for
Variable Life Insurance Policies (the "Policies") issued by these companies. The
separate accounts invest in shares of one or more of the Portfolios, in
accordance with allocation instructions received from policy owners. Such
allocation rights are described further in the accompanying Prospectus offering
the variable life insurance policies.
The four Portfolios of the Fund are as follows:
The Stock Portfolio
The Money Market Portfolio
The Bond Portfolio
The Asset Allocation Portfolio
Information about the investment objective and restrictions of each
Portfolio, along with a detailed description of the types of securities in which
each Portfolio may invest, are set forth in this Prospectus. There can be no
assurance that the investment objective for any Portfolio will be achieved.
NONE OF THE PORTFOLIOS ARE INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
WHILE THE MONEY MARKET PORTFOLIO INTENDS TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE, THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO OBTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information,
dated April 30, 1997, containing additional and more detailed information about
the Fund has been filed with the Securities and Exchange Commission and is
hereby incorporated by reference into this Prospectus. The Statement of
Additional Information is available without charge and may be obtained by
writing to the Fund at the address printed above or calling the Fund at (800)
338-7737, extension 3623. The Statement of Additional Information is also
available without charge upon request by writing to ReliaStar at the above
address or by calling (800) 621-3750, and it may also be obtained by accessing
the SEC's internet web site (http://www.sec.gov).
SHARES OF THE FUND ARE AVAILABLE EXCLUSIVELY TO INSURANCE COMPANY SEPARATE
ACCOUNTS AS AN INVESTMENT VEHICLE FOR VARIABLE INSURANCE CONTRACTS. THIS
PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OFFERING THE
VARIABLE INSURANCE CONTRACT. BOTH PROSPECTUSES SHOULD BE READ CAREFULLY AND
RETAINED FOR FUTURE REFERENCE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY A 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 April 30, 1997.
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TABLE OF CONTENTS
DESCRIPTION PAGE
- ----------- ----
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CONDENSED FINANCIAL INFORMATION........................................................................................ 3
GENERAL DESCRIPTION OF THE FUND........................................................................................ 8
INVESTMENT OBJECTIVES AND POLICIES..................................................................................... 9
The Stock Portfolio............................................................................................. 9
The Money Market Portfolio...................................................................................... 10
The Bond Portfolio.............................................................................................. 11
The Asset Allocation Portfolio.................................................................................. 11
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES.................................................................... 12
U.S. Government Securities...................................................................................... 12
Mortgage-Related Securities..................................................................................... 12
Repurchase Agreements........................................................................................... 13
Certificates of Deposit......................................................................................... 13
Bankers' Acceptances............................................................................................ 13
Commercial Paper................................................................................................ 13
Corporate Debt Securities....................................................................................... 13
Options -- Calls................................................................................................ 14
INVESTMENT RESTRICTIONS................................................................................................ 14
Additional Investment Restrictions Applicable to the Money Market and Bond Portfolios........................... 15
Diversification................................................................................................. 15
RISK FACTORS AND SPECIAL CONSIDERATIONS................................................................................ 15
MANAGEMENT OF THE FUND................................................................................................. 16
Investment Advisers............................................................................................. 16
Portfolio Managers.............................................................................................. 17
Management Fees................................................................................................. 18
Other Expenses.................................................................................................. 18
Total Expenses.................................................................................................. 18
MANAGEMENT DISCUSSION OF FUND PERFORMANCE.............................................................................. 19
The Stock Portfolio............................................................................................. 19
The Bond Portfolio.............................................................................................. 20
The Asset Allocation Portfolio.................................................................................. 21
DISTRIBUTOR, CUSTODIAN, DIVIDEND DISBURSING, TRANSFER AGENT
AND ACCOUNT SERVICES AGENT............................................................................................. 22
EXCHANGES.............................................................................................................. 22
PORTFOLIO TRANSACTIONS................................................................................................. 22
DESCRIPTION OF THE FUND'S SHARES....................................................................................... 23
Capitalization.................................................................................................. 23
Voting Rights................................................................................................... 23
DIVIDENDS, DISTRIBUTION AND TAXES...................................................................................... 23
Federal Income Tax Status....................................................................................... 23
Distributions and Dividends..................................................................................... 24
PURCHASE OF SHARES..................................................................................................... 24
NET ASSET VALUE........................................................................................................ 25
REDEMPTION OF SHARES................................................................................................... 25
INVESTMENT PERFORMANCE................................................................................................. 26
INDEPENDENT AUDITORS................................................................................................... 27
</TABLE>
CONDENSED FINANCIAL INFORMATION
The following tables give information regarding income, distributions,
portfolio value changes and other information about the Common Stock, Money
Market, Bond and Asset Allocation Portfolios of the USLICO Series Fund (formerly
Bankers Security and United Services Variable Life Separate Accounts I, II, III
and IV), on a per fund share outstanding basis. The information is presented
under the continuing-entity basis of accounting, as if the Reorganization
described under "General Description of the Fund" had always been in effect.
Data shown for the periods prior to 1988 is derived solely from Bankers Security
Variable Life Separate Account which was deemed to be the principal predecessor
entity.
The information in the tables for the years ended December 31, 1996 and
1995 was derived from financial statements of the Fund audited by Deloitte &
Touche LLP, independent auditors of the Fund.
The information in the tables for the period January 1, 1987 through
December 31, 1994 has been derived from financial statements of the Fund (as
restated to give effect to the Reorganization described herein), for the same
period, which have been audited by KPMG Peat Marwick LLP, independent auditors.
The financial statements are incorporated by reference into the Statement of
Additional Information.
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COMMON STOCK PORTFOLIO
YEAR ENDED DECEMBER 31, 1996
1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
FINANCIAL HIGHLIGHTS
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period $12.62 $10.37 $11.23 $10.45 $10.55 $9.97 $11.81
Income from investment
operations:
Net investment income 0.34 0.36 0.36 0.32 0.38 0.38 0.37
Net realized and unrealized
gains
(losses) on securities 2.55 2.95 (0.05) 0.78 0.22 1.37 (1.15)
--------- --------- --------- --------- --------- -------- ---------
Total from investment 2.89 3.31 0.31 1.10 0.60 1.75 (0.78)
operations
Distributions:
Distribution of income (0.33) (0.37) (0.36) (0.32) (0.70) (0.29) (0.58)
Distribution of capital (1.93) (0.69) (0.81) 0 0 (0.88) (0.48)
gains
--------- --------- --------- --------- --------- -------- ---------
Net asset value, end of period $13.25 $12.62 $10.37 $11.23 $10.45 $10.55 $9.97
========= ========= ========= ========= ========= ========= =========
Total return 22.90% 31.92% 2.76% 10.53% 5.69% 17.55% (6.60%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $23,558,091 $19,968,336 $14,687,489 $12,449,453 $11,102,452 $10,128,224 $7,807,886
Expense to average net assets 0.75% 0.63% 0.75% 0.75% 0.75% 0.78% 0.72%
Net investment income to
average net assets 2.50% 3.07% 3.23% 2.93% 3.53% 3.61% 3.46%
Portfolio turnover rate 79.17% 62.51% 59.41% 51.27% 36.00% 98.05% 43.06%
Weighted average number of
shares outstanding for year
ended December 31 1,575,455 1,450,668 1,195,719 1,079,215 994,102 847,572 729,023
</TABLE>
COMMON STOCK PORTFOLIO
YEAR ENDED DECEMBER 31, 1996
1989 1988 1987
---- ---- ----
FINANCIAL HIGHLIGHTS
(CONTINUED)
Net Asset Value, beginning of
period $10.36 $9.76 $9.64
Income from investment
operations:
Net investment income 0.33 0.52 0.42
Net realized and unrealized
gains
(losses) on securities 2.17 0.80 (0.30)
--------- --------- ---------
Total from investment 2.50 1.32 0.12
operations
Distributions:
Distribution of income (0.33) (0.53) 0
Distribution of capital (0.72) (0.19) 0
gains
--------- --------- ---------
Net asset value, end of period $11.81 $10.36 $9.76
========= ========= =========
Total return 24.13% 10.80% 3.73%
RATIOS/SUPPLEMENTAL DATA
(CONTINUED)
Net assets, end of period $8,203,966 $6,876,501 $4,192,224
Expense to average net assets 0.84% 0.50% 0.26%
Net investment income to
average net assets 2.90% 5.20% 3.30%
Portfolio turnover rate 30.28% 12.79% 56.85%
Weighted average number of
shares outstanding for year
ended December 31 663,118 614,675 512,620
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MONEY MARKET PORTFOLIO
YEAR ENDED DECEMBER 31, 1996
1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
FINANCIAL HIGHLIGHTS
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income 0.05 0.05 0.04 0.02 0.03 0.05 0.07
Net realized and unrealized
gains
(losses) on securities 0 0 0 0 0 0 0
--------- --------- --------- --------- --------- --------- ---------
Total from investment 0.05 0.05 0.04 0.02 0.03 0.05 0.07
operations
Distributions:
Distribution of income (0.05) (0.05) (0.04) (0.02) (0.03) (0.05) (0.07)
Distribution of capital 0 0 0 0 0 0 0
gains
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
========= ========= ========= ========= ========= ========= =========
Total return 5.00% 5.00% 4.00% 2.00% 3.00% 5.00% 7.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $5,979,861 $5,819,470 $5,752,426 $5,371,877 $5,464,509 $5,329,151 $4,984,823
Expense to average net assets 0.75% 0.63% 0.75% 0.75% 0.75% 0.75% 0.68%
Net investment income to
average net assets 4.77% 5.37% 3.54% 2.42% 2.98% 5.30% 7.52%
Portfolio turnover rate N/A N/A N/A N/A N/A N/A N/A
Weighted average number of
shares outstanding for year
ended December 31 5,897,797 5,763,272 5,527,212 5,386,166 5,433,008 5,144,416 4,730,373
</TABLE>
MONEY MARKET PORTFOLIO
YEAR ENDED DECEMBER 31, 1996
1989 1988 1987
---- ---- ----
FINANCIAL HIGHLIGHTS
(CONTINUED)
Net Asset Value, beginning of period $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income 0.08 0.08 0.08
Net realized and unrealized
gains
(losses) on securities 0 0 0
--------- --------- ---------
Total from investment 0.08 0.08 0.08
operations
Distributions:
Distribution of income (0.08) (0.08) (0.08)
Distribution of capital 0 0 0
gains
--------- --------- ---------
Net asset value, end of period $1.00 $1.00 $1.00
========= ========= =========
Total return 8.00% 8.00% 8.00%
RATIOS/SUPPLEMENTAL DATA
(CONTINUED)
Net assets, end of period $4,616,689 $4,109,710 $2,535,315
Expense to average net assets 0.84% 0.10% 0.27%
Net investment income to
average net assets 8.39% 8.00% 6.50%
Portfolio turnover rate N/A N/A N/A
Weighted average number of
shares outstanding for year
ended December 31 4,421,651 3,896,950 2,928,408
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BOND PORTFOLIO
YEAR ENDED DECEMBER 31, 1996
1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
FINANCIAL HIGHLIGHTS
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period $10.38 $9.41 $10.49 $10.21 $10.21 $9.65 $10.00
Income from investment
operations:
Net investment income 0.64 0.66 0.67 0.70 0.73 0.79 0.78
Net realized and unrealized
gains
(losses) on securities (0.36) 1.04 (1.06) 0.37 0.06 0.58 (0.36)
--------- --------- --------- --------- --------- --------- ---------
Total from investment 0.28 1.70 (0.39) 1.07 0.79 1.37 0.42
operations
Distributions:
Distribution of income (0.64) (0.66) (0.67) (0.70) (0.79) (0.79) (0.76)
Distribution of capital 0 (0.07) (0.02) (0.09) 0 (0.02) (0.01)
gains
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period $10.02 $10.38 $9.41 $10.49 $10.21 $10.21 $9.65
========= ========= ========= ========= ========= ========= =========
Total return 2.70% 18.07% (3.72%) 10.48% 7.74% 14.20% 4.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $2,783,385 $3,068,825 $2,484,720 $2,631,773 $2,507,559 $2,512,214 $2,255,591
Expense to average net assets 0.75% 0.63% 0.75% 0.75% 0.75% 0.81% 0.61%
Net investment income to
average net assets 6.45% 6.49% 6.67% 6.62% 7.16% 7.86% 8.22%
Portfolio turnover rate 47.37% 32.67% 10.94% 19.04% 41.30% 12.17% 10.56%
Weighted average number of
shares outstanding for year
ended December 31 284,090 276,475 254,126 243,616 238,112 236,131 235,850
</TABLE>
BOND PORTFOLIO
YEAR ENDED DECEMBER 31, 1996
Period from
6/25/87
(inception)
to
1989 1988 12/31/87
---- ---- --------
FINANCIAL HIGHLIGHTS
(CONTINUED)
Net Asset Value, beginning of
period $9.63 $9.66 $9.52
Income from investment
operations:
Net investment income 0.78 0.92 0.39
Net realized and unrealized
gains
(losses) on securities 0.40 0.03 (0.25)
--------- --------- ---------
Total from investment 1.18 0.95 0.14
operations
Distributions:
Distribution of income (0.78) (0.95) 0
Distribution of capital (0.03) (0.03) 0
gains
--------- --------- ---------
Net asset value, end of period $10.00 $9.63 $9.66
========= ========= =========
Total return 12.25% 9.83% 1.47%
RATIOS/SUPPLEMENTAL DATA
(CONTINUED)
Net assets, end of period $2,375,680 $2,227,057 $2,090,880
Expense to average net assets 0.89% 0.50% 0.02%
Net investment income to
average net assets 7.90% 6.50% 8.10%
Portfolio turnover rate 4.32% 4.18% -
Weighted average number of
shares outstanding for year
ended December 31 230,848 217,798 107,366
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ASSET ALLOCATION PORTFOLIO
YEAR ENDED DECEMBER 31, 1996
1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
FINANCIAL HIGHLIGHTS
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period $11.82 $10.18 $11.26 $10.71 $10.71 $10.08 $10.83
Income from investment
operations:
Net investment income 0.53 0.55 0.55 0.58 0.61 0.61 0.64
Net realized and unrealized
gains
(losses) on securities 0.94 2.01 (0.70) 0.58 0.19 0.87 (0.55)
--------- --------- --------- --------- --------- --------- ---------
Total from investment 1.47 2.56 (0.15) 1.16 0.80 1.48 0.09
operations
Distributions:
Distribution of income (0.53) (0.55) (0.55) (0.58) (0.78) (0.58) (0.69)
Distribution of capital (0.91) (0.37) (0.38) (0.03) (0.02) (0.27) (0.15)
gains
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period $11.85 $11.82 $10.18 $11.26 $10.71 $10.71 $10.08
========= ========= ========= ========= ========= ========= =========
Total return 12.44% 25.15% (1.33%) 10.83% 7.47% 14.68% 0.83%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $14,614,568 $13,675,779 $10,548,284 $9,127,047 $8,054,067 $6,540,186 $4,497,556
Expense to average net assets 0.75% 0.63% 0.75% 0.75% 0.75% 0.77% 0.69%
Net investment income to
average net assets 4.39% 4.81% 5.09% 5.09% 5.61% 5.78% 6.17%
Portfolio turnover rate 61.98% 44.97% 28.53% 27.80% 26.79% 39.91% 19.54%
Weighted average number of
shares outstanding for year
ended December 31 1,148,567 1,068,503 892,257 772,390 665,240 507,445 393,425
</TABLE>
ASSET ALLOCATION PORTFOLIO
YEAR ENDED DECEMBER 31, 1996
Period from
6/25/87
(inception)
to
1989 1988 12/31/87
---- ---- --------
FINANCIAL HIGHLIGHTS
(CONTINUED)
Net Asset Value, beginning of
period $9.97 $9.72 $10.26
Income from investment
operations:
Net investment income 0.59 0.72 0.33
Net realized and unrealized
gains
(losses) on securities 1.09 0.29 (0.87)
--------- --------- ---------
Total from investment 1.68 1.01 (0.54)
operations
Distributions:
Distribution of income (0.58) (0.68) 0
Distribution of capital (0.24) (0.08) 0
gains
--------- --------- ---------
Net asset value, end of period $10.83 $9.97 $9.72
========= ========= =========
Total return 16.85% 10.39% (5.26%)
RATIOS/SUPPLEMENTAL DATA
(CONTINUED)
Net assets, end of period $4,072,387 $2,617,965 $2,085,034
Expense to average net assets 0.87% 0.50% 0.26%
Net investment income to
average net assets 5.53% 5.21% 6.20%
Portfolio turnover rate 17.03% 5.28% 9.48%
Weighted average number of
shares outstanding for year
ended December 31 310,973 236,949 102,740
GENERAL DESCRIPTION OF THE FUND
The Fund is an open-end, diversified management investment company that was
organized as a Massachusetts business trust on January 19, 1988.
The Fund is the successor for accounting purposes to the Separate Account I
(a Stock Account), Separate Account II (a Money Market Account), Separate
Account III (a Bond Account), and Separate Account IV (an Asset Allocation
Account) of United Services Life Insurance Company and Separate Account I (a
Stock Account), Separate Account II (a Money Market Account), Separate Account
III (a Bond Account), and Separate Account IV (an Asset Allocation Account) of
Bankers Security Life Insurance Society (collective, the "USL and BSL Separate
Accounts"). On April 30, 1988, the investment-related assets and liabilities of
the USL and BSL Separate Accounts were transferred to the Stock, Money Market,
Bond, and Asset Allocation Portfolios of the Fund. This transaction was pursuant
to separate Agreements and Plans of Reorganization of United Services Life
Insurance Company, the USL Separate Accounts, and USLICO Series Fund and Bankers
Security Life Insurance Society, the BSL Separate Accounts and USLICO Series
Fund, respectively. At the same time, the USL Separate Accounts were combined
into one continuing separate account, United Services Variable Life Separate
Account I, which was simultaneously reorganized to operate as a unit investment
trust under the 1940 Act rather than an open-end diversified management company.
Similarly, the BSL Separate Accounts were reorganized into one continuing
separate account, Bankers Security Variable Life Separate Account I, which was
simultaneously reorganized to operate as a unit investment trust under the 1940
Act rather than an open-end diversified management company. On July 1, 1996
Bankers Security Life Insurance Society changed its name to ReliaStar Bankers
Life Insurance Company. United Services Life Insurance Company changed its name
to ReliaStar United Services Life Insurance Company on January 1, 1997. Both
companies are wholly-owned subsidiaries of ReliaStar Financial Corp.
ReliaStar Financial Corp. is a Minneapolis-based holding company.
ReliaStar, through its affiliates, offers individual life insurance and
annuities, employee benefits, retirement plans, life and health reinsurance,
mutual funds, personal finance education and residential mortgages.
As a "series" type of mutual fund, the Fund issues shares of beneficial
interest relating to separate series of investment portfolios currently
consisting of the Stock Portfolio, Money Market Portfolio, Bond Portfolio, and
Asset Allocation Portfolio. Additional Portfolios may be established in the
future. An interest in the Fund is limited to the assets of the particular
Portfolio in which shares are held, and shareholders of each Portfolio are
entitled to a pro rata share of all dividends and distributions arising from the
net income and capital gains in the investment of such Portfolio. Each Portfolio
share outstanding carries a par value of $.001. The Fund has an unlimited number
of shares authorized.
The Fund's shares are sold only to separate accounts of insurance companies
to serve as the investment medium for variable insurance products. Currently,
the shares of the Fund are sold only to separate accounts (the "Separate
Accounts") of ReliaStar United Services Life Insurance Company ("RUSL") and
ReliaStar Bankers Security Life Insurance Company ("RBSL"), a wholly-owned
subsidiary of RUSL, to serve as an investment medium for variable life insurance
policies issued by these companies. These separate accounts invest in shares of
the Fund in accordance with allocation instructions received from policy owners.
In the future, shares of the Fund may be sold to other separate accounts of RUSL
or RBSL, or to separate accounts of other affiliated insurance companies to
serve as the investment medium for other variable life insurance policies or
variable annuity contracts. To the extent the Fund serves as the funding medium
for variable life insurance policies and variable annuity contracts, the Fund's
Board of Trustees will monitor events in order to identify any material
irreconcilable conflicts that may possibly arise between such policy owners and
contract owners and to determine what action, if any, should be taken in
response thereto.
INVESTMENT OBJECTIVES AND POLICIES
The USLICO Series Fund currently offers four Portfolios with separate
investment objectives as described below. There can be no assurance that any of
the Portfolios will achieve its investment objective or objectives. Each
Portfolio is subject to the general risk of changing economic conditions, as
well as the risk inherent in the ability of the Investment Adviser to make
changes in the Portfolio's investments in anticipation of changes in economic,
business, or other financial conditions. As with any security, a risk of loss is
inherent in an investment in Fund shares.
The different types of securities and investment techniques used by the
individual Portfolios all have attendant risks of varying degrees. For example,
with respect to equity securities, there can be no assurance of capital
appreciation and there is a risk of market decline. With respect to debt
securities, there exists the risk that the issuer of a security may not be able
to meet its obligations on interest or principal payments at the time called for
by an instrument. In addition, because the value of debt instruments rises and
falls inversely with interest rates generally, the longer the maturity of a debt
security, the more volatile it will be in terms of changes in value. Because
each Portfolio seeks a different investment objective, each is subject to
varying degrees of financial and market risks.
Certain types of investments and investment techniques common to one or
more Portfolios are described in greater detail, including the risks of each, in
this Prospectus under "Description of Securities and Investment Techniques" and
in the Statement of Additional Information.
The Portfolios are subject to investment restrictions that are described
under the heading "Investment Restrictions." Those investment restrictions so
designated and the investment objective of each Portfolio are "fundamental
policies" of the Fund, which means that they may not be changed without a
majority vote of shareholders of the affected Portfolio. Except for the
investment objectives and those restrictions specifically identified as
fundamental, all investment policies and practices described in this Prospectus
and in the Statement of Additional Information are not fundamental, meaning that
the Board of Trustees may change them without shareholder approval.
THE STOCK PORTFOLIO
The Stock Portfolio's investment objective is to achieve intermediate and
long-term capital growth. A reasonable level of income is a secondary objective.
To achieve its objective, the Portfolio invests primarily in common stock of
companies believed by the Adviser to offer above average growth potential over
both the intermediate and the long term. There can be no assurance that this
objective will be achieved.
Under normal circumstances, at least 70% of the Portfolio's assets will be
invested in common stock (including debt securities convertible into common
stock). The majority of such common stock will be listed on a national
securities exchange, although the Portfolio may also invest in stocks that are
traded over-the-counter on the NASDAQ national market system. The Portfolio may
also invest in convertible preferred stocks, convertible debt securities,
non-convertible debt securities, U.S. Government securities, commercial paper,
and other money market instruments, including repurchase agreements maturing in
seven days or less. The Portfolio will invest only in debt securities in the top
four rating categories of either Standard and Poor's Corporation ("S&P") (AAA,
AA, A, and BBB) or Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, and
Baa), or, if not rated, of comparable quality in the judgment of the Adviser,
and in commercial paper and money market instruments eligible for purchase by
the Money Market Portfolio.
The Portfolio may also seek to enhance the return on its common stock
portfolio by writing covered call options that are standardized and traded on a
United States securities exchange or board of trade (See "Options -- Calls"
under "Investment Techniques" in this prospectus.)
The Portfolio will retain a flexible approach to the investment of funds
and the portfolio composition may vary with the economic outlook. Therefore,
when, in the judgment of the Adviser, current cash needs or market or economic
conditions warrant a temporary defensive position, the Portfolio may invest to a
greater degree in short-term U.S. Government securities, commercial paper, and
other money market instruments.
THE MONEY MARKET PORTFOLIO
The investment objective of the Money Market Portfolio is to seek maximum
current income consistent with the preservation of capital and the maintenance
of liquidity by investing in "money market" instruments meeting specified
quality standards. The Portfolio may invest only in high-quality instruments
with a maturity or remaining maturity of 12 months or less from the date of
purchase, and may include the following: U.S. Government securities; commercial
paper maturing in nine months or less from the date of purchase if rated A-1 by
S&P or Prime-1 by Moody's, or, if not rated, issued by issuers having
outstanding debt securities rated at least AA by S&P or at least Aa by Moody's;
debt obligations rated at least AA by S&P or at least Aa by Moody's, or, if not
rated, issued by issuers having outstanding debt securities with such a rating;
repurchase agreements maturing in seven days or less with Federal Reserve System
banks or with dealers in U.S. Government securities; and negotiable certificates
of deposit, bankers' acceptances, fixed-time deposits, and other obligations of
federally chartered domestic banks, savings banks, or savings and loan
associations having total assets of $1 billion or more. The Portfolio will not
invest in any fixed-time deposit maturing in more than 7 days if, as a result,
more than 10% of the value of its total assets would be invested in such
fixed-time deposits and other illiquid securities. The Portfolio may also invest
in fixed-time or other deposits with a state-chartered bank that acts as
custodian to the Fund, provided that any such bank has total assets of $2
billion or more. The Portfolio may also purchase obligations that mature in 12
months or less from the date of purchase if the obligation is accompanied by a
guarantee of principal and interest provided that the guarantee is that of a
bank or corporation whose certificates of deposit or commercial paper may
otherwise be purchased by the Portfolio.
In addition to its other policies and restrictions, the Money Market
Portfolio is subject to the investment restrictions of Rule 2a-7 under the
Investment Company Act of 1940. Rule 2a-7 requires that the Portfolio maintain
an average weighted maturity of not more than 90 days and invest exclusively in
securities that mature within 397 days. Rule 2a-7 also requires that all
investments by the Portfolio be limited to United States dollar-denominated
investments that: (1) present "minimal credit risks," and (2) are at the time of
acquisition "Eligible Securities." Eligible Securities include, among others,
securities that are rated by two Nationally Recognized Statistical Rating
Organizations ("NRSROs") in one of the two highest categories for short-term
debt obligations, such as A-1 or A-2 by S&P, or P-1 or P-2 by Moody's. Eligible
Securities also include a long-term security if its issuer has received from two
NRSROs a rating, with respect to a class of short-term debt obligations that
currently is comparable in priority and security with the long-term security, in
one of the two highest rating categories. It is the responsibility of the
Adviser of the Portfolio to determine that the Fund's investments present only
"minimal credit risks" and are Eligible Securities.
Under Rule 2a-7, 95% of the assets of the Portfolio must be invested in
Eligible Securities that are deemed First Tier Securities, which include, among
others, securities rated by two NRSROs in the highest category (such as A-1 and
P-1). Rule 2a-7 also requires that: (1) the Portfolio may not (with certain
exceptions) invest more that 5% of its total assets in securities of a single
issuer; and (2) the Portfolio's investment in Second Tier Securities of a single
issuer may not exceed the greater of 1% of the Portfolio's total assets or $1
million. Repurchase agreements can be entered into only with regard to
Government securities or securities that are rated in the highest rating
category by two NRSROs.
THE BOND PORTFOLIO
The Bond Portfolio's investment objective is to provide a high level of
income consistent with prudent investment risk by investing primarily in
investment-grade intermediate to long-term corporate bonds and other debt
securities. As a secondary objective, the Portfolio seeks capital appreciation
when consistent with its principal objective. To achieve this objective, the
Portfolio invests primarily in securities rated in the top four rating
categories of either S&P (AAA, AA, A, and BBB) or Moody's (Aaa, Aa, A, and Baa)
or, if not rated, of equivalent quality in the judgment of the Adviser. The
Portfolio may also invest in U.S. Government securities, commercial paper,
certificates of deposit, and other money market instruments eligible for
purchase by the Money Market Portfolio. The Portfolio will not invest in common
stocks, rights, or other equity securities. There can be no assurance that the
Portfolio's objectives will be achieved.
The weighted average maturity of the securities in the Portfolio will vary
from time to time depending upon the judgment of the Adviser as to prevailing
conditions in the economy and the securities markets and the prospects for
interest rate changes among different categories of fixed-income securities.
Under normal circumstances, more than 80% of the Portfolio's assets will be
invested in fixed-income securities, including convertible and non-convertible
debt securities. Under unusual market or economic conditions, the Adviser, for
defensive or other purposes, may increase the amount of the Portfolio's assets
invested in U.S. Government securities, cash, and money market obligations that
can be purchased by the Money Market Portfolio, including certificates of
deposit and other bank obligations, commercial paper, and other fixed-income
securities.
Since shares of the Portfolio normally represent an investment primarily in
debt securities with market prices that may vary, the value of the Portfolio's
shares will vary as the aggregate value of the Portfolio's investments increases
or decreases. Although the Portfolio will invest only in investment-grade debt
securities, the market price of the Portfolio's securities will likely be
affected by changes in interest rates since the market value of debt obligations
may be expected to rise and fall inversely with interest rates generally. As
interest rates rise, the market value of fixed-income securities will likely
fall, adversely affecting the value of the Portfolio. Debt obligations with
longer maturities that typically provide the best yield will subject the
Portfolio to relatively greater price fluctuations than shorter-term
obligations.
THE ASSET ALLOCATION PORTFOLIO
The Asset Allocation Portfolio's investment objective is to seek, over the
intermediate and long-term, a high total return, consistent with prudent
investment risk by investing in common stocks, securities convertible into
common stocks, intermediate to long-term debt obligations and money market
instruments. Total return is the sum of dividend and interest income and capital
changes in the assets of the Portfolio. While this Portfolio will generally
emphasize investment in common stocks of larger capitalization issues and in
investment-grade debt securities, the Portfolio may also invest in stocks of
smaller and emerging growth companies. The Portfolio will invest only in debt
securities rated in the top four rating categories of either S&P (AAA, AA, A,
and BBB) or Moody's (Aaa, Aa, A, and Baa) or, if not rated, of equivalent
quality in the judgment of the Adviser, and in money market obligations eligible
for purchase by the Money Market Portfolio. In furtherance of its objective, the
Portfolio may also write covered call options traded on United States securities
exchanges or boards of trade. (See "Options -- Calls" at Page 14.) There can be
no assurance that the Portfolio's investment objective will be achieved.
The Adviser will determine the composition of the Portfolio based upon an
assessment of economic and market trends and the anticipated relative total
return available from investment in a particular type of security. Accordingly,
at any given time, the Portfolio may be substantially invested in common stocks,
debt securities, or money market securities. In determining asset allocation,
the Adviser may consider, among other factors, economic conditions, growth
potential of the economy, the securities markets, currency and tax
considerations, and other pertinent financial, social, national, and political
factors.
Because of the flexible investment policy of the Portfolio, turnover may be
greater than for a portfolio that does not allocate assets among various types
of securities, which may result in greater transactional costs.
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. GOVERNMENT SECURITIES--are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. Securities guaranteed by the U.S.
Government include: (1) direct obligations of the U.S. Treasury (such as
Treasury bills, notes, and bonds) and (2) federal agency obligations guaranteed
as to principal and interest by the U.S. Treasury (such as GNMA certificates).
In these securities, the payment of principal and interest is unconditionally
guaranteed by the U.S. Government, and thus they are of the highest possible
credit quality. Such securities are subject to variations in market value due to
fluctuations in interest rates, but, if held to maturity, will be paid in full.
Securities issued by U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of nor guaranteed by the Treasury.
However, they involve federal sponsorship in one way or another: some are
supported by the discretionary authority of the Treasury to purchase certain
obligations of the issuer; others are supported only by the credit of the
issuing government agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land Banks, Farmers
Home Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks. All of the Portfolios may invest in U.S.
Government securities.
MORTGAGE-RELATED SECURITIES--The Bond and Asset Allocation Portfolios may
invest in GNMA certificates and FNMA and FHLMC mortgage-backed obligations.
GNMA Certificates: GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
Government. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity. Although the mortgage loans in the pool will have maturities of up to
30 years, the actual average life of the GNMA certificates typically will be
substantially less because the mortgages will be subject to normal principal
amortization and may be prepaid prior to maturity. Reinvestment of prepayments
may occur at higher or lower rates than the original yield on the certificates.
FNMA and FHLMC Mortgage-Backed Obligations: The Federal National Mortgage
Association ("FNMA"), a federally chartered and privately-owned corporation,
issues pass-through securities representing interests in a pool of conventional
mortgage loans. FNMA guarantees the timely payment of principal and interest but
this guarantee is not backed by the full faith and credit of the U.S.
Government. The Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate
instrumentality of the United States, issues participation certificates which
represent an interest in a pool of conventional mortgage loans. FHLMC guarantees
the timely payment of interest and the ultimate collection of principal and
maintains reserves to protect holders against losses due to default, but the
certificates are not backed by the full faith and credit of the U.S. Government.
As is the case with GNMA certificates, the actual maturity of and realized yield
on particular FNMA and FHLMC pass-through securities will vary based on the
prepayment experience of the underlying pool of mortgages.
Risks of Mortgage-Related Securities: In the case of mortgage pass-through
securities such as GNMA certificates or FNMA and FHLMC mortgage-backed
obligations, early repayment of principal arising from prepayments of principal
on the underlying mortgage loans due to the sale of the underlying property, the
refinancing of the loan, or foreclosure may expose a Portfolio to a lower rate
of return upon reinvestment of principal. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby shortening the actual
average life of the mortgage-related security. Conversely, when interest rates
are rising, the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the mortgage-related security. Accordingly, it is not
possible to accurately predict the average life of a particular pool.
Reinvestment of prepayments may occur at higher or lower rates than the original
yield on the certificates. Therefore, the actual maturity and realized yield on
pass-through or modified pass-through mortgage-related securities will vary
based upon the prepayment experience on the underlying pool of mortgages.
REPURCHASE AGREEMENTS--are agreements by which the Portfolio purchases a
security and obtains a simultaneous commitment from the seller (a member bank of
the Federal Reserve System or a recognized securities dealer) to repurchase the
security at an agreed upon price and date. The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford an opportunity for a
Portfolio to maintain liquidity and earn income over periods of time as short as
overnight.
The underlying securities on repurchase agreements are ordinarily U.S.
Government securities, but may be other securities in which the Portfolio might
otherwise invest. A Portfolio will enter into repurchase agreements only if they
are fully collateralized. The market value of the collateral, including accrued
interest, will equal or exceed the repurchase price, and the collateral will be
in the actual or constructive possession of the Portfolio.
A Portfolio will enter only into repurchase agreements that mature in seven
days or less. A repurchase agreement subjects a Portfolio to the risk of the
ability of the seller to pay the repurchase price on the delivery date; however,
the underlying security constitutes the collateral for the seller's obligation.
In addition, the Adviser will enter into repurchase agreements with parties that
it considers creditworthy. In the event the seller does default, the Portfolio
may incur (i) a loss if the value of the collateral declines and (ii)
disposition costs in connection with liquidating the collateral. In the event
bankruptcy proceedings are commenced with respect to the seller, realization
upon the collateral by the Portfolio may be delayed or limited and a loss may be
incurred if the collateral securing the repurchase agreement declines in value
during the bankruptcy proceedings.
CERTIFICATES OF DEPOSIT--are certificates issued against funds deposited in
a bank, are for definite period of time, earn a specified rate of return, and
are normally negotiable.
BANKERS' ACCEPTANCES--are short-term credit instruments issued by
corporations to finance the import-export transfer or storage of goods. They are
termed "accepted" when a bank guarantees their payment at maturity. These
instruments reflect the obligation of both the bank and drawer to pay the face
amount of the instrument at maturity.
COMMERCIAL PAPER--All Portfolios may invest in commercial paper. Commercial
paper represents short-term unsecured promissory notes issued by bank holding
companies, corporations, and finance companies. The commercial paper purchased
by a Portfolio will consist of direct obligations of domestic issuers which, at
the time of investment, (i) meet the rating standard for particular Portfolios
as specified in the section on Investment Objectives and Policies, or (ii) if
not rated, are determined to be of an investment quality comparable to rated
commercial paper in which a Portfolio may invest.
CORPORATE DEBT SECURITIES--All Portfolios may invest in corporate debt
securities of domestic issuers. The debt securities in which a Portfolio may
invest are limited to corporate debt securities (corporate bonds, debentures,
notes, and other similar corporate debt instruments) which meet the minimum
ratings criteria or other standards set forth for that particular Portfolio, or,
if not so rated, are, in the Adviser's opinion, comparable in quality to
corporate debt securities in which a Portfolio may invest.
The investment return on corporate debt securities reflects interest
earnings and changes in the market value of the security. The market value of
corporate debt obligations may be expected to rise and fall inversely with the
interest rates generally. There also exists the risk that the issuers of the
securities may not be able to meet their obligations on interest or principal
payments at the time called for by an instrument.
OPTIONS--CALLS--The Stock Portfolio and the Asset Allocation Portfolio may
write (i.e., sell) call options ("calls") if (i) after any sale, not more than
25% of that Portfolio's total assets are subject to calls; (ii) the calls are
traded on a domestic securities exchange or board of trade; and (iii) the calls
are "covered." The option is "covered" if the Portfolio owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or, if additional cash
consideration is required, cash or cash equivalents in such amount are placed in
a segregated account by its custodian) upon conversion or exchange of other
securities held by the Portfolio. When the Portfolio writes a call, it receives
a premium and agrees to sell the callable securities to a purchaser at a fixed
exercise price (which may differ from the market price of the underlying
security) regardless of market price changes during the call period. The
Portfolio may purchase a call only in a "closing purchase transaction" to
terminate its obligation on a call which it has written. For as long as the
Portfolio remains obligated as a writer of a call, it forgoes the opportunity to
profit from increases in the market price of the underlying security above the
call price. The principal objective in writing covered calls is to attempt to
attain, through the receipt of premiums from expired calls and net profits, if
any, from closing purchase transactions, a greater current return than might be
realized by holding the securities without writing calls.
INVESTMENT RESTRICTIONS
Each Portfolio's investment objective as set forth under "Investment
Objectives and Policies," together with the investment restrictions set forth
below, are fundamental policies of each existing Portfolio and may not be
changed with respect to any Portfolio without the approval of a majority of the
outstanding voting shares of that Portfolio. The vote of a majority of the
outstanding voting securities of a Portfolio means the vote at an annual or
special meeting of: (i) 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the outstanding voting securities of
such Portfolio are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of such Portfolio, whichever is the less. Under
these restrictions, an existing Portfolio may not:
1. Purchase securities on margin or make short sales;
2. Invest more than 25% of its total assets in securities of any one
particular industry nor invest more than 5% of its assets in any one
issuer, except that these restrictions do not apply to investments in
U.S. Government securities and the 25% limit does not apply to the
Money Market or Bond Portfolios for securities or obligations issued
by U.S. banks;
3. Invest in more than 10% of any issuer's outstanding voting securities;
4. Invest in securities of other investment companies;
5. Participate in the underwriting of securities;
6. Borrow, pledge, or hypothecate its assets, except that a Portfolio may
borrow from banks for temporary purposes, but any such borrowing is
limited to an amount equal to 25% of a Portfolio's net assets and a
Portfolio will not purchase additional securities while borrowing
funds in excess of 5% of that Portfolio's net assets;
7. Invest for the purpose of exercising control over any company;
8. Invest in commodities or commodity contracts;
9. Purchase warrants, or write, purchase, or sell puts, calls, straddles,
spreads, or combinations thereof, except the Stock and Asset
Allocation Portfolios may write covered call options as described in
the section Investment Techniques;
10. Make investments in real estate or mortgages except that a Portfolio
may purchase readily marketable securities of companies holding real
estate or interest therein, or in oil, gas, or development programs;
11. Purchase securities having legal or contractual restrictions on
resale;
12. Make any loans of securities or cash, except that a Portfolio may,
consistent with its investment objective and policies, (i) invest in
debt obligations including bonds, debentures, or other debt
securities, bank and other depository institution obligations, and
commercial paper, even though the purchase of such obligations may be
deemed the making of loans, and (ii) enter into repurchase agreements;
13. Issue senior securities; and
14. Invest more than 10% of its total assets in repurchase agreements
maturing in more than seven days or in portfolio securities that are
not readily marketable.
ADDITIONAL INVESTMENT RESTRICTIONS APPLICABLE TO THE MONEY MARKET AND BOND
PORTFOLIOS
The Fund has adopted the following investment restrictions applicable only
to the Money Market and Bond Portfolios under which such Portfolios may not do
the following:
1. Invest in common stocks or other equity securities; and
2. Invest in securities of companies which, together with predecessor
companies, have a record of less than five years continuous
operations.
If a percentage restriction is adhered to at the time of an investment for
any Portfolio, a later increase or decrease in percentage resulting from a
change in the value of portfolio securities or the amount of the Portfolio's net
assets will not be considered a violation of any of the foregoing restrictions.
DIVERSIFICATION
As indicated by the second fundamental investment restriction set forth
above, each Portfolio operates as a "diversified" fund. In addition, each
Portfolio intends to conduct its operations so that it will comply with
diversification requirements of Subchapter M of the Internal Revenue Code of
1986 as amended (the "Code"), and qualify as a "regulated investment company."
In order to qualify as a regulated investment company, each Portfolio must limit
its investments so that at the close of each quarter of the taxable year, with
respect to at least 50% of its total assets, not more than 5% of its total
assets will be invested in the securities of a single issuer. The Code requires
that not more than 25% in value of each Portfolio's total assets may be invested
in the securities of a single issuer at the close of each quarter of the taxable
year. These restrictions do not apply to investments in U.S. Government
securities. The 25% limit does not apply to the Money Market Fund or the Bond
Portfolio for securities or obligations issued by U.S. Banks.
RISK FACTORS AND SPECIAL CONSIDERATIONS
GENERALLY
The value of a Portfolio's investments, and as a result the net asset value
of the Portfolio's shares, will fluctuate in response to changes in the market
and economic conditions as well as the financial condition and prospects of
issuers in which the Portfolio invests. Because of the risks associated with the
Fund's investments, the Fund is intended as a long term investment vehicle for
Variable Life Insurance Policies and is not designed to provide policyholders
with a means of speculating on short-term stock market movements. While the Fund
may compare its total returns for benchmarking purposes to the total returns of
broad based securities indices (such as the S&P 500), the Fund is not managed to
replicate the securities contained in such indices and therefore may achieve
returns which are less than such indices.
REPURCHASE AGREEMENTS
In entering into a repurchase agreement, the Portfolio bears a risk of loss
in the event that the other party to the transaction defaults on its obligations
and the Portfolio is delayed, or prevented from, exercising its rights to
dispose of the underlying securities, including the risk of possible decline in
the value of the underlying securities during the period in which the Portfolio
seeks to assert its rights to them, the risk of incurring expenses associated
with asserting those rights and the risk of losing all or part of the income
from the agreement.
OPTIONS
Participation in the options market involves investment risks and
transaction costs to which the Portfolio would not be subject, absent the use of
this strategy. If predictions of movements in the direction of the securities
and interest rate markets are inaccurate, the adverse consequences to the
Portfolio may leave it in a worse position than if such strategy was not used.
Risks inherent in the use of options include: (a) dependency on the ability of
the Portfolio Manager, as the case may be, to predict correctly movements in the
direction of interest rates and securities prices; (b) imperfect correlation
between the price of options and movements in the prices of the securities; (c)
the fact that the skills needed to use these strategies are unique to this
investment technique; and (d) the possible need to defer closing out certain
positions. See "Description of Securities and Investment Techniques" in the
Statement of Additional Information.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of its
Board of Trustees according to applicable laws of the Commonwealth of
Massachusetts and the Fund's Declaration and Agreement of Trust. The Trustees
are Richard C. Kaufman, Chairman, David H. Roe, President, Jeri A. Eckhart, and
Wayne O. Jefferson, Jr. Additional information about the Trustees and the Fund's
executive officers may be found in the Statement of Additional Information under
the heading "Management of the Fund."
INVESTMENT ADVISERS
Effective April 1, 1995, the Fund entered into an Investment Advisory
Agreement with Washington Square Advisers, Inc. (the "Adviser"). The Adviser's
address is 100 Washington Square, Suite 700, Minneapolis, Minnesota 55401.
Effective April 1, 1995 the Fund, the Adviser and Newbold's Asset Management,
Inc. (the "Sub-Adviser") entered into a Sub-Investment Advisory Agreement under
which the Sub-Adviser provides advisory services to the Stock Portfolio and the
equity portion of the Asset Allocation Portfolio of the Fund. The address of the
Sub-Adviser is 950 Haverford Road, Bryn Mawr, PA 19010. Both agreements were
reapproved by the Board of Trustees on March 5, 1997.
The Sub-Adviser was founded in 1943 and incorporated in June, 1988 for the
purpose of acquiring all the assets and liabilities of Newbold's Asset
Management. The Sub-Adviser is a wholly owned Subsidiary of United Asset
Management Corporation. No Trustee of the Fund has any financial interest in the
Sub-Adviser or its affiliates.
Subject to overall supervision of the Fund's Board of Trustees, the Adviser
exercises overall responsibility for the investment and reinvestment of the
Fund's assets for which it has primary investment responsibility and
continuously monitors and supervises all aspects of the Sub-Adviser's
performance of its investment advisory duties. In so doing, the Adviser manages
the day-to-day investment operations of the Fund and the composition of the
investment portfolios of the Bond and Money Market Portfolios and the assets of
the Asset Allocation Portfolio not allocated to the management of the
Sub-Adviser, including the purchase, retention and disposition of the
investments, securities and cash contained therein, in accordance with each
Portfolio's investment objectives and policies as stated in the Fund's
Declaration and Agreement of Trust, By-Laws, Prospectus and Statement of
Additional Information as from time to time in effect. With the assistance of
the Sub-Adviser, the Adviser determines the portion of the Asset Allocation
Portfolio to be allocated to the management of the Sub-Adviser.
Subject to the overall responsibility of the Fund's Board of Trustees and
the Adviser, the Sub-Adviser will exercise overall responsibility for the
investment and reinvestment of the Stock Portfolio and the portion of the assets
of the Asset Allocation Portfolio allocated by the Adviser to the Sub-Adviser.
In so doing, the Sub-Adviser will manage the day-to-day operations of the
investment portfolio of the Stock Portfolio and the portion of the Asset
Allocation Portfolio for which it has primary advisory responsibility, which
includes all equity investments and will manage the composition of these
Portfolios, including the purchase, retention and disposition of the
investments, securities and cash contained therein, in accordance with each
Portfolio's investment objectives and policies as stated in the Fund's
Declaration and Agreement of Trust, By-Laws, Prospectus and Statement of
Additional Information as from time to time in effect. The Sub-Adviser will
furnish to the Board of Trustees such periodic and special reports as the Board
may reasonably request. The Sub-Adviser will also implement purchases and sales
of investments for each Portfolio in a manner consistent with such investment
policies, as from time to time amended.
At the Fund's request, the Adviser will provide, without charge, personnel,
who may be the Fund's officers, to render certain clerical, accounting,
administrative and other services, other than investor services, to the Fund as
it may from time to time request. Also, the Adviser will furnish to the Fund,
without additional charge, such administrative and management supervision and
office facilities, which may be the Adviser's own offices, as the Adviser may
believe appropriate or as the Fund may reasonably request, subject to the
requirements of any regulatory authority to which the Adviser may be subject.
However, the Fund may also hire its own employees and contract for services to
be performed by third parties.
The Adviser is a wholly-owned subsidiary of ReliaStar Financial Corp.
ReliaStar Financial Corp. is also the parent company of ReliaStar United
Services Life Insurance Company, which is the parent company of ReliaStar
Bankers Security Life Insurance Company. The Adviser was established in 1981. As
of December 31, 1996, total net assets of the four Portfolios of the Fund were
approximately $46.9 million.
PORTFOLIO MANAGERS
The Stock Portfolio, and that portion of the Asset Allocation Portfolio
investing primarily in stocks, is managed by James H. Farrell, Jr., who since
March, 1997 has had the primary responsibility for the day to day investment
management of those assets. He is the Chief Investment Officer of the
Sub-Adviser, Newbold's Asset Management, and a Chartered Financial Analyst
(CFA). Mr. Farrell has 27 years of investment management experience and has been
employed by the Sub-Adviser since 1996. From 1980 through 1994, he was employed
by Cashman, Farrell and Associates performing senior portfolio management
responsibilities, and from 1994 to 1996 he was a principal in Farrell & Seiwell
Investment Advisors. He is a cum laude graduate of Tufts University and earned
his MBA from Drexel University.
The Money Market and Bond Portfolios, and that portion of the Asset
Allocation Portfolio which invests in bonds and money market assets, is managed
by Gregory Hanson. He has been the Portfolio manager for these assets since
April, 1995. He is a Senior Vice President and Portfolio Manager of the Adviser,
Washington Square Advisers, where he has served in its investment department
since August 1979. He has an MBA degree in Finance from the University of St.
Thomas, St. Paul, Minnesota, and is a Chartered Financial Analyst (CFA).
MANAGEMENT FEES
Under the Investment Advisory Agreement, the Adviser is compensated for its
services at a quarterly fee based on an annual percentage of the average daily
net assets of each Portfolio. For each Portfolio, the Fund pays the Adviser a
fee at a maximum annual rate of .50% of the first $100 million of the average
daily net assets of the Portfolio, and .45% of the average daily net assets of
the Portfolio in excess of $100 million. During 1996 and 1995, the Adviser was
paid a fee at an annual rate of .25% of the net asset value of the Portfolios,
except for the period from January 1, 1995 to June 30, 1995 during which no
investment advisory fee was charged pending approval of new advisory agreements
June 30, 1995. For the years 1996, 1995, and 1994, the Fund paid the Adviser the
following management fees: Stock Portfolio, $53,353, $23,450 and $33,276,
respectively; Money Market Portfolio, $14,752, $7,184 and $13,776, respectively;
Bond Portfolio, $7,176, $3,692, and $6,302 respectively; Asset Allocation
Portfolio, $34,689, $16,081 and $24,168, respectively.
The Adviser pays the Sub-Adviser on a quarterly basis, based on the value
of the assets under the Sub-Adviser's Management on the last day of the quarter,
an annual fee of .50% on the first $20 million, .40% on the next $20 million and
.30% thereafter. The Fund does not directly compensate the Sub-Adviser.
The Investment Advisory Agreement with the Adviser and the Sub-Advisory
Agreement were approved by a majority of the Board (including a majority of the
non-interested Trustees) on March 1, 1995, effective April 1, 1995, and approved
by Fund Shareholders on June 30, 1995. Assuming shareholder approval, the
Agreements will continue in effect so long as they are approved at least
annually by (i) the holders of a majority of the outstanding voting securities
of the Fund or by the Board and (ii) a majority of the non-interested Trustees
[as defined in the Investment Company Act of 1940 (the "1940 Act)]. The
Agreements were re-approved most recently by the Board and a majority of the
non-interested trustees on March 5, 1997. Each Agreement will terminate
automatically in the event of its assignment, and may be terminated without
penalty on sixty days' written notice by any party to the Agreement. (See
"Description of the Fund's Shares -- Voting Rights" at Page 18.)
OTHER EXPENSES
The Fund bears all costs of its operations. Such costs include fees to the
Adviser, shareholder servicing costs, trustees' fees and expenses, legal,
accounting services, auditing fees, custodian fees, printing and supplies,
registration fees, and others. Fund expenses directly attributable to a
Portfolio are charged to that Portfolio; other expenses are allocated
proportionately among all the Portfolios in relation to the net assets of each
Portfolio. In 1996, 1995, and 1994, the Fund paid $219,940, $189,587, and
$155,043 respectively for these services.
TOTAL EXPENSES
In 1996, the management fee (computed on an annualized basis as a
percentage of the net asset value of each Portfolio) and the total operating
expenses as a percentage of average net assets of each Portfolio were as
follows:
<TABLE>
<CAPTION>
TOTAL EXPENSES
PORTFOLIO MANAGEMENT FEE (INCLUDING MANAGEMENT FEES)
- --------- -------------- ---------------------------
<S> <C> <C>
Common Stock Portfolio .25% .75%
Money Market Portfolio .25% .75%
Bond Portfolio .25% .75%
Asset Allocation Portfolio .25% .75%
</TABLE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
STOCK PORTFOLIO
Newbold's Asset Management, Inc. (the Sub-Adviser') is responsible for the
investments and reinvestments of the Stock Portfolio's assets. They are "value
oriented" in their investment philosophy, which means they proceed from the
premise that investment value and return can best be realized through buying
companies with a low price relative to current earnings. This "bottom up"
approach seeks to identify companies whose earnings growth suggests an
increasing stream of future dividend income, and whose shares' pricing
represents a level below realizable value.
In the continued strong stock market environment during 1996, Newbold's
participated reasonably well given their value style investment approach.
Individual stock selection, particularly in the Energy and Healthcare sectors,
contributed positively to the year's results. The shortfall in return relative
to the S&P 500 was largely due to the Fund's underweighting in bank stocks and
the high-performing Technology sector relative to index, and to a higher
weighting in the lagging Utility sector. Newbold's investment approach precluded
them from holding a full market weighting in Technology due to the increased
weighting in the Financial sector and reduced commitment to Utility stocks in
comparison with the prior year. Consistent with Newbold's investment philosophy,
the Fund continues to be positioned in a portfolio of high quality stocks with
low valuations and high current dividend yields.
[GRAPHIC GOES HERE]
<TABLE>
<CAPTION>
Comparison of Ten Year Cumulative Total Return
Between the Stock Portfolio and the S&P 500 Index
12/86 12/87 12/88 12/89 12/90 12/91
TOTAL RETURN
<S> <C> <C> <C> <C> <C> <C>
Stock Portfolio-Per F/S 11.96 3.73 10.80 24.13 (6.60) 17.55
S&P 500 Index total return 18.62 5.18 16.61 29.92 (1.79) 30.47
incl divs
TOTAL RETURN APPLIED TO BASE-Source for Chart
Stock Portfolio (Italics) 10.0 10.4 11.5 14.3 13.3 15.7
S&P 500 Index 10.0 10.5 12.3 15.9 15.6 20.4
Comparison of Ten Year Cumulative Total Return
Between the Stock Portfolio and the S&P 500 Index
12/92 12/93 12/94 12/95 12/96
TOTAL RETURN
Stock Portfolio-Per F/S 5.69 10.53 2.76 31.92 22.90
S&P 500 Index total return 7.62 10.06 1.32 37.58 22.96
incl divs
TOTAL RETURN APPLIED TO BASE-Source for Chart
Stock Portfolio (Italics) 16.6 18.3 18.8 24.8 30.5
S&P 500 Index 22.0 24.2 24.5 33.7 41.5
</TABLE>
*- $10,000 INVESTED ON 12/31/86 IN FUND OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS FISCAL YEARS ENDED 12/31
The Standard and Poor's ("S&P) 500 Index is an unmanaged, market value
weighted index of 500 widely held common stocks. The index includes industrial,
utility, financial and transportation stocks primarily, but not exclusively,
traded on the New York Stock Exchange. The S&P 500 represents approximately 77%
of the NYSE market capitalization. The index assumes that no operating expenses,
transaction fees or sales charges are incurred by a hypothetical investor who
directly owns the securities maintained in the index. In order to outperform the
index over any specific time frame, a fund must return to investors an amount
greater than that provided by the index plus total operating expenses.
Returns include the reinvestment of all distributions at Net Asset Value
and the change in share price for the stated period, but exclude insurance and
administration charges assessed by the insurance company separate accounts. Past
performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
THE BOND PORTFOLIO
The responsibility for investments and reinvestments in the Bond Portfolio
is with Washington Square Advisers, Inc. (the "Adviser"), which is affiliated
with ReliaStar Bankers Security Life Insurance Company and ReliaStar United
Services Life Insurance Company. Investments are primarily in investment-grade
intermediate to long-term corporate bonds. During 1996, the Bond Portfolio was
primarily invested in corporate bonds rated "A" or better by Moody's or Standard
& Poor's. The Portfolio holds no Collateralized Mortgage Obligations. The
average maturity of the bonds was less than ten years. The composition of the
Portfolio holdings tended to have heavier emphasis on corporate bonds than that
of its most representative industry index, which is the Lehman Brothers
Government/Corporate Bond Index. The Total Return for 1996, after all expenses
at the Portfolio level was 2.70%.
[GRAPHIC GOES HERE]
<TABLE>
<CAPTION>
Comparison of 114 Month Cumulative Total Return
Between the Bond Portfolio and the Lehman Bros Gov't Corp Index
6/25/87 12/87 12/88 12/89 12/90 12/91
TOTAL RETURN
<S> <C> <C> <C> <C> <C> <C>
Bond Portfolio-Per F/S 1.47 9.83 12.25 4.20 14.20
Lehman Index Total Return 1.15 7.59 14.24 8.28 16.13
TOTAL RETURN APPLIED TO BASE-Source for Chart
Bond Portfolio (Italics) 10.0 10.1 11.1 12.5 13.0 14.9
Lehman Bros Gov't Corp Index 10.0 10.1 10.9 12.4 13.5 15.6
Comparison of 114 Month Cumulative Total Return
Between the Bond Portfolio and the Lehman Bros Gov't Corp Index
12/92 12/93 12/94 12/95 12/96
TOTAL RETURN
Bond Portfolio-Per F/S 7.74 10.48 (3.72) 18.07 2.70
Lehman Index Total Return 7.58 11.03 (3.51) 19.24 2.90
TOTAL RETURN APPLIED TO BASE-Source for Chart
Bond Portfolio (Italics) 16.0 17.7 17.1 20.1 20.7
Lehman Bros Gov't Corp Index 16.8 18.7 18.0 21.5 22.1
</TABLE>
*- $10,000 INVESTED ON 6/25/87 IN FUND OR 7/1/87 IN INDEX INCLUDING REINVESTMENT
OF DIVIDENDS FISCAL YEARS ENDED 12/31
The Lehman Brothers Corporate/Bond Index is a broad, unmanaged index of
securities of United States Municipalities. The index assumes that no operating
expenses, transaction fees or sales loads are incurred by a hypothetical
investor who directly owns the securities maintained in the index. In order to
outperform an index over any specific time frame, a fund must return to
investors an amount greater than that provided by the index plus total operating
expenses. For this reason, few fixed income funds are able to outperform broad
market indices over the long term. The chart above is comprised of data that
represents the cumulative total return of a hypothetical investment of $10,000
made on the dates the Fund commenced operations through December 31, 1996.
Returns include the reinvestment of all distributions at Net Asset Value
and the change in share price for the stated period, but exclude insurance and
administration charges assessed by the insurance company separate accounts. Past
performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
THE ASSET ALLOCATION PORTFOLIO
This Portfolio consists of stocks, intermediate to long term bonds of
primarily investment grade and money market instruments. The stocks are chosen
by Newbold's, which is also responsible for choosing the stocks in the Stock
Portfolio. It is a "value oriented" investment manager and uses the same
strategies to pick stocks for this Portfolio as is described under "Investment
Strategies and Performance of the Stock Portfolio." The Adviser for the bonds
and money market portions is Washington Square Advisers, Inc. During 1996, the
bonds in the Portfolio were primarily corporate bonds rated "A" or better by
Moody's or Standard and Poor's. The Portfolio holds no Collateralized Mortgage
obligations. The average maturity of the bonds was less than ten years. Bond
holdings were slightly shorter in duration with heavier emphasis on corporate
bonds than that of Lehman Brothers Government/Corporate Bond Index. The Total
Return for 1996, after all expenses at the Portfolio level, was 12.44%.
[GRAPHIC GOES HERE]
<TABLE>
<CAPTION>
Comparison of 114 Month Cumulative Total Return Between the Asset Allocation
Portfolio, Lehman Bros Gov't Corp Index and S&P 500 Index
6/25/87 12/87 12/88 12/89 12/90 12/91
TOTAL RETURN
<S> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio-Per F/S (5.26) 10.39 16.85 0.83 14.68
S&P 500 Index 18.62 5.18 16.61 29.92 (1.79) 30.47
TOTAL RETURN APPLIED TO BASE-Source for Chart
Asset Allocation Portfolio (Italics)10.0 9.5 10.5 12.2 12.3 14.1
Lehman Bros Gov't Corp Index 10.0 10.1 10.9 12.4 13.5 15.6
S&P 500 Index (underline) 10.0 10.3 12.0 15.5 15.3 19.9
Comparison of 114 Month Cumulative Total Return
Between the Asset Allocation Portfolio, Lehman Bros Gov't Corp Index and S&P 500 Index
12/92 12/93 12/94 12/95 12/95
TOTAL RETURN
Asset Allocation Portfolio-Per F/S 7.47 10.83 (1.33) 25.15 12.44
S&P 500 Index 7.62 10.06 1.32 37.58 22.96
TOTAL RETURN APPLIED TO BASE-Source for Chart
Asset Allocation Portfolio (Italics) 15.2 16.8 16.6 20.8 23.4
Lehman Bros Gov't Corp Index 16.8 18.7 18.0 21.5 22.1
S&P 500 Index (underline) 21.4 23.6 23.9 32.9 40.4
</TABLE>
*- $10,000 INVESTED ON 6/25/87 IN FUND OR 7/1/87 IN INDEX INCLUDING REINVESTMENT
OF DIVIDENDS FISCAL YEARS ENDED 12/31
The Lehman Brothers Corporate/Bond Index is a broad, unmanaged index of
securities of United States Municipalities. The index assumes that no operating
expenses, transaction fees or sales loads are incurred by a hypothetical
investor who directly owns the securities maintained in the index. In order to
outperform an index over any specific time frame, a fund must return to
investors an amount greater than that provided by the index plus total operating
expenses. For this reason, few fixed income funds are able to outperform broad
market indices over the long term. The chart above is comprised of data that
represents the cumulative total return of a hypothetical investment of $10,000
made on the dates the Fund commenced operations through December 31, 1996.
Returns include the reinvestment of all distributions at Net Asset Value
and the change in share price for the stated period, but exclude insurance and
administration charges assessed by the insurance company separate accounts. Past
performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
DISTRIBUTOR, CUSTODIAN, DIVIDEND DISBURSING AGENT, TRANSFER AGENT,
ADMINISTRATIVE AND ACCOUNT SERVICES AGENT
DISTRIBUTOR
The distributor for shares of the Fund is Washington Square Securities,
Inc., a wholly-owned subsidiary of ReliaStar Financial Corp. The distributor's
address is 20 Washington Avenue South, Minneapolis, Minnesota, 55402. It is a
Registered broker-dealer under the Securities Exchange Act of 1934 and a member
of the National Association of Securities Dealers and an affiliate of RUSL and
RBSL. Washington Square Securities, Inc. acts a distributor without remuneration
from the Funds.
CUSTODIAN
Crestar Bank, a Virginia banking institution serves as custodian for the
Fund's portfolio securities. See - "Management of the Fund - Custodian" in the
Statement of Additional Information.
DIVIDEND DISBURSING, TRANSFER AGENT, ADMINISTRATIVE AND ACCOUNT SERVICES AGENT
RUSL acts as the Fund's dividend disbursing, transfer, administrative and
accounting services agent pursuant to an Administrative Services Agreement (the
"Administration Agreement") by and between the Fund, RUSL, and the Adviser. See
- - "Management of the Fund - Administrative Services Agreement" in the Statement
of Additional Information.
EXCHANGES
Shares of any one Portfolio may be exchanged for shares of any of the other
Portfolios in the Fund, all of which are described in this Prospectus. Exchanges
are treated as a redemption of shares of one Portfolio and a purchase of shares
of one or more of the other Portfolios and are effected at the respective net
asset values per share of each Portfolio on the date of the exchange. The Fund
reserves the right to modify or discontinue its exchange privilege at any time
without notice.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Adviser places orders
for the purchase and sale of portfolio investments for the Fund's Portfolios
with brokers or dealers selected by it in its discretion. In executing
transactions, the Adviser will attempt to obtain the best execution for a
Portfolio taking into account such factors as price (including the applicable
brokerage experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution and operational facilities
of the firms involved, and the firm's risk in positioning a block of securities.
In effecting purchases and sales of portfolio securities in transactions on
United States stock exchanges for the account of the Fund, the Adviser may pay
higher commission rates than the lowest available when the Adviser believes it
is reasonable to do so in light of the value of the brokerage and research
services provided by the broker effecting the transaction. In the case of
securities traded on the over-the-counter markets, there is generally no stated
commission, but the price includes an undisclosed commission or markup.
Some securities considered for investment by the Fund may also be
appropriate for other clients served by the Adviser. If a purchase or sale of
securities consistent with the investment policies of a Portfolio and one or
more of these clients served by the Adviser is considered at or about the same
time, transactions in such securities will be allocated among the Portfolio and
clients in a manner deemed fair and reasonable by the Adviser. Although there is
no specified formula for allocating such transactions, the various allocation
methods used by the Adviser, and the results of such allocations, are subject to
periodic review by the Fund's Adviser and Board of Trustees. It is anticipated
that the annual portfolio turnover, as defined above, will not exceed the
following limits of the Portfolios under normal market conditions: Stock
Portfolio -- 125%, Bond Portfolio -- 100%, and Asset Allocation Portfolio --
150%. Increased portfolio turnover may result in greater brokerage commissions.
In 1996, the Portfolio turnover rate was: Stock Portfolio -- 79.17%, Bond
Portfolio --47.37%, and Asset Allocation Portfolio -- 61.98%.
Market conditions and changes in interest rates may result in turnover at a
greater or lesser rate than anticipated. For information on calculating
portfolio turnover, see the section "Portfolio Turnover" in the Statement of
Additional Information.
DESCRIPTION OF THE FUND'S SHARES
CAPITALIZATION
The Fund was organized as a Massachusetts business trust on January 19,
1988, and currently consists of four separately managed Portfolios. The Board of
Trustees may establish additional Portfolios in the future. The capitalization
of the Fund consists solely of an unlimited number of shares of beneficial
interest with a par value of $0.001 each. When issued, shares of the Fund are
fully paid, non-assessable, and freely transferable.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the
Declaration and Agreement of Trust disclaims liability of the shareholders,
Trustees, or officers of the Fund for acts or obligations of the Fund, which are
binding only on the assets and property of the Fund and requires that notice of
the disclaimer be given in each contract or obligation entered into or executed
by the Fund or the Trustees. The Declaration and Agreement of Trust provides for
indemnification out of Fund property for all loss and expense of any shareholder
held personally liable for the obligations of the Fund. The risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations and thus should be considered remote.
VOTING RIGHTS
Shareholders of the Fund are given certain voting rights. Massachusetts
business trust law does not require the Fund to hold annual shareholder
meetings, although special meetings may be called for a specific Portfolio, or
for the Fund as a whole, for purposes such as electing or removing Trustees,
changing fundamental policies, or approving an advisory contract. In accordance
with current laws, it is anticipated that an insurance company issuing one or
more variable contracts that participate in the Fund will request voting
instructions from owners of the contracts and will vote shares or other voting
interests in the separate account in proportion to the voting instructions
received. The Fund's Declaration and Agreement of Trust provides that the
holders of not less than two-thirds of the outstanding shares of the Trust may
remove a person serving as a Trustee either by declaration in writing or a
meeting called for such a purpose. The Trustees are required to call a meeting
for the purpose of considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust.
DIVIDENDS, DISTRIBUTION AND TAXES
FEDERAL INCOME TAX STATUS
Each Portfolio intends to qualify each year as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code"). Under such
provisions, a Portfolio will not be subject to federal income tax on the part of
its net investment income and its realized capital gains that it distributes to
the Separate Account. Such income and capital gains distributions are
automatically reinvested in additional shares of the Portfolio.
Distributions of any net investment income and of any net realized
short-term capital gains are treated as ordinary income for tax purposes in the
hands of the shareholder (Separate Account). The excess of any net long-term
capital gains over the net short-term capital losses will, to the extent
distributed, be treated as long-term capital gains in the hands of the Separate
Account regardless of the length of time the Separate Account may have held the
shares.
The Code generally imposes a 4 percent excise tax on a portion of the
undistributed income of a regulated investment company if that company fails to
distribute required percentages of its ordinary income and capital gain net
income. Each portfolio intends to employ practices that will eliminate or
minimize the imposition of this excise tax. To comply with regulations under
Section 817(h) of the Code, beginning after the first anniversary of investment
in the Fund, each Portfolio will be required to diversify its investments.
Generally, a Portfolio will be required to diversify its investments so that on
the last day of each quarter of a calendar year, no more than 55% of the value
of its assets is represented by securities of any one issuer, no more than 70%
is represented by securities of any two issuers, no more than 80% is represented
by securities of any three issuers, and no more than 90% is represented by
securities of any four issuers. For this purpose, each U.S. Government agency
and instrumentality is to be treated as a separate issuer. A special rule allows
an investment medium underlying variable life insurance contracts to include an
unlimited amount of Treasury securities (a direct obligation of the U.S.
Treasury) so long as its assets other than Treasury securities are adequately
diversified. For purposes of determining whether its assets other than Treasury
securities are adequately diversified, the generally applicable percentage
limitations are increased by one-half of the percentage of the value of the
assets of the account that is represented by Treasury securities and such
limitations are applied as if the Treasury securities were not included in the
account (i.e., the increased percentage limitations are applied as if the other
assets were the only assets in the account).
Reference is made to the Prospectus for the Separate Accounts that invest
in the Fund and the applicable Policy for information regarding the federal
income tax treatment of distributions to the Separate Accounts.
The foregoing is a general and abbreviated summary of the applicable
federal income tax provisions currently in effect. For complete information,
reference should be made to the pertinent Code sections and Treasury
regulations. The Code and regulations are subject to change by legislative or
administrative actions.
DISTRIBUTIONS AND DIVIDENDS
Any distributions made by any Portfolio will be automatically reinvested in
additional shares of that Portfolio, unless an election is made on behalf of a
Separate Account to receive distributions in cash. Dividends or distributions by
a Portfolio other than the Money Market Portfolio will reduce the per-share net
asset value by the per-share amount so paid.
PURCHASE OF SHARES
As of the date of this Prospectus, shares of the Fund are offered only for
purchase by the separate accounts of RUSL and RBSL to serve as an investment
medium for the Policies issued by each insurance company. However, shares of
each Portfolio may be offered in the future to other separate accounts
established by RUSL or RBSL or separate accounts of other affiliated insurance
companies to serve as the underlying investment medium for both variable annuity
and variable life insurance contracts. In the event that an insurance company
invests in the Fund as an investment medium for variable annuity contracts, the
Fund's Board will monitor events in order to identify any material conflicts
between variable annuity contract owners and variable life policy owners, and
will determine what action, if any, should be taken in the event of such a
conflict.
Shares of each Portfolio are sold at their respective net asset values
(without a sales charge) next computed after receipt of a purchase order.
NET ASSET VALUE
The net asset value is determined by dividing the value of each Portfolio's
net assets by the number of its shares outstanding. That determination is made
once each business day, Monday through Friday, exclusive of federal holidays at
or about 4 p.m., eastern standard time, on each day that the New York Stock
Exchange is open for trading. The Board of Trustees has established procedures
to value each Portfolio's assets to determine net asset value. In general, these
valuations are based on actual or estimated market value, with special
provisions for assets not having readily available market quotations and
short-term debt securities. The net asset values per share of each Portfolio
will fluctuate in response to changes in market conditions and other factors,
except that the Money Market Portfolio will attempt to maintain a constant net
asset value per share of $1.00, which will not fluctuate in response to changes
in market conditions.
The Money Market Portfolio attempts to maintain a constant net asset value
per share by using the amortized cost method of valuation for its portfolio
securities. This involves valuing a security at cost on the date of acquisition
and thereafter assuming a constant accretion of a discount or amortization of a
premium to maturity. See the Statement of Additional Information for a
description of certain conditions and procedures followed by the Portfolio in
connection with amortized cost valuation.
All other Portfolios are valued as follows:
Portfolio securities for which market quotations are readily available are
stated at market value. Market value is determined on the basis of last reported
sales price, or, if no sales are reported, the latest available bid price
obtained from a quotation reporting system or from established market makers. In
other cases, securities are valued at their fair value as determined in good
faith by the Board of Trustees of the Fund, although the actual calculations may
be made by persons acting under the direction of the Board. Money market
instruments are valued at market value, except that instruments maturing in
sixty days or less are valued using the amortized cost method of valuation.
Debt securities (other than obligations having a maturity of sixty days or
less at their date of acquisition) are normally valued on the basis of quotes
obtained from brokers and dealers or pricing services, which take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data. Debt obligations having a maturity of
sixty days or less are generally valued at amortized cost.
When a Portfolio writes a call option, the amount of the premium is
included in the Portfolio's assets and an equal amount is included in its
liabilities. The liability thereafter is adjusted to the current market value of
the option. The premium paid for an option purchased by the Portfolio is
recorded as an asset and subsequently adjusted to market value.
REDEMPTION OF SHARES
Shares of any Portfolio may be redeemed on any business day. Redemptions
are effected at the per share net asset value next determined after receipt of
the redemption request. Redemption proceeds normally will be paid within seven
days following receipt of instructions in proper form. The right of redemption
may be suspended by the Fund (i) when the New York Stock Exchange is closed
(other than customary weekend and holiday closings) or for any period during
which trading thereon is restricted, (ii) because an emergency exists, as
determined by the Securities and Exchange Commission, making disposal of
portfolio securities or valuation of new assets not reasonably practicable, and
(iii) whenever the Securities and Exchange Commission has by order permitted
such suspension or postponement for the protection of shareholders.
INVESTMENT PERFORMANCE
GENERALLY
Performance information for a Portfolio may be compared in advertisements,
sales literature, and reports to shareholders to: (i) the Standard & Poor's 500
Stock Index ("S&P 500"), Dow Jones Industrial Average ("DJIA"), or other
unmanaged indices so that investors may compare a Portfolio's results with those
of a group of unmanaged securities widely regarded by investors as
representative of the securities markets in general; (ii) other groups of mutual
funds tracked by Lipper Analytical Services, a widely used independent research
firm which ranks mutual funds by overall performance, investment objectives, and
assets, or tracked by other services, companies, publications, or persons who
rank mutual funds on overall performance or other criteria; and (iii) the
Consumer Price Index (measure for inflation) to assess the real rate of return
from an investment in the Portfolio. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses. Advertisements or sales
literature containing any such comparisons will also be accompanied by
performance information for a Separate Account to which the Fund offers its
shares, and such information will be comparable to the performance information
given for the Fund. The Fund may also include in communications to Fund
shareholders evaluations of the Fund published by nationally recognized ranking
services and by financial publications that are nationally recognized such as:
Barron's, Business Week, Forbes, Institutional Investor, Investor's Daily,
Money, Kiplinger's Personal Finance Magazine, Morningstar Mutual Fund Values,
The New York Times, USA Today, and the Wall Street Journal.
Advertisements and other sales literature may refer to "yield," "effective
yield," "average annual total return," "cumulative total return," and may
compare such performance quotations with published indices and comparable
quotations of other funds. All such figures are based on historical earnings and
performance and are not intended to be indicative of future performance.
Additionally, performance information may not provide a basis for comparison
with other investments or other mutual funds using a different method of
calculating performance.
The investment return on, and principal value of, an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Performance comparisons should NOT be
considered as representative of the Fund's performance for any future period.
THE MONEY MARKET PORTFOLIO
The Fund's yield is computed by determining the net change exclusive of
capital changes in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of a seven-day calendar period, dividing
the net change in account value by the value of the account at the beginning of
the period, and multiplying the return over the seven-day period by 365/7.
THE STOCK PORTFOLIO, THE BOND PORTFOLIO, THE ASSET ALLOCATION PORTFOLIO
The SEC 30 day yield quotation is based on a 30 day (or one month) period
ended on the date of the most recent balance sheet, (incorporated by reference
in the Statement of Additional Information), computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return on a hypothetical investment in the
Portfolio over a period of 1, 5, and 10 years (up to the life of the Portfolio),
will reflect the deduction of a proportional share of the Portfolio's expenses
(on an annual basis), and will assume that all dividends and distributions are
reinvested when paid.
Cumulative total return is calculated by subtracting a hypothetical $1,000
payment to the Fund from the ending redeemable value of such payment (at the end
of the relevant advertised period), dividing such difference by $1,000 and
multiplying the quotient by 100. In calculating ending redeemable value, all
income and capital gain distributions are assumed to be reinvested in additional
Fund shares.
Quotations of yield or total return for the Fund will not take into account
charges or deductions against the Separate Account to which the Fund shares are
sold or charges and deductions against the Policies issued by RUSL and RBSL.
Performance information for a Portfolio reflects only the performance of a
hypothetical investment in the Portfolio during the particular time period on
which the calculation is based. Performance information should be considered in
light of the Portfolios' investment objectives and policies, characteristics and
quality of the Portfolios, the market conditions during the given time period,
and should not be considered as representation of what may be achieved in the
future.
For additional information regarding the calculation yield, effective
yield, average annual total return, and cumulative total return, see
"Calculation of Performance Data" in the Statement of Additional Information.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, Minneapolis, Minnesota, served as independent
auditors of the Fund, for the fiscal years ending December 31, 1995-1996. From
1987 to 1994 KPMG Peat Marwick LLP served as the Fund's independent auditors.
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS (AND/OR STATEMENT OF ADDITIONAL INFORMATION REFERRED TO ON THE COVER
PAGE OF THIS PROSPECTUS), AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
WASHINGTON SQUARE SECURITIES, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN THE STATE IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OF
SOLICITATION.
USLICO SERIES FUND
Statement of Additional Information
April 30, 1997
USLICO Series Fund (the "Fund") is an open-end, diversified management
investment company currently consisting of four separate investment Portfolios:
the Money Market Portfolio, the Bond Portfolio, the Stock Portfolio and the
Asset Allocation Portfolio.
The Statement of Additional Information is intended to supplement the
information provided to investors in the Prospectus dated April 30, 1997, of
USLICO Series Fund, and has been filed with the Securities and Exchange
Commission as part of the Fund's Registration Statement. Investors should note,
however, that this Statement of Additional Information is not itself a
prospectus and should be read carefully in conjunction with the Fund's
Prospectus and retained for future reference. The contents of this Statement of
Additional Information are incorporated by reference in the Prospectus in their
entirety. A copy of the Prospectus may be obtained free of charge from the Fund
at the address and telephone number listed below.
USLICO Series Fund
4601 Fairfax Drive
Arlington, Virginia 22203
(800) 338-7737, extension 3623
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
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<S> <C>
Introduction.............................................................................................. 1
General Information and History .......................................................................... 1
Description of Securities and Investment Techniques....................................................... 1
U.S. Government Securities......................................................................... 1
Mortgage-Related Securities........................................................................ 2
GNMA Certificates......................................................................... 2
FNMA and FHLMC Mortgage-Backed Obligations................................................ 2
Bank Obligations................................................................................... 3
Corporate Debt Securities.......................................................................... 3
Commercial Paper................................................................................... 4
Repurchase Agreements.............................................................................. 4
Options .......................................................................................... 4
Risks Associated with Call Options on Securities.......................................... 5
Concentration Policy...................................................................... 5
Management of the Fund.................................................................................... 6
Trustees and Executive Officers.................................................................... 6
Compensation of Trustees........................................................................... 7
Control Persons and Principal holders of Securities....................................................... 7
The Investment Adviser and Sub-Adviser............................................................. 8
Distribution of Fund Shares........................................................................ 9
Purchases and Redemptions.......................................................................... 9
Custodian.......................................................................................... 9
Administrative Services Agreement.................................................................. 9
Portfolio Transactions and Brokerage...................................................................... 10
Brokerage and Research Services.................................................................... 10
Portfolio Turnover................................................................................. 11
Net Asset Value........................................................................................... 11
Calculation of Performance Information.................................................................... 12
The Money Market Portfolio Yield ......................................................................... 13
The Stock Portfolio, The Bond Portfolio, The Asset Allocation Portfolio................................... 13
SEC 30 Day Yield................................................................................... 13
Average Annual Total Return........................................................................ 14
Cumulative Total Return............................................................................ 14
Performance Comparisons................................................................................... 15
Taxation.................................................................................................. 15
Distributions............................................................................................. 16
Additional Information.................................................................................... 16
Shareholder Meetings............................................................................... 16
Liability.......................................................................................... 16
Financial Statements...................................................................................... 16
Report of Independent Auditors'........................................................................... 17
Appendix I: Corporate Bond and Commercial Paper Ratings.................................................. A-1
</TABLE>
INTRODUCTION
This Statement of Additional Information is designed to elaborate upon the
discussion of certain securities and investment techniques which are described
in the Prospectus. The more detailed information contained herein is intended
solely for investors who have read the Prospectus and are interested in a more
detailed explanation of certain aspects of the Fund's securities and investment
techniques. Captions and defined terms in this Statement of Additional
Information generally correspond to like captions and terms in the Prospectus.
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information or the Prospectus dated April 30, 1997, and, if given or made, such
information or representations may not be relied upon as having been authorized
by the Fund. This Statement of Additional Information does not constitute an
offer to sell securities in any state or jurisdiction in which such offering may
not lawfully be made. The delivery of this Statement of Additional Information
at any time shall not imply that there has been no change in the affairs of the
Fund since the date hereof.
GENERAL INFORMATION
USLICO Series Fund (the "Fund") is an open-end diversified management
investment company registered under the Investment Company Act of 1940 and
consists of four separate series (Portfolios), each of which has its own
investment objectives and policies. The Fund was organized as a business trust
under the laws of Massachusetts on January 19, 1988. On January 17, 1995,
ReliaStar United Services Life Insurance Company (hereinafter "RUSL" and
formerly known as "United Services Life Insurance Company") and ReliaStar
Bankers Security Life Insurance Company (herein after "RBSL" and formerly known
as "Bankers Security Life Insurance Society") became wholly-owned subsidiaries
of ReliaStar Financial Corp. ("ReliaStar"), previously the NWNL Companies, Inc.,
an insurance holding company based in Minneapolis, Minnesota.
Shares of the Portfolios are sold only to separate accounts of RUSL and
RBSL to serve as the investment medium for variable life insurance policies
issued by these companies. Each Portfolio share outstanding represents a
beneficial interest in the respective Portfolio and carries a par value of
$.001. The Fund has an unlimited number of shares authorized. All shares are
non-assessable and fully transfer when issued and paid for in accordance
thereof. The Fund sends its contract holders annual audited financial statements
and six-month unaudited financial statements.
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUE
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. U.S. Government securities
include a variety of Treasury securities which differ with respect to certain
items such as coupons, maturities and dates of issue. Treasury bills have a
maturity of one year or less. Treasury notes have maturities of one to ten years
and Treasury bonds generally have a maturity of greater than ten years.
Securities guaranteed by the U.S. Government include federal agency obligations
guaranteed as to principal and interest by the U.S. Treasury (such as GNMA
certificates and Federal Housing Administration debentures). In these
securities, the payment of principal and interest is unconditionally guaranteed
by the U.S. Government and, thus, they are of the highest possible credit
quality. Such securities are subject to variations in market value due to
fluctuations in interest rates but, if held to maturity, will be paid in full.
Securities issued by U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they involve federal sponsorship in one way or another: some
are backed by specific types of collateral; some are supported by the issuer's
right to purchase certain obligations of the issuer; others are supported only
by the credit of the issuing government agency or instrumentality. These
agencies and instrumentalities include, but are not limited to, Federal National
Mortgage Association, Federal Home Loan Bank, Federal Land Banks, Farmers
Financing Bank, Farm Credit Banks and the Tennessee Valley Authority. All of the
Portfolios may invest in U.S. Government securities.
MORTGAGE-RELATED SECURITIES
The Bond and Asset Allocation Portfolios may invest in GNMA certificates
and FNMA and FHLMC mortgage-backed obligations. Mortgage-related securities are
interests in pools of mortgage loans made to residential home buyers, including
mortgage loans made by savings and loan institutions, mortgage bankers,
commercial banks and others. Pools of mortgage loans are assembled as securities
for sale to investors by various governmental and government-related
organizations.
GNMA Certificates: GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans for which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
Government. GNMA is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the U.S. Government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of FHA-insured or VA-guaranteed mortgages. GNMA certificates
differ from typical bonds because principal is repaid monthly over the term of
the loan rather than returned in a lump sum at maturity. Because both interest
and principal payments (including prepayments) on the underlying mortgage loans
are passed through to the holder of the certificate, GNMA certificates are
called "pass-through" securities.
Interest in pools of mortgage-related securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a periodic payment which consists of both
interest and principal payments. In effect, these payments are a "pass-through"
of the periodic payments made by the individual borrowers on the residential
mortgage loans, net any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayment of principal resulting from the sale
of the underlying residential property, refinancing or foreclosure, net of fees
or costs which may be incurred. Mortgage-related securities issued by GNMA are
described as "modified pass-through" securities. These securities entitle the
holder to receive all interest and principal payments owed on the mortgage pool,
net of certain fees, at the schedule payment dates regardless of whether or not
the mortgagor actually makes the payment. Although GNMA guarantees timely
payment even if homeowners delay or default, tracking the "pass-through"
payments may, at times, be difficult as there is currently no central repository
for the paper form certificates. Expected payments may be delayed due to the
delays in registering the newly traded paper securities. The custodian's
policies for crediting missed payments while errant receipts are tracked down
may vary. Other mortgage-backed securities such as those of FHLMC and FNMA trade
in book-entry form and are not subject to the risk of delays in timely payment
of income.
Although the mortgage loans in the pool will have maturities of up to 30
years, the actual average life of the GNMA certificates typically will be
substantially less because the mortgages will be subject to normal principal
amortization and may be prepaid prior to maturity. Early payments of principal
on the underlying mortgages may expose a Portfolio to a lower rate of return
upon reinvestment of principal. Prepayment rates vary widely and may be affected
by changes in market interest rates. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of the GNMA certificates. Conversely, when interest rates are rising, the rate
of prepayment tends to decrease, thereby lengthening the actual life of the GNMA
certificates. Accordingly, it is not possible to accurately predict the average
life of a particular pool. Reinvestment of prepayments may occur at higher or
lower rates than the original yield on the certificates. Due to the prepayment
feature and the need to reinvest prepayments of principal at current rates, GNMA
certificates can be less effective than typical bonds of similar maturities at
"locking in" yields during periods of declining interests rates, although they
may have comparable risk of decline in value during periods of rising interest
rates.
FNMA and FHLMC Mortgage-Backed Obligations: Government-related guarantors
(i.e., not backed by the full faith and credit of the U.S. Government) include
the Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Association ("FHLMC"). FNMA, a federally-chartered and privately-owned
corporation, issues pass-through securities representing interest in a pool of
conventional mortgage loans. FNMA guarantees the timely payment of principal and
interest but this guarantee is not backed by the full faith and credit of the
U.S. Government. FNMA is a government-sponsored corporation owned entirely by
private stockholders. It is subject to general regulation by the Secretary of
Housing and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally-chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. FHLMC, a corporate instrumentality of the United States,
was created by Congress in 1970 for the purpose of increasing the availability
of mortgage credit for residential housing. Its stock is owned by the 12 Federal
Home Loan Banks. FHLMC issues Participation Certificates ("PCs") which represent
interests in conventional mortgages from FHLMC's national portfolio. GNMA
guarantees the timely payment of interest and ultimate collection of principal
and maintains reserves to protect holders against losses due to default, but PCs
are not backed by the full faith and credit of the U.S. Government. As is the
case with GNMA certificates, the actual maturity of and realized yield on
particular FNMA and FHLMC pass-through securities will vary based on the
prepayment experience of the underlying pool of mortgages.
BANK OBLIGATIONS
Bank obligations in which all Portfolios may invest include certificates of
deposit, bankers' acceptances and fixed time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand
by the investor, but may be subject to early withdrawal penalties which are
dependent upon the market conditions and the remaining maturity of obligations.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party, although there is no market
for such deposits.
A Portfolio will not invest in any security issued by a commercial bank
unless the bank is federally-chartered and has total assets of at least U.S. $1
billion, or the equivalent in other currencies. All Portfolios may invest in
obligations of savings banks. A Portfolio will not invest in any security issued
by a savings bank unless such institution is federally-chartered and has total
assets of at least $1 billion.
CORPORATE DEBT SECURITIES
All Portfolios may invest in corporate debt securities or obligations. The
investment return of corporate debt securities reflects interest earnings and
changes in the market value of the security. The market value of a corporate
debt obligation may also be expected to rise and fall inversely with interest
rates generally. There also exists the risk that the issuers of the securities
may not be able to meet their obligations on interest or principal payments at
the time called for by an instrument.
COMMERCIAL PAPER
All of the Portfolios may invest in commercial paper (including variable
amount master demand notes) issued by U.S. corporations (1) that have the rating
designated for the applicable Portfolio as described in the Prospectus in the
section on Investment Objectives and Policies, or (2) if not rated, are
determined to be of an investment quality comparable to rated commercial paper
in which a Portfolio may invest.
REPURCHASE AGREEMENTS
All Portfolios may invest in repurchase agreements. If a Portfolio acquires
securities from a bank or broker-dealer, it may simultaneously enter into a
repurchase agreement with the seller wherein the seller agrees at the time of
sale to repurchase the security at a mutually agreed upon time and price. The
term of such an agreement is generally quite short, possibly overnight or for a
few days, although it may extend over a number of month (up to one year) from
the date of delivery. The resale price is in excess of the purchase price by an
amount which reflect an agreed upon market rate of return, effective for the
period of time the Portfolio is invested in the security. This results in a
fixed rate of return protected from market fluctuations during the period of the
agreement. This rate is not tied to the coupon rate on the security subject to
the repurchase agreement.
Under the Investment Company Act of 1940 (the "1940 Act"), repurchase
agreements are considered to be loans by the purchaser collateralized by the
underlying securities. The Adviser or Sub-Adviser of a Portfolio will monitor
the value of the underlying securities at the time a repurchase agreement is
entered into and at all times during the term of the agreement to ensure that
its value always equals or exceeds the agreed upon repurchase price to be paid
to the Portfolio. The Adviser, in accordance with procedures established by the
Board of Trustees, will also evaluate the creditworthiness and financial
responsibility of the banks and broker-dealers with which the Portfolio enters
into repurchase agreements.
A Portfolio may not enter into a repurchase agreement having more than
seven days remaining to maturity if, as a result, such agreements together with
any other securities which are not readily marketable, would exceed ten percent
(10%) of the net assets of the Portfolio. If the seller should become bankrupt
or default on its obligations to repurchase the securities, a Portfolio may
experience delay or difficulties in exercising its rights to the securities held
as collateral and might incur a loss if the value of the securities should
decline. A Portfolio also might incur disposition costs in connection with
liquidation of the securities.
OPTIONS
In pursuing their investments objectives, the Stock and Asset Allocation
Portfolios may engage in the writing of call options on debt securities.
Writing Options on Securities: The Portfolios may write (sell) call options
on debt or other securities in standardized contracts traded on national
securities exchanges or boards of trade.
A call option on a security is a contract that gives the holder of the
call, in return for a premium, the right to buy the underlying security from the
writer of the option at a specified exercise price at any time during the term
of the option. The writer of a call option on a security has the obligation upon
exercise of the option to deliver the underlying security upon payment of the
exercise price.
A Portfolio may write call options only if they are "covered" or "secured".
In the case of a call option on a security, the option is "covered" if the
Portfolio owns the security underlying the call or has an absolute and immediate
right to acquire that security without additional cash consideration (or, if
additional cash consideration is required, cash or cash equivalents in such
amount are placed in a segregated account by its custodian) upon conversion or
exchange of other securities held by the Portfolio.
If an option written by a Portfolio expires unexercised, the Portfolio
realizes a capital gain equal to the premium received at the time the option was
written. If an option purchased by a Portfolio expires unexercised, the
Portfolio realized a capital loss equal to the premium paid.
A Portfolio may purchase a call only in a "closing purchase transaction" to
terminate its obligation on a call that it has written. Prior to the earlier of
exercise or expiration of the call, an option may be closed out by an offsetting
purchase of a call option of the same series (type, exchange, underlying
security, exercise price and expiration). There can be no assurance, however,
that a closing purchase transaction can be effected when the Portfolio desires.
A Portfolio will realize a capital gain from a closing purchase transaction
if the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Portfolio will realize a capital loss. The
principal factors affecting the market value of a call option include supply and
demand, interest rates, the current market price of the underlying security in
relation to the exercise price of the option, the volatility of the underlying
security, and the time remaining until the expiration date.
The premium received for an option written by a Portfolio is recorded as a
deferred credit. The value of the option is marked-to-market daily and is valued
at the closing price on the exchange or board of trade on which it is traded,
or, if no closing price is available, at the mean between the last bid and asked
prices.
RISKS ASSOCIATED WITH CALL OPTIONS ON SECURITIES:
There are several risks associated with writing call options on securities.
For example, there are significant differences between the securities and option
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. A decision as to
whether, when, and how to use a call option involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when a Portfolio
seeks to close out an option position. If a Portfolio were unable to close out a
covered call option it had written on a security, it would not be able to sell
the underlying security unless the option expired without exercise. As a writer
of a covered call option, a Portfolio foregoes, during the option's life, the
opportunity to profit from increases in the market value of the security
covering the call option above the sum of the premium and the exercise price of
the call.
If trading were suspended in an option written by a Portfolio, the
Portfolio would not be able to close out the option. If restrictions on exercise
were imposed, the Portfolio might be unable to exercise an option it has
purchased.
CONCENTRATION POLICY
As a fundamental policy, each Portfolio may not invest 25% or more of its
total assets in the securities of any industry, nor more than 5% of its assets
in any one issuer. Although, for purposes of this limitation, U.S. Government
obligations are not considered to be part of any industry; therefore these
restrictions do not apply to U.S. Government securities. Further, the 25% limit
does not apply to the Money Market or Bond Portfolios for securities or
obligations issued by U.S. Banks.
MANAGEMENT OF THE FUND
Trustees and Officers
Information pertaining to the Trustees and Executive Officers of the Fund is set
forth below.
The Trustee and officers are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ---------------- -------- -----------------------------------------------
<S> <C> <C>
Richard C. Kaufman Chairman and Trustee Assistant Director of Legislative Affairs, AUSA 1984-1994
907 Leigh Mill Road Retired; Colonel, AUS (Ret.); previously served on RUSL
Great Falls, VA 22066 Advisory Counsel
David H. Roe President, and Senior Vice President, ReliaStar Financial Corp. 1995 to
6060 Sugarstone Court Trustee 1996; President and Chief Operating Officer of USLICO
McLean, VA 22101 Corporation, 1993-1995; President and CEO of ReliaStar
United Services Life Insurance Company ("RUSL"); and
ReliaStar Bankers Security Life Insurance Company ("RBSL")
an officer from 1991 to 1996.
Jeri A. Eckhart Trustee Independent Management Consultant, 1988-present; Board
6619 Jill Court Member, White House Fellows Foundation, 1990-present.
McLean, VA 22101
Wayne O. Jefferson, Jr. Trustee Telecommunications Consultant, 1994-present; Executive
1003 Emerald Dr. Director, Support Services, LLC, Arlington, VA 1992-1994;
Alexandria, VA 22308 General Manager, Telecom Solutions, Inc., Arlington, VA,
1991-1992; Telecommunications Consultant and President,
Jefferson Associates, Inc., Alexandria, VA, 1989-1992.
Rebecca B. Crunk Vice President and Treasurer Vice President, Treasurer and Controller of RUSL and RBSL;
4601 North Fairfax Drive Affiliated with RUSL since 1977.
Arlington, VA 22203
Robert B. Saginaw Vice President, Secretary and Vice President and Associate Counsel of RUSL since 1980.
20 Washington Avenue South Counsel Associated with affiliates since 1974.
Minneapolis, MN 55401
</TABLE>
COMPENSATION OF TRUSTEES
The officers are "interested persons" of the Fund and are also officers of
RUSL or its Affiliates and receive compensation therefrom. They do not receive
additional compensation for services rendered to the Fund. The "Non-Interested"
Trustees of the Board receive a fee of $500 for each meeting attended. The
regular meetings of the Board are held quarterly. For the years ended December
31, 1996 and 1995, total fees paid to the Trustees aggregated $6,000 in each
periods for all portfolios combined.
<TABLE>
<CAPTION>
PENSION OR ESTIMATED TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL FROM REGISTRANT AND
COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX PAID TO
NAME AND POSITION FROM REGISTRANT FUND EXPENSE RETIREMENT TRUSTEE
----------------- --------------- ------------ ---------- -------
<S> <C> <C> <C> <C>
Richard C. Kaufman $2,000 0 0 $2,000
Chairman and Trustee
David H. Roe 0 0 0 0
President and Trustee
Jeri A. Eckhart $2,000 0 0 $2,000
Trustee
Wayne O. Jefferson, Jr. $2,000 0 0 $2,000
Trustee
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On January 17, 1995, ReliaStar Financial Corp. ("ReliaStar") acquired
USLICO. USLICO was a holding company with two primary subsidiaries: United
Services Life Insurance Company, (now known as ReliaStar United Services Life
Insurance Company, or "RUSL"), of Arlington, Virginia and Bankers Security Life
Insurance Society (now known as ReliaStar Bankers Security Life Insurance
Company or "RBSL"), of Woodbury, New York.
USLICO Series Fund (the "Fund"), consisting of four distinct Portfolios, is
an investment vehicle for the separate accounts of RUSL and RBSL. At the present
time, shares of the Fund are sold exclusively to RUSL and RBSL. The shares serve
as the investment medium for variable life insurance policies issued by these
companies.
Beneficial owners of more than 25% of the Fund's outstanding securities as
of April 1, 1997 were: ReliaStar United Services Variable Life Separate Account
I and ReliaStar Bankers Security Variable Life Separate Account I. For this
purpose "control" means: (i) the beneficial ownership, either directly or
through one or more controlled companies, of more than 25% of the voting
securities of a company; (ii) the acknowledgment or assertion by either the
controlled or controlling party of the existence of control; or (iii) an
adjudication under the terms and conditions of the "40 Act", which has become
final, that control exists.
THE INVESTMENT ADVISER AND SUB-ADVISER
Since April 1, 1995, Washington Square Advisers, Inc. ("Washington Square"
or the "Adviser") has served as Investment Adviser (the "Adviser") to the Fund
pursuant to an Investment Advisory Agreement between it and the Fund. Washington
Square is a wholly owned subsidiary of ReliaStar Financial Corp. From April 1988
through April 1995, the Adviser for the Fund was Bankers Centennial Management
Corp. The Adviser is responsible for administering affairs of and supervising
the investment program for the Fund. The Adviser also furnishes to the Board of
Trustees, which has overall responsibility for the business and affairs of the
Fund, periodic reports on the investment performance of each Portfolio.
Effective April 1, 1995, the Fund, the Adviser and Newbold's Asset
Management, Inc. (the "Sub-Adviser") entered into an Investment Advisory and a
Sub-Investment Advisory Agreements. The Sub-Adviser provides advisory services
to the Stock Portfolio and the Asset Allocation Portfolio of the Fund. The
address of the Sub-Adviser is 950 Haverford Road, Bryn Mawr, PA 19010. Newbold's
has been the Sub-Adviser for equities since July 1992.
Subject to overall supervision of the Fund's Board of Trustees, the Adviser
exercises overall responsibility for the investment and reinvestment of the
Fund's Assets for which its has primary investment responsibility and
continuously monitors and supervises all aspects of the Sub-Adviser's
performance of its investment duties. In so doing, the Adviser manages the
day-to-day investment operations of the Fund and the composition of the
investment portfolios of the Bond and Money Market Portfolios and the assets of
the Asset allocation Portfolio not allocated to the management of the
Sub-Adviser, including the purchase, retention and disposition of the
investments, securities and cash contained therein.
Subject to overall responsibility of the Fund's Board of Trustees and the
Adviser, the Sub-Adviser will exercise overall responsibility for the investment
and reinvestment of the Stock Portfolio and the portion of the assets of the
Asset Allocation Portfolio allocated by the Adviser to the Sub-Adviser. In so
doing, the Sub-Adviser will manage the day-to-day operations of the investment
portfolio of the Stock Portfolio and the portion of the Asset Allocation
Portfolio for which it has primary advisory responsibility, which includes all
equity investments.
Under the terms of the Advisory Agreement, Washington Square is obligated
to manage the Fund's Portfolios in accordance with applicable laws and
regulations.
The Advisory and Sub-Advisory Agreements ("Agreements") were reapproved by
the Board of Trustees, including a majority of the Trustees who are not parties
to the Agreements, or interested persons of such parties, at a meeting held on
March 5, 1997, to be effective April 1, 1997. The Agreements will continue in
effect indefinitely, provided such continuance is approved annually by (i) the
holders of a majority of the outstanding voting securities of the Fund or by the
Board, and (ii) a majority of the Trustees who are not parties to such Advisory
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party. The Board approved the Agreements on March 6, 1996. Each Agreement may be
terminated without penalty on 60 days written notice by either party to the
Agreement and will terminate automatically if assigned.
The Fund pays the Adviser for its services under the Agreement a fee based
on an annual percentage of the average daily net assets of each portfolio. For
each Portfolio, the Fund pays the Adviser a fee at an annual rate not to exceed
.50% of the first $100 million of the average daily net assets of the Portfolio,
and .45% of the average daily net assets of the Portfolio in excess of $100
million. The Fund does not pay the Sub-Adviser. For the years 1996, 1995, and
1994, the Fund paid the Adviser the following management fees: Stock Portfolio,
$53,353, $23,450 and $33,276, respectively; Money Market Portfolio, $14,752,
$7,184 and $13,776, respectively; Bond Portfolio, $7,176, $3,692, and $6,302
respectively; Asset Allocation Portfolio, $34,689, $16,081 and $24,168,
respectively.
DISTRIBUTION OF FUND SHARES
Shares of the Fund are distributed through Washington Square Securities,
Inc., a wholly-owned subsidiary of ReliaStar Financial Corp. The Fund entered
into a distribution agreement, with Washington Square Securities, Inc. on
February 1, 1997. Washington Square Securities, Inc., a registered broker-dealer
under the Securities Act of 1934, and member of the National Association of
Securities Dealers, Inc., receives no remuneration from the Fund.
ReliaStar Financial Marketing Corporation, formerly known as USLICO
Securities Corp., a direct wholly-owned subsidiary of ReliaStar Financial Corp.
served as the Fund's Distributor pursuant to a distribution contract, until
February 1, 1997.
PURCHASES AND REDEMPTIONS
For information on purchase and redemption of shares, see "Purchase of
Shares" and "Redemption of Shares" in the Fund's Prospectus. The Fund may
suspend the right of redemption of shares of any Portfolio for any period: (i)
during which the New York Stock Exchange is closed other than customary weekend
and holiday closings or during which trading on the New York Stock Exchange is
restricted; (ii) when the Securities and Exchange Commission determines that a
state of emergency exists which may make payment or transfer not reasonable
practicable; (iii) as the Securities and Exchange Commission may by order permit
for the protection of the security holder of the Fund; or (iv) at any other time
when the Fund may, under applicable laws and regulations, suspend payment on the
redemption of its shares.
CUSTODIAN
Crestar Bank, a Virginia banking institution serves as custodian for the
Fund's portfolio securities and cash. In that capacity, Crestar maintains
certain financial and accounting books and records pursuant to a separate
agreement with the Fund.
ADMINISTRATIVE SERVICES AGREEMENT
ReliaStar United Services Life Insurance Company ("RUSL") acts as the
Fund's dividend disbursing, transfer, administrative and accounting services
agent pursuant to an Administrative Services Agreement (the "Administrative
Agreement") by and between the Fund, RUSL, and the Adviser.
As compensation, RUSL will be reimbursed for its costs associated with
providing services under the Administrative Agreement to the Fund. Such
reimbursements will be fair and reasonable and include all costs incurred by
RUSL.
The Administrative Services Agreement is renewable from year to year if the
Fund's trustees, (including a majority of the Fund's disinterested trustees)
approve the continuance of the Agreement. RUSL or the Fund may terminate the
Administrative Services Agreement on 90 days written notice to the other party.
Amendments to the Agreement may be effected if approved by the Trustees of the
Fund (including a majority of the disinterested trustees) and the Agreement is
not assignable by the Fund without the written consent of RUSL, or by RUSL
without the written authorization of the Fund's Board of Trustees.
PORTFOLIO TRANSACTIONS AND BROKERAGE
BROKERAGE AND RESEARCH SERVICES
There is generally no stated commission in the case of fixed-income
securities, which are traded in the over-the-counter markets, but the price paid
by the Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transaction on
national stock exchanges and other agency transaction involve the payment of the
Fund of negotiated brokerage commissions. Such commissions vary among different
brokers. Also, a particular broker may charge different commissions according to
such factors as the difficulty and size of the transaction.
The Adviser or the Sub-Adviser for a Portfolio places all orders for the
purchase and sale of portfolio securities and options for a Portfolio through a
substantial number of broker-dealers. In executing transactions, the Adviser or
the Sub-Adviser will attempt to obtain the best execution for a Portfolio taking
into account such factors as price (including the applicable brokerage
commission or dollar spread), size of order, the nature of the market for the
security, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer involved, the quality of the service,
the difficulty of execution and operational facilities of the firms involved,
and the firm's risk in positioning a block of securities. In effecting purchases
and sales of portfolio securities in transaction on national stock exchanges for
the account of the Fund the Adviser or the Sub-Adviser may pay higher commission
rates than the lowest available when the Adviser or the Sub-Adviser believes it
is reasonable to do so in light of the value of the brokerage and research
services provided by the broker-dealer effecting the transaction, as described
below. In the case of securities traded on the over-the-counter markets, there
is generally no stated commission, but the price includes an undisclosed
commission or mark-up.
Some securities considered for investment by the Fund's Portfolios may also
be appropriate for other clients served by the Adviser or the Sub-Adviser. If a
purchase or sale of securities consistent with the investment policies of a
Portfolio and one or more of these clients served by the Adviser or the
Sub-Adviser is considered at or about the same time, transactions in such
securities will be allocated among the Portfolios and clients in a manner deemed
fair and reasonable by the Adviser or the Sub-Adviser. Although there is no
specified formula for allocating such transaction, the various allocation
methods used by the Adviser or the Sub-Adviser, and the results of such
allocations, are subject to periodic review by the Fund's Adviser and Board of
Trustees.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
the Adviser for a Portfolio may receive research services from many
broker-dealers with which the Adviser places the Portfolio transactions. These
services, which in some cases may also be purchased for cash, include such
matters as general economic and security market reviews, industry and company
reviews, evaluations of securities and recommendations as to the purchase and
sale of securities. Some of these services may be of value to the Adviser in
advising its various clients (including the Fund), although not all of these
services are necessarily useful and of value in managing a Portfolio. The
management fee paid by the Portfolio is not reduced because the Adviser and its
affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
adviser may cause a Portfolio to pay a broker-dealer, which provides "brokerage
and research services" (as defined in that Act) to the Adviser, an amount of
disclosed commission for effecting a securities transaction for the Portfolio in
excess of the commission which another broker-dealer would have charged for
effecting that transaction.
The Fund paid brokerage commissions of $50,288 for the Stock Portfolio and
$17,072 for the Asset Allocation Portfolio for the year ended December 31, 1996.
PORTFOLIO TURNOVER
For reporting purposes, the portfolio turnover rate of each Portfolio is
calculated by dividing the value of the lesser of purchases or sales of
portfolio securities for the fiscal year by the monthly average of the value of
portfolio securities owned by the Portfolio during the fiscal year. In
determining such portfolio turnover, long-term U.S. Government securities are
included. Short-term U.S. Government securities and all other securities whose
maturities at the time of acquisition were one year or less are excluded. A 100%
portfolio turnover rate would occur, for example, if all of the Portfolio's
securities (other than short-term securities) were replaced once during the
fiscal year. The portfolio turnover rate for each Portfolio will vary from year
to year, depending on market conditions. Because each Portfolio has a different
investment objective, each will have a different expected rate of portfolio
turnover. However, the portfolio turnover rate will not be a limiting factor
when management deems it appropriate to buy or sell securities for a particular
Portfolio.
The writing of call options by the Stock and Asset Allocation Portfolios
may result in higher turnover than otherwise would be the case and, therefore,
greater commission expenses.
It is anticipated that the annual portfolio turnover, as defined above,
will not exceed the following limits of the Portfolios under normal market
conditions: Money Market Portfolio -- 0%; Stock Portfolio -- 125%; Bond
Portfolio -- 100%; and Asset Allocation Portfolio -- 150%. Increased portfolio
turnover may result in greater brokerage commission. In 1996, the Portfolio
turnover rate was: Stock Portfolio -- 79.17%; Bond Portfolio -- 47.37%; and
Asset Allocation Portfolio -- 61.98%.
Market conditions and changes in interest rates may result in turnover at a
greater or lesser than anticipated.
NET ASSET VALUE
As indicated under "Net Asset Value" in the Prospectus, the Fund's net
asset value per share for the purpose of pricing purchase and redemption orders
is determined after 4:00 p.m. Eastern Standard Time, on each day the New York
Stock Exchange is open for trading. Net asset value will not be determined on
the following days: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Pursuant to an exemptive rule of the Securities and Exchange Commission,
The Money Market Portfolio's securities are valued by the amortized cost method.
This method of valuation involves valuing a security at its cost at the time of
purchase and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the security. 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 the Portfolio would receive if
it sold the security. During periods of declining interest rates, the quoted
yield on shares of the Portfolio may tend to be higher than that of a fund or
Portfolio with identical investments which uses a method of valuation based on
market prices an estimates of market prices for all its portfolio securities.
Thus, if the use of amortized cost by the Portfolio resulted in lower aggregate
portfolio value on a particular day, a prospective investor in the Portfolio
would be able to obtain a somewhat higher yield of he purchased shares on that
day than he would be able to receive from a fund or Portfolio using solely
market values. Existing investors in the Portfolio would receive less investment
income. The converse is true in a period of rising interest rates.
The Rule permitting the Portfolio to use the amortized cost method of
valuation requires that, under the direction of the Board of Trustees, certain
procedures be adopted to monitor and stabilize the price per share of the
Portfolio. Calculations are made to compare the value of its investments valued
at amortized cost with market values. Market valuations are obtained by using
actual quotations provided by issuers or market makers, estimates of market
value, or values obtained from yield data relating to classes of money market
instruments or U.S. Government securities published by reputable sources at the
mean between the bid and asked prices for the instruments. In the event that a
deviation of 1/2 of 1% or more exists between the Fund's $1.00 per share net
asset value and the net asset value calculated by reference to market
quotations, or if there is any other deviation which the Board of Trustees
believes would result in a material dilution of shareholders or purchasers, the
Board of Trustees will promptly consider what action, if any, should be
initiated.
Under the exemptive Rule of the Securities and Exchange Commission allowing
the Fund to use the amortized cost method of valuation of portfolio securities,
the Fund must maintain a dollar-weighted average portfolio maturity of 90 days
or less. In addition, with certain limited exceptions, the Fund cannot invest
more than 5% of its assets in the securities of a single issuer (other than
government securities). Investments in Second Tier securities in the aggregate
must be limited to 5% of the Fund's total assets, and investment in a single
Second Tier Security cannot exceed the greater of 1% of total assets or $1
million. See, "Investment Strategies."
The Fund can only invest in instruments having remaining maturities of 397
days or less and can only invest in securities determined by the Adviser to be
of high quality with minimal credit risks.
On December 31, 1996, the net asset value per share of each portfolio was
calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
The Stock Portfolio
Net Assets $23,558,091 = Net Asset Value Per Share $13.25
-----------------------------------
Shares Outstanding 1,777,387
The Money Market Portfolio
Net Assets $5,979,861 = Net Asset Value Per Share $1.00
-----------------------------------
Shares Outstanding 5,979,861
The Bond Portfolio
Net Assets $2,783,385 = Net Asset Value Per Share $10.02
-----------------------------------
Shares Outstanding 277,650
The Asset Allocation Portfolio
Net Assets $14,614,568 = Net Asset Value Per Share $11.85
-----------------------------------
Shares Outstanding 1,233,142
</TABLE>
CALCULATION OF PERFORMANCE DATA
The Fund is the successor to the Separate Account I (a Stock Account),
Separate Account II (a Money Market Account), Separate Account III (a Bond
Account) and Separate Account IV (an Asset Allocation Account) of ReliaStar
United Services Life Insurance Company and Separate Account I (a Stock Account),
Separate Account II (a Money Market Account), Separate Account III (a Bond
Account) and Separate Account IV (an Asset Allocation Account) of ReliaStar
Bankers Security Life Insurance Company (collectively, the "RUSL and RBSL
Separate Accounts"). On April 30, 1988, the investment-related assets and
liabilities of the RUSL and RBSL Separate Accounts were transferred to the
Stock, Money Market, Bond and Asset Allocation Portfolios of the Fund.
Performance calculations are based upon the RBSL Separate Accounts.
THE MONEY MARKET PORTFOLIO YIELD
To calculate a seven-day yield for the Money Market Portfolio, the Fund
uses a hypothetical, pre-existing account having a balance of $100 at the
beginning of the seven-day period. The net change in the value of the Portfolio
during the seven-day period (excluding any realized gains or losses from the
sale of securities and unrealized appreciation and depreciation) is divided by
the value of the Account at the beginning of the period and then multiplied by
365/7 to obtain the annual yield to the nearest hundredth of one percent. Since
the net change in the seven-day value is used, the values reflect the charges
made against the Portfolio.
The seven-day yield does not necessarily represent the future yield of the
Money Market Portfolio. Yields fluctuate on a daily basis and reflect quality,
length of maturities, rates of return and market conditions for money market
investments suitable for this Portfolio.
A hypothetical example of how we calculate the seven-day yield for the
period ending December 31, 1996, assuming the values used are as follows:
<TABLE>
<CAPTION>
<S> <C>
(1) Value on Dec. 24, 1996.......................................... $100.00
(2) Value on Dec. 31, 1996 (exclusive of capital charges).......... 100.08
(3) Net change:(2) - (1)............................................ .08
(4) Net change divided by Value on Dec. 24, 1996:
(3) divided by (1)......................................... .0008
(5) Seven-day yield annualized (multiplied by 365/7)................ 4.17%
</TABLE>
THE BOND PORTFOLIO, THE COMMON STOCK PORTFOLIO,
THE ASSET ALLOCATION PORTFOLIO -
SEC 30 DAY YIELD
Yield is computed by dividing the net investment income per share
deemed earned during the computation period by the maximum offering price per
share on the last day of the period according to the following formula:
a-b
--- 6
SEC YIELD = 2[( cd + 1) -1]
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends: and,
d = the maximum offering price per share on the last day of the
period.
The SEC 30 day yield for the period ending December 31, 1996 for the Bond
Portfolio was 6.55%; the Common Stock Fund, 2.48%; and the Asset Allocation Fund
4.62%
THE STOCK PORTFOLIO, THE BOND PORTFOLIO, AND THE ASSET ALLOCATION PORTFOLIO -
AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return is computed by finding the average annual
compounded rates of return over 1, 5, and 10 years that would equate the initial
amount invested to the ending redeemable value, according to the following
formula:
1/n
P(1+T) = ERV or T = ERV/P - 1
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and,
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period.
This calculation assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged as expenses to all shareholder accounts.
Average annual total return figures for one year ending December 31, 1996
are: 22.90% -- Stock Portfolio; 2.70% -- Bond Portfolio; and, 12.44% -- Asset
Allocation Portfolio. For the five year period ending December 31, 1996, the
average annual total return figures are: 14.76% --Stock Portfolio; 7.05% -- Bond
Portfolio; and, 10.94% -- Asset Allocation Portfolio. For the ten year period
ending December 31, 1996, the average annual total return for the Stock
Portfolio was 12.34%. Because the Bond and Asset Allocation Portfolios commenced
operations on June 25, 1987, no ten-year period average annual total return
figures are reported. Life of the fund return figures are reported in lieu of 10
year figures based on the inception of the Portfolios ending December 31, 1996
are: 8.74% -- Bond Portfolio and 9.64% -- Asset Allocation Portfolio.
THE STOCK PORTFOLIO, THE BOND PORTFOLIO, THE ASSET ALLOCATION PORTFOLIO -
CUMULATIVE TOTAL RETURN
Cumulative Total Return is computed by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
CTR = ERV - P
---------- * 100
P
Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period; and,
P = initial payment of $1,000.
This calculation assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged as expenses to all shareholder accounts.
The cumulative total return for the fiscal year ending December 31, 1996,
for each Portfolio was 220.14%, Stock Portfolio; 131.15%, Bond Portfolio; and,
151.01%, Asset Allocation Portfolio.
PERFORMANCE COMPARISONS
Comparative performance information may be used from time to time in
advertising each Portfolio's shares, including data from Lipper Analytical
Services, Inc., Morningstar, Inc. and other entities or organizations which
track the performance of investment companies. Each Portfolio's performance also
may be compared to the performance of its respective Comparison Index, if any,
as described in the Prospectus, and, additionally, to the performance of
unmanaged indices. Unmanaged indices may assume the reinvestment of dividends
but generally do not reflect deductions for administrative and management cost
and expenses.
Quotations of yield or total return for the Fund will not take into account
charges or deductions against the Separate Account to which the Fund shares are
sold or charges and deductions against the policies issued by RUSL and RBSL.
Performance information for a Portfolio reflects only the performance of a
hypothetical investment in the Portfolio during the particular time period on
which the calculation is based. Performance information should be considered in
light of the Portfolios' investment objectives and policies, characteristics and
quality of the Portfolios, and the market conditions during the given time
period, and should not be considered as a representation of what may be achieved
in the future.
TAXATION
Each Portfolio intends to qualify annually and elects to be treated as a
regulated investment company under the Internal Revenue Code of 1986 (the
"Code").
To qualify as a regulated investment company, each Portfolio must, among
other things: (i) derive in each taxable year at least ninety percent (90%) of
its gross income from dividends, interest, payments with respect to securities
loan, and gains from the sale or other disposition of stock, securities or
foreign currencies or other income derived with respect to its business of
investing in such stock, securities or currencies; (ii) derive in each taxable
year less than thirty percent (30%) of its gross income from the sale or other
disposition of stock or securities held less than three months; (iii) diversify
its holdings so that, at the end of each quarter of the taxable year,(a) at
least fifty percent (50%) of the market value of the Portfolios' assets are
represented by cash, U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other securities
of any one issuer limited for the purposes of this calculation to an amount not
greater than five percent (5%) of the value of the Portfolio's total assets and
10 percent (10%) of the outstanding voting securities of such issuer, and (b)
not more than twenty-five percent (25%) of the value of its total assets is
invested in the securities of and one issuer (other than U.S. Government
securities or the securities of other resulted investment companies); and (iv)
distribute at least ninety percent (90%) of its net investment income (which
includes dividends, interest, and net short-term capital gains in excess of and
net long-term capital losses) each taxable year.
As a regulated investment company, a Portfolio will not be subject to U.S.
federal income tax on its net investment income and net capital gains (any net
long-term capital gains in excess of the sum of net short-term capital losses
and capital loss carryovers from prior years), if any, that it distributes to
shareholders. Each Portfolio intends to distribute to its shareholders, at least
annually, substantially all of its net investment income and any net capital
gains. In addition, amounts not distributed by a Portfolio on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible four percent (4%) excise tax. To avoid the tax, a Portfolio must
distribute during each calendar year, (i) at least ninety-eight percent (98%) of
its ordinary income (not taking into account any capital gains or losses) for
the calendar year, (ii) at least ninety-eight percent (98%) of its capital gains
in excess of its capital losses for the twelve-month period ending October 31 of
the calendar year, and (iii) all ordinary income and capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, each Portfolio intends to make these distributions in accordance
with the calendar year distribution requirement. A distribution will be treated
as paid during the calendar year if it is declared by a Portfolio before
December 31 of the year and paid by the Portfolio by January 31 of the following
year. Such distribution will be taxable to shareholders (the Separate Account)
in the year the distributions are declared, rather than the year in which the
distributions are received.
DISTRIBUTIONS
Distributions of any new investment income by a Portfolio are taxable to
the shareholder as ordinary income. Net capital gains will be treated, to the
extent distributed, as long-term capital gains in the hands of the shareholder.
ADDITIONAL INFORMATION
SHAREHOLDER MEETINGS
The Declaration of Trust does not require that the Fund hold annual or
regular meetings of shareholders. Meetings of the Shareholders may be called by
the Trustees and held at such times the Trustees may from time to time
determine, for the purpose of the elections of Trustees or such other purposes
as may be specified by the Trustees.
LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund, or Portfolio thereof,
organized as a Massachusetts business trust. The Declaration of Trust further
provides for indemnification out of the assets and property of the Fund, or
Portfolio thereof, for all loss and expense of any shareholder held personally
liable for the obligations of the Fund or Portfolio. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund or Portfolio would be unable to meet
its obligations.
FINANCIAL STATEMENTS
The audited Financial Statements and accompanying Report of Independent
Auditors' (Deloitte & Touche LLP for the Fund for the fiscal year ended December
31, 1995 and 1996) are incorporated herein by reference to the Registrant's 1996
Annual Report to Shareholders filed with the U.S. Securities and Exchange
Commission on February 25, 1997. No other portion of the Annual Report is so
incorporated. Please call 1-800-338-7737, ext. 3626 to obtain a copy of the most
recent Annual Report of the Fund at no charge.
KPMG PEAT MARWICK LLP
INDEPENDENT AUDITORS' REPORT
The Board of Trustees
USLICO Series Fund:
We have audited the statement of assets and liabilities and the related
statement of operations and changes in net assets of the USLICO Series Fund as
of and for the year ended December 31, 1994 (not presented herein), and the
condensed financial information for the years ended December 31, 1994, 1993, and
1992. The financial statements and condensed financial information are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on the financial statements and the condensed financial information
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evident supporting the amounts and disclosures in
the financial statements and the condensed financial information. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements (not presented herein) and the
condensed financial information referred to above present fairly, in all
material respects, the financial position of each of the respective portfolios
constituting the USLICO Series Fund as of December 31, 1994, and the results of
their operations and changes in their net assets for the year ended December 31,
1994, and the condensed financial information for the years ended December 31,
1994, 1993 and 1992, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Washington, D.C.
February 2, 1995
APPENDIX I
CORPORATE BOND AND COMMERCIAL PAPER RATINGS
(a) Corporate Bonds: Bonds are rated Aa by Moody's Investors Service, Inc.
are judged by Moody's to be of high quality by all standards. Together with
bonds rated Aaa (Moody's highest rating) they comprise what are generally known
as high-grade bonds. Aa bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, 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 those
applicable to Aaa securities. Bonds which are rated A by Moody's possess may
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 as susceptibility to
impairment sometime in the future.
Moody's Baa rated bonds are Considered as medium-grade obligations, i.e.,
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.
Bonds rated AA by Standard & Poor's Corporation are judged by Standard &
Poor's to be high-grade obligations and in the majority of instances differ only
in small degree from issues rated AAA (Standard & Poor's highest rating). Bonds
rated AAA are considered by Standard & Poor's to be the highest grade
obligations and possess the ultimate degree of protection as to principal and
interest. With AA bonds, as with AAA bonds, prices move with the long-term money
market. Bonds rated A by Standard & Poor's have a strong capacity to pay
principal and interest, although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.
Standard & Poor's BBB rated bonds, or medium-grade category bonds, are
borderline between definitely sound obligations and those where the speculative
elements begin to predominate. These bonds have adequate asset coverage and
normally are protected by satisfactory earnings. Their susceptibility to
changing conditions, particularly depressions, necessitates constant watching.
These bonds generally are more responsive to business and trade conditions than
to interest rates. This group is the lowest which qualifies for commercial bank
investment.
(b) Commercial Paper: The ratings Prime-1 and Prime-2 are the two highest
commercial paper rating assigned by Moody's. Among the factors considered by
Moody's in assigning ratings are the following: (1) evaluation of the management
of the issuer; (2) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by management of obligations which may be present or may arise as a
result of public interest questions and preparations to meet such obligations.
Issuers within this Prime category may be given ratings 1, 2 or 3, depending on
the relative strengths of these factors.
Commercial paper rated A-1 or A-2 by Standard & Poor's has the following
characteristics: (1) liquidity ratios are adequate to meet cash requirements;
(2) long-term senior debt rating should be A or better, although in some cases
BBB credits may be allowed if other factors outweigh the BBB; (3) the issuer
should have access to at least two additional channels of borrowing; (4) basic
earnings and cash flow should have an upward trend with allowance made for
unusual circumstances; and (5) typically the issuer's industry should be well
established and the issuer should have a strong position within its industry and
the reliability and quality of management should be unquestioned. Issuers rated
A are further referred to by use of numbers 1, 2 and 3 to denote relative
strength within this highest classification.
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Contained in Part A:
Financial Highlights for each portfolio for each year in the ten year
period ending December 31, 1996, for the common stock and money market
portfolios.
Financial highlights for each year since inception of The Bond
Portfolio and The Asset Allocation Portfolio for the period ending
December 31, 1996.
Contained in Part B:
The financial statements are incorporated by reference into in Part B
from the Registrant's 1996 Annual Report to Shareholders filed
February 25, 1997.
(b) Exhibits
1. Agreement and Declaration of Trust of USLICO Series Fund, filed
as an Exhibit to Form N-14 of Bankers Security Variable Life
Separate Account I, Bankers Security Life Insurance Society, and
the USLICO Series Fund on January 19, 1988, File No. 33-19750,
filed as an Exhibit hereto.
2. USLICO Series Bylaws, filed as an Exhibit to Form N-14 of Bankers
Security Variable Life Separate Account I, Bankers Security Life
Insurance Society, and the USLICO Series Fund on January 19,
1988, File No. 33-19750, filed as an Exhibit hereto.
3. Voting Trust Agreement. Not Applicable.
4. Specimen Security. Not Applicable.
5.1 Investment Advisory Agreement by and between USLICO Series Fund
and Washington Square Advisers, Inc. restated as of March 5,
1997, to reflect a name change, filed as an Exhibit hereto.
5.2 Sub-Investment Advisory Agreement by and between Newbold's Asset
Management, Inc. and Washington Square Advisers, Inc. restated as
of March 5, 1997, to reflect a name change, filed as an Exhibit
hereto.
6. Distribution Agreement by and between USLICO Series Fund and
Washington Square Securities, Inc., dated February 1, 1997, filed
as an Exhibit hereto.
7. Bonus, Profit Sharing, or Pension Plans. None.
8. Custodian Agreement by and between USLICO Series Fund and Crestar
Bank, dated May 2, 1988, filed as an Exhibit hereto.
9. Administrative Services Agreement by and between USLICO Series
Fund, Washington Square Advisers, Inc. and ReliaStar United
Services Life Insurance Company dated January 1, 1997, filed as
an Exhibit hereto
10. Opinion and Consent of Robert B. Saginaw filed as an Exhibit to
Post-Effective Amendment No. 9 to Form N-1A on April 30, 1996,
File No. 33-20957, and incorporated herein by reference.
11.1 Consent of Deloitte & Touche LLP, dated April 28, 1997 filed as
an Exhibit hereto.
11.2 Consent of KPMG Peat Marwick, dated April 29, 1997 filed as an
Exhibit hereto.
12. All Financial Statements Omitted from Item 23. None.
13. Letter of Investment Intent. Not Applicable.
14. Copy of Prototype defined contribution plan. Not Applicable.
15. Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940. Not Applicable.
16. Schedule for Computation of Performance Data - Common Stock Fund,
Money Market Portfolio, Bond Portfolio, and Asset Allocation
Portfolio, filed as an Exhibit hereto.
17.1 Power of Attorney, dated May 1, 1989, filed as an Exhibit to
Post-Effective Amendment No. 2 to Form N-1A on May 1, 1989, File
No. 33-19749, and incorporated herein by reference.
17.2 Power of Attorney, dated April 27, 1995, filed as an Exhibit to
Post-Effective Amendment No. 8 to Form N-1A of USLICO Series
Fund, on April 27, 1995, File No. 33-20957, and incorporated
herein by reference.
17.3 Financial Data Schedule - Common Stock Fund, filed hereto
electronically as Exhibit 27.1 pursuant to Rule 401 of Regulation
S-T.
17.4 Financial Data Schedule - Money Market Portfolio, filed hereto
electronically as Exhibit 27.2 pursuant to Rule 401 of Regulation
S-T.
17.5 Financial Data Schedule - Bond Portfolio, filed hereto
electronically as Exhibit 27.3 pursuant to Rule 401 of Regulation
S-T.
17.6 Financial Data Schedule - Asset Allocation Portfolio, filed
hereto electronically as Exhibit 27.4 pursuant to Rule 401 of
Regulation S-T.
18. Plan pursuant to Rule 18f-3 under the Investment Company Act of
1940. Not Applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
A chart identifying the subsidiaries of ReliaStar Financial Corp. and
their relationship to one another is incorporated by reference to item
26 of Form N-4 Registration Statement of ReliaStar Bankers Security
Variable Annuity Funds M, P, and Q, File No. 33-11489, filed February
28, 1997.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Two - ReliaStar United Services Variable Life Separate Account I and
ReliaStar Bankers Security Variable Life Separate Account I.
ITEM 27. INDEMNIFICATION
Reference is made to Article V, Section 5.4 of the Registrant's
Agreement and Declaration of Trust, which is incorporated by reference
herein.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant pursuant
to the Declaration of Trust or otherwise, the Registrant is aware that
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act, and
therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant) of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the
successful defense of any act, suit or proceeding is asserted by such
trustees, officers or controlling persons in connection with the
shares being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISERS
(a) The directors and officers of the Adviser, Washington Square Advisers,
Inc. and their businesses and other connection during the past two
years are as follows:
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL BUSINESS AND OTHER CONNECTIONS
------------------ ------------------------------
<S> <C>
Susan M. Bergen Counsel of ReliaStar Life Insurance Company; Secretary of
Adviser and Washington Square Securities, Inc.
Richard R. Crowl Senior Vice President and General Counsel, ReliaStar
Financial Corp. and ReliaStar Life Insurance Company Senior
Vice President and General Counsel, WSA.
Gregory A. Hanson Senior Vice President and Portfolio Manager, WSA.
Douglas P. Hedberg Executive Vice President and Managing Director, WSA.
Wayne R. Huneke Senior Vice President and Chief Financial Officer, ReliaStar
Financial Corp. and ReliaStar Life Insurance Company;
Treasurer and Chief Financial Officer, WSA.
Mark S. Jordahl Executive Vice President and Managing Director, WSA.
Kenneth U. Kuk Vice President, ReliaStar Financial Corp. and ReliaStar Life
Insurance Company; Chief Executive Officer, President and
Director, WSA.
James L. Mahnke Senior Vice President and Portfolio Manager, WSA.
John Maschoff Senior Vice President and Portfolio Manager, WSA.
Frank P. Pintens Senior Vice President and Portfolio Manager, WSA.
John J. Turner Chairman and Chief Executive Officer, ReliaStar Financial
Corp. and ReliaStar Life Insurance Company; Director, WSA.
</TABLE>
(b) The directors and officers of the Sub-Adviser, Newbold's Asset
Management, Inc. and their businesses and other connection during the
past two years are as follows:
<TABLE>
<CAPTION>
NAME TITLE BUSINESS AND OTHER CONNECTIONS
---- ----- ------------------------------
<S> <C> <C>
Harold Joseph Baxter Chairman, CEO, Director Chairman, CEO, and Director of the sub-adviser since July,
1996; Chairman, CEO, and Director of Pilgrim Baxter &
Associates, Ltd. since August, 1985.
James Henry Farrell, Jr. Chief Investment Officer and Chief Investment Officer and Director of the sub-adviser
Director since September, 1996; prior thereto President of Farrell &
Seiwell, Inc. from April, 1996 to April 1997; prior thereto,
Sole Proprietor of James H. Farrell, Jr. Investment
Counselor from July, 1994 to March, 1996.
David Wade Jennings President, COO, Director and President, COO, Director, and Treasurer of the sub-adviser
Treasurer since July, 1996; Director of Client Services at Pilgrim
Baxter & Associates, Ltd., since March 1996; prior thereto
President of Downing Street Associates from February, 1994
to February, 1996.
Eric Charles Schneider Chief Financial Officer CFO of the sub-adviser since July, 1996; CFO of Pilgrim
Baxter & Associates, Ltd. since February, 1996; prior
thereto, Partner, Sacco, Sweeney & Schneider from January,
1986 to January 1996.
Amy Yuter Chief Compliance Officer Chief Compliance Officer of the sub-adviser since July,
1996; Registered Principal, SEI Financial Services Company
since March, 1996; Chief Compliance Officer, Pilgrim Baxter
& Associates, Ltd. since July, 1995.
John Mark Zerr General Counsel, Secretary General Counsel and Secretary of the sub-adviser since July,
1996; General Counsel and Secretary of Pilgrim Baxter &
Associates, Ltd. since November, 1996; prior thereto Vice
President and Assistant Secretary of Delaware Management
Company, Inc. from July, 1995 to November, 1996.
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Washington Square Securities, Inc. serves as the Fund's Distributor
and as the Distributor of Bankers Security Variable Annuity Contracts
issued by subaccounts of its Separate Accounts P and Q, pursuant to a
distribution contract. It also acts as Distributor to ReliaStar Life
Insurance Company products: ReliaStar Select Variable Account Annuity
II; ReliaStar Select Variable Account Annuity III; Select*Life
Variable Account - Life I; Select*Life Variable Account - Life II;
Select*Life Variable Account - Life III; Select*Life Variable Account
- SVUL.
Washington Square Securities, Inc. also acts as Distributor to:
Northern Life Insurance Co. - Separate Account One - Advantage; and,
ReliaStar Bankers Security Life Insurance Co. - ReliaStar Banker's
Variable Life New York.
(b) The directors and officers of WSSI are as follows:
NAME POSITIONS AND OFFICES WITH WSSI
---- -------------------------------
John H. Flittie Director and Chairman
Roger W. Arnold Director
Michael J. Dubes Director
Robert C. Salipante Director
Steven W. Wishart Director
James R. Gelder President and Chief Executive
Officer
Michael R. Fanning Executive Vice President and
Chief Marketing Officer
Jeffrey A. Montgomery Executive Vice President and
Chief Operating Officer
Robert B. Saginaw Vice President and
Chief Legal Officer
Susan M. Bergen Secretary
David Braun Assistant Vice President
Karin Callanan Assistant Vice President
Timothy J. Lyle Assistant Vice President and
Chief Compliance Officer
Margaret B. Wall Treasurer and Chief Financial
Officer
David Cox Assistant Secretary
Allen L. Kidd Assistant Secretary
Loralee A. Renelt Assistant Secretary
The principal business address of each of the foregoing executive
officers is 20 Washington Avenue South, Minneapolis, Minnesota 55401,
except for the following individuals whose principal business
addresses are listed after their respective names: Michael J. Dubes,
1110 3rd Avenue, Seattle, Washington 98101; Allen L. Kidd, 222 North
Arch Road, Richmond, Virginia 23236.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The account books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and the Rules thereunder will be maintained at 4601 Fairfax
Drive, Arlington, Virginia 22203.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not Applicable.
(b) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the effective date of Registrant's Registration Statement
under the Securities Act of 1933.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment No. 10 to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Arlington, County of Arlington, Commonwealth of Virginia this 30th day
of April 1997.
USLICO SERIES FUND
By /S/ROBERT B. SAGINAW
---------------------
Robert B. Saginaw
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Richard C. Kaufman* Chairman of the Board of Trustees April 30, 1997
Jeri A. Eckhart** Trustee April 30, 1997
Wayne O. Jefferson, Jr.** Trustee April 30, 1997
/S/REBECCA B. CRUNK Vice President and Treasurer April 30, 1997
-------------------
Rebecca B. Crunk
</TABLE>
* By /S/ROBERT B. SAGINAW
--------------------
Robert B. Saginaw
Attorney-in-Fact
April 30, 1997
* Power of Attorney filed in Post-Effective Amendment No. 2, File No.
33-19749, filed on May 1, 1989, and incorporated by reference herein.
** Powers of Attorney for Ms. Eckhart and Mr. Jefferson filed in
Post-Effective Amendment No. 8, filed April 27, 1995, filed No. 33-19749,
and incorporated by reference herein.
USLICO SERIES FUND
AGREEMENT AND
DECLARATION OF TRUST
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I -- THE TRUST
<S> <C> <C>
Section 1.1 Name.............................................................................. 1
Section 1.2 Definitions....................................................................... 2
ARTICLE II -- TRUSTEES
Section 2.1 Management of the Trust........................................................... 3
Section 2.2 Election of Trustees.............................................................. 4
Section 2.3 Term of Office of Trustees........................................................ 4
Section 2.4 Termination of Service and Appointment of Trustees................................ 4
Section 2.5 Temporary Absence of Trustee...................................................... 5
Section 2.6 Number of Trustees................................................................ 5
Section 2.7 Effect of Death, Resignation, etc. of a Trustee................................... 5
Section 2.8 No Accounting..................................................................... 5
Section 2.9 Ownership of the Trust............................................................ 5
ARTICLE III -- POWERS OF TRUSTEES
Section 3.1 General........................................................................... 6
Section 3.2 Investments....................................................................... 6
Section 3.3 Legal Title....................................................................... 7
Section 3.4 Issuance and Repurchase of Securities............................................. 7
Section 3.5 Borrow Money...................................................................... 8
Section 3.6 Officers; Delegation; Committees.................................................. 8
Section 3.7 Collection and Payment............................................................ 8
Section 3.8 Expenses.......................................................................... 8
Section 3.9 Manner of Acting; By-laws......................................................... 9
Section 3.10 Voting Trusts..................................................................... 9
Section 3.11 Miscellaneous Powers.............................................................. 9
Section 3.12 Further Powers.................................................................... 10
ARTICLE IV -- ADVISORY, MANAGEMENT AND DISTRIBUTION ARRANGEMENTS
Section 4.1 Advisory and Management Arrangements.............................................. 10
Section 4.2 Distribution Arrangements......................................................... 11
Section 4.3 Parties to Contract............................................................... 11
Section 4.4 Provisions and Amendments......................................................... 12
ARTICLE V -- LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND
OTHERS
Section 5.1 Trustees, Shareholders, etc. Not Personally Liable; Notice........................ 12
Section 5.2 Trustee's Good Faith Action; Expert Advise; No Bond or Surety..................... 13
Section 5.3 Indemnification of Shareholders................................................... 13
Section 5.4 Indemnification of Trustees, Officers, etc........................................ 14
Section 5.5 Compromise Payment................................................................ 15
Section 5.6 Indemnification Not Exclusive, etc................................................ 15
Section 5.7 Liability of Third Persons Dealing with Trustees.................................. 16
ARTICLE VI -- SHARES OF BENEFICIAL INTEREST
Section 6.1 Beneficial Interest............................................................... 16
Section 6.2 Series Designation................................................................ 16
Section 6.3 Rights of Shareholders............................................................ 18
Section 6.4 Trust Only........................................................................ 19
Section 6.5 Issuance of Shares................................................................ 19
Section 6.6 Register of Shares................................................................ 19
Section 6.7 Transfer Agent and Registrar...................................................... 20
Section 6.8 Transfer of Shares................................................................ 20
Section 6.9 Notice............................................................................ 21
ARTICLE VII -- CUSTODIANS
Section 7.1 Appointment and Duties............................................................ 21
Section 7.2 Action Upon Termination of Custodian Agreement.................................... 22
Section 7.3 Central Certificate System........................................................ 22
Section 7.4 Acceptance of Receipts in Lieu of Certificates.................................... 22
ARTICLE VIII -- REDEMPTION
Section 8.1 Redemptions....................................................................... 23
Section 8.2 Redemptions of Accounts of Less Than a Minimum Dollar Amount...................... 23
ARTICLE IX -- DETERMINATION OF NET ASSET VALUE, NET INCOME AND
DISTRIBUTIONS
Section 9.1 Net Asset Value................................................................... 23
Section 9.2 Distributions to Shareholders..................................................... 24
Section 9.3 Power to Modify Foregoing Procedures.............................................. 24
ARTICLE X -- SHAREHOLDERS
Section 10.1 Voting Powers..................................................................... 24
Section 10.2 Meetings.......................................................................... 25
Section 10.3 Quorum and Required Vote.......................................................... 25
Section 10.4 Record Date for Meetings.......................................................... 26
Section 10.5 Proxies........................................................................... 26
Section 10.6 Additional Provisions............................................................. 26
Section 10.7 Reports........................................................................... 26
Section 10.8 Shareholder Action by Written Consent............................................. 27
ARTICLE XI -- DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS,
ETC.
Section 11.1 Duration.......................................................................... 27
Section 11.2 Termination....................................................................... 27
Section 11.3 Reorganization.................................................................... 28
Section 11.4 Amendment Procedure............................................................... 29
Section 11.5 Incorporation..................................................................... 30
ARTICLE XII -- MISCELLANEOUS
Section 12.1 Filing............................................................................ 31
Section 12.2 Resident Agent.................................................................... 31
Section 12.3 Governing Law..................................................................... 31
Section 12.4 Counterparts...................................................................... 31
Section 12.5 Reliance by Third Parties......................................................... 32
Section 12.6 Provisions in Conflict with Law or Regulations.................................... 32
</TABLE>
AGREEMENT AND
DECLARATION OF TRUST
OF
USLICO SERIES FUND
THE AGREEMENT AND DECLARATION OF TRUST made the 19th day of January, 1988
by the parties signatory hereto, as trustees (such persons, so long as they
shall continue in office in accordance with the terms of this Agreement and
Declaration of Trust, and all other persons who at the time in question have
been duly elected or appointed as trustees in accordance with the provisions of
this Agreement and Declaration of Trust and are then in office, being
hereinafter called the "Trustees") and by the holders of shares of beneficial
interest to be issued hereunder hereinafter provided.
W I T N E S S E T H
WHEREAS, the Trustees desire to form a trust fund under the laws of the
Commonwealth of Massachusetts for the investment and reinvestment of funds
contributed thereto; and
WHEREAS, it is proposed that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest, which may, at the
discretion of the Trustees, be divided into separate series as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
ARTICLE I
The Trust
Section 1.1 NAME. The name of the trust created hereby (the "Trust"), which
term shall be deemed to include any series of the Trust when the context
requires, shall be "USLICO Series Fund", and so far as may be practicable the
Trustees shall conduct the activities of the Trust, execute all documents and
sue or be sued under that name, which name (and the word "Trust" wherever
hereinafter used) shall refer to the Trustees as Trustees, and not individually,
and shall not refer to the officers, agents, employees or shareholders of the
Trust or any Series thereof. Each Series of the Trust which shall be established
and designated by the Trustees pursuant to Section 6.2 and each Series shall
conduct its activities under such name as the Trustees shall determine and set
forth in the instrument establishing such Series. Should the Trustees determine
that the use of the name of the Trust or any Series is not advisable, they may
select such other name for the Trust or such Series as they deem proper and the
Trust or such Series may conduct its activities under such other name. Any name
change shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth the new name. Any such instrument shall have the
status of an amendment to this Agreement and Declaration of Trust.
Section 1.2 DEFINITIONS. As used in this Agreement and Declaration of
Trust, the following terms shall have the following meanings:
The "1940 ACT" refers to the Investment Company Act of 1940 and the
regulations promulgated thereunder, as amended from time to time.
The terms "AFFILIATED PERSON", "ASSIGNMENT", "COMMISSION", "INTERESTED
PERSON", "MAJORITY-SHAREHOLDER VOTE" (the 67% or 50% requirement of the
third sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "PRINCIPAL UNDERWRITER" shall have the meanings given them
in the 1940 Act. "COMMISSION" shall mean the U.S. Securities and Exchange
Commission.
"DECLARATION" OR "DECLARATION OF TRUST" shall mean this Agreement and
Declaration of Trust as amended from time to time. References in this
Declaration to "DECLARATION", "HEREOF", "HEREIN" and "HEREUNDER" shall be
deemed to refer to the Declaration rather than the article or section in
which such words appear.
"FUNDAMENTAL POLICIES" shall mean the investment objective for each
Series and the investment restrictions set forth in the registration
statement for the Trust on Form N-lA and designated as fundamental policies
therein.
"PERSON" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PROSPECTUS" shall mean the currently effective prospectus of any
Series of the Trust under the Securities Act of 1933, as amended.
"SERIES" shall mean any separate Series that may be established and
designated pursuant to Section 6.2.
"SHAREHOLDERS" shall mean as of any particular time all holders of
record of outstanding Shares at such time.
"SHARES" shall mean the equal proportionate transferable units of
interest into which the beneficial interest in any Series of the Trust
shall be divided from time to time and includes fractions of Shares as well
as whole Shares. All references to Shares shall be deemed to be Shares of
any or all Series as the context may require.
"TRUSTEES" shall mean the signatories to this Declaration, so long as
they shall continue in office in accordance with the terms hereof, and all
other persons who at the time in question have been duly-elected or
appointed and have qualified as Trustees in accordance with the provisions
hereof and are then in office, and each such person is herein referred to
as the "Trustee", and reference in this Declaration to a Trustee or
Trustees shall refer to such person or persons in their capacity as
Trustees hereunder.
"TRUST PROPERTY" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust, any Series thereof or the
Trustees.
ARTICLE II
Trustees
Section 2.1 MANAGEMENT OF THE TRUST. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility. The Trustees named herein (or their
successors appointed hereunder) shall serve until the election of Trustees at
the first meeting of Shareholders of the Trust.
Section 2.2 ELECTION OF TRUSTEES. Except for the Trustees named herein and
those Trustees designated by such Trustees prior to the issuance of Shares, or
appointed to fill vacancies pursuant to Section 2.4 hereof, the Shareholders of
the Trust shall elect Trustees at Shareholder meetings called for that purpose.
The Trustees need not be elected annually or at regular intervals. Except as
provided in Section 10.2, the Trustees shall not be required to call a meeting
of Shareholders for the purpose of electing Trustees, provided, however, that in
the event that at any time, other than the time preceding the first meeting of
Shareholders for the purpose of electing Trustees, less than a majority of the
Trustees holding office at that time were elected by the Shareholders, a meeting
of the Shareholders for the purpose of electing Trustees shall be held promptly
and in any event within 60 days (unless the Commission shall by order extend
such period). No election of a Trustee shall become effective, however, until
the person elected shall have accepted such election and agreed in writing to be
bound by the terms of this Declaration. If re-elected, a Trustee may succeed
himself. Trustees need not own shares.
Section 2.3 TERM OF OFFICE OF TRUSTEES. A Trustee duly appointed or elected
hereunder shall hold office until the occurrence of any of the following: (a)
the Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) the Trustee may be removed at
any time by written instrument signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date when such removal shall
become effective; (c) the Trustee who requests in writing to be retired or who
has become mentally or physically incapacitated may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement; and (d) the Trustee may be removed at any meeting of
Shareholders of the Trust by a vote of two-thirds of the outstanding Shares or
by a written declaration executed, without a meeting, by the holders of not less
than two-thirds of the outstanding Shares.
Section 2.4 TERMINATION OF SERVICE AND APPOINTMENT OF TRUSTEES. In case of
the death, resignation, retirement, removal or mental or physical incapacity of
any of the Trustees, or in case a vacancy shall, by reason of an increase in
number, or for any other reason, exist, the remaining Trustees may (but need not
unless required by the 1940 Act, so long as there are at least two remaining
Trustees) fill such vacancy by appointing for the remaining term of the
predecessor Trustee such other person as they in their discretion shall see fit.
Such appointment shall be effective upon the signing of a written instrument by
a majority of the Trustees in office and the written acceptance of this
Declaration by the appointee. An appointment of a Trustee may be made by the
Trustees then in office in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of Trustees
and the written acceptance of this Declaration by the appointee. As soon as any
Trustee so appointed shall have accepted this Trust, the trust estate shall vest
in the now Trustee or Trustees, together with the continuing Trustees, without
any further act of conveyance, and he shall be deemed a Trustee hereunder. Any
appointment authorized by this Section 2.4 is subject to the provisions of
Section 16(a) of the 1940 Act.
Section 2.5 TEMPORARY ABSENCE OF TRUSTEE. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees, provided that in no case shall less than
two of the Trustees personally exercise the power hereunder except as herein
otherwise expressly provided.
Section 2.6 NUMBER OF TRUSTEES. The number of Trustees serving hereunder at
any time shall be determined by the Trustees themselves, but once Shares have
been issued shall not be less than two (2) or more than fifteen (15).
Section 2.7 EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The death,
resignation, retirement, removal, or mental or physical incapacity of the
Trustees, or any one of them, shall not operate to annul or terminate the Trust
or any Series hereunder or to revoke or terminate any existing agency or
contract created pursuant to the terms of this Declaration, and until such
vacancy is filled, the Trustees in office, regardless of their number, shall
have all of the powers granted to the Trustees and shall discharge all the
duties imposed upon them by this Declaration.
Section 2.8 NO ACCOUNTING. Except to the extent required by the 1940 Act or
under circumstances which would justify his removal for cause, no person ceasing
to be a Trustee as a result of his death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required to make an
accounting to the shareholders or remaining Trustees upon such cessation.
Section 2.9 OWNERSHIP OF THE TRUST. The assets of the Trust shall be held
separate and apart from any assets now or hereafter held in any capacity other
than as Trustee hereunder by the Trustees or by any successor Trustees. All of
the assets of the Trust shall at all times be considered as vested in the
Trustees. No Shareholder shall be deemed to have a severable ownership in any
individual asset of the Trust or any right of partition or possession thereof,
but each Shareholder shall have a proportionate undivided beneficial interest in
the Trust.
ARTICLE III
Powers of Trustees
Section 3.1 GENERAL. The Trustees in all instances shall act as principals,
and are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider necessary
or appropriate in connection with the management of the Trust. The Trustees
shall not be bound or limited by present or future laws or customs with regard
to investment by trustees or fiduciaries, but shall have full authority and
absolute power and control over the Trust Property and business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, including such authority, power and control to
do all acts and things as they, in their uncontrolled discretion, shall deem
proper to accomplish the purposes of this Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid powers.
Section 3.2 INVESTMENTS. The Trustees shall have power, subject to the
Fundamental Policies, to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, lend, exchange, mortgage,
hypothecate, lease, distribute or otherwise deal in or dispose of common
stocks, preferred stocks, bonds, debentures, warrants and rights to
purchase securities, mortgage related securities such as mortgage-backed
securities and collateralized mortgage obligations, options on securities,
futures contracts and options on futures contracts, covered spread options,
certificates of beneficial interest, negotiable or non-negotiable
instruments, bank obligations, evidences of indebtedness, privately placed
debt securities, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, reverse repurchase agreements, firm commitment
agreements and "when-issued" securities and other securities, including,
without limitation, those issued, guaranteed or sponsored by any state,
territory or possession of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, or by the
United States Government or its agencies or instrumentalities, or
international instrumentalities, or by any bank, savings institution,
corporation or other business entity organized under the laws of the United
States and, to the extent provided in the Prospectus and not prohibited by
the Fundamental Policies of the Trust, foreign securities of issuers or
governments organized under foreign laws; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any
and all such investments of every kind and description, with power to
designate one or more persons, firms, associations or corporations to
exercise any of said rights, powers and privileges in respect of any of
said instruments; and the Trustees shall be deemed to have the foregoing
powers with respect to any additional securities in which any Series of the
Trust may invest should the investment policies set forth in the Prospectus
or the Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust or any Series.
Section 3.3 LEGAL TITLE. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust or any Series thereof,
or in the name of any other Person as nominee, on such terms as the Trustees may
determine, provided that the interest of the Trust or any Series thereof is
appropriately protected.
Section 3.4 ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in, Shares, including
shares in fractional denominations, and, subject to the more detailed provisions
set forth in Articles VIII and IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of the
applicable Series of the Trust whether capital or surplus or otherwise, to the
full extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts governing business corporations.
Section 3.5 BORROW MONEY. Subject to the Fundamental Policies, the Trustees
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the assets of
the Trust or any Series thereof, including the lending of portfolio securities,
and to endorse, guarantee or undertake the performance of any obligation,
contract or engagement of any other person, form, association or corporation.
Section 3.6 OFFICERS; DELEGATION; COMMITTEES. The Trustees may, as they
consider appropriate, elect and remove officers and appoint and terminate agents
and consultants and hire and terminate employees, any one or more of the
foregoing of whom may be a Trustee and may provide for the compensation of all
of the foregoing. The Trustees shall have power, consistent with their
continuing exclusive authority over the management of the Trust and the Trust
Property, to delegate from time to time to such of their number or to officers,
employees or agents of the Trust the doing of such things and the execution of
such instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient. The Trustees may appoint from
their number and terminate any one or more committees consisting of two or more
Trustees, including without implied limitation an Executive Committee which may,
when the Trustees are not in session and subject to the 1940 Act, exercise some
or all of the powers and authority of the Trustees as the Trustees may
determine.
Section 3.7 COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Trust or any Series thereof; to pay all claims,
including taxes, against the Trust Property; to prosecute, defend, compromise,
arbitrate or abandon any claims relating to the Trust Property; to foreclose any
security interest securing any obligations, by virtue of which any property is
owed to the Trust or any Series thereof; and to enter into releases, agreements
and other instruments.
Section 3.8 EXPENSES. The Trustees shall have power to incur and pay any
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of the Trust or any Series, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services, including legal,
underwriting, syndicating and brokerage services, as they in good faith may deem
reasonable and reimbursement for expenses reasonably incurred by themselves on
behalf of the Trust.
Section 3.9 MANNER OF ACTING; BY-LAWS. Except as otherwise provided herein
or in the By-laws or required by the 1940 Act, any action to be taken by the
Trustees may be taken by a majority of the Trustees present at a meeting of the
Trustees (a quorum being present), including any meeting held by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, or by written consents
of a majority of Trustees then in office (or such larger or different number as
may be required by the 1940 Act or other applicable law). The Trustees may adopt
and from time to time amend or repeal the By-laws for the conduct of the
business of the Trust.
Section 3.10 VOTING TRUSTS. The Trustees shall have power and authority for
and on behalf of the Trust to join with other holders of any securities or debt
instruments in acting through a committee, depositary, voting trustee or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper.
Section 3.11 MISCELLANEOUS POWERS. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust or any Series thereof; (b) enter
into joint ventures, partnership and any other combinations or associations; (c)
purchase, and pay for out of Trust Property, insurance as they deem necessary or
appropriate for the conduct of the business, including without limitation,
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or independent contractors
of the Trust or any Series thereof against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any
such Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (e) make donations, irrespective of benefit to the
Trust, for charitable, religious, educational, scientific, civic or similar
purposes; (f) to the extent permitted by law, indemnify any Person with whom the
Trust or any Series thereof has dealings, including any adviser, administrator,
manager, distributor and selected dealers with respect to any Series, to such
extent as the Trustees shall determine; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the fiscal year of
the Trust and the method in which its accounts shall be kept; and (i) adopt a
seal for the Trust, provided that the absence of such seal shall not impair the
validity of any instrument executed on behalf of the Trust.
Section 3.12 FURTHER POWERS. The Trustees shall have power to conduct the
business of the Trust or any Series thereof, carry on its operations and
maintain offices both within and without the Commonwealth of Massachusetts, in
any and all states of the United States of America, in the District of Columbia,
and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust or any Series thereof although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust or any series thereof made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Declaration, the presumption
shall be in favor of a grant of power to the Trustees. The Trustees will not be
required to obtain any court order to deal with the Trust Property. No Trustee
shall be required to give any bond or other security for the performance of any
of his duties hereunder.
ARTICLE IV
Advisory, Management and Distribution Arrangements
Section 4.1 ADVISORY AND MANAGEMENT ARRANGEMENTS. Subject to a Majority
Shareholder Vote, if required by law, of the applicable Series, the Trustees may
in their discretion from time to time enter into advisory, administrative or
management contracts whereby the other party to such contract shall undertake to
furnish to the Trustees such advisory, administrative and management services,
with respect to a Series as the Trustees shall from time to time consider
desirable and all upon such terms and conditions as the Trustees may in their
discretion determine. Subject to a Majority Shareholder Vote if required by law,
the investment adviser may engage one or more firms to serve as Portfolio
Manager to a Series pursuant to a sub-investment advisory contract in which the
Portfolio Manager makes all determinations with respect to the purchase and sale
of portfolio securities and places, in the names of the Series all orders for
execution of the Series' portfolio transactions upon such terms and conditions
and for such compensation as the Trustees may in their discretion approve. A
Portfolio Manager may, in turn, engage its own sub-adviser in managing a
particular Series. Notwithstanding any provisions of this Declaration, the
Trustees may authorize any adviser, portfolio manager, administrator or manager
(subject to such general or specific instructions as the Trustees may from time
to time adopt) to effect purchases, sales, loans or exchanges of portfolio
securities of any Series of the Trust on behalf of the Trustees or may authorize
any officer, employee or Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of any such adviser, portfolio manager,
administrator or manager (and all without further action by the Trustees). Any
such purchases, sales, loans or exchanges shall be deemed to have been
authorized by all of the Trustees.
Section 4.2 DISTRIBUTION ARRANGEMENTS. The Trustees may in their discretion
from time to time enter into a contract, providing for the sale of the Shares of
the Trust or any Series of the Trust, whereby the Trust may either agree to sell
the Shares to the other party to the contract or appoint such other party as its
sales agent for such Shares. In either case, the contract shall be on such terms
and conditions as the Trustees may in their discretion determine to be not
inconsistent with the provisions of this Article IV or the By-laws; and such
contract may also provide for the repurchase or sale of Shares by such other
party as principal or as agent of the Trust and may provide that such other
party may enter into selected dealer agreements with registered securities
dealers to further the purpose of the distribution or repurchase of the Shares.
The Trustees may adopt a Distribution Plan pursuant to Rule 12b-1 of the 1940
Act and may authorize the Trust to make payments from its assets pursuant to
such Plan.
Section 4.3 PARTIES TO CONTRACT. Any contract of the character described in
Sections 4.1 and 4.2 of this Article IV or in Article VII hereof may be entered
into with any corporation, firm, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, Trustee,
shareholder or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this Article IV
or the By-laws. The same person (including a firm, corporation, trust or
association) may be the other party to contracts entered into pursuant to
Sections 4.1 and 4.2 above or Article VII, and any individual may be financially
interested or otherwise affiliated with persons who are parties to any or all of
the contracts mentioned in this section 4.3.
Section 4.4 PROVISIONS AND AMENDMENTS. Any contract entered into pursuant
to Sections 4.1 and 4.2 of this Article IV shall be consistent with and subject
to the requirements of Section 15 of the 1940 Act with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 4.1 shall be effective unless consented to by a
Majority Shareholder Vote of the applicable Series if required by law.
ARTICLE V
Limitations of Liability of Shareholders, Trustees and Others
Section 5.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Series with which such person dealt
for payment under such credit, contract or claim; and neither the Shareholders
of any Series nor the Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, nor any other Series shall be
personally liable therefor. Every note, bond, contract, instrument, certificate
or undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust, any Series or the Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been executed or done only
by or for the Trust (or the Series) or the Trustees and not personally. Nothing
in this Declaration shall protect any Trustee or officer against any liability
to the Trust or the Shareholders to which such Trustee or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or of such officer.
Every note, bond, contract, instrument, certificate, share or undertaking
made or issued by the Trustees or by any officers or officer shall give notice
that this Declaration is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite to the effect that the same was executed or made
by or on behalf of the Trust or by them as Trustees or Trustee or as officers or
officer and not individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are binding only
upon the assets and property of the Trust, or the particular Series in question,
as the case may be, but the omission thereof shall not operate to bind any
Trustees or Trustee or officers or officer or Shareholders or Shareholder
individually.
Section 5.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretion hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. Subject
to the foregoing, (a) the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, consultant,
adviser, administrator, distributor or principal underwriter, custodian or
transfer, dividend disbursing, Shareholder servicing or accounting agent of the
Trust, nor shall any Trustee be responsible for the act or omission of any other
Trustee; (b) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration and their duties as
Trustees, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice; and (c) in discharging
their duties, the Trustees, when acting in good faith, shall be entitled to rely
upon the books of account of the Trust and upon written reports made to the
Trustees by any officer appointed by them, any independent public accountant,
and (with respect to the subject matter of the contract involved) any officer,
partner or responsible employee of any adviser, administrator, manager,
distributor, selected dealer, appraiser or other expert, consultant or agent.
The Trustees as such shall not be required to give any bond or surety or any
other security for the performance of their duties.
Section 5.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder (or
former Shareholder) of any Series of the Trust shall be charged or held to be
personally liable for any obligation or liability of the Trust solely by reason
of being or having been a Shareholder and not because of such Shareholder's acts
or omissions or for some other reason, said Series (upon proper and timely
request by the Shareholder) shall assume the defense against such charge and
satisfy any judgment thereon, and the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets of said Series' estate to be held harmless
from and indemnified against all loss and expense arising from such liability.
Section 5.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall
indemnify (from the assets of the Series or Series in question) each of its
Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) [hereinafter referred to
as a "Covered Person"] against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or with which such person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined that such Covered
Person (i) did not act in good faith in the reasonable belief that such Covered
Person's action was in or not opposed to the best interests of the Trust or (ii)
had acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office
(either and both of the conduct described in (i) and (ii) being referred to
hereafter as "Disabling Conduct"). A determination that the Covered Person is
entitled to indemnification may be made by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that the person to
be indemnified was not liable by reason of Disabling Conduct, (ii) dismissal of
a court action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in section
2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be paid
from time to time by the Series in question in advance of the final disposition
of any such action, suit or proceeding, provided that the Covered Person shall
have undertaken to repay the amounts so paid to the Series in question if it is
ultimately determined that indemnification of such expenses is not authorized
under this Article V and (i) the covered Person shall have provided security for
such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the proceeding, or an independent
legal counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Covered Person ultimately will be found entitled to
indemnification.
Section 5.5 COMPROMISE PAYMENT. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 5.4,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
Trustees who are not parties to the proceeding or (b) by an independent legal
counsel in a written opinion. Approval by the Trustees pursuant to clause (a) or
by independent legal counsel pursuant to clause (b) shall not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with any of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's action was in
or not opposed to the best interests of the Trust or to have been liable to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office.
Section 5.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article V shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article V, "Covered Person" shall include such person's heirs, executors
and administrators; "interested Covered Person" is one against whom the action,
suit or other proceeding in question or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened, and a
"disinterested" person is a person against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending or threatened. Nothing contained in
this Article shall affect any rights to indemnification to which personnel of
the Trust, other than Trustees and officers, and other persons may be entitled
by contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
Section 5.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VI
Shares of Beneficial Interest
Section 6.1 BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest with
par value $.001 per share. The number of such shares of beneficial interest
authorized hereunder is unlimited. All Shares issued hereunder including,
without limitation, Shares issued in connection with a dividend in Shares or a
split of Shares, shall be fully paid and nonassessable.
Section 6.2 SERIES DESIGNATION. The Trustees, in their discretion from time
to time, may authorize the division of Shares into additional Series, each
additional Series relating to a separate portfolio of investments. The first
eight such Series are hereby established and designated:
The Stock Portfolio
The Money Market Portfolio
The Bond Portfolio
The Asset Allocation Portfolio
These four Series shall be the only Series until additional series are
established and designated by the Trustees. Different Series may be established
and designated and variations in the relative rights and preferences as between
the different Series shall be fixed and determined by the Trustees; provided
that all Shares shall be identical except that there may be variations between
different Series as to investment policies, securities portfolios, purchase
price, determination of net asset value, the price, terms and manner of
redemption, special and relative rights as to dividends and on liquidation,
conversion rights, and conditions under which the several Series shall have
separate voting rights. All references to Shares in this Declaration shall be
deemed to be shares of any or all Series as the context may require.
The following provisions shall be applicable to all Series:
(a) The number of Shares of each Series that may be issued shall be
unlimited. The Trustees may classify or reclassify any unissued Shares or
any Shares previously issued and required of any Series into one or more
Series that may be established and designated from time to time. The
Trustees may hold as treasury Shares (of the same or some other Series),
reissue for such consideration and on such terms as they may determine, or
cancel any Shares of any Series reacquired by the Trust at their discretion
from time to time.
(b) The power of the Trustees to invest and reinvest the Trust
Property of each Series that has been or that may be established shall be
governed by Section 3.2 of this Declaration.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account of
the Trust. In the event that there are any assets, income, earnings,
profits and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Series, the Trustees shall
allocate them among any one or more of the Series established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all
Series for all purposes.
(d) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series and all
expenses, costs, charges and reserves attributable to that Series, and any
general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular series
shall be allocated and charged by the Trustees to and among any one or more
of the Series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the holders
of all Series for all purposes. The Trustees shall have full discretion, to
the extent not inconsistent with the 1940 Act, to determine which items
shall be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders.
(e) The power of the Trustees to pay dividends and make distributions
with respect to any one or more Series shall be governed by Section 9.2 of
this Trust. Dividends and distributions on Shares of a particular Series
may be paid with such frequency as the Trustees may determine, which may be
daily or otherwise, pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the holders of Shares of that Series, from such of the income and capital
gains, accrued liabilities belonging to that Series. All dividends and
distributions on Shares of a particular Series shall be distributed pro
rata to the holders of that Series in proportion to the number of Shares of
that Series held by such holders at the date and time of record established
for the payment of such dividends or distributions.
The establishment and designation of any additional Series of Shares shall
be effective upon the execution by a majority of the then Trustees of any
instrument setting forth the establishment and designation of such Series. Such
instrument shall also set forth any rights and preferences of such Series which
are in addition to the rights and preferences of Shares set forth in this
Declaration. The Trustees may by an instrument executed by a majority of their
number abolish a series and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of an amendment
to this Declaration.
Section 6.3 RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property of
every description and the right to conduct any business hereinbefore described
are vested exclusively in the Trustees, and the Shareholders shall have no
interest therein other than the beneficial interest conferred by their Shares
with respect to a particular Series, and they shall have no right to call for
any partition or division of any property, profits, rights or interests of the
Trust nor can they be called upon to share or assume any losses of the Trust, or
suffer an assessment of any kind by virtue of their ownership of Shares. The
Shares shall be personal property giving only the rights in this Declaration
specifically set forth. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights (except for rights to
exchange Shares of one Series for Shares of another Series as set forth in the
Prospectus).
Section 6.4 TRUST ONLY. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.5 ISSUANCE OF SHARES. The Trustees, in their discretion, may from
time to time without a vote of the Shareholders issue Shares with respect to any
Series that may have been established pursuant to Section 6.2, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount not less than the then current net asset
value of said Shares and type of consideration, including cash or property, at
such time or times and on such terms as the Trustee may deem best, and may in
such manner acquire other assets (including the acquisition of assets subject
to, and in connection with the assumption of, liabilities) and businesses. In
connection with any issuance of Shares, the Trustees may issue fractional
Shares. The Trustees may from time to time divide or combine the Shares of any
Series into a greater or lesser number without thereby changing the
proportionate beneficial interests in such Series of the Trust. Contributions to
the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or 1/1,000ths of a Share or multiples thereof.
Section 6.6 REGISTER OF SHARES. A register shall be kept at the Trust or
the offices of any transfer agent duly appointed by the Trustees under the
direction of the Trustees which shall contain the names and addresses of the
Shareholders and the number of Shares (with respect to each Series that may have
been established) held by them respectively and a record of all transfers
thereof. Separate registers shall be established and maintained for each Series
of the Trust. Each such register shall be conclusive as to who are the holders
of the Shares of the applicable Series and who shall be entitled to receive
dividends or distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein provided,
until he has given his address to a transfer agent or such other officer or
agent of the Trustees as shall keep the register for entry thereon. The Trust
shall not be required to issue certificates for the Shares; however, the
Trustees, in their discretion, may authorize the issuance of share certificates
and promulgate appropriate rules and regulations as to their use.
Section 6.7 TRANSFER AGENT AND REGISTRAR. The Trustee shall have power to
employ a transfer agent or transfer agents, and a registrar or registrars, with
respect to the Shares of the various Series. The transfer agent may keep the
applicable register and record therein the original issues and transfers, if
any, of the said Shares of the applicable Series. Any such transfer agent and
registrar shall perform the duties usually performed by transfer agents and
registrars of certificates of stock in a corporation, except as modified by the
Trustees.
Section 6.8 TRANSFER OF SHARES. Shares shall be transferable on the records
of the Trust only by the record holder thereof or by his agent thereto duly
authorized in writing, upon delivery to the Trustees or a transfer agent of the
Trust of a duly executed instrument of transfer, together with such evidence of
the genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery, the transfer shall be recorded
on the applicable register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereof and neither the Trustees nor any transfer agent or registrar nor
any officer, employee or agent of the Trust shall be affected by any notice of
the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy or incompetence of any Shareholder, or otherwise by operation of law,
shall be recorded on the applicable register of Shares as the holder of such
Shares upon production of the proper evidence thereof to the Trustees or a
transfer agent of the Trust, but until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes hereof
and neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
Section 6.9 NOTICE. Any and all notices to which any Shareholder hereunder
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the applicable register of the Trust.
ARTICLE VII
Custodians
Section 7.1 APPOINTMENT AND DUTIES. The Trustees shall at all times employ,
as custodian with respect to each Series of the Trust, a custodian or
custodians, each of which shall have an aggregate capital, surplus and undivided
profits (as shown on its last published report) of at least two million dollars
and shall meet the qualifications for custodians for portfolio securities of
investment companies contained in the 1940 Act. It is contemplated that separate
custodians may be employed for the different Series of the Trust. Any custodian,
acting with respect to one or more Series, shall have authority as agent of the
Trust or the Series with respect to which it is acting, but subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the By-laws of the Trust and the 1940 Act:
(1) to hold the securities owned by the Trust or the Series and
deliver the same upon written order;
(2) to receive any receipt for any monies due to the Trust or the
Series and deposit the same in its own banking department (if a bank) or
elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of
the Trust or the Series and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net income
and the value of the net assets of the Trust or the Series;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote of the Series
with respect to which the custodian is acting, the custodian shall deliver and
pay over all property of the Trust held by it as specified in such vote.
The Trustees may also authorize each custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall meet the qualifications for custodians
contained in the 1940 Act.
Section 7.2 ACTION UPON TERMINATION OF CUSTODIAN AGREEMENT. Upon
termination of any custodian agreement with respect to any Series or inability
of any custodian to continue to serve, the Trustees shall promptly appoint a
successor custodian, but in the event that 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 Shareholders' meeting to determine
whether such Series shall function without a custodian or shall be liquidated.
If so directed by vote of the holders of a majority of the Shares of such Series
outstanding and entitled to vote, the custodian shall deliver and pay over all
Trust Property held by it as specified in such vote.
Section 7.3 CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations
and orders as the Commission may adopt or issue, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust or the
Series in a system for the central handling of securities established by a
national securities exchange or a national securities association registered
with the Commission under the Securities Exchange Act of 1934, or such other
person 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, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
Section 7.4 ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
ARTICLE VIII
Redemption
Section 8.1 REDEMPTIONS. All outstanding Shares of any Series of the Trust
may be redeemed at the option of the holders thereof, upon and subject to the
terms and conditions provided in this Article VIII. The Trust shall, upon
application of any Shareholder or pursuant to authorization from any Shareholder
of a particular Series, redeem or repurchase from such Shareholder outstanding
Shares of such Series at the then current net asset value of such Shares. If so
authorized by the Trustees, the Trust may, at any time and from time to time,
charge fees or deferred sales charges for effecting such redemption, at such
rates as the Trustees may establish, as and to the extent permitted under the
1940 Act, and may, at any time and from time to time, pursuant to such Act,
suspend such right of redemption. The procedures for effecting redemption shall
be as set forth in the Prospectus with respect to the applicable Series from
time to time.
Section 8.2 REDEMPTIONS OF ACCOUNTS OF LESS THAN A MINIMUM DOLLAR AMOUNT.
The Trustees shall have the power to redeem shares at a redemption price
determined in accordance with Section 8.1 if at any time the total investment in
such account does not have a minimum dollar value determined from time to time
by the Trustees in their sole discretion; provided, however, that the Trustees
may exercise such power with respect to Shares of any Series only to the extent
the Prospectus describes such power with respect to such Series. In the event
the Trustees determine to exercise their power to redeem Shares provided in this
Section 8.2, Shareholders shall be notified that the value of their account is
less than the then effective minimum dollar amount and allowed 60 days to make
an additional investment before redemption is processed.
ARTICLE IX
Determination of Net Asset Value, Net Income and Distributions
Section 9.1 NET ASSET VALUE. The net asset value of each outstanding Share
of each Series of the Trust shall be determined with respect to each Series at
such time or times on such days as the Trustees may determine, in accordance
with the 1940 Act. The method of determination of net asset value shall be
determined by the Trustees and shall be as set forth in the Prospectus with
respect to the applicable Series. The power and duty to make the daily
calculations for any Series may be delegated by the Trustees to the adviser,
administrator, manager, custodian, transfer agent or such other person as the
Trustees may determine. The Trustees may suspend the daily determination of net
asset value to the extent permitted by the 1940 Act.
Section 9.2 DISTRIBUTIONS TO SHAREHOLDERS. Except at such times when the
Trustees deem proper, the Trustees will not distribute to Shareholders net
investment income and realized capital gains, but will retain and reinvest such
net profits. The Trustees may make distributions to Shareholders to the extent
the distribution and the circumstances in which it may be made are determined by
the Trustees to be in the best interests of the Series. The Trustees may retain
and not reinvest from the net profits such amount as they may deem necessary to
pay the debts or expenses of the Trust or to meet obligations of the Trust, or
as they may deem desirable to use in the conduct of its affairs or to retain for
future requirements or extensions of the business.
Section 9.3 POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of
the foregoing provisions of this Article IX, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
share net asset value of the Trust's Shares or net income, or the declaration
and payment of dividends and distributions as they may deem necessary or
desirable to enable the Trust to comply with any provision of the 1940 Act, or
any securities association registered under the securities Exchange Act of 1934,
or any order of exemption issued by said Commission, all as in effect now or
hereafter amended or modified.
ARTICLE X
Shareholders
Section 10.1 VOTING POWERS. The Shareholders shall have the power to vote
(i) for the election of Trustees as provided in Article II, Section 2.2; (ii)
for the removal of Trustees as provided in Article II, Section 2.3(d); (iii)
with respect to any investment adviser as provided in Article IV, Section 4.1;
(iv) with respect to the merger, consolidation and sale of assets of the Trust
as provided in Article XI, Section 11.3; (v) with respect to the amendment of
this Declaration as provided in Article XI, Section 11.4; (vi) to the same
extent as the Shareholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders
(provided, however, that a shareholder of a particular Series shall not be
entitled to a derivative or class action on behalf of any other Series (or
shareholders of any other Series) of the Trust); and (vii) with respect to such
additional matters relating to the Trust as may be required by law, by this
Declaration, or the By-laws of the Trust or any regulation of the Trust, by the
Commission or any State, or as the Trustees may consider desirable. Any matter
affecting a particular Series, including without limitation, matters affecting
the investment advisory arrangements or investment policies or restrictions of a
Series, if required by law, shall not be deemed to have been effectively acted
upon unless approved by the required vote of the Shareholders of such Series if
required by law. Unless otherwise required by law, each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action to be taken by Shareholders which is required or permitted by law, this
Declaration or any By-laws of the Trust.
Section 10.2 MEETINGS. Shareholder meetings shall be held as specified in
Article I of the By-laws and in Section 2.2 hereof at the principal office of
the Trust or at such other place as the Trustees may designate. No annual or
regular meetings of shareholders are required. Meetings of the Shareholders may
be called by the Trustees and shall be held at such times, on such day and at
such hour as the Trustees may from time to time determine, for the purposes
specified in Section 2.2 and for such other purposes as may be specified by the
trustees.
Section 10.3 QUORUM AND REQUIRED VOTE. Except as otherwise provided by law,
the holders of thirty percent of the outstanding Shares of each Series present
in person or by proxy shall constitute a quorum for the transaction of any
business at any meeting of Shareholders. If a quorum, as above defined, shall
not be present for the purpose of any vote that may properly come before the
meeting, the Shareholders present in person or by proxy and entitled to vote at
such meeting on such matter holding a majority of the Shares present entitled to
vote on such matter may by vote adjourn the meeting from time to time to be held
at the same place without further notice than by announcement to be given at the
meeting until a quorum, as above defined, entitled to vote on such matter shall
be present, whereupon any such matter may be voted upon at the meeting as though
held when originally convened. Subject to any applicable requirement of law,
this Declaration or the By-laws, a plurality of the votes cast shall elect a
Trustee and all other matters shall be decided by a majority of the votes cast
entitled to vote thereon.
Section 10.4 RECORD DATE FOR MEETINGS. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding 30 days, as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date not more than 180 days prior to the
date of any meeting of Shareholders or declaration of dividends or other action
as a record date for the determination of the persons to be treated as
Shareholders of record for such purposes, except for dividend payments which
shall be governed by Section 9.2 hereof.
Section 10.5 PROXIES. Any vote by a Shareholder of the Trust may be made in
person or by proxy, provided that no proxy shall be voted at any meeting unless
it shall have been placed on file with the Trustees or their designee prior to
the time the vote is taken. Pursuant to a resolution of a majority of the
Trustees, proxies may be solicited in the name of one or more Trustees or one or
more officers of the Trust. Only Shareholders of record shall be entitled to
vote. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. A proxy with respect to shares
held in the name of two or more persons shall be valid if executed by any one of
them unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them.
Section 10.6 ADDITIONAL PROVISIONS. The By-laws may include further
provisions for Shareholders' votes, meetings and related matters.
Section 10.7 REPORTS. The Trustees shall cause to be prepared with respect
to each Series at least annually a report of operations containing a balance
sheet and statement of income and undistributed income of the applicable Series
of the Trust prepared in conformity with generally accepted accounting
principles and an opinion of an independent public accountant on such financial
statements. It is contemplated that separate reports may be prepared for the
various Series. Copies of such reports shall be mailed to all Shareholders of
record of the applicable Series within the time required by the 1940 Act. The
Trustees shall, in addition, furnish to the Shareholders at least semi-annually,
interim reports containing an unaudited balance sheet of the Series as of the
end of such period and an unaudited statement of income and surplus for the
period from the beginning of the current fiscal year to the end of such period.
Section 10.8 SHAREHOLDER ACTION BY WRITTEN CONSENT. Any action which may be
taken by Shareholders may be taken without a meeting if a majority of
Shareholders of each Series entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration) consent to the action in writing and the written consents are filed
with the records of the meetings of Shareholders. Such consent shall be treated
for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE XI
Duration; Termination of Trust; Amendment; Mergers; Etc.
Section 11.1 DURATION. Subject to the provisions of Sections 11.2 and 11.3
hereof, this Trust shall continue without limitation of time.
Section 11.2 TERMINATION.
(a) The Trust, or any Series thereof, may be terminated by the affirmative
vote of a majority of the Trustees. Upon the termination of the Trust or any
Series:
(i) the Trust or such Series shall carry on no business except for the
purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the Trust or
such series and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust or such Series shall have
been wound up, including the power to fulfill or discharge the contracts of
the Trust or such Series, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the remaining
Trust Property to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its liabilities, and do all
other acts appropriate to liquidate its business; provided that any sale,
conveyance, assignment, exchange, transfer or other disposition of all or
substantially all the Trust Property shall require approval of the
principal terms of the transaction and the nature and amount of the
consideration by vote or consent of the holders of a majority of the Shares
entitled to vote; and
(iii) after payment or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property of any Series, in cash or in kind
or partly each, among the Shareholders of such Series according to their
respective rights.
(b) After termination of the Trust or any Series and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth the
fact of such termination. Upon termination of the Trust, the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Shareholders shall thereupon cease. Upon
termination of any Series, the Trustees thereunder shall be discharged from any
further liabilities and duties with respect to such Series, and the rights and
interests of all Shareholders of such Series shall thereupon cease.
Section 11.3 REORGANIZATION. The Trustees may sell, convey, merge and
transfer the assets of the Trust, or the assets belonging to any one or more
Series, to another trust, partnership, association or corporation organized
under the laws of any state of the United States, or to the Trust to be held as
assets belonging to another Series of the Trust, in exchange for cash, shares or
other securities (including, in the case of a transfer to another Series of the
Trust, Shares of such other Series) with such transfer either (1) being made
subject to, or with the assumption by the transferee of, the liabilities
belonging to each Series the assets of which are so transferred, or (2) not
being made subject to, or not with the assumption of, such liabilities;
provided, however, that no assets belonging to any particular Series shall be so
transferred unless the terms of such transfer shall have first been approved at
a meeting called for the purpose by a majority Shareholder Vote of that Series.
Following such transfer, the Trustees shall distribute such cash, shares or
other securities (giving due effect to the assets and liabilities belonging to
and any other differences among the various Series the assets belonging to which
have so been transferred) among the Shareholders of the Series the assets
belonging to which have been so transferred; and if all of the assets of the
Trust have been so transferred, the Trust shall be terminated.
The Trust, or any one or more Series, may, either as the successor,
survivor, or non-survivor, (1) consolidate with one or more other trusts,
partnerships, associations or corporations organized under the laws of the
Commonwealth of Massachusetts or any other state of the United States, to form a
new consolidated trust, partnership, association or corporation under the laws
of which any one of the constituent entities is organized, or (2) merge into one
or more other trusts, partnerships, associations or corporations organized under
the laws of the Commonwealth of Massachusetts or any other state of the United
States, or have one or more such trusts, partnerships, associations or
corporations merged into it, any such consolidation or merger to be upon such
terms and conditions as are specified in an agreement and plan of reorganization
entered into by the Trust, or one or more Series as the case may be, in
connection therewith. The terms "merge" or "merger" as used herein shall also
include the purchase or acquisition of any assets of any other trust,
partnership, association or corporation which is an investment company organized
under the laws of the Commonwealth of Massachusetts or any other state of the
United States. Any such consolidation or merger shall require the approval of a
Majority Shareholder Vote of each Series affected thereby.
Shareholders shall have no right to demand payment for their shares or to
any other rights of dissenting shareholders in the event the Trust or any Series
participates in any transaction which would give rise to appraisal or
dissenters' rights by a shareholder of a corporation organized under Chapter
156B of the General Laws of the Commonwealth of Massachusetts.
Section 11.4 AMENDMENT PROCEDURE. All rights granted to the Shareholders
under this Declaration are granted subject to the reservation of the right to
amend this Declaration as herein provided, except that no amendment shall repeal
the limitations on personal liability of any Shareholder or Trustee or repeal
the prohibition of assessment upon the Shareholders without the express consent
of each Shareholder or Trustee involved. Subject to the foregoing, the
provisions of this Declaration (whether or not related to the rights of
Shareholders) may be amended at any time, so long as such amendment does not
adversely affect the rights of any Shareholder with respect to which such
amendment is or purports to be applicable and so long as such amendment is not
in contravention of applicable law, including the 1940 Act, by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to the vote of a majority of such Trustees). Any amendment to this
Declaration that adversely affects the rights of Shareholders may be adopted at
any time by an instrument in writing signed by a majority of the then Trustees
(or by an officer of the Trust pursuant to a vote of a majority of such
Trustees) when authorized to do so by the vote of a majority of the Shares
entitled to vote. Subject to the foregoing, any such amendment shall be
effective as provided in the instrument containing the terms of such amendment
or, if there is no provision therein with respect to effectiveness, upon the
execution of such instrument and of a certificate (which may be a part of such
instrument) executed by a Trustee or officer of the Trust to the effect that
such amendment has been duly adopted.
Section 11.5 INCORPORATION. With the approval of the holders of a majority
of the Shares, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, association or organization in exchange
for the shares or securities thereof or otherwise, and to lend money to,
subscribe for the Shares or securities of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, trust, partnership, association or organization in which the Trust
holds or is about to acquire shares or any other interest. The Trustees may also
cause a merger or consolidation between the Trust or any successor thereto and
any such corporation, trust, partnership, association or other organization if
and to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organizations or entities.
ARTICLE XII
Miscellaneous
Section 12.1 FILING. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and also
may be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein, and unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing. A restated Declaration, containing the original
Declaration and all amendments theretofore made, may be executed from time to
time by a majority of the Trustees and shall, upon filing with the Secretary of
the Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of the original
Declaration and the various amendments thereto.
Section 12.2 RESIDENT AGENT. The Trust shall maintain a resident agent in
the Commonwealth of Massachusetts, which agent shall initially be CT Corporation
System, 2 Oliver Street, Boston, Massachusetts 02109. The Trustees may designate
a successor resident agent, provided, however, that such appointment shall not
become effective until written notice thereof is delivered to the office of the
Secretary of the Commonwealth of Massachusetts.
Section 12.3 GOVERNING LAW. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
laws thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said Commonwealth and reference shall be specifically made to the business
corporation law of the Commonwealth of Massachusetts as to the construction of
matters not specifically covered herein or as to which an ambiguity exists but
the reference to said business corporation law is not intended to give the
Trust, Trustees, Shareholders or any other person, any right, power, authority
or responsibility only to or in connection with an entity organized in corporate
form.
Section 12.4 COUNTERPARTS. This Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 12.5 RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust or of any recording office
in which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to: (a) the number or identity of Trustees or Shareholders; (b) the
name of the Trust or any Series thereof; (c) the due authorization of the
execution of any instrument or writing; (d) the form of any vote passed at a
meeting of Trustees or Shareholders; (e) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration; (f) the form of any By-laws
adopted by or the identity of any officers elected by the Trustees; (g) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust or any Series; or (h) the establishment of any Series, shall be conclusive
evidence as to the matters so certified in favor of any person dealing with the
Trustees and their successors.
Section 12.6 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
/s/Laura M. Moret
-----------------
Laura M. Moret
Trustee
USLICO SERIES FUND
BY-LAWS
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TABLE OF CONTENTS
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ARTICLE I -- SHAREHOLDER MEETINGS
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Section 1.1 Calling of Meetings............................................................... 1
Section 1.2 Notices........................................................................... 1
Section 1.3 Place of Meeting.................................................................. 1
Section 1.4 Chairman.......................................................................... 1
Section 1.5 Proxies; Voting................................................................... 1
Section 1.6 Closing of Transfer Books and Fixing Record Dates................................. 2
Section 1.7 Inspectors of Election............................................................ 2
ARTICLE II -- TRUSTEES
Section 2.1 The Trustees...................................................................... 3
Section 2.2 Regular and Special Meetings...................................................... 3
Section 2.3 Notice............................................................................ 3
Section 2.4 Records........................................................................... 3
Section 2.5 Quorum and Vote................................................................... 4
Section 2.6 Telephone Meeting................................................................. 4
Section 2.7 Special Action.................................................................... 4
Section 2.8 Action by Consent................................................................. 4
Section 2.9 Compensation of Trustees.......................................................... 4
ARTICLE III -- OFFICERS
Section 3.1 Officers of the Trust............................................................. 4
Section 3.2 Election and Tenure............................................................... 5
Section 3.3 Removal of Officers............................................................... 5
Section 3.4 Bonds and Surety.................................................................. 5
Section 3.5 Chairman, President and Vice-Presidents........................................... 5
Section 3.6 Secretary......................................................................... 6
Section 3.7 Treasurer......................................................................... 7
Section 3.8 Other Officers and Duties......................................................... 7
ARTICLE IV -- POWER AND DUTIES OF THE EXECUTIVE AND OTHER COMMITTEES
Section 4.1 Executive and Other Committees.................................................... 7
Section 4.2 Vacancies in Executive Committee.................................................. 8
Section 4.3 Executive Committee to Report to Trustees......................................... 8
Section 4.4 Procedure of Executive Committee.................................................. 8
Section 4.5 Powers of Executive Committee..................................................... 8
Section 4.6 Compensation...................................................................... 8
Section 4.7 Informal Action by Executive Committee or Other Committee......................... 8
ARTICLE V -- SHARES OF BENEFICIAL INTEREST
Section 5.1 Book Entry Shares................................................................. 9
Section 5.2 Transfer Agents, Registrars and the Like.......................................... 9
Section 5.3 Transfer of Shares................................................................ 9
Section 5.4 Registered Shareholders........................................................... 9
ARTICLE VI -- AMENDMENT OF BY-LAWS........................................................................... 10
ARTICLE VII -- INSPECTION OF BOOKS........................................................................... 10
ARTICLE VIII -- AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
Section 8.1 Agreements, Etc................................................................... 10
Section 8.2 Checks, Drafts, Etc............................................................... 11
Section 8.3 Endorsements, Assignments and Transfer of Securities.............................. 11
Section 8.4 Evidence of Authority............................................................. 11
ARTICLE IX -- SEAL .................................................................................. 11
ARTICLE X -- FISCAL YEAR .................................................................................. 11
ARTICLE XI -- WAIVERS OF NOTICE.............................................................................. 12
ARTICLE XII -- BOOKS AND RECORDS............................................................................. 12
</TABLE>
USLICO SERIES FUND
BY-LAWS
These By-laws are made and adopted pursuant to Section 3.9 of the Agreement
and Declaration of Trust establishing USLICO SERIES FUND ("Trust") dated January
19, 1988, as from time to time amended (hereinafter called the "Declaration").
All words and terms capitalized in these By-laws shall have the meaning or
meanings set forth for such words or terms in the Declaration.
ARTICLE I
Shareholder Meetings
Section 1.1. CALLING OF MEETINGS. Meetings of the Shareholders shall be
held as provided in Section 10.2 of the Declaration at such place within or
without the Commonwealth of Massachusetts as the Trustees shall designate.
Section 1.2. NOTICES. Notice of all meetings of Shareholders, stating the
time, place and purposes of the meeting, shall be given by mail to each
Shareholder at his registered address as recorded on the register of the Trust,
mailed at least 10 days and not more than sixty (60) days before the meeting.
Any adjourned meeting shall be held as adjourned without further notice. No
notice need be given to any Shareholder who shall have failed to inform the
Trust of his current address or if a written waiver of notice, executed before
or after the meeting by the Shareholder or his attorney, thereunto authorized,
is filed with the records of the meeting.
Section 1.3. PLACE OF MEETING. Meetings of the Shareholders of the Trust
shall be held at such place within or without the Commonwealth of Massachusetts
as may be fixed from time to time by resolution of the Trustees.
Section 1.4. CHAIRMAN. The Chairman, if any, shall act as Chairman at all
meetings of the Shareholders; in his absence, the President shall act as
Chairman; and in the absence of the Chairman and the President, the Trustee or
Trustees present at each meeting may elect a temporary Chairman for the meeting,
who may be one of themselves.
Section 1.5. PROXIES; VOTING. Shareholders may vote either in person or by
duly executed proxy and, unless otherwise required by applicable law, each full
share represented at the meeting shall have one vote, and each fractional share
shall have a proportionate fractional vote all as provided in Article X of the
Declaration. No proxy shall be valid after eleven (11) months from the date of
its execution, unless a longer period is expressly stated in such proxy.
Section 1.6. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATES. For the
purpose of determining the Shareholders who are entitled to notice of or to vote
or act at any meeting, including any adjournment thereof, or who are entitled to
participate in any dividends, or for any other proper purpose, the Trustees may
from time to time close the transfer books or fix a record date in the manner
provided in Section 10.4 of the Declaration. If the Trustees do not, prior to
any meeting of Shareholders, so fix a record date or close the transfer books,
then an officer of the Trust shall determine a date which shall be not more than
180 days prior to the date of the meeting or the date upon which the dividend is
declared, as the case may be, and such date shall be the record date.
Section 1.7. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman, if any, of any meeting of Shareholders may, and on the
request of any Shareholder of his proxy shall, appoint Inspectors of Election of
the meeting. The number of Inspectors shall be either one or three. If appointed
at the meeting on the request of one or more Shareholders or proxies, a majority
of Shares present shall determine whether one or three Inspectors are to be
appointed, but failure to allow such determination by the Shareholders shall not
affect the validity of the appointment of Inspectors of Election. In case any
person appointed as Inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment made by the Trustees in advance of the
convening of the meeting or at the meeting by the person acting as Chairman. The
Inspectors of Election shall ascertain and monitor the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all votes
or consents, determine the results, and do such other acts as may be proper to
conduct the election or vote with fairness to all Shareholders. If there are
three Inspectors of Election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all. On request
of the Chairman, if any, of the meeting, or of any Shareholder or his proxy, the
Inspectors of Election shall make a report in writing of any challenge or
question or matter determined by them and shall execute a certificate of any
facts found by them.
ARTICLE II
Trustees
Section 2.1. THE TRUSTEES. The Trustees shall be responsible for the
management of the Trust; they may retain such authority to direct the business
affairs of the Trust as they deem advisable, but, subject to the Declaration and
the provisions of applicable law, they may delegate any of the various functions
involved in the management of the Trust to its officers and/or agents as they
deem fit. The term of office of each Trustee shall continue until the Trustee
resigns, is removed, retires, or is retired pursuant to Section 2.3 of the
Declaration. Subject to the provisions of Sections 2.2 and 2.4 of the
Declaration, all persons to serve as Trustees of the Trust shall be elected at
each meeting of the Shareholders of the Trust called for that purpose.
Section 2.2. REGULAR AND SPECIAL MEETINGS. Regular meetings of the Trustees
may be held without call or notice at such place or places and times as the
Trustees may determine from time to time. Special Meetings of the Trustees shall
be held upon the call of the Chairman, if any, the President, the Secretary or
any two Trustees, at such time, on such day, and at such place, as shall be
designated in the notice of the meeting.
Section 2.3. NOTICE. Notice of a meeting shall be given by mail or by
telegram (which term shall include a cablegram) or delivered personally. If
notice is given by mail, it shall be mailed not later than 24 hours preceding
the meeting and if given by telegram or personally, such telegram shall be sent
or delivered not later than 24 hours preceding the meeting, unless otherwise
subject to the provisions of the 1940 Act. Notice by telephone shall constitute
personal delivery for these purposes. Notice of a meeting of Trustees may be
waived before or after any meeting by signed written waiver. Neither the
business to be transacted at, nor the purpose of, any meeting of the Trustees
need be stated in the notice or waiver of notice of such meeting, and no notice
need be given of action proposed to be taken by unanimous written consent. The
attendance of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
Section 2.4. RECORDS. The results of all actions taken at a meeting of the
Trustees, or by unanimous written consent of the Trustees, shall be recorded by
the Secretary or Assistant Secretary.
Section 2.5. QUORUM AND VOTE. A majority of the Trustees shall constitute a
quorum for the transaction of business. The act of a majority of the Trustees
present at any meeting at which a quorum is present shall be the act of the
Trustees unless a greater proportion is required by the Declaration or these
By-laws or applicable law. In the absence of a quorum, a majority of the
Trustees present may adjourn the meeting from time to time until a quorum shall
be present. Notice of any adjourned meeting need not be given.
Section 2.6. TELEPHONE MEETING. Subject to compliance with the provisions
of the 1940 Act, the Trustees may meet by means of a conference telephone or
similar equipment by means of which all persons participating in the meeting can
hear each other.
Section 2.7. SPECIAL ACTION. When all the Trustees shall be present at any
meeting, however called or whenever held, or shall assent to the holding of the
meeting without notice, or after the meeting shall sign a written assent thereto
on the record of such meeting, the acts of such meeting shall be valid as if
such meeting had been regularly held.
Section 2.8. ACTION BY CONSENT. Subject to compliance with the provisions
of the 1940 Act, any action by the Trustees may be taken without a meeting if a
written consent thereto is signed by a majority of the Trustees then in office
and filed with the records of the Trustees' meetings. Such consent shall be
treated as a vote of the Trustees for all purposes.
Section 2.9. COMPENSATION OF TRUSTEES. The Trustees may receive a stated
salary for their services as Trustees, and by resolution of the Trustees a fixed
fee and expense of attendance may be allowed for attendance at each meeting.
Nothing herein contained shall be construed to preclude any Trustee from serving
the Trust in any other capacity, as an officer, agent or otherwise, and
receiving compensation therefor.
ARTICLE III
Officers
Section 3.1. OFFICERS OF THE TRUST. The officers of the Trust may consist
of a Chairman, if one shall be appointed by the Trustees, and shall consist of a
President, a Secretary, a Treasurer and such other officers or assistant
officers, including Vice-Presidents, as may be elected by the Trustees. Any two
or more of the offices may be held by the same person, except that the same
person may not be both President and Secretary. The Trustees may designate a
Vice-President as an Executive Vice-President and may designate the order in
which the other Vice-Presidents may act. The Chairman and the President shall be
Trustees, but no other officer of the Trust need be a Trustee.
Section 3.2. ELECTION AND TENURE. At the initial organizational meeting and
at least once a year thereafter the Trustees shall elect the Chairman, if any,
the President, Secretary, Treasurer and such other officers as the Trustees
shall deem necessary or appropriate in order to carry out the business of the
Trust. Such officers shall hold the office until their successors have been duly
elected and qualified. The Trustees may fill any vacancy in office or add any
additional officers at any time.
Section 3.3. REMOVAL OF OFFICERS. Any officer may be removed at any time,
with or without cause, by action of a majority of the Trustees. This provision
shall not prevent the making of a contract of employment for a definite term
with any officer and shall have no effect upon any cause of action which any
officer may have as a result of removal in breach of a contract of employment.
Any officer may resign at any time by notice in writing signed by such officer
and delivered or mailed to the Chairman, if any, President, or Secretary, and
such resignation shall take effect immediately upon receipt by the Chairman, if
any, President, or Secretary, or at a later date according to the terms of such
notice in writing.
Section 3.4. BONDS AND SURETY. Any officer may be required by the Trustees
to be bonded for the faithful performance of his duties in such amount and with
such sureties as the Trustees may determine.
Section 3.5. CHAIRMAN, PRESIDENT AND VICE-PRESIDENTS. The Chairman, if any,
shall, if present, preside at all meetings of the Shareholders and of the
Trustees and shall exercise and perform such other powers and duties as may be
from time to time assigned to him by the Trustees. Subject to such supervisory
powers, if any, as may be given by the Trustees to the Chairman, if any, the
President shall be the chief executive officer of the Trust, and, subject to the
control of the Trustees, shall have general supervision, direction and control
of the business of the Trust and of its employees and shall exercise such
general powers of management as are usually vested in the office of President of
a corporation. In the absence of the Chairman, if any, the President shall
preside at all meetings of the Shareholders and of the Trustees. The President
shall be, EX OFFICIO, a member of all outstanding committees (except the Audit
Committee or any other Committee that consists only of Trustees who are not
interested persons of the Trust or its Investment Adviser). Subject to direction
of the Trustees, the Chairman, if any, and the President shall each have power
in the name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages and other instruments in writing, and to
employ and discharge employees and agents of the Trust. Unless otherwise
directed by the Trustees, the Chairman, if any, and the President shall each
have full authority and power, on behalf of all of the Trustees, to attend and
to act and to vote, on behalf of the Trust at any meetings of the business
organizations in which the Trust holds an interest, or to confer such powers
upon any other persons, by executing any proxies duly authorizing such persons.
The Chairman, if any, and the President shall have such further authorities and
duties as the Trustees shall from time to time determine. In the absence or
disability of the President, the Vice-Presidents in order of their rank as fixed
by the Trustees or, if more than one and not ranked, the Vice-President
designated by the Trustees, shall perform all of the duties of the President,
and when so acting shall have all the powers of and be subject to all of the
restrictions upon the President. Subject to the direction of the Trustees, and
of the President, each Vice-President shall have the power in the name and on
behalf of the Trust to execute any and all loan documents, contracts,
agreements, deeds, mortgages and other instruments in writing, and, in addition,
shall have such other duties and powers as shall be designated from time to time
by the Trustees or by the President.
Section 3.6. SECRETARY. The Secretary shall keep the minutes of all
meetings of, and record all votes of, Shareholders, Trustees and the Executive
Committee, if any. He shall be custodian of the seal of the Trust, if any, and
he (and any other person so authorized by the Trustees) shall affix the seal or,
if permitted, a facsimile thereof, to any instrument executed by the Trust which
would be sealed by a Massachusetts corporation executing the same or a similar
instrument and shall attest to the seal and the signature or signatures of the
officer or officers executing such instrument on behalf of the Trust. The
Secretary shall also perform any other duties commonly incident to such office
in a Massachusetts business corporation, and shall have such other authorities
and duties as the Trustees shall from time to time determine. Any of the duties
of the Secretary may be performed by an Assistant Secretary duly appointed by
the Trustees.
Section 3.7. TREASURER. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, funds, securities,
notes receivable and other valuable papers and documents of the Trust, and shall
have and exercise under the supervision of the Trustees and of the President all
powers and duties normally incident to his office. He may endorse for deposit or
collection all notes, checks and other instruments payable to the Trust or to
its order. He shall deposit all funds of the Trust in such depositories as the
Trustees shall designate. He shall be responsible for such disbursement of the
funds of the Trust as may be ordered by the Trustees or the President. He shall
keep accurate account of the books of the Trust's transactions which shall be
the property of the Trust, and which together with all other property of the
Trust in his possession, shall be subject at all times to the inspection and
control of the Trustees. Unless the Trustees shall otherwise determine, the
Treasurer shall be the principal accounting officer of the Trust and shall also
be the principal financial officer of the Trust. He shall have such other duties
and authorities as the Trustees shall from time to time determine.
Notwithstanding anything to the contrary herein contained, the Trustees may
authorize any adviser, administrator, manager or transfer agent to maintain bank
accounts and deposit and disburse funds of any Series of the Trust on behalf of
such Series.
Section 3.8. OTHER OFFICERS AND DUTIES. The Trustees may elect such other
officers and assistant officers as they shall from time to time determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
shall assist that officer in the duties of his office. Each officer, employee
and agent of the Trust shall have such other duties and authority as may be
conferred upon him by the Trustees or delegated to him by the President.
ARTICLE IV
Power and Duties of the
Executive and Other Committees
Section 4.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees may, but shall
not be required to, elect from their own number an Executive Committee to
consist of not less than two members, which number shall include the President,
who shall, EX OFFICIO, be a member thereof. The Executive Committee shall be
elected by a resolution passed by a vote of at least a majority of the Trustees
then in office. The Trustees may also elect from their own number other
committees from time to time, the number composing such committees and the
powers conferred upon the same to be determined by vote of the Trustees.
Section 4.2. VACANCIES IN EXECUTIVE COMMITTEE. Vacancies occurring in the
Executive Committee from any cause shall be filled by the Trustees by a
resolution passed by the vote of at least a majority of the Trustees then in
office.
Section 4.3. EXECUTIVE COMMITTEE TO REPORT TO TRUSTEES. All action by the
Executive Committee shall be reported to the Trustees at their meeting next
succeeding such action.
Section 4.4. PROCEDURE OF EXECUTIVE COMMITTEE. The Executive Committee
shall fix its own rules of procedures not inconsistent with these By-laws or
with any directions of the Trustees. It shall meet at such times and places and
upon such notice as shall be provided by such rules or by resolution of the
Trustees. The presence of a majority shall constitute a quorum for the
transaction of business, and in every case an affirmative vote of a majority of
all the members of the Committee present shall be necessary for the taking of
any action.
Section 4.5. POWERS OF EXECUTIVE COMMITTEE. During the intervals between
the meetings of the Trustees, the Executive Committee, except as limited by the
By-laws of the Trust or by specific directions of the Trustees, shall possess
and may exercise all the powers of the Trustees in the management and direction
of the business and conduct of the affairs of the Trust in such manner as the
Executive Committee shall deem for the best interests of the Trust, and shall
have power to authorize the seal of the Trust to be affixed to all instruments
and documents requiring same. Notwithstanding the foregoing, the Executive
Committee shall not have the power to elect Trustees, increase or decrease the
number of Trustees, elect or remove any officer, declare dividends, issue shares
or recommend to Shareholders any action requiring Shareholder approval.
Section 4.6. COMPENSATION. The members of any duly appointed committee
shall receive such compensation and/or fees as from time to time may be fixed by
the Trustees.
Section 4.7. INFORMAL ACTION BY EXECUTIVE COMMITTEE OR OTHER COMMITTEE. Any
action required or permitted to be taken at any meeting of the Executive
Committee or any other duly appointed Committee may be taken without a meeting
if a consent in writing setting forth such action is signed by all members of
such committee and such consent is filed with the records of the Trust.
ARTICLE V
Shares of Beneficial Interest
Section 5.1. BOOK ENTRY SHARES. No certificates will be issued to represent
shares in the Trust unless the Trustees, in their discretion, may so authorize.
The Trust may issue certificates in any fixed denomination of shares, or
alternatively, may issue to all investors certificates evidencing ownership of
shares of beneficial interest in the Trust which will not evidence ownership of
a fixed number of shares but will indicate on its face that it represents all
Trust shares of beneficial interest for which the investor is the record owner
as shown on the books of record of the Transfer Agent of the Trust. The Trust
shall maintain adequate records to determine the holdings of each Shareholder of
record, and such records shall be deemed the equivalent of a certificate
representing the shares for all purposes.
Section 5.2. TRANSFER AGENTS, REGISTRARS AND THE LIKE. As provided in
Section 6.7 of the Declaration, the Trustees shall have authority to employ and
compensate such transfer agents and registrars with respect to the Shares of the
various Series of the Trust as the Trustees shall deem necessary or desirable.
In addition, the Trustees shall have power to employ and compensate such
dividend disbursing agents, warrant agents and agents for the reinvestment of
dividends as they shall deem necessary or desirable. Any of such agents shall
have such power and authority as is delegated to any of them by the Trustees.
Section 5.3. TRANSFER OF SHARES. The shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees or a
transfer agent of the Trust of proper documentation as provided in Section 6.8
of the Declaration. The Trust, or its transfer agents, shall be authorized to
refuse any transfer unless and until there is presented such evidence as may be
reasonably required to show that the requested transfer is proper.
Section 5.4. REGISTERED SHAREHOLDERS. The Trust may deem and treat the
holder of record of any Share as the absolute owner thereof for all purposes and
shall not be required to take any notice of any right or claim of right of any
other person, unless otherwise required by applicable law.
ARTICLE VI
Amendment of By-laws
In accordance with Section 3.9 of the Declaration, the Trustees shall have
the power to alter, amend or repeal the By-laws or adopt new By-laws at any
time. Action by the Trustees with respect to the By-laws shall be taken by an
affirmative vote of a majority of the Trustees. The Trustees shall in no event
adopt By-laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
The Agreement and Declaration of Trust establishing USLICO Series Fund,
dated January 19, 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 USLICO Series Fund 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 USLICO Series Fund 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 said USLICO Series Fund
but the Trust estate only shall be liable.
ARTICLE VIII
Inspection of Books
The Trustees shall from time to time determine whether and to what extent,
and at what times and places, and under what conditions and regulations the
accounts and books of the Trust or any of them shall be open to the inspection
of the Shareholders; and no Shareholder shall have any right to inspect an
account or book or document of the Trust except as conferred by law or
authorized by the Trustees or by resolution of the Shareholders.
ARTICLE VIII
Agreements, Checks, Drafts, Endorsements, Etc.
Section 8.1. AGREEMENTS, ETC. The Trustees or the Executive Committee may
authorize any officer or officers, or agent or agents of the Trust to enter into
any agreement or execute and deliver any instrument in the name of and on behalf
of the Trust, and such authority may be general or confined to specific
instances; and, unless so authorized by the Trustees or by the Executive
Committee or by these By-laws, no officer, agent or employee shall have any
power or authority to bind the Trust by any agreement or engagement or to pledge
its credit or to render it liable for any purpose or in any amount.
Section 8.2. CHECKS, DRAFTS, ETC. All checks, drafts, or orders for the
payment of money, notes and other evidences of indebtedness shall be signed by
such officer or officers, employee or employees, or agent or agents, as shall
from time to time be designated by the Trustees or the Executive Committee, if
any, or as may be specified in or pursuant to the agreement between the Trust
and any bank or trust company appointed as custodian depository pursuant to the
provisions of the Declaration.
Section 8.3. ENDORSEMENTS, ASSIGNMENTS AND TRANSFER OF SECURITIES. All
endorsements, assignments, stock powers or other instruments of transfer of
securities standing in the name of the Trust or its nominees or directions for
the transfer of securities belonging to the Trust shall be made by such officer
or officers, employee or employees, or agent or agents as may be authorized by
the Trustees or the Executive Committee, if any.
Section 8.4. EVIDENCE OF AUTHORITY. Anyone dealing with the Trust shall be
fully justified in relying on a copy of a resolution of the Trustees or of any
committee thereof empowered to act in the premises which is certified as true by
the Secretary or an Assistant Secretary under the seal of the Trust.
ARTICLE IX
Seal
The seal of the Trust shall be circular in form, bearing the inscription:
USLICO Series Fund - 1988 - Massachusetts
ARTICLE X
Fiscal Year
The fiscal year of the Trust shall be the period of twelve months ending on
December 31 of each calendar year.
ARTICLE XI
Waivers of Notice
Whenever any notice whatsoever is required to be given under the provisions
of any statue of the Commonwealth of Massachusetts, or under the provisions of
the Declaration or these By-laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice whether before or after the time
stated therein, shall be deemed equivalent thereto. A notice shall be deemed to
have been given if telegraphed, cabled or sent by wireless when it has been
delivered to a representative of any telegraph, cable or wireless company with
instructions that it be telegraphed, cabled or sent by wireless. Any notice, if
mailed, shall be deemed to be given at the time when the same shall be deposited
in the mail.
ARTICLE XII
Books and Records
The books and records of the Trust, including the stock ledger or ledgers,
may be kept in or outside the Commonwealth of Massachusetts at such office or
agency of the Trust as may be from time to time determined by the Trustees.
INVESTMENT ADVISORY AGREEMENT
Agreement restated as of the 5th day of March, 1997, to reflect a name
change between USLICO Series Fund (the "Fund") and Washington Square Advisers,
Inc. (the "Adviser").
WITNESSETH:
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), the securities of which are registered under the Securities Act of 1933,
as amended (the "1933 Act"); and
WHEREAS, The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 as amended (the "Advisers Act"); and
WHEREAS, the Fund is authorized to issue shares of beneficial interest
("Shares") in separate classes or portfolios, with each such portfolio
representing interests in a separate portfolio of securities and other assets;
and
WHEREAS, the Fund has initially established four portfolios, designated the
Money Market Portfolio, the Stock Portfolio, the Bond Portfolio, and the Asset
Allocation Portfolio, such portfolios together with all other portfolios
subsequently established by the Fund with respect to which the Fund desires to
retain the Adviser to render investment advisory services hereunder and with
respect to which the Adviser is willing so to do being herein collectively
referred to as the "Portfolios".
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties as follows:
1. The Fund hereby appoints the Adviser to act as investment adviser to the
Fund with respect to the Portfolios for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to tender the
services herein set forth, for the compensation herein provided.
In the event the Fund establishes one or more additional portfolios with
respect to which it desires to retain the Adviser to render management and
investment advisory services hereunder, it shall notify the Adviser in writing.
If the Adviser is willing to render such services it shall notify the Fund in
writing, whereupon such class shall become a Portfolio hereunder.
2. The Fund has delivered properly certified or authenticated copies of
each of the following documents to the Adviser and will deliver to it all future
amendments and supplements thereto, if any:
(a) a certified resolution of the Board of Trustees of the Fund
authorizing the appointment of the Adviser and approving the form of
this Agreement;
(b) the Registration Statement as filed by the Fund under the 1940 Act and
the 1933 Act with the Securities and Exchange Commission (the
"Registration Statement"), including the Fund's Prospectus and
Statement of Additional Information, and any amendments or supplements
thereto;
(c) exhibits, powers of attorneys, certificates and any and all other
documents relating to or filed in connection with the Registration
Statement described above.
3. The Adviser agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required to be maintained
by the Adviser with respect to the Fund by the 1940 Act. The adviser further
agrees that all records which it maintains for the Fund are the property of the
Fund and it will promptly surrender any of such records upon request.
4. (a) The Adviser shall provide to the Fund investment guidance and policy
direction in connection with the management of the Portfolio of the Fund,
including oral and written research, analysis, advice, and statistical and
economic data and information.
Consistent with the investment objectives, policies and restrictions
applicable to the Fund and its Portfolios, the Adviser will determine the
securities and other assets to be purchased or sold by each Portfolio of the
Fund and will determine what portion of each Portfolio shall be invested is
securities or other assets, and what portion, if any, should be held uninvested.
The Fund will have the benefit of the investment analysis and research, the
review of current economic conditions and trends and the consideration of
long-range investment policy generally available to investment advisory clients
of the Adviser. It is understood that the Adviser will not use any inside
information pertinent to investment decisions undertaken in connection with this
Agreement that may be in its possession or in the possession of any of its
affiliates, nor will the Adviser seek to obtain any such information.
(b) The Adviser also shall provide to the officers of the Fund
administrative assistance in connection with the operation of the Fund and the
Portfolios, which shall include (i) compliance with all reasonable requests of
the Fund for information, including information required in connection with the
Fund's filings with the Securities and Exchange Commission and state securities
commissions, and (ii) such other services as the Fund's officers shall from time
to time determine to be necessary or useful to the administration of the Fund
and the Portfolios.
(c) As manager of the assets of the Portfolios, the Adviser shall make
investments for the account of the Portfolios in accordance with the Adviser's
best judgment and within the investment objectives, policies and restrictions
set forth in the Prospectus, the 1940 Act and the provisions of the Internal
Revenue Code relating to regulated investment companies, subject to policy
decisions adopted by the Fund's Board of Trustees. In connection therewith, the
Adviser shall place orders for the purchase and sale of securities and other
assets either directly with the issuer or with any broker-dealer. The Adviser is
authorized to select brokers and dealers and to open and maintain brokerage
accounts and trading accounts for the purchase and sale of securities and
options with broker-dealers for and on behalf of the Portfolios in accordance
with procedures, if any, established by the Adviser and approved by the Fund's
Board of Trustees.
(d) The Adviser shall furnish to the Fund's Board of Trustees periodic
reports on the investment performance of the Fund and its Portfolios and on the
performance of its obligations under this Agreement and shall supply such
additional reports and information as the Fund's officers or Board of Trustees
shall reasonably request.
(e) On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of a Portfolio as well as other of its clients, the
Adviser, to the extent permitted by applicable law, may aggregate the securities
to be sold or purchased in order to obtain the best execution or lower brokerage
commissions, if any. The Adviser may also on occasion purchase or sell a
particular security for one or more clients in different amounts. On either
occasion, and to the extent permitted by applicable law and regulations,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to such other customers.
(f) The Adviser may cause a Portfolio to pay a broker which provides
brokerage and research services to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker might have
charged. Such higher commissions may not be paid unless the Adviser determines
in good faith that the amount paid is reasonable in relation to the services
received in terms of the particular transaction or the Adviser's overall
responsibilities to the Fund and any other of the Adviser's clients.
(g) In connection with the purchase and sale of securities of each
Portfolio, the Adviser will arrange for the transmission to the Fund's Custodian
or other agent on a daily basis, such confirmations, trade tickets and other
documents and shall provide information reasonably requested by the Fund's
Custodian or other agent for helping such agent perform its administrative
responsibilities to the Fund including responsibility to identify securities to
be purchased or sold by the Fund, to determine the value of the Fund's portfolio
securities and other assets and to determine the Fund's net asset value per
share. With respect to portfolio securities to be purchased or sold through the
Depository Trust Company, the Adviser will arrange for the automatic
transmission of the confirmation of such trades to the Fund's custodian.
5. The Adviser shall give the Fund the benefit of the Adviser's best
judgment and efforts in rendering services under this Agreement. As an
inducement to the Adviser's undertaking to render these services, the Fund
agrees that the Adviser shall not be liable under this Agreement for any mistake
in judgment or in any other event whatsoever, PROVIDED that nothing in this
Agreement shall be deemed to protect or purport to protect the Adviser against
any liability to the Fund or its shareholders to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance or the Adviser's duties under this Agreement or by
reason of the Adviser's reckless disregard of its obligation and duties
hereunder.
6. (a) The Adviser shall, at its expense, (i) employ or associate with
itself such persons as it believes appropriate to assist it in performing its
obligations under this Agreement and (ii) provide all services, equipment and
facilities necessary to perform its obligations under this Agreement.
(b) Subject to the approval of the Fund's Board of Trustees and, to the
extent required by law, the Shareholders of Portfolios, the Adviser may contract
with such other parties as it deems appropriate to obtain investment research,
information, investment advisory and management services and other assistance,
but any fees, compensation or expenses to be paid to any such party shall be
paid by the Adviser, and no obligation shall be incurred on the Fund's behalf in
any respect.
(c) The Fund shall be responsible for all of its expenses and liabilities,
including compensation of its trustees who are not affiliated with the Adviser;
taxes and governmental fees; interest charges; fees and expenses of the Fund's
independent accountants and legal counsel; trade association membership dues;
fees and expenses of any custodian (including maintenance of books and accounts
and calculation of the net asset value of the Fund's Shares), transfer agent,
registrar and dividend disbursing agent of the Fund; expenses of issuing,
selling, redeeming, registering and qualifying the Shares for sale; expenses of
preparing and printing share certificates, prospectuses and reports to
shareholders, notices, proxy statements, reports to regulatory agencies and any
postage and mailing expenses associated with such distributions; the cost of
office supplies, including stationery; travel expenses of all officers, trustees
and employees; insurance premiums; brokerage and other expenses of executing
portfolio transactions; expenses of shareholders' meetings; organizational
expenses; and extraordinary expenses.
7. In consideration of the services to be rendered by the Adviser under
this Agreement, each Portfolio of the Fund shall pay the Adviser fee, calculated
each day based on the Portfolio's daily net assets (as determined on each
business day at the time set forth in the Prospectus for determining net asset
value per share) at a maximum annual rate of 0.50% of the first $100 million of
the Portfolio's net assets and 0.45% of the Portfolio's net assets in excess of
$100 million.
8. (a) This Agreement shall become effective with respect to the Portfolios
on April 1, 1995 (and, with respect to any additional portfolio, the date
specified in a supplement to the Agreement) and shall continue in effect with
respect to a Portfolio for a period of more than two years from that date (or,
with respect to additional Portfolio, the date specified in a supplement to this
Agreement) only so long as the continuance is specifically approved at least
annually (i) by the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Portfolios or by the Fund's Board of Trustees
and (ii) by the vote, cast in person at a meeting called for the purpose, of a
majority of the Fund's Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party.
(b) This Agreement may be terminated with respect to a Portfolio (or any
additional Portfolio) at any time, without the payment of any penalty, by a vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of the Portfolios or by a vote of a majority of the Fund's entire Board of
Trustees on 60 days' written notice to the Adviser or by the Adviser on 60 days'
written notice to the Fund. This Agreement shall terminate automatically in the
event of its assignment (as defined in the 1940 Act).
9. Except to the extent necessary to perform the Adviser's obligations
under this Agreement, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the
Adviser, to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
10. The investment management services of the Adviser to the Fund under
this Agreement are not to be deemed exclusive as to the Adviser and the Adviser
will be free to render similar services to others.
11. This Agreement shall be construed in accordance with the laws of the
State of Minnesota, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act.
12. The Adviser agrees that it will keep confidential and not disclose or
use any records of or information in its possession relating to the Fund
obtained pursuant to this Agreement in any manner whatsoever except as expressly
authorized in this Agreement, and will keep confidential any information
obtained pursuant to the investment advisory relationship, and disclose such
information only if the Fund has authorized such disclosure, or if such
disclosure is expressly required by federal or state regulatory authorities.
13. Notices of any kind to be given to the Adviser by the Fund shall be in
writing and shall be duly given if mailed or delivered to the Adviser at 100
Washington Square, Suite 800, Minneapolis, Minnesota 55401, or at such other
address or to such individual as shall be specified by the Adviser to the Fund.
Notices of any kind to be given to the Fund by the Adviser shall be in writing
and shall be given if mailed or delivered to 4601 N. Fairfax Drive, Arlington,
Virginia 22203, or at such other address or to such individual as shall be
specified by the Fund to the Adviser.
14. The Declaration of Trust establishing the Fund, filed on January 19,
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 "USLICO Series Fund" refers to the Trustees under the
Declaration collectively as trustees and not as individuals or personally, and
that no shareholder, trustee, officer, employee or agent of the Fund shall be
subject to claims against or obligations of the Fund to any extent whatsoever,
but that the Fund estate only shall be liable.
15. The Fund acknowledges receipt of Part II of the Adviser's Form ADV
which is on file with the Securities and Exchange Commission
If the foregoing correctly sets forth the agreement between the Fund and
the Adviser, please so indicate by signing and returning to the Fund the
enclosed copy hereof.
USLICO SERIES FUND
By:/s/Robert B. Saginaw
--------------------
Robert B. Saginaw
Title: Vice President & Secretary
Accepted:
WASHINGTON SQUARE ADVISERS, INC.
By:/s/Douglas Hedberg
-----------------------------
Douglas Hedberg
Title: Executive Vice President
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT restated as of the 5th day of March, 1997, to reflect a name
change, among Newbold's Asset Management, Inc. ("Newbold"), Sub-Adviser,
Washington Square Advisers, Inc. (the "Adviser") and USLICO Series Fund, a
Massachusetts business trust (the "Fund").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act") as an open-end, diversified management investment
company and is authorized to issue its shares of beneficial interest ("Shares")
in separate classes or portfolios, each portfolio having its own investment
objectives, policies and restrictions; and
WHEREAS, the Fund offers shares in four classes, two of which are the Stock
Portfolio and the Asset Allocation Portfolio; and
WHEREAS, the Fund has retained the Adviser to render investment management
and administrative services to the Fund's four portfolios; and
WHEREAS, the Sub-Adviser represents and warrants that it is a duly
registered investment adviser under the Investment Advisers Act of 1940, as
amended ("Advisers Act"); and
WHEREAS, the Adviser and the Fund desire to retain the Sub-Adviser to
furnish portfolio management services to the Stock Portfolio and to the portion
of the assets of the Asset Allocation Portfolio allocated to the Sub-Adviser
management by the Adviser (which portion, together with the assets of the Stock
Portfolio, are herein referred to as the "Portfolios") in connection with the
Adviser's investment advisory activities on behalf of the Portfolios, and the
Sub-Adviser is willing to furnish such services to the Adviser and the Fund;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Adviser, the Sub-Adviser and the Fund as
follows:
1. APPOINTMENT. The Adviser and the Fund hereby appoint the Sub-Adviser to
act as Portfolio Manager to the Portfolios, for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
In the event the Fund designates one of more classes of shares other than
the Portfolios with respect to which the Adviser and the Fund desire to retain
the Sub-Adviser to render portfolio management services hereinunder, they shall
notify the Sub-Adviser in writing. If the Sub-Adviser is willing to render such
services, it shall notify the Adviser and the Fund in writing, whereupon such
class shall become a Portfolio hereunder, and be subject to this Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the Adviser
and the Fund's Board of Trustees, the Sub-Adviser will provide a continuous
investment program for the Portfolios or for any portion of the assets of the
Portfolios assigned to the Sub-Adviser by the Adviser, including investment
research and management with respect to all securities and investments and cash
equivalents held by the portfolios. The Sub-Adviser will determine from time to
time what securities and other investments will be purchased retained or sold by
the Portfolios. The Sub-Adviser will provide services under this Agreement in
accordance with the Portfolios' investment objectives, policies and restrictions
as stated in the Fund's Registration Statement, including the Fund's Prospectus
and Statement of Additional Information (the "Registration Statement"), as filed
with the Securities and Exchange Commission, as amended or supplemented from
time to time. A copy of the Registration Statement has been provided by the Fund
to the Sub-Adviser and the Fund agrees to provide the Sub-Adviser with any
amendment or supplement to the Registration Statement promptly. The Sub-Adviser
further agrees that it will:
(a) conform with all applicable rules and regulations of the 1940 Act, all
other applicable federal and state laws and regulations and with any applicable
procedures adopted by the Fund's Board of Trustees;
(b) place orders for the purchase or sale of securities pursuant to its
investment determinations for the Portfolios, either directly with the issuer or
with any broker or dealer. The Sub-Adviser is authorized to select brokers and
dealers and to open and maintain brokerage accounts and trading accounts for the
purchase and sale of securities and options with broker-dealers for and on
behalf of the Portfolios in accordance with procedures established by the
Adviser and approved by the Fund's Board of Trustees. In placing orders with
brokers and dealers, the Sub-Adviser will attempt to obtain the best net price
and the most favorable execution of its orders. Consistent with this obligation,
when the execution and price offered by two or more brokers or dealers are
comparable, the Sub-Adviser may, in its discretion, purchase and sell portfolio
securities to and from brokers and dealers who provide it with research advice
and other services of lawful assistance to the Sub-Adviser in serving the
Portfolios as Portfolio Manager.
(c) On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as its other investment
advisory clients, the Sub-Adviser may, to the extent permitted by applicable
laws and regulations, but shall not be obligated to, aggregate the securities to
be so sold or purchased with those of its other clients where such aggregation
is not inconsistent with the policies set forth in the Fund's Registration
Statement. 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
Sub-Adviser in the manner it considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities of each
Portfolio, the Sub-Adviser will arrange for the transmission to the Fund's
Custodian or other agent on a daily basis, such confirmations, trade tickets and
other documents and shall provide information reasonably requested by the Fund's
Custodian or other agent for helping such agent perform its administrative
responsibilities to the Fund including responsibility to identify securities to
be purchased or sold by the Fund, to determine the value of the Fund's portfolio
securities and other assets and to determine the Fund's net asset value per
share. With respect to portfolio securities to be purchased or sold through the
Depository Trust Company, the Sub-Adviser will arrange for the automatic
transmission of the confirmation of such trades to the Fund's custodian.
(e) The Sub-Adviser will make available to the Adviser and the Fund
promptly upon their request all of the Fund's investment records and ledgers as
are necessary to assist the Adviser and the Fund in their compliance with
respect to the Portfolio's securities transactions as required by the 1940 Act
and the Advisers Act, as well as other applicable laws. The Sub-Adviser will
furnish the Fund's Board of Trustees with respect to the Portfolios such
periodic and special reports as the Adviser and the Trustees may reasonably
request. The Sub-Adviser will furnish to regulatory authorities any information
or reports to ascertain whether the operations of the Fund are being conducted
in a manner consistent with applicable laws and regulations.
(f) The Sub-Adviser will not disclose or use any records or information
obtained pursuant to this Agreement in any manner whatsoever except as expressly
authorized in this Agreement or in the ordinary course of business in connection
with placing orders for the purchase and sale of securities, and will keep
confidential any information obtained pursuant to this Agreement, and disclose
such information only if the Board of Trustees of the Fund has authorized such
disclosure, or if such disclosure is expressly required by applicable federal or
state regulatory authorities.
(g) In rendering the services required under this Agreement, the
Sub-Adviser or a Portfolio may, from time to time, employ or associate with
itself such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Sub-Adviser may not
retain as sub-adviser to the Fund or a Portfolio any company that would be an
"investment adviser," as that term is defined in the 1940 Act, unless the
contract with such company is approved by a majority of the Fund's Board of
Trustees and a majority of Trustees who are not parties to any agreement or
contract with such person or persons and who are not "interested persons," as
defined in the 1940 Act, of the Fund, Sub-Adviser, or any such person or
persons, and approved by the vote of a majority of the outstanding voting
securities of the Fund or a Portfolio, to the extent required by the 1940 Act.
3. EXPENSES. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it, its staff and their activities, in connection with
its portfolio management under this Agreement.
4. COMPENSATION. For the services provided pursuant to this Agreement, the
Adviser will pay the Sub-Adviser a quarterly fee, computed as of the last day of
the quarter, in accordance with Schedule A.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Portfolios are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's request. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 3la-2
under the 1940 Act the records required to be maintained by Rule 3la-1 under the
1940 Act and to preserve the records required by Rule 204-2 under the Advisers
Act for the period specified in the Rule.
6. INDEMNIFICATION. The Sub-Adviser agrees to indemnify, and hold harmless,
the Adviser, and affiliated persons of the Adviser (as defined in the 1940 Act)
and each person, if any who, within the meaning of Section 15 of the Securities
Act of 1933 (the "1933 Act"), controls ("controlling person") the Adviser,
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or such affiliated
person or controlling person may become subject under the 1933 Act, the 1940
Act, the Advisers Act, under any other statute, at common law or otherwise,
arising out of the Sub-Adviser's responsibilities as Portfolio Manager of the
Fund which (1) may be based upon any misfeasance, malfeasance, or nonfeasance by
the Sub-Adviser, any of its employees or representatives or any affiliate of or
any person acting on behalf of the Sub-Adviser, or (2) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if such a statement or omission was made in reliance
upon written information furnished to the Adviser, the Fund or any affiliated
person of the Fund by the Sub-Adviser or any affiliated person or the
Sub-Adviser; provided, however, that in no case is the Sub-Adviser's indemnity
in favor of the Adviser or any affiliated person or controlling person of the
Adviser deemed to protect such person against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of his duties or by reason of his reckless
disregard of obligation and duties under this Agreement.
The Adviser agrees to indemnify and hold harmless the Sub-Adviser, and
affiliated person of the Sub-Adviser (as defined in the 1940 Act) ("affiliated
person") and each person, if any, who, within the meaning of Section 15 of the
1933 Act controls ("controlling person") the Sub-Adviser against any and all
losses, claims, damages. liabilities or litigation (including legal and other
expenses) to which the Sub-Adviser or such affiliated person or controlling
person may become subject under the 1933 Act, the 1940 Act, the Advisers Act,
under any other statutes, at common law or otherwise, arising out of the
Adviser's responsibilities as Investment Adviser to the Fund which (1) may be
based upon any misfeasance, malfeasance, or nonfeasance by the Adviser, any of
its employees or representatives or any affiliate of or any person acting on
behalf of the Adviser or (2) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading unless
such statement or omission was made in reliance upon written information
furnished to the Adviser or any affiliated person of the Adviser by the
Sub-Adviser or any affiliated person or controlling person of the Sub-Adviser;
provided, however, that in no case is the Adviser's indemnity in favor of the
Sub-Adviser or any affiliated person or controlling person of the Sub-Adviser
deemed to protect such person against any liability to which any such person
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties or by reason of this reckless
disregard of obligations and duties under this Agreement.
Except as may otherwise be required by the 1940 Act or the rules
thereunder, the Fund agrees that the Sub-Adviser, any affiliated person of the
Sub-Adviser (as defined in the 1940 Act) and each person, if any, who, within
the meaning of Section 15 of the 1933 Act controls the Sub-Adviser shall not be
liable, or subject to payment of any damages, expenses or losses to the Fund, in
connection with any act or omission connected with or arising out of any
investment advisory services rendered under this Agreement, except by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard of the Sub-Adviser's
obligations and duties under this Agreement.
7. CONTROL. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Fund shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve or disapprove any action
hereunder taken on its behalf by the Sub-Adviser.
8. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Sub-Adviser are not exclusive, and nothing in this Agreement shall prevent the
Sub-Adviser from providing similar services to other clients, including
investment companies (whether or not their investment objectives and policies
are similar to those of the Portfolios) or from engaging in other activities.
9. DURATION AND TERMINATION. This Agreement shall become effective on April
1, 1995, unless terminated as provided herein, shall continue for a period of
two years from that date and thereafter shall continue on an annual basis with
respect to each Portfolio provided that such annual continuance is specifically
approved each year by (a) the vote of a majority of the entire Board of Trustees
of the Fund, or by vote of a majority of the outstanding voting securities of
each Portfolio (as defined in the 1940 Act), and (b) the vote of a majority of
those Trustees who are not parties to this Agreement or interested persons (as
such term is defined in the 1940 Act) or any such party to this Agreement, cast
in person at a meeting called for the purpose of voting such approval. In the
event this Agreement is not approved in the manner described in the preceding
sentence, the paragraph number six (6), of this Agreement shall remain in effect
as well as any applicable provision of this paragraph number nine (9) and the
Sub-Adviser shall not provide any services for such Portfolios or receive any
fees on account of such Portfolios that fail to so approve of this Agreement.
Notwithstanding the foregoing, this Agreement may be terminated (a) by the
Adviser at any time without penalty, upon 60 days' written notice to the
Sub-Adviser and the Fund, (b) at any time without payment of any penalty by the
Fund, upon the vote of a majority of the Fund's Board of Trustees or a majority
or the outstanding voting securities of each Portfolio, upon written notice to
the Sub-Adviser, or (c) by the Sub-Adviser at any time without penalty by the
Sub-Adviser, upon 60 days' written notice to the Adviser and the Fund. In the
event of termination for any reason, all records of each Portfolio for which the
Agreement is terminated shall promptly be returned to the Sub-Adviser or the
Fund, free from any claim or retention of rights by the Sub-Adviser. This
Agreement shall automatically terminate in the event of its assignment (as such
term is defied in the 1940 Act).
10. AMENDMENTS. No provision of his Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the charge, waiver, discharge or
termination is sought and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Portfolios, and (ii) the Trustees of the
Fund, including a majority of the Trustees of the Fund 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, if such approval is required by
applicable law.
11. MISCELLANEOUS.
a. This Agreement shall be governed by the laws of the State of Minnesota,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act or rules or orders of the Securities and Exchange
Commission thereunder.
b. The Adviser and the Fund acknowledge receipt of Part II of the
Sub-Adviser's Form ADV which is filed with the Securities and Exchange
Commission.
c. The captions of this Agreement are included for convenience only and in
no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
d. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
e. Nothing herein shall be construed as constituting the Sub-Adviser as an
agent of the Fund or the Adviser.
f. Notices of any kind to be given to the Sub-Adviser by the Adviser or the
Fund shall be in writing and shall be duly given if mailed or delivered to the
Sub-Adviser at 937 Haverford Road, Bryn Mawr, Pennsylvania 19010-3845, or at
such other address as shall be specified by the Sub-Adviser to the Fund and the
Adviser. Notice of any kind to be given by the Sub-Adviser shall be in writing
and shall be duly given if mailed or delivered to the Fund at 950 North Glebe
Road, Arlington, Virginia 22203 and to the Adviser at 100 Washington Square,
Suite 800, Minneapolis, Minnesota 55401.
12. LIMITATION ON TRUSTEE LIABILITY. The Declaration of Trust establishing
the Fund, filed on January 19, 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 "USLICO
Series Fund" refers to the Trustee under the Declaration collectively as
trustees and not as individuals or personally, and that no shareholder, trustee,
officer, employee or agent of the Fund shall be subject to claims against or
obligations of the Fund to any extent whatsoever, but that the Fund estate only
shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
Newbold's Asset
Management, Inc.
By/s/Steven B. Darby
------------------
Steven B. Darby
Washington Square
Advisers, Inc.
By/s/Douglas P. Hedberg
---------------------
Douglas P. Hedberg
USLICO Series Fund
By/s/Robert B. Saginaw
--------------------
Robert B. Saginaw
Vice President & Secretary
SCHEDULE A
1. Investment Goal: Long term capital appreciation with reasonable income and
capital preservation.
2. Special restrictions and instructions: None
3. Fee: .5 of 1% on the first $20,000,000
.4 of 1% on the next $20,000,000
.3 of 1% thereafter
On an annual basis with pro-ration according to the following: Such fees
shall be payable, based on assets of each Portfolio of the USLICO Series Fund
under management, when billed on or after the date as of which the market value
of assets is computed: Quarterly (March 31, June 30, September 30, December 31)
4. Custodian: Crestar Bank
919 East Main Street
P.O. Box 2665
Richmond, Virginia 23261-6665
USLICO Series Fund - Common Stock
Account No. 010-903200
USLICO Series Fund - Money Market
Account No. 010-903300
USLICO Series Fund - Bond
Account No. 010-903400
USLICO Series Fund - Asset Allocation
Fixed Income - Account No. 010-903500
Equity - Account No. 010-903501
5. Name of Adviser's representatives authorized to give instructions to
Sub-Adviser:
Doug Hedberg
Greg Hanson
Keith Hoppe
Attached to and forming a part of a
Sub-Advisory Agreement dated:
Initialed for identification:
FOR THE SUB-ADVISER:
By:/s/Steven B. Darby
------------------
Steven B. Darby
Newbold's Asset Management, Inc.
FOR THE ADVISER:
By:/s/Douglas Hedberg
------------------
Douglas Hedberg
FOR THE FUND:
By:/s/Robert B. Saginaw
--------------------
Robert B. Saginaw
DISTRIBUTION AGREEMENT
Agreement, made this 1st day of February, 1997 between USLICO Series Fund ("the
Fund") and Washington Square Securities, Inc. ("WSSI" or "Distributor").
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), securities of which are registered under the Securities Act of 1933, as
amended ("1933 Act"); and
WHEREAS, the Fund is authorized to issue shares of beneficial interest (the
"Shares") in separate classes, or "portfolios" with each such class representing
interests in a separate portfolio of securities and other assets; and
WHEREAS, the Fund offers shares in four portfolios designated as the Stock
Portfolio, the Money Market Portfolio, the Bond Portfolio and the Asset
Allocation Portfolio, such Portfolios together with all other Portfolios
subsequently established by the Fund with respect to which the Fund desires to
retain the Distributor to render services hereunder and with respect to which
the Distributor is willing so to do, being herein collectively referred to as
the "Portfolios."
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. The Fund hereby appoints WSSI as Distributor of the Shares on the
terms and for the period set forth in this Agreement, and WSSI hereby
accepts such appointment and agrees to render the services and
undertake the duties set forth herein.
2. (a) In performing its duties as Distributor, WSSI will act in
conformity with the Prospectus of the Fund (the "Prospectus") included
in the Fund's Registration Statement on Form N-1A under the 1933 Act
and the 1940 Act, as filed with the Securities and Exchange Commission
and as amended or supplemented from time to time, and with the
instructions and directions of the Board of Trustees of the Fund, the
requirements of the 1933 Act, the 1940 Act and all other applicable
federal and state laws and regulations.
(b) WSSI will hold itself available to receive by mail, telex and/or
telephone orders for the purchase or redemption of the Shares and
will accept or reject such orders on behalf of the Fund in
accordance with the provisions of the Prospectus, and will
transmit such orders as are so accepted to the Fund's transfer
agent promptly for processing at the Shares' net asset value next
determined in accordance with the Prospectus. The Distributor
will not use any sales literature which has not been previously
approved by the Fund.
(c) WSSI shall not be obligated to sell any certain number of shares.
Such shares will be sold without a sales charge. No commission or
other fee will be paid to WSSI in connection with the sale of the
Shares.
3. During the term of this Agreement, WSSI will bear all its expenses in
complying with this Agreement, including the following expenses:
(a) costs of sales presentations, mailings, advertising, and any
other marketing efforts by WSSI in connection with the
distribution or sales of the Shares; and
(b) any compensation paid to employees of WSSI in connection with the
distribution or sale of the Shares.
4. The Fund shall bear all of its other expenses, including, but not
limited to:
(a) preparation of its reports, proxies and prospectuses and printing
and distributing reports, proxies and prospectuses and other
communications to existing shareholders;
(b) registration of the Fund's Shares with the Securities and
Exchange Commission; and
(c) qualification of the Fund's Shares for sale in jurisdictions
designated by the Distributor;
5. WSSI shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from its willful
misfeasance, bad faith or negligence in the performance of its duties
under this Agreement. Any person, even though also an officer,
employee or agent of WSSI, who may be or become an officer, trustee,
employee or agent of the Fund shall be deemed, when rendering services
to the Fund or acting in any business of the Fund, to be rendering
such services to or acting solely for the Fund and not as an officer,
partner, employee or agent or one under the control or direction of
WSSI even though paid by WSSI.
6. This Agreement shall take effect on February 1, 1997, and shall
continue in effect, unless sooner terminated as provided herein, for
two years from such date and shall continue from year to year
thereafter so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the
Board of Trustees of the Fund who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
approval, and (b) either by a majority of the entire Board of Trustees
of the Fund or by a majority vote (as defined in the Prospectus) of
the shareholders of the Fund; provided, however, that this Agreement
may be terminated at any time and without penalty by the Board of
Trustees of the Fund; by a majority vote (as defined in the
Prospectus) of the shareholders of the Fund on 60 days' written notice
to WSSI; or by WSSI, without payment of any penalty, on 90 days'
written notice to the Fund. This Agreement will automatically and
immediately terminate in the event of its assignment (as defined in
the 1940 Act).
7. Notices of any kind to be given to WSSI by the Fund shall be in
writing and shall be duly given if mailed, first class postage
prepaid, or delivered to WSSI, 20 Washington Avenue South,
Minneapolis, MN 55401, or at such other address or to such individual
as shall be specified by WSSI to the Fund. Notices of any kind to be
given to the Fund shall be in writing and shall be duly given if
mailed, first class postage pre-paid, or delivered to the Fund at 4601
North Fairfax Drive, Arlington, Virginia 22203 or at such other
address or to such individual as shall be specified by the Fund.
8. The services of the Distributor to the Fund under this Agreement are
not to be deemed exclusive, and the Distributor shall be free to
render similar services or other services to others so long as its
services hereunder are not impaired thereby.
9. The Distributor shall prepare reports to the Board of Trustees of the
Fund on a quarterly basis showing such information as from time to
time shall be reasonably requested by the Board.
10. The Distributor shall for all purposes herein is deemed to be an
independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund
in any way or otherwise be deemed an agent of the Fund. It is
understood and agreed that the Distributor, by separate agreement with
the Fund, may also serve the Fund in other capacities.
11. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.
12. This Agreement shall be governed by the laws of Virginia, provided
that nothing herein shall be construed in a manner inconsistent with
the Investment Company Act of 1940, the Securities Exchange Act of
1934 or any rule or order of the Securities and Exchange Commission.
13. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable.
14. The Declaration of Trust establishing the Fund, filed on January 19,
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 "USLICO Series
Fund" refers to the Trustees under the Declaration collectively as
trustees and not as individuals or personally, and that no
shareholder, trustee, officer, employee or agent of the Fund shall be
subject to claims against or obligations of the Fund to any extent
whatsoever, but that the Fund estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
WASHINGTON SQUARE SECURITIES, INC.
BY:/s/Robert B. Sagniaw
-------------------------------
Robert B. Saginaw
Title: Vice President
USLICO SERIES FUND
By:/s/Robert B. Saginaw
--------------------
Robert B. Saginaw
Title: Vice President
CRESTAR BANK
CUSTODIAN AGREEMENT
THIS AGREEMENT, made and entered into this 2nd day of May, 1988, between
USLICO SERIES FUND (hereinafter called the Owner), and CRESTAR BANK, a Virginia
banking institution (hereinafter called the Custodian);
W I T N E S S E T H:
WHEREAS, the owner has deposited with the Custodian the securities and
other properties (hereinafter called the Securities) identified on the statement
attached hereto as Exhibit A and made a part of this Agreement, which, together
with other Securities that may hereafter be brought within the operation of this
Agreement, are to be held by the Custodian upon the terms and conditions
hereinafter set forth:
NOW, THEREFORE, the parties hereto, in consideration of the covenants and
agreements to be duly kept and performed, do hereby agree as follows:
1. The Custodian agrees to receive the Securities set forth on Exhibit A,
together with other Securities that may be hereafter brought within the
operation of this Agreement, and to hold the same in a custodian account. The
Securities shall at all times be kept separate and apart from other deposits or
securities held by the Custodian from other persons or Corporate Entities so
that they may be identified as belonging solely to the Owner.
2. The Custodian further agrees:
(a) To receive and hold in safekeeping the Securities subject to the terms
of this Agreement, and to issue receipts therefor;
(b) To collect such income as may accrue and be paid on the Securities and
remit the same in accordance with written instructions given by the Owner;
(c) To collect the principal of called, tendered, or matured Securities,
and to remit the same in accordance with written instructions given by the
Owner.
(d) To exchange temporary certificates for definitive certificates when
appropriate;
(e) To notify the Owner and any service company designated by the Owner of
any default in the payment of principal or interest on the Securities and after
receipt by the Custodian of timely notice from the issuer of the Securities of
any redemption (by issue), tender offer, subscription right, merger,
consolidation, reorganization, or recapitalization, or similar proceeding
affecting the Securities; provided, however, that the Custodian assumes no
responsibility for notifying the Owner with respect to any such transaction in
the absence of timely, formal notice from the Issuer; provided, further, that
the Custodian shall not be required to act with respect to any such notice
without direction in writing from the Owner.
(f) Upon specific written instructions from the Owner, to exchange
Securities; to receive the proceeds of securities sold or redeemed for the
account of the Owner; and to use cash in the account to pay for Securities
purchased for the account of the Owner and to receive the same; provided,
however, that if there are insufficient funds in the Owner's account to settle
directed purchases, thereby creating an overdraft, prompt notification shall be
given to the Owner and then the account will be subject to additional charges by
the Custodian;
(g) To provide automatic investment of daily cash balance down to $1.00 in
money market funds or similar short-term investments maintained by the Custodian
as selected by the Owner and, after paying all commissions or expenses
chargeable to such income, to collect and remit the net income as provided in
subparagraph (b) above;
(h) To notify the Owner, in a timely fashion after it receives such notice,
of all voting rights with respect to the Securities and to vote or otherwise act
with respect to any Securities held hereunder for the account of the Owner in
accordance with instructions in writing from the Owner (Exhibit B); and
(i) To maintain records of income collected, Securities purchased and sold,
and other transactions occurring in the account; and to render periodic
statements with respect to the account to the Owner not less frequently than
monthly in accordance with applicable regulatory bookkeeping requirements.
NOTE: The Custodian expressly disclaims any responsibility for reviewing
any purchases or sales for Owner's account as to investment merit,
qualifications as investments for the account, or the frequency of trades except
those functions deemed traditional custodian functions.
3. All Securities held by the Custodian under this Agreement may be
registered and held in the name of a nominee of the Custodian or its agent. The
Custodian, in its discretion, is hereby authorized to maintain portions of the
Securities in a correspondent bank or banks, if the custodian believes it to be
expeditious in the delivery of such Securities when purchased or sold. This
would not limit the Custodian's recordkeeping responsibilities for knowledge of
physical location of these Securities. The responsibility of the Custodian shall
not be lessened or limited by reason of the registration of the Securities in
the name of the nominee or by any actions of the nominee. The Securities shall
at all times be held by a bank or trust company being licensed and regularly
examined by the United States or any state thereof, except in those instances as
a result of a sale, purchase, or corporate action, when such Securities may be
in transit and, in the normal course of business, would temporarily not be in
the actual possession of such bank or trust company. The Custodian will be
responsible for the safekeeping of all Securities registered in nominee or
bearer form and held by other banking institutions or trust companies which have
furnished the custodian receipts for such Securities. The Custodian will also be
responsible for obtaining such receipts.
4. The Owner hereby authorizes the Custodian to use the Federal Reserve
book-entry program and the facilities of a qualified central depository system
for all of the Securities whenever possible. With respect to Securities held by
a depository, the Custodian hereby agrees to use only those central depository
systems which are regulated by the Securities and Exchange Commission and the
Federal Reserve System.
5. The Custodian shall be responsible only for loss or damage sustained by
the Owner through fault, negligence or willful misconduct on the part of the
Custodian, its agents, or employees, in connection with, or with respect to, the
handling, transfer, delivery, or custody of the Securities held under this
Agreement. The Custodian shall indemnify and save harmless the Owner for or on
account of any such time loss or damage.
6. In the event that a loss of Securities occurs for which the Custodian is
obligated to indemnify the Owner the owner shall be promptly notified and the
Securities shall be promptly replaced, or the value thereof, by the Custodian as
of the date of loss. The value of any loss of income rights or privileges
resulting from such loss of Securities also shall be restored by the Custodian
to the Owner.
7. The Owner may withdraw any part of the Securities held hereunder upon
written notice. The Owner may terminate this Agreement and withdraw all of the
Securities upon ninety (90) days' written notice to the Custodian. The Custodian
may terminate this Agreement by giving the owner ninety (90) days' written
notice and by delivering or offering to deliver the Securities to the Owner.
8. In consideration of the promise of the Custodian to render the foregoing
services, the Owner agrees to pay the Custodian compensation based upon the
Custodian's fee schedule attached as Exhibit E and as amended from time to time.
9. For purposes of this Agreement, the term "Owner" shall include, where
applicable, the Owner acting through its authorized employees or designated
agents (Exhibit B), including an Investment Advisor appointed in writing by the
Owner (Exhibit C). The term "Custodian" shall include the Custodian acting
through its authorized employees, nominees, or designated agents.
10. This Agreement shall be executed in one or more counterparts, each of
which shall be deemed to be an original.
11. This instrument constitutes the entire agreement between the parties,
and its terms may be modified only by a subsequent agreement in writing. The
parties represent that all corporate action necessary to enter into this
Agreement has been duly taken (sample attached as Exhibit D).
12. This agreement shall be construed according to the laws of the
Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
USLICO SERIES FUND
/s/Charles V. Guiffra
------------------------------
Charles V. Giuffra
President
CRESTAR BANK
By___________________________
Wayne G. Larochelle
Vice President
JAWF/ac
EXHIBIT A
LISTING OF SECURITIES
(TO BE FORWARDED)
EXHIBIT B
AUTHORIZED REPRESENTATIVES
In accordance with Section 9 of the attached Custodial Agreement with
Crestar Bank dated 2 May 1988, we hereby appoint the following individuals as
our designated representatives who are authorized to give directions to the Bank
and to receive information on our behalf:
Charles V. Giuffra, Alan Aument, David Karsten, Robert B. Saginaw, Leigh A.
Duff, Frances A. Podlesney, Dan Shannon, Sophie Chi
You are authorized to accept directions with respect to our account and
provide information to these persons with respect to our account until we notify
you in writing to the contrary.
Date: 2 May 1988
By /s/Robert B. Saginaw
--------------------
Robert B. Saginaw
Title /s/Secretary
------------
Secretary
EXHIBIT C
INVESTMENT ADVISORY AUTHORIZATION
In accordance with Section 9 of the attached Custodial Agreement with
Crestar Bank dated 2 May 1988, we hereby appoint Bankers Centennial Manage. Corp
and Wood, Struthers Winthrup Manage., Co. as the authorized Investment Advisors
for the above noted account. This appointment will allow representatives of the
advisors to act as designated agents for the Owner until rescinded in writing.
Date: 2 May 1988
By /s/Robert B. Saginaw
--------------------
Robert B. Saginaw
Title /s/Secretary
------------
Secretary
EXHIBIT D
CERTIFICATE OF RESOLUTION
I, Robert B. Saginaw Secretary of USLICO Series Fund (the Corporation),
hereby certifies that the following is a true copy of action taken by the Board
of Directors of the Corporation [at a meeting, duly called and convened on
____________________ ] or [by unanimous consent in writing effective 2 May
1988]:
RESOLVED, that the Corporation enter into a Custodian Agreement with
Crestar Bank for the deposit and custody of such funds and securities, in
one or more accounts, as may be determined from time to time.
RESOLVED, FURTHER, that the President, Vice President, or any officer
designated by the President is hereby authorized and directed to execute
such documents and to take such additional action as may be appropriate to
carry out the purposes of these resolutions.
And the undersigned further certifies that the foregoing resolutions remain
in effect and do not contravene the charter of the by-laws of the Corporation.
WITNESS the following signature and seal this 2nd day of May 1988.
/s/Robert B. Saginaw
--------------------
Robert B. Saginaw
,Secretary
EXHIBIT E
COMPENSATION SCHEDULE
CUSTODY SERVICES
* ACCOUNT ADMINISTRATIVE FEE - $2,000 base fee per investment advisor plus
.03% (3 basis points) on the fair market value of custody assets. Market
value charges will be based on the average size of the account during the
year using quarterly valuations.
* TRANSACTION FEE - $15 per transaction. $20.00 per transaction if Crestar is
responsible for affirming trade activity.
* ADDITIONAL SERVICES - Should Crestar Bank be required to perform services
other than those enumerated, charges will be applied at rates in effect at
the time services are rendered.
ADMINISTRATIVE AGREEMENT
AGREEMENT, between USLICO SERIES FUND (the "Fund"), a trust operating as an
open-ended investment company under the Investment Company Act of 1940, duly
organized under the laws of Massachusetts, WASHINGTON SQUARE ADVISERS, INC. (the
"Investment Advisor") and RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY, an
insurance company organized under the laws of the Commonwealth of Virginia
("RUSL"), provides as follows:
WHEREAS, the Fund desires to appoint RUSL to perform certain
administrative, accounting, recordkeeping, and other functions required of a
duly-registered investment company in compliance with certain provisions of
federal, state and local law, rules and regulations and as required, to provide
certain financial reports, to maintain and preserve certain books, accounts and
records as the basis for such reports and to perform certain daily functions in
connection with such accounts and records; and
WHEREAS, RUSL is willing to perform such functions upon the terms and
conditions herein set forth;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the parties do hereby agree as follows:
SECTION 1. RUSL shall examine and review the Fund's records and other
documents in accordance with applicable regulations and act upon instructions
received by the Fund as to how such records and other documents shall be
maintained.
SECTION 2. RUSL, upon receipt of necessary information and Written or Oral
Instructions from the Fund, shall maintain and keep current the following books,
accounts, records, journals, or other records of original entry, relating to the
business of the Fund and necessary or advisable for compliance with applicable
regulations as may be mutually agreed to between the Fund and RUSL:
(a) cash receipts;
(b) cash disbursements;
(c) dividend records;
(d) purchases and sales of portfolio securities;
(e) subscription and redemption journals;
(f) security ledgers;
(g) broker ledgers;
(h) general ledgers;
(i) daily expense accruals;
(j) daily interest accruals;
(k) securities and monies borrowed or loaned and collateral
therefor; and
(1) trial balances.
By means of illustration and not limitation, it shall be the responsibility
of the Fund to furnish RUSL with (i) the declaration, record, payment dates and
amounts of any dividends or income, and any other special actions required
concerning each of its securities; and (ii) all information necessary to
maintain the above-described records in a timely manner.
RUSL shall have no responsibility to file any record, report or statement
with any federal or state regulatory body or a Shareholder.
SECTION 3. RUSL, on behalf of the Fund, shall calculate the Fund's net
asset value once each business day in accordance with the Fund's Prospectus and
resolutions of the Board of Trustees, and shall communicate this information to
the Fund's Transfer Agent and to any additional parties as the Fund may direct.
RUSL shall prepare and maintain a daily market valuation of securities for which
market quotations are available; all other securities valuations shall be
provided by the Fund's Investment Advisor.
The Fund's Investment Advisor assumes all responsibility for determining
the valuation of restricted securities, securities for which market valuations
are not readily available to RUSL and valuations not ascertainable solely by
mechanical procedures made known to RUSL by the Fund. RUSL shall be responsible
to reflect on the books or account any default, tender offer, subscription
right, merger, consolidation, reorganization, or recapitalization, or similar
proceeding affecting the securities for which it has notice or is aware.
SECTION 4. At the end of each month, the Custodian of the Fund's assets
shall forward to RUSL a monthly statement of cash and portfolio transactions,
which shall be reconciled with RUSL's accounts and records maintained for the
Fund; RUSL shall proceed to clear such items within 60 days.
SECTION 5. RUSL shall supply daily and periodic reports to the Fund, as
required by laws and regulations, requested by the Fund and agreed to by RUSL.
SECTION 6. The Fund shall confirm to the Fund's Transfer Agent all Share
purchases and redemptions effected through the Fund or its distributor. RUSL
shall receive from the Fund's Transfer Agent daily reports of Share purchases,
redemptions, and total Shares outstanding. Reports of purchases and redemptions
so received shall be deemed to be Share orders to the Fund and shall be deemed
to be orders accepted by the Fund when so received. RUSL shall reconcile
outstanding Shares with the Fund's Transfer Agent periodically but no less
frequently than monthly.
SECTION 7. The accounts and records maintained by RUSL shall be the
property of the Fund and must be readily accessible and available to the Fund,
upon demand. RUSL shall assist the Fund's independent auditors or any regulatory
body in any requested review of the Fund's accounts and records. Upon receipt
from the Fund of the necessary information, RUSL shall supply the necessary data
for the Fund's completion of any necessary tax returns, questionnaires, periodic
Shareholder reports required by Federal and state securities regulatory
authorities, financial statements and such other reports and information
requests as the Fund and RUSL shall mutually agree upon from time to time.
SECTION 8. The Fund may request from time to time, that RUSL provide
additional services on its behalf, such as legal services, printing, supplies,
postage, advertising and sales brochures, rent for space and other
administrative services.
SECTION 9. Where information and/or services are to be provided to RUSL by
the Investment Advisor in order for RUSL to perform the services required of it
pursuant to this Agreement, the Investment Advisor shall cooperate with and
provide such information or services to RUSL in a timely fashion.
SECTION 10. RUSL and the Fund may, from time to time, adopt procedures for
implementing this Agreement. RUSL may conclusively assume that any procedure
approved or directed by the Fund does not conflict with or violate any
requirements of its Prospectus, Agreement and Declaration of Trust, By-Laws, or
any rule or regulation of any regulatory body or governmental agency. The Fund
shall be responsible for notifying RUSL of any changes in regulations or rules
that might necessitate changes in the Fund's procedures. RUSL agrees to modify
procedures on an timely basis to the extent necessary so as to comply with
changes in applicable securities laws and regulations.
SECTION 11. RUSL may rely upon the advice of the Fund and its Investment
Advisor and upon statements of the Fund's accountants, counsel and other persons
reasonably believed by RUSL in good faith to be expert in matters upon which
they are consulted.
SECTION 12. RUSL shall not be liable for any action taken in good faith
reliance upon any authorized Oral Instructions, any Written Instructions, any
certified copy of any resolution of the Board of Trustees of the Fund or any
other document reasonably believed by RUSL in good faith to be genuine and to
have been executed or signed by officers of the Fund or their designees.
RUSL shall not be held to have notice of any change of authority or any
officer, employee or agent of the Fund until notified of the change by the Fund.
SECTION 13. The Fund agrees to pay RUSL compensation for its services, as
set forth in the exhibit attached as Exhibit A and as amended from time to time.
SECTION 14. Either the Fund or RUSL may give written notice to the other of
the termination of this Agreement, such termination to take effect at the time
specified in the notice, which time shall not be less than 90 days from the
giving of such notice, unless RUSL and the Fund mutually agree to a shorter
period. Any termination shall be without penalty.
SECTION 15. This Agreement may be executed in more than one counterpart,
each of which shall be deemed to be an original.
SECTION 16. This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund without the written
consent of RUSL, or by RUSL without the written authorization of the Fund's
Board of Trustees.
SECTION 17. This Agreement shall be governed by the laws of the
Commonwealth of Virginia and shall become effective on the last date below.
WITNESS the following signatures:
USLICO SERIES FUND
/s/Robert B. Saginaw
--------------------
Robert B. Saginaw
Vice President
Date: January 1, 1997
RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY
/s/Robert B. Saginaw
----------------------
Robert B. Saginaw
Assistant Secretary
Date: January 1, 1997
Consented To and Agreed
Washington Square Advisers, Inc.
By:/s/Douglas Hedberg
- ---------------------
Douglas Hedberg
Executive Vice
President
Date: January 1, 1997
EXHIBIT A
COMPENSATION
ReliaStar United Services Life Insurance Company shall be reimbursed for its
costs associated with providing the services under this Agreement to the USLICO
Series Fund. Such reimbursements shall be fair and reasonable and include all
costs incurred by United Services Life Insurance Company.
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
USLICO Series Funds
We consent to the incorporation by reference in this Post-effective Amendment
Nos. 10 and 11 to the Registration Statement on Form N-1A of USLICO Series Fund
filed under the Securities Act of 1933 and of the Investment Company Act of 1940
of our report dated January 31, 1997, accompanying the financial statements and
financial highlights of USLICO Series Fund as of December 31, 1996 and for the
two years then ended as listed in Item 24(a) of such Registration Statement.
We also consent to the reference to us under the headings "Condensed Financial
Information" and "Independent Auditors" in the prospectus and under the heading
"Financial Statements" in the Statement of Additional Information.
/s/Deloitte & Touche LLP
Minneapolis, Minnesota
April 28, 1997
KPMG PEAT MARWICK LLP
INDEPENDENT AUDITORS' CONSENT
Board of Trustees
USLICO Series Fund;
We consent to the use in this Post-Effective Amendment No. 10 and No. 11 to
Registration Statement on Form N-1A (File No. 33-20957) of the USLICO Series
Fund filed under the Securities Act of 1933 and the Investment Company Act of
1940, respectively, of our report dated February 2, 1995 on the audit of the
statement of assets and liabilities and the related statement of operations and
changes in net assets as of and for the year ended December 31, 1994 (not
presented herein), and the condensed financial information of the USLICO Series
Fund for the years ended December 31, 1994, 1993, and 1992, appearing in the
Statement of Additional Information and under the heading "Condensed Financial
Information" of such Registration Statement; and to the references to us under
the heading "Condensed Financial Information," which is part of such
Registration Statement.
KPMG Peat Marwick LLP Washington, D.C.
April 28, 1997
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATIONS
USLICO SERIES FUND
Average annual total return figures for the current one year period, five year
period and ten year period (or life of fund if less than ten years) ending
December 31, 1996, are calculated as follows:
1/n
FORMULA: P(1+T) = ERV or T = ERV/P - 1
WHERE: P = hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period
<TABLE>
<CAPTION>
ASSET
COMMON BOND ALLOCATION
STOCK FUND FUND FUND
---------- ---- ----
<S> <C> <C> <C>
ONE YEAR PERIOD:
ERV = $ 1,229.00 $ 1,027.00 $ 1,124.40
n = 1 1 1
T = 22.90% 2.70% 12.44%
P = $ 1,000.00 $ 1,000.00 $ 1,000.00
FIVE YEAR PERIOD:
ERV = $ 1,990.46 $ 1,405.83 $ 1,680.51
n = 5 5 5
T = 14.76% 7.05% 10.94%
P = $ 1,000.00 $ 1,000.00 $ 1,000.00
TEN YEAR PERIOD (COMMON STOCK)
OR SINCE INCEPTION (JULY 1, 1987) FOR THE BOND AND ASSET ALLOCATION FUNDS
ERV = $ 3,201.43 $ 2,311.50 $ 2,510.10
n = 10.0 9.5 9.5
T = 12.34% 8.74% 9.64%
P = $ 1,000.00 $ 1,000.00 $ 1,000.00
</TABLE>
EXHIBIT 16.1
COMPUTATION OF PERFORMANCE QUOTATIONS
USLICO SERIES FUND
Cumulative total return figures for the ten year period ending December 31, 1996
(Common Stock Fund) or since inception (July 1, 1987) for the Bond and Asset
Allocation Funds are calculated as follows:
Formula: CTR = ERV - P * 100
------------
P
Where: CTR = cumulative total return
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of the
period.
P = initial payment of $1,000
<TABLE>
<CAPTION>
ASSET
COMMON BOND ALLOCATION
STOCK FUND FUND FUND
---------- ---- ----
<S> <C> <C> <C>
P = $ 1,000.00 $ 1,000.00 $ 1,000.00
ERV = $ 3,201.43 $ 2,311.50 $ 2,510.10
CTR = 220.14 % 131.15% 151.01%
</TABLE>
COMPUTATION OF PERFORMANCE QUOTATIONS
USLICO SERIES FUND
The 30 day SEC yield for the period ending December 31, 1996 is calculated as
follows:
6
Formula: 2(((a-b)+1) -1)
-----
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day
of the period.
<TABLE>
<CAPTION>
ASSET
COMMON BOND ALLOCATION
STOCK FUND FUND FUND
---------- ---- ----
<S> <C> <C> <C>
a = $ 58,105.00 $ 17,205.00 $ 61,853.00
b = $ 15,213.00 $ 1,886.00 $ 9,909.00
c = 1,575,455.00 284,090.00 1,148,567.00
d = $ 13.25 $10.02 $11.85
Sec Yield = 2.48% 6.55% 4.62%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INOFRMATION EXTRACTED FROM THE ANNUAL
REPORT AND IS QUALIFIED IN ITS ENIRETY BY REFERNCE TO SUCH FINANCIAN STATEMENTS.
</LEGEND>
<CIK> 0000827885
<NAME> USLICO SERIES FUND
<SERIES>
<NUMBER> 1
<NAME> COMMON STOCK PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 19759
<INVESTMENTS-AT-VALUE> 23352
<RECEIVABLES> 58
<ASSETS-OTHER> 299
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23709
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 151
<TOTAL-LIABILITIES> 151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19951
<SHARES-COMMON-STOCK> 1777
<SHARES-COMMON-PRIOR> 1582
<ACCUMULATED-NII-CURRENT> 10
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3594
<NET-ASSETS> 23558
<DIVIDEND-INCOME> 665
<INTEREST-INCOME> 30
<OTHER-INCOME> 0
<EXPENSES-NET> 160
<NET-INVESTMENT-INCOME> 535
<REALIZED-GAINS-CURRENT> 3045
<APPREC-INCREASE-CURRENT> 637
<NET-CHANGE-FROM-OPS> 4217
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (522)
<DISTRIBUTIONS-OF-GAINS> (3045)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (46)
<SHARES-REINVESTED> 241
<NET-CHANGE-IN-ASSETS> 3590
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2
<OVERDISTRIB-NII-PRIOR> (3)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 53
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 160
<AVERAGE-NET-ASSETS> 21376
<PER-SHARE-NAV-BEGIN> 12.62
<PER-SHARE-NII> .34
<PER-SHARE-GAIN-APPREC> 2.55
<PER-SHARE-DIVIDEND> (.33)
<PER-SHARE-DISTRIBUTIONS> (1.93)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.25
<EXPENSE-RATIO> .75
<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 ANNUAL
FORM THE ANNUAL REPORT AND IS QULAIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000827885
<NAME> USLICO SERIES FUND
<SERIES>
<NUMBER> 2
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 6039
<INVESTMENTS-AT-VALUE> 6039
<RECEIVABLES> 0
<ASSETS-OTHER> 4
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6043
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 63
<TOTAL-LIABILITIES> 63
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5974
<SHARES-COMMON-STOCK> 5980
<SHARES-COMMON-PRIOR> 5819
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5980
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 325
<OTHER-INCOME> 0
<EXPENSES-NET> 44
<NET-INVESTMENT-INCOME> 281
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 281
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (281)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (121)
<SHARES-REINVESTED> 281
<NET-CHANGE-IN-ASSETS> 160
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 44
<AVERAGE-NET-ASSETS> 5896
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .75
<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 ANNUAL
REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000827885
<NAME> USLICO SERIES FUND
<SERIES>
<NUMBER> 3
<NAME> BOND PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2510
<INVESTMENTS-AT-VALUE> 2582
<RECEIVABLES> 49
<ASSETS-OTHER> 183
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2814
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31
<TOTAL-LIABILITIES> 31
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2734
<SHARES-COMMON-STOCK> 278
<SHARES-COMMON-PRIOR> 296
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (25)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 72
<NET-ASSETS> 2783
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 206
<OTHER-INCOME> 0
<EXPENSES-NET> 22
<NET-INVESTMENT-INCOME> 184
<REALIZED-GAINS-CURRENT> (25)
<APPREC-INCREASE-CURRENT> (86)
<NET-CHANGE-FROM-OPS> 73
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (183)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (36)
<SHARES-REINVESTED> 18
<NET-CHANGE-IN-ASSETS> (285)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22
<AVERAGE-NET-ASSETS> 2858
<PER-SHARE-NAV-BEGIN> 10.38
<PER-SHARE-NII> .64
<PER-SHARE-GAIN-APPREC> (.36)
<PER-SHARE-DIVIDEND> (.64)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.02
<EXPENSE-RATIO> .75
<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 ANNUAL
REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000827885
<NAME> USLICO SERIES FUND
<SERIES>
<NUMBER> 4
<NAME> ASSET ALLOCATION PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 12552
<INVESTMENTS-AT-VALUE> 13825
<RECEIVABLES> 136
<ASSETS-OTHER> 732
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14693
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78
<TOTAL-LIABILITIES> 78
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13332
<SHARES-COMMON-STOCK> 1233
<SHARES-COMMON-PRIOR> 1157
<ACCUMULATED-NII-CURRENT> 5
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1273
<NET-ASSETS> 14615
<DIVIDEND-INCOME> 222
<INTEREST-INCOME> 491
<OTHER-INCOME> 0
<EXPENSES-NET> 104
<NET-INVESTMENT-INCOME> 609
<REALIZED-GAINS-CURRENT> 1048
<APPREC-INCREASE-CURRENT> (50)
<NET-CHANGE-FROM-OPS> 1607
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (604)
<DISTRIBUTIONS-OF-GAINS> (1048)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (55)
<SHARES-REINVESTED> 131
<NET-CHANGE-IN-ASSETS> 939
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 35
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 104
<AVERAGE-NET-ASSETS> 13875
<PER-SHARE-NAV-BEGIN> 11.82
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> .94
<PER-SHARE-DIVIDEND> (.53)
<PER-SHARE-DISTRIBUTIONS> (.91)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.85
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
