<PAGE>
File No. 33-67852
811-7978
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___
Post-Effective Amendment No. 11
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 13
NORTHSTAR TRUST
(Exact name of Registrant as specified in charter)
TWO PICKWICK PLAZA, GREENWICH, CT 06830
(Adress of Principal Executive Offices)
(203) 863-6200
(Registrant's telephone number)
MARK L. LIPSON
C/O NORTHSTAR INVESTMENT MANAGEMENT CORPORATION
TWO PICKWICK PLAZA, GREENWICH, CONNECTICUT 06830
(Name and address of agent for service)
Copies of all correspondence to:
JEFFREY L. STEELE, ESQ.
DECHERT, PRICE & RHOADS
1500 K STREET, N.W., SUITE 500
WASHINGTON, D.C. 20005
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
<TABLE>
<CAPTION>
<S> <C>
__ immediately upon filing pursuant to paragraph (b) __ on (date) pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1) __ on (date) pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2) __ on (date) pursuant to paragraph (a)(2)
of Rule 485
</TABLE>
If appropriate, check the following box:
__ This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Registrant has registered an indefinite number of shares of beneficial interest
by its initial Registration Statement pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, which became effective November 5,
1993. Registrant filed the notice required by Rule 24f-2 with respect to its
most recent fiscal year on December 23, 1996.
<PAGE>
CROSS REFERENCE SHEET
The enclosed materials relate only to the Northstar High Total Return Fund II
which is a separate investment series of the Northstar Trust (the "Trust") and
do not amend in any respect the Trust's other investment series. Information
relating to the Trust's other investment series is contained in previously filed
Post-Effective Amendments.
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
<S> <C> <C>
1. Cover Page.............................. Cover Page
2. Synopsis.................................. Expense Information
3. Condensed Financial
Information.............................. Financial Highlights
4. General Description of
Registrant................................ Cover Page; Investment Objective and
Policies of the Fund; Investment
Techniques; Investment Considerations and
Risk Factors; General Information
5. Management of the Fund................... Management of the Fund
6. Capital Stock and Other
Securities............................... How Net Asset Value is
Determined; How to Purchase Shares;
Alternative Sales Arrangements;
Investor Services and Account Policies;
Dividends, Distribution and Taxes;
General Information
7. Purchases of Securities Being
Offered................................... How Net Asset Value is Determined;
How to Purchase Shares; Alternative
Sales Arrangments; Investor Services and
Account Policies; Distribution Plans
8. Redemption or Repurchase.... How Net Asset Value is Determined; How
to Sell Shares
9. Legal Proceedings.................. Not Applicable
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form N-1A Part B Item Statement of Additional Information
Caption
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information & History Cover Page; Other Information
13. Investment Objectives & Policies Cover Page; Investment Restrictions;
Investment Techniques
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal N/A
Holders of Securities
16. Investment Advisory and Services of Northstar and the Administrator;
Other Services Other Information
17. Brokerage Allocation and Portfolio Transactions and Brokerage
Other Practices Allocation
18. Capital Stock and Other Securities Purchases and Redemptions
19. Purchases, Redemptions and Net Asset Value; Purchases and
Pricing Redemptions
20. Tax Status Dividends, Distributions and Taxes
21. Underwriter Underwriter and Distribution Services
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
<PAGE>
[LOGO]
Two Pickwick Plaza (203) 863-6200
Greenwich, Connecticut, 06830 (800) 595-7827
PROSPECTUS January __, 1997
Northstar High Total Return Fund II (the "Fund") is a separate
diversified portfolio of Northstar Trust, an open-end, management investment
company (the "Trust") , known as a mutual fund. The Fund's investment objective
is high income and capital appreciation. It will seek to achieve this objective
by primarily investing in high yield-high risk, lower rated and non-rated U.S.
dollar denominated debt securities. While investing in income-producing
securities, the Fund will seek to maximize total return from a combination of
income and capital appreciation.
Northstar Investment Management Corporation ("Northstar" or the
"Adviser") is the investment adviser for the Fund, Northstar Distributors, Inc.
("Underwriter") is the underwriter of the Fund's shares, and Northstar
Administrators Corporation ( the "Administrator") serves as administrator to the
Fund. The Underwriter and the Administrator are each affiliates of the Adviser.
This Prospectus sets forth concisely the information about the Fund
that prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
January __, 1997, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information is
available without charge upon request to Northstar at the address or telephone
number given above.
The Fund may invest in lower-rated and non-rated debt securities, commonly known
as "junk bonds." Investors should consider that these securities carry greater
risks, such as the risk of default, than other debt securities. See "Risk
Factors -- High Yield Securities."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
The tables and examples below are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as an
investor in the Fund. Shareholder Transaction Expenses are paid by investors
when purchasing or redeeming Fund shares. Annual Operating Expenses are paid by
the Fund and are reflected in the Fund's net asset value.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Front-End Sales Load Imposed on Purchase
of Shares (as a % of Offering Price) ............................................... 4.75 None None
Maximum Contingent Deferred Sales Load on Sale
of Shares (as a % of the lesser of original
price or redemption proceeds) ...................................................... None(1) 5.00%(2) 1.00%
Annual Fund Operating Expenses
(As a % of Average Net Assets)
Management Fee ........................................................................ .75% .75% .75%
12b-1 Fee ............................................................................. .30% 1.00%(3) 1.00%(3)
Other Expenses ........................................................................ .45% .45% .45%
Total Fund Operating Expenses ......................................................... 1.50% 2.20% 2.20%
</TABLE>
-----------------------
(1) Purchases of $1 million or more are not subject to an initial sales charge;
however, a CDSC of up to 1% will be imposed on such purchases in the event of
certain redemption transactions within 18 months following the date of purchase.
(2) The Class B CDSC on redemptions decreases 1% annually after year one to 2%
in years four and five and to 0% after year five.
(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc. ("NASD") rules regarding investment companies.
Examples: An investor in the Fund would pay the following expenses on a $1,000
investment assuming a 5% annual return throughout the period, and, unless
otherwise noted, redemption at the end of each period.
CLASS A CLASS B CLASS B(1) CLASS C CLASS C(1)
1 Year 63 74 23 33 23
3 Years 94 103 70 71 71
5 Years 128 143 120 122 122
10 Years 223 258 258 261 261
(1) Assumes no redemption
The amounts listed in the Example should not be considered a representation of
past or future expenses and actual expenses may be greater or lesser than those
shown.
2
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The Fund's investment objective is high income and capital appreciation. It
cannot be changed without approval by the holders of a majority (as defined in
the Investment Company Act of 1940, as amended (the "1940 Act")) of the Fund's
outstanding voting shares. There can be no assurance that the Fund's investment
objective will be achieved.
While investing in income producing securities, the Fund will seek to maximize
total return from a combination of income and capital appreciation. The Fund,
will pursue this strategy by taking advantage of equity participations, market
developments, yield disparities and variations in the creditworthiness of
issuers.
Under normal market conditions, the Fund will seek to achieve its investment
objective by investing at least 65% of its total assets in higher-yielding,
lower-rated U.S. dollar-denominated debt securities of U.S. and foreign
issuers, which involve special risks and are predominantly speculative in
character, but may also hold equity securities, including warrants and other
convertible securities. The Fund may invest up to 35% of its assets in non-U.S.
dollar denominated securities. Investments in securities offering the high
current income sought by the Fund, while generally providing greater income and
potential opportunity for gain than investments in higher rated securities, also
entail greater risk. The value of high yield securities (and therefore the net
asset value per share of the Fund) can be expected to increase or decrease in
response to changes in interest rates, real or perceived changes in the credit
risks associated with its portfolio investments, and other factors affecting
the credit markets generally. The Fund may invest up to 50% of its assets in
securities of foreign issuers, including up to 35% of such assets in emerging
market debt. Emerging markets are countries whose sovereign bonds generally
are rated below investment grade and whose financial markets are not well-
developed. The Fund intends to restrict its investments in emerging markets
that have in the opinion of Northstar sound economies that are expected to
experience strong growth with controlled inflation, and therefore higher-than-
average returns, over time. See "Investment Considerations and Risk Factors --
Foreign Investments."
Most of the debt securities in which the Fund invests are lower-rated, and may
include bonds in the lowest rating categories (C for Moody's and D for S&P) and
unrated bonds. Most of the securities will be rated at least Caa by Moody's
or at least CCC by S&P, (or if not rated, are of equivalent quality in the
opinion of Northstar). The Fund may invest up to 10%, and hold up to 25% of
its assets in securities rated below Caa by Moody's or CCC by S&P. Such debt
securities are highly speculative and may be in default of payment of interest
and/or repayment of principal may be in arrears. The issuers of such debt
securities may be involved in bankruptcy or reorganization proceedings and/or
may be restructuring outstanding debt. Investing in bankrupt and troubled
companies involves special risks. See "Investment Considerations and Risk
Factors -- High Yield Securities" and the Appendix.
INVESTMENT CONSIDERATIONS AND RISK FACTORS
General. The Fund's net asset value per share is expected to fluctuate.
Investors should consider the Fund as a supplement to an overall investment
program and should invest only if they are willing to undertake the risks
involved.
3
<PAGE>
Equity Securities. Equity securities can over time rise and fall in value,
often based on factors unrelated to the value of the issuer of the securities,
and such fluctuations can be pronounced. Changes in the value of each of the
Fund's investments will result in changes in the value of the Fund's shares and
thus its total return to investors.
The securities of smaller companies in which the Fund's may invest may be
subject to more abrupt or erratic market movements than larger more established
companies, because these securities typically are traded in lower volume and the
issuers typically are subject to a greater degree to changes in earnings and
prospects.
FIXED-INCOME SECURITIES. Even though interest bearing securities are
investments which promise a stable stream of income, the price of such
securities generally are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. The values of
fixed-income securities also may be affected by changes in the credit rating or
financial condition of the issuer. Certain securities purchased by the Funds,
such as those rated Baa or lower by Moody's and BBB or lower by S&P, may be
subject to such risk with respect to the issuing entity and to greater market
price fluctuations than certain lower-yielding, higher rated fixed-income
securities. See "High Yield Securities" below.
HIGH YIELD SECURITIES. Fund may invest in higher yielding (and therefore
higher risk) debt securities. These are securities such as those rated Ba by
Moody's or S&P (commonly known as "junk bonds"). They generally are not meant
for short term investing and may be subject to certain risks with respect to the
issuing entity and to greater market fluctuations than certain lower yielding,
higher rated fixed income securities. The retail market for these securities may
be less liquid than that of higher rated securities; adverse conditions could
make it difficult at times for the Fund to sell certain securities or could
result in lower prices than those used in calculating the Fund's net asset
value. The value of these securities, as is the case with the value of higher
rated fixed income securities, will be inversely affected by changes in interest
rates.
The ratings of Moody's and S&P represent their opinion as to the quality of
the obligations which they undertake to rate. Ratings are relative and
subjective and, although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value risk of
such obligations. Although these ratings may be an initial criterion for
selection of portfolio investments, Northstar also will evaluate these
securities and the ability of the issuers of such securities to pay interest and
repay principal. The Fund's ability to achieve its investment objective may be
more dependent on Northstar's credit analysis than might be the case for a
fund that invested in higher rated securities. See the Appendix for a
description of bond ratings categories.
High yield securities are subject to special risks, typically are subject to
greater market fluctuations and may be less liquid and subject to greater risk
of loss of income and principal due to default by the issuer.
See "Risk Factors -- High Yield Securities" and the Appendix.
FOREIGN SECURITIES. The Fund may invest in securities of foreign issuers.
Foreign securities markets generally are not as developed or efficient as those
in the United States.
4
<PAGE>
Securities of some foreign issuers are less liquid and more volatile than
securities of comparable U.S. issuers. Similarly, volume and liquidity in most
foreign securities markets are less than in the U.S. and at times, volatility of
price can be greater than in the U.S.
Because evidences of ownership of such securities usually are held outside the
United States, the Fund will be subject to additional risks which include
possible: adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect the payment of and interest on the foreign
securities or restrict the payment of principal and interest to investors
located outside the country of the issuer, whether from currency blockage or
otherwise.
Developing countries have economic structures that are generally less diverse
and mature, and political systems that are less stable, than those of developed
countries. The markets of developing countries may be more volatile than the
markets of more mature economies; however, such markets may provide higher rates
of return to investors. Many developing countries providing investment
opportunities for the Funds have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
affects on the economies and securities markets of certain of these countries.
Since foreign securities are often purchased with and payable in currencies of
foreign countries, the value of these assets as measured in U.S. dollars may be
affected favorably or unfavorably by changes in currency rates and exchange
control regulations.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury securities
that differ in their interest rates, maturities and times of issuance. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others, by the right of the issuer to borrow from the Treasury; others
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, only by the credit of
the agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. While the U.S. Government provides financial support to such
U.S. Government-sponsored agencies and instrumentalities, no assurance can be
given that it will always do so since it is not obligated to do so by law.
Investment Techniques. Unless otherwise stated, each of the following
strategies and techniques may be utilized by the Fund. The Fund may, but does
not currently intend to, engage in certain additional investment techniques not
described in this Prospectus. These techniques and additional information on the
securities and techniques described in the Prospectus are contained in the
Statement of Additional Information.
OPTIONS AND FUTURES TRANSACTIONS. The Fund may enter into futures contracts on
securities, financial indices and foreign currencies and options on such
contracts and may invest in options on securities, financial indices and foreign
currencies, and forward contracts (collectively "derivative instruments"). The
Fund intends to use derivative instruments primarily
5
<PAGE>
to hedge the value of their portfolios against potential adverse movements in
securities price, foreign currency markets or interest rates. To a limited
extent, the Fund may also use derivative instruments for non-hedging purposes
such as increasing a Fund's income or otherwise enhancing return. When a Fund
invests in a derivative instrument, it may be required to segregate cash and
other high-grade liquid assets or portfolio securities to "cover" the Fund's
position. Assets segregated or set aside may limit a Fund's portfolio management
activities while such Fund maintains the positions, which could diminish the
Fund's return due to foregoing other potential investments with such assets.
The use of options and futures strategies involves certain other risks,
including the risk that no liquid market will exist and that the Fund will be
unable to effect closing transactions at any particular time or at an acceptable
price, and the risk of imperfect correlation between movements in options and
futures prices and movements in the price of securities which are the subject of
the hedge. The successful use of options and futures strategies depends on the
ability of Northstar to forecast correctly rate movements and general stock
market price movements. Expenses and losses incurred as a result of these
hedging strategies will reduce the current return of the Fund. See the Statement
of Additional Information for further information on derivative instruments.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements, either
for temporary defensive purposes or to generate income from its cash balances.
Under a repurchase agreement, the Fund buys a security from a bank or dealer,
which is obligated to buy it back at a fixed price and time. The security is
held in a separate account at the Fund's custodian and constitutes the Fund's
collateral for the bank's or dealer's repurchase obligation. Additional
collateral may be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters into
bankruptcy, the Fund may experience costs and delays in liquidating the
collateral, and may experience a loss if it is unable to demonstrate its right
to the collateral in a bankruptcy proceeding. Repurchase agreements maturing
more than seven days in the future are considered illiquid, and the Fund will
invest no more than 5% of its net assets in such repurchase agreements at any
time. The Fund, under normal market conditions, does not intend to invest more
than 15% of its assets in repurchase agreements.
WHEN ISSUED SECURITIES. The Fund may acquire securities on a "when-issued"
basis by contracting to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until settlement. If
made through a dealer, the contract is dependent on the dealer completing the
sale. The dealer's failure could deprive the Fund of an advantageous yield or
price. These contracts may be considered securities and involve risk to the
extent that the value of the underlying security changes prior to settlement.
The Fund may realize short-term profits or losses if the contracts are sold.
Transactions in when-issued securities may be limited by certain Internal
Revenue Code requirements.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities, including restricted securities or private placements. An
illiquid security is a security that cannot be sold quickly in the normal course
of business. Some securities cannot be sold to the U.S.
6
<PAGE>
public because of their terms or because of SEC regulations. Northstar may
determine that securities that cannot be sold to the U.S. public, but that can
be sold to institutional investors ("Rule 144A" securities) or on foreign
markets, are liquid, following guidelines established by the Trustees of the
Fund.
TRADING AND PORTFOLIO TURNOVER. The Fund generally intends to purchase
securities for long-term investment. However, the Fund may purchase a security
in anticipation of relatively short-term price gains and short-term transactions
may result from liquidity needs, securities having reached a price or yield
objective, changes in interest rates or the credit standing of an issuer, or by
reason of economic or other developments not foreseen at the time of the initial
investment decision. Portfolio turnover rates are usually not a factor in making
buy and sell decisions. The Fund may also sell one security and simultaneously
purchase the same or comparable security to take advantage of short-term
differentials in yield or price. Increased portfolio turnover may result in
higher costs for brokerage commissions, dealer mark-ups and other transaction
costs and may also result in taxable capital gains. Short term trading may also
be restricted by certain tax rules.
TEMPORARY INVESTMENTS. In periods of unusual market conditions, for temporary
and defensive purposes, when Northstar considers it appropriate, the Fund may
maintain part or all of its assets in cash, or may invest part or all of its
assets in U.S. government securities, commercial paper, bankers' acceptances,
repurchase agreements and certificates of deposit.
INVESTMENT RESTRICTIONS. For information on certain fundamental and
non-fundamental investment restrictions applicable to the Fund, see "Investment
Restrictions" in the Statement of Additional Information.
HOW NET ASSET VALUE IS DETERMINED
All purchases, redemptions and exchanges are processed at the net asset value
("NAV") per share next calculated after your request is received and approved.
In order to receive a day's price, your order must be received by 4:00 p.m.
Eastern Standard Time ("EST"). NAV fluctuates and is determined separately for
each class as of the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. EST) each day the Exchange is open. NAV is computed by
dividing the total value of the fund's securities and other assets, less all
liabilities, by the total number of shares outstanding. The specific expenses
borne by each class of shares will be deducted from that class and will result
in different NAVs and dividend payments. The NAV of a Class B, or Class C share
will generally be lower than that of a Class A share because of the higher
distribution fees or certain other class specific expenses borne by these
classes.
Under normal market conditions, daily prices for securities are obtained from
independent pricing services determined by them in accordance with the
Registration Statement for the Fund. Securities are valued at market value or,
if a market quotation is not readily available, at their fair value determined
in good faith under procedures established by and under the supervision of the
Trustees. Money market instruments maturing within 60 days are valued
7
<PAGE>
at amortized cost, which approximates market value. See the Statement of
Additional Information.
MANAGEMENT OF THE FUND
The Trustees. The Trustees of the Fund ("Trustees") oversee the operations of
the Fund. The Trustees meet quarterly to review the Funds' investment policies,
performance, expenses and other business affairs and elect the officers of the
Fund annually. The Trustees delegate day to day management of the Fund to the
officers of the Fund.
The Adviser and Affiliated Service Providers. Pursuant to an Investment
Advisory Agreement with the Fund, Northstar Investment Management Corporation
acts as the investment adviser to the Fund. In this capacity, the Adviser,
subject to the authority of the Trustees, is responsible for furnishing
continuous investment supervision to the Fund and is responsible for the
management of the Fund's portfolio. Northstar Administrators Corporation, an
affiliate of the Adviser, furnishes certain administrative, compliance,
accounting, transfer agent and Blue Sky services to the Fund. Employees of the
Adviser and Administrator serve as officers of the Fund, and the Adviser
provides office space for the Fund and pays the salaries of all Fund officers
and Trustees who are affiliated with the Adviser. Northstar Distributors, Inc.,
also an affiliate of the Adviser, serves as principal underwriter of the shares
of the Fund, conducting a continuous offering pursuant to a "best efforts"
arrangement requiring it to take and pay for only such securities as may be sold
to the public through investment dealers.
The Adviser and its affiliates are indirect, majority owned subsidiaries of
ReliaStar Financial Corp. ("ReliaStar"). ReliaStar's address is 20 Washington
Avenue South, Minneapolis, MN 55401. Combined minority interests of the Adviser
held by members of senior management currently equal 20%. ReliaStar is a
publicly traded holding company whose subsidiaries specialize in the life and
health insurance businesses. Through Northwestern National Life Insurance
Company and other subsidiaries, ReliaStar issues and distributes individual life
insurance, annuities and mutual funds, group life and health insurance and life
and health reinsurance, and provides related investment management services.
The Adviser's fee is accrued daily against the value of the Fund's net assets
and is payable by the Fund monthly at an annual rate of .75% of the Fund's
average daily net assets (which may be subject to voluntary waiver or
reimbursement by the Adviser). The Administrator's fee is accrued daily against
the value of each Fund's net assets and is payable monthly at an annual rate of
.10% of the Fund's average daily net assets. The Administrator also charges an
annual account service fee of $5.00 for each account of beneficial holders of
shares in the Fund for providing certain shareholder services and assisting
broker-dealers in servicing Fund accounts.
Portfolio Manager. Thomas Ole Dial is the portfolio manager of the High Total
Return Fund II. Mr. Dial joined Northstar in October 1993 and has managed the
High Total Return Fund since its inception and the High Yield Fund since July
31, 1996 and has co-managed the Balance Sheet Opportunities Fund since July 31,
1996. Prior to joining Northstar, Mr. Dial served as
8
<PAGE>
Executive Vice President, Chief Investment Officer - Fixed Income of National
Securities & Research Corporation, and Senior Portfolio Manager of the National
Bond Fund, National Asset Reserve, and National Multi-Sector Fixed Income Fund.
Prior to National, Mr. Dial managed high yield securities portfolios through
Dial Capital Management and various financial institutions. Mr. Dial also
manages investments for T.D. Partners, a limited partnership for which the
Adviser serves as subadviser.
Other Service Providers. The custodian for the Fund is Custodial Trust Company,
a bank organized under the laws of New Jersey, located at 101 Carnegie Center,
Princeton, New Jersey 08540-6231.
HOW TO PURCHASE SHARES
The Fund continuously offers three classes of shares. Each class is described
below under "Alternative Purchase Arrangements." Shares of the Fund may be
purchased from the Fund or from investment dealers having a sales agreement with
the Underwriter. Orders received in good form prior to 4:00 p.m. Eastern time or
placed with a financial service firm before such time and transmitted before the
Fund processes that day's share transactions, will be processed at that day's
closing NAV, plus any applicable sales charge. The minimum initial purchase is
$2,500, except IRA accounts, for which the minimum is $250; additional
investments for as little as $100 ($25 for IRA accounts) may be made at any time
through an investment dealer or by sending a check payable to The Northstar
Funds, Two Pickwick Plaza, Greenwich, Connecticut 06830, for the purchase of
full and fractional shares. Most shareholders choose not to hold their shares in
certificate form because account transactions such as exchanges and redemptions
cannot be completed until the certificate has been returned to the Funds and
certificate holders may not participate in certain shareholder services, such as
telephone exchanges and redemptions and the withdrawal program. Certificates
will be issued only upon written request. Shareholders requesting certificates
may incur a fee for lost or stolen certificates and no certificates are issued
for fractional shares (which shares remain in the shareholder's account in book
entry form). The Fund or the Underwriter may refuse any purchase order for
shares.
At various times, the Underwriter implements programs under which (a) a
dealer's sales force may be eligible to win cash or material awards for certain
sales efforts or under which (b) the Underwriter will reallow an amount not
exceeding the total applicable sales charges on the sales generated by the
dealer during such programs to any dealer that (i) sponsors sales contests or
recognition programs conforming to criteria established by the Underwriter or
(ii) participates in sales programs sponsored by the Underwriter. Sales
personnel of broker-dealers distributing shares of the Fund may receive
differing compensation for selling different classes of shares.
ALTERNATIVE SALES ARRANGEMENTS
The alternative purchase arrangements permit an investor to choose among three
methods (each a class) of purchasing shares. Each class is described below.
Which class is more beneficial to
9
<PAGE>
an investor depends on the amount and intended length of the investment. Large
investments qualifying for a reduced Class A sales charge avoid the higher
distribution fee. Investments in Class B and Class C shares have 100% of the
purchase invested immediately. Purchases of $500,000 or more must be for Class A
shares. Please consult your financial service firm. All contingent deferred
sales charges are deducted from the redemption proceeds, not the amount
remaining in the account. No contingent deferred sales charge is imposed on
shares acquired through reinvestment of dividends and distributions, or on
amounts representing appreciation. In determining whether a contingent deferred
sales charge is applicable to a redemption, the calculation will be determined
in the manner that results in the lowest possible rate being charged.
Accordingly, in determining whether a contingent deferred sales charge will be
payable and, if so, the percentage charge applicable, shares acquired through
reinvestment and then shares held the longest will be considered the first to be
redeemed. Class B shares automatically convert to Class A shares after eight
years from purchase. The purpose of the conversion is to relieve the holders
from the burden of higher distribution fees once the Underwriter had been
reimbursed for most of its distribution related expenses. For purposes of
conversion to Class A shares, shares purchased through the reinvestment of
dividends and distributions paid in respect of Class B shares in a shareholder's
Fund account will be considered to be held in a separate subaccount. Each time
any Class B shares in the shareholder's Fund account (other than those in the
subaccount) convert to Class A, an equal pro rata portion of the Class B shares
in the subaccount will also convert to Class A.
As set forth below, the initial or contingent deferred sales charges may be
reduced or eliminated for certain persons or organizations purchasing Fund
shares alone or in combination with other Northstar Funds. See the Statement of
Additional Information for more details regarding waivers and purchases at net
asset value.
Investors choosing the initial sales charge alternative may under certain
circumstances be entitled to pay reduced sales charges. The sales charge varies
with the size of the purchase and reduced charges apply to the aggregate of
purchases of the Fund made at one time by any "Purchaser," which term includes
(i) an individual and his/her spouse and their children under the age of 21,
(ii) a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including pension, profit-sharing or other employee benefit
trusts created pursuant to a plan qualified under Section 401 of the Internal
Revenue Code, a Simplified Employee Pension ("SEP"), Salary Reduction and other
Elective Simplified Employee Pension Accounts ("SARSEP")) and 403(b) and 457
plans, although more than one beneficiary or participant is involved; and (iii)
any other organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some purpose
other than the purchase at a discount of redeemable securities of a registered
investment company. The circumstances under which "Purchasers" may pay reduced
sales charges are described below.
Rights of Accumulation. A Purchaser may qualify for reduced initial sales
charges based upon the Purchaser's existing investment in shares of the Fund at
the time of purchase. The applicable sales charge is determined by aggregating
the dollar amount of the new purchase and the greater of the Purchaser's total
(i) net asset value or (ii) cost of all shares owned in the
10
<PAGE>
Fund sold subject to a front-end sales charge and/or designated as "Class A"
shares then held by such Purchaser, and applying the sales charge applicable to
such aggregate.
In order to obtain this discount, the Underwriter (if a purchase is made
through an investment dealer) or Transfer Agent (if made by mail) must be
provided with sufficient information, including the Purchaser's total cost at
the time of purchase, to permit verification that the Purchaser qualifies for a
cumulative quantity discount, and confirmation of the order is subject to such
verification. The privilege of cumulative quantity discounts may be modified or
discontinued at any time.
Letter of Intent. Purchasers may also qualify for reduced sales charges by
signing a Letter of Intent ("LOI"). This enables the Purchaser to aggregate
purchases over a 13-month period of all Funds sold subject to a front-end sales
charge and/or designated as "Class A" shares. The sales charge is based on the
total amount invested during the 13-month period. A 90-day back-dated period can
be used to include earlier purchases (with a partial retroactive downward
adjustment in an amount equal to the commission paid to the broker-dealer); the
13-month period would then begin on the date of the first purchase during the
90-day period. No retroactive adjustment will be made if purchases exceed the
amount indicted in the LOI. A shareholder must notify the Transfer Agent
whenever a purchase is being made pursuant to a LOI.
The LOI is not a binding obligation on the investor to purchase the full
amount indicated; however, on the initial purchase, if required (or on
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in shares registered in
the shareholder's name in order to assure payment of the proper sales charge. If
total purchases pursuant to the LOI (less any dispositions and exclusive of any
distributions on such shares automatically reinvested) are less than the amount
specified, the investor will be requested to remit to the Underwriter an amount
equal to the difference between the sales charge paid and the sales charge
applicable to the aggregate purchases actually made. If not remitted within 20
days after written request, an appropriate number of escrowed shares will be
redeemed in order to realize the difference.
CDSC Waivers. The contingent deferred sales charge is waived on redemptions of
Class B and Class C shares (a) following the death or disability, as defined in
Section 72(m)(7) of the Internal Revenue Code (the "Code"), of a shareholder if
redemption is made within one year of the death or disability of the
shareholder, as relevant; (b) in connection with redemptions of shares made
pursuant to a shareholder's participation in any systematic withdrawal plan
adopted by the Funds provided, however, that such withdrawals shall not exceed
in any calendar year 9% of the original principal amount invested (any excess
being assessed the applicable deferred sales charge, if any), and provided
further that the redeeming shareholder reinvests all dividends and capital gain
distributions during his/her participation in the withdrawal plan (see
"Systematic Withdrawal Program"); (c) after attaining the age of 70 1/2 in the
case of redemption from an IRA or other retirement plan such as a Keogh plan or
custodial account pursuant to Section 403 (b)(7) of the Code, or on any
redemption resulting from the tax-free return of an excess contribution pursuant
to Section 408(d)(4) or (5) of the
11
<PAGE>
Code; and (d) in connection with the exercise of certain exchange privileges
among Class B or Class C shares of the Funds, including shares of the Class B or
Class C Account of the Money Market Portfolio.
Class A Shares. Class A shares are offered at net asset value plus an initial
or a contingent deferred sales charge as set forth below. Class A shares bear a
0.25% annual service fee and a .05% annual distribution fee.
<TABLE>
<CAPTION>
Amount Purchased % of Amount Invested % of Offering Price Amount Retained by Dealers
as % of Offering Price
<S> <C> <C> <C>
Up to $99,999 4.99% 4.75% 4.00%
$100,000 to $249,999 3.9 3.75 3.1
250,000 to 499,999 2.83 2.75 2.3
500,000 to 999,999 2.04 2 1.7
*1,000,000 and above -- -- --
</TABLE>
- ------------------------
* The Underwriter pays investment dealers or financial service firms a
commission from its own resources of up to 1.00% of the amount invested for
amounts from $1,000,000 to $2,499,999, up to 0.50% on amounts of $2,500,000 to
$4,999,999 and up to 0.25% on amounts of $5 million and above. Purchases of over
$1 Million are subject to a maximum contingent deferred sales charge of 1%
(scaled down to 0.50% for amounts of $2.5 million or more, and 0.25% on amounts
over $5 million) on redemptions made within eighteen months.
Class B Shares. Class B shares are offered at net asset value, without an
initial sales charge, subject to a .75% annual distribution fee for
approximately 8 years (at which time they convert to Class A shares bearing only
a .05% annual distribution fee), a 0.25% annual service fee and a contingent
deferred sales charge if shares are redeemed within five years after purchase.
As set forth below, the amount of the deferred sales charge varies depending on
the number of years after purchase that the redemption occurs. For determining
the date of purchase, all payments during a month will be aggregated and deemed
to have been made on the last day of the month. The deferred sales charge will
be assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed.
The Underwriter currently pays investment dealers a sales commission of 4% of
the sale price of Class B shares sold by the dealers, subject to future
amendment or termination. The Underwriter will retain all or a portion of the
continuing distribution fee assessed to Class B shareholders and will receive
the entire amount of the contingent deferred sales charge paid by shareholders
on the redemption of shares to reimburse the Underwriter in whole or in part for
the payment of such sales commission, plus financing costs and related marketing
expenses.
12
<PAGE>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
First.......................................... 5%
Second......................................... 4%
Third.......................................... 3%
Fourth......................................... 2%
Fifth.......................................... 2%
Thereafter..................................... 0%
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares upon dividend reinvestment. If, at such time the investor
makes his first redemption of 50 shares (proceeds of $600), 10 shares will not
be subject to charge because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 4% (the
applicable rate in the second year after purchase).
Class C Shares. Investors choosing Class C shares purchase shares at net asset
value without a sales charge at the time of purchase, subject to a 0.75% annual
distribution fee, a 0.25% annual service fee, and a 1.00% contingent deferred
sales charge on redemptions made within one year from the first day of the month
after purchase.
The Underwriter currently pays investment dealers a sales commission of 1% of
the sale price of Class C shares sold by such dealers, subject to future
amendment or termination. The Underwriter will retain the distribution fee
assessed against Class C shareholders in the first year of investment, and the
entire amount of the contingent deferred sales charge paid by Class C
shareholders upon redemption in year one, in order to compensate the Underwriter
for providing distribution related services to the Fund in connection with the
sale of Class C shares, and to reimburse the Underwriter in whole or in part for
the commissions (and any related financing costs) paid to dealers at the time of
purchase. There is no conversion feature associated with Class C shares;
therefore, Class C shareholders will be subject to the higher distribution fee
associated with such shares for the life of the shareholder's investment.
INVESTOR SERVICES AND ACCOUNT POLICIES
An account will be opened for each investor after an initial investment is made.
The Fund acts as its own transfer agent and maintains a record of your ownership
and sends confirmations and statements of account. The Fund sends annual and
semi-annual financial statements to all of its shareholders. To reduce expenses,
only one copy of most Fund reports will be mailed to accounts listed under the
same social security number or to households for multiple accounts
13
<PAGE>
with the same surname. Information regarding the tax status of income dividends
and capital gains distribution will be mailed to shareholders on or before
January 31st of each year. Account tax information will also be sent to the IRS.
Requests for account assistance or additional information should be directed to
Northstar at (800) 595-7827.
Dividend and Distribution Reinvestment Options. Shareholders of Class A,
Class B and Class C shares may direct that income dividends and capital gain
distributions be paid to them through any one of the following options: income
dividends and capital gain distributions both paid in additional shares of the
same class of a designated Fund at net asset value; income dividends paid in
cash and capital gain distributions paid in additional shares of the same class
of a designated Fund at net asset value; or income dividends and capital gain
distributions both paid in cash. If a shareholder does not indicate which option
is preferred upon the opening of an account, both income dividends and capital
gain distributions will be paid in additional shares of the Fund from which the
investor earned such distributions. Payment options may be changed at any time
by notifying Northstar in writing.
Automatic Investment Plan. Shareholders may elect to purchase shares through
the establishment of an Automatic Investment Plan, in which case the minimum
investment in order to open an account is $25. An Automatic Investment
Authorization Form (available on request from Northstar) provides for funds to
be automatically drawn on a shareholder's bank account and deposited in his or
her Fund account ($25 per month minimum). The shareholder's bank may charge a
nominal fee in connection with the establishment and use of automatic deposit
services. Shareholders may not participate in the Automatic Investment Plan
while participating in the Systematic Withdrawal Program described below.
Systematic Withdrawal Program. A shareholder owning $5,000 or more worth of
shares of a Fund in book-entry form may establish a withdrawal program with the
Fund and provide for the payment monthly or quarterly of any requested dollar
amount ($25 minimum per payment) from the account to his or her order. A
sufficient number of full and fractional shares will be redeemed to make the
designated payment. Shareholders may not maintain an Automatic Investment Plan
while participating in the withdrawal program. The contingent deferred sales
charge applicable to Class B and Class C shares shall be waived in connection
with redemptions made pursuant to the Systematic Withdrawal Program provided
that such withdrawals do not exceed 9% of the original principal amount invested
and provided further that the investor reinvest all dividends and capital gains
distributions during participation in such Plan. The Fund may terminate an
investor's withdrawal program if the account value falls below $5,000 due to the
transfer or redemption of shares from the account. See the enclosed application
form.
Tax-Sheltered Retirement Plans. Shares of the Fund may be offered in
connection with the following qualified prototype retirement plans: IRA and
Rollover IRA, SEP-IRA, Profit-Sharing and Money Purchase Pension Plans which can
be adopted by self-employed persons ("Keogh") and by corporations. Call or write
Northstar for further information.
Exchange Privileges. Shareholders may exchange shares of the Fund for the same
class of shares of another fund managed by Northstar, or for shares of The Cash
Management Fund of
14
<PAGE>
Salomon Brothers Investment Series (an open-end management investment company
comprised of various portfolios, hereafter referred to as "Money Market
Portfolio," that is not a Northstar Fund, but is available by purchase or
exchange through the Underwriter). Exchange requests in proper form will be
honored prior to 4:00 p.m. EST. For telephone exchanges or authorization forms,
contact Northstar at 1-800-595-7827. Exchanges will be based upon each Fund's
NAV per share next computed following receipt of a properly executed exchange
request, without a sales charge; provided, however, in the case of exchanges
into Class A shares of a Fund after a direct purchase into the Money Market
Portfolio, a sales charge will be imposed in accordance with the sales charge
table that is applicable to direct purchases. Collection of the contingent
deferred sales charge will be deferred on shares subject to a charge that are
exchanged for shares of the same class of another Fund, or converted to shares
of the Money Market Portfolio. Under these circumstances, the combined holding
period of shares in the Funds and the Money Market Portfolio, shall be used to
calculate the conversion period, if applicable, and to determine the deferred
sales charge due upon redemption, if any. The exchange of shares from one Fund
to another is treated as a sale of the exchanged shares and a purchase of the
acquired shares for Federal income tax purposes. Shareholders may, therefore,
realize a taxable gain or loss. See "Exchanges" and "Dividends, Distributions
and Taxes" in the Statement of Additional Information.
Each Fund reserves the right to terminate or modify its exchange privileges at
any time upon prominent notice to shareholders. Such notice will be given at
least 60 days in advance. Each Fund and the Money Market Portfolio has different
investment objectives and policies. Shareholders should obtain and review the
prospectus of the Fund into which the exchange is to be made before any exchange
requests are made.
Telephone Transactions. Shareholders holding shares in book-entry form may
authorize the Fund to accept telephone redemptions and exchanges. Shareholders
may redeem up to $50,000 worth of their shares by telephoning Northstar prior to
4:00 p.m. EST. Redemption proceeds must be payable to the record holder of the
shares and mailed to the shareholder's address of record or wire transferred to
the shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System, normally within one business day, but in no event longer
than three days after the request. The minimum amount for a wire transfer is
$1,000. If at any time the Funds shall determine that it is necessary to
terminate or modify telephone transaction privileges, shareholders would be
promptly notified. Information on these services is included in the Application
and is available from Northstar. Neither the Adviser, the Underwriter nor the
Fund will be liable for any loss, damages, expense or cost arising out of any
telephone transaction effected in accordance with the Funds' procedures, upon
instructions believed to be genuine. Shareholders who utilize telephone
privileges bear the risk of any loss, damages, expense or cost arising from
their election, including risk of unauthorized use; provided, however that the
Fund shall employ reasonable procedures to confirm that all telephone
instructions are genuine. For this purpose, the Fund or its agent will require
all individuals delivering telephone instructions to provide specific
information to identify themselves as the account holder, such as the name in
which the account is registered, the account holder's social security number,
account number, and broker of record. In the
15
<PAGE>
absence of such procedures, or should the Fund or its agents for any reason fail
to follow such procedures, the Fund or its agents may be liable for losses due
to unauthorized or fraudulent telephone instructions.
Involuntary Redemptions. Due to the high cost of maintaining accounts with
small account values, each Fund reserves the right to close all accounts that
have been in existence for at least one year and have a value that is less than
$500. Shareholders will receive 60 days' written notice during which time they
may bring the value up to $500 or more. If the account value is not raised
during that time, the Fund will redeem all shares in the account and send the
proceeds to the shareholder's address of record.
Each Fund reserves the right to close all accounts of a shareholder who has
failed to provide a social security number or other taxpayer identification
number and certification (if required) that such number is correct, or if a
shareholder is deemed to engage in activities which are illegal or otherwise
detrimental to the Fund.
Reinstatement Privilege. Shareholders have a one time privilege of
reinstating their investment into any of the Fund, subject to the terms of
exchange (see "Exchange Privileges") at the NAV next determined after the
request for reinstatement is made. For Federal income tax purposes, a redemption
and reinstatement will be treated as a sale and purchase of shares; special
rules may apply in computing the amount of gain or loss in these situations. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
A written request for reinstatement must be received by the Underwriter within
30 days of the redemption accompanied by payment for the shares (not in excess
of the redemption). Shareholder accounts will be credited with an amount equal
to the deferred sales charge (or pro rata portion thereof) paid upon redemption.
HOW TO SELL SHARES
Shareholders may sell their shares back to the Fund at the NAV next determined
after the Fund receives a redemption request with any other required
documentation in proper form. Investors will be subject to the applicable
deferred sales charge, if any, for such shares. The Fund requires a written
request, with the signature guaranteed by a bank, a national stock exchange
member or other eligible guarantor institution. The Fund may waive the signature
guarantee requirement in the case of book-entry share redemption requests of
less than $50,000 if the proceeds are payable to the account as registered and
mailed to the address of record. Redemption requests must be signed by each
person in whose name the account is registered.
Shareholders may also sell shares back to the Fund through dealers who are
members of the selling group. The redemption price in such a case will be the
price as of the close of the New York Stock Exchange on that day, provided the
order is received by the dealer prior to the close of the Exchange and is
transmitted to the Underwriter prior to the close of its business. The dealer is
responsible for the timely transmission of orders to the Underwriter. No service
16
<PAGE>
charge is made by the Fund on redemptions, but shares tendered through
investment dealers may be subject to a service charge by such dealers. Payment
for shares redeemed is normally made within three days. However, for shares
recently purchased by check, the Fund cannot send proceeds until the check has
cleared, which may take up to 15 days.
Redemptions by corporations, partnerships or other organizations, executors,
administrators, trustees, custodians, guardians, or from IRA's or other
retirement plans may require additional documentation. To avoid delay in
redemption or transfer, shareholders having questions about specific
requirements, including eligible guarantor institutions, should contact
Northstar at (800) 595-7827.
Redemption requests will not be honored until all required documents in the
proper form have been received.
DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a distribution and service plan under Rule 12b-1 of the
1940 Act for each class of shares of the Fund (collectively, the "Plans"). The
Plans permit the Fund to compensate the Underwriter in connection with
activities intended to promote the sale of shares of each class of shares of the
Fund. Pursuant to the Plans, the Fund shall pay the Underwriter 0.30% annually
of the average daily net assets of the Fund's Class A shares and 1.00% annually
of the average daily net assets of the Fund's Class B and Class C shares,. Under
the NASD rules, fees of this type are limited to 0.75% annually for distribution
fees and 0.25% annually for service fees, subject to aggregate limits. The
Underwriter uses the fee to defray the costs of commissions and service fees
paid to financial service firms which have sold Fund shares, and to defray other
expenses such as sales literature, prospectus printing and distribution,
shareholder servicing costs and compensation to wholesalers. Should the fees
exceed the Underwriter's expenses in any year, the Underwriter would realize a
profit.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FOLLOWING DISCUSSION IS INTENDED FOR GENERAL INFORMATION ONLY. EACH
INVESTOR SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE TAX
CONSEQUENCES OF AN INVESTMENT IN THE FUND.
The Fund intends to qualify annually and elect to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify, the Fund must meet certain income, distribution and
diversification requirements. In any year in which the Fund qualifies as a
regulated investment company and timely distributes all of its taxable income,
the Fund generally will not pay any U.S.
federal income or excise tax.
The Fund intends to distribute to shareholders substantially all of its net
investment income and any net capital gains at least annually. It is intended
that dividends from net investment income will be paid annually.
Dividends paid out of the fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to a
shareholder as ordinary income.
17
<PAGE>
If a portion of the Fund's income consists of dividends paid by U.S.
corporations, a portion of the dividends paid by the Fund may be eligible for
the corporate dividends-received deduction. Distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital losses),
if any, designated as capital gain dividends are taxable as long-term capital
gains, regardless of how long the shareholder has held the Fund's shares.
Dividends are taxable to shareholders in the same manner whether received in
cash or reinvested in additional Fund shares.
Each year the Fund will notify shareholders of the tax status of dividends and
distributions. The Fund may be required to withhold U.S. federal income tax at
the rate of 31% of all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the IRS that they are
subject to backup withholding.
Investors who purchase shares of the Fund just before the distribution will
pay full price for the shares and receive a portion of the purchase price back
as a taxable distribution. Unless your account is set up as a tax-deferred
account, dividends paid to you would be included in your gross income for tax
purposes even though you may not have participated in the increase in the net
asset value of the Fund. Further information relating to tax consequences is
contained in the Statement of Additional Information. Fund distributions also
may be subject to state, local and foreign taxes. Fund distributions that are
derived from interest on obligations of the U.S. Government and certain of its
agencies, authorities and instrumentalities may be exempt from state and local
taxes in certain states.
A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by the Fund in October, November or December with a
record date in such a month and paid by the Fund during January of the following
calendar year. Such distributions will be taxable to shareholders in the
calendar year in which the distributions are declared, rather than the calendar
year in which the distributions are received.
Upon the sale or other disposition of shares of the Fund, a shareholder may
realize a capital gain or loss which will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total returns in
advertisements or reports to shareholders or prospective investors. Both yield
and total return figures are computed separately for each class of shares of the
Fund in accordance with formulas specified by the Securities and Exchange
Commission. Both yield and total return figures are based on historical earnings
and are not intended to indicate future performance. The yield for each class of
the Fund (which shows the rate of income the Fund earned on its investment as a
percentage of the Fund's share price) will be computed by dividing (a) net
investment income over a 30-day period by (b) an average value of invested
assets (using the average number of shares entitled to receive dividends and the
maximum offering price per share or the
18
<PAGE>
maximum redemption price per share) at the end of the period, as appropriate,
all in accordance with applicable regulatory requirements. Such amounts will be
compounded for six months and then annualized for a twelve-month period to
derive the yield of each class.
Standardized quotations of average annual total return for each class of
shares will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in the class of shares over a period of 1, 5
and 10 years (or up to the life of the class of shares). Total return is the
percentage increase or decrease in the value of an investment over a stated
period of time. Standardized total return quotations reflect the deduction of a
proportional share of expenses (on an annual basis) of a class, deduction of the
maximum initial sales load or the maximum CDSC applicable to a complete
redemption of the investment, as appropriate, and assume that all dividends and
distributions are reinvested when paid. The Fund also may quote a supplementary
rate of total return over different periods of time or by non-standardized
means.
Performance for Class B and Class C shares typically will be less favorable
than that for Class A shares due to the higher expense ratios for Class B and
Class C shares. For a complete description of the methods used to determine
yield and total return forthe Fund, see the Statement of Additional Information.
GENERAL INFORMATION
Organization of the Fund. The Northstar Trust (the "Trust") is organized under
Massachusetts law as a business trust. The Trust was organized in 1993. The
Trust's Declaration of Trust, as amended, and each Fund's Amended and Restated
Declaration of Trust provides that the Trustees are authorized to create an
unlimited number of series and, with respect to each series, to issue an
unlimited number of full and fractional shares of one or more classes and to
divide or combine the shares into a greater or lesser number of shares without
thereby changing the proportionate beneficial interests in the series. All
shares have equal voting rights, except that only shares of the respective
series or separate classes within a series are entitled to vote on matters
concerning only that series or class. As of the date of this Prospectus, each
Fund within the Trust has three classes of shares.
Neither the Trust nor the Fund are required to hold shareholder meetings, but
special meetings may be called under certain circumstances. Meetings of the
shareholders will be called upon written request of shareholders holding in the
aggregate not less than 10% of the outstanding shares of the affected Fund or
class having voting rights.
REGISTRATION STATEMENT. This prospectus does not contain all the information
included in the Registration Statement filed for the Fund with the Securities
and Exchange Commission under the Securities Act of 1933 and the 1940 Act, with
respect to the securities offered hereby, certain portions of which have been
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The Registration Statement, including the exhibits filed therewith,
may be examined at the office of the Securities and Exchange Commission in
Washington, D.C.
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
New Account Application
---------------------------------------------------------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION
---------------------------------------------------------------------------------------------------------------------------------
Type of Account (Choose One Only):
/ / INDIVIDUAL / / JOINT ACCOUNT / / FOR A MINOR / / TRUST, CORPORATION, PARTNERSHIP OR OTHER ENTITY
USE LINE A USE LINES A & B USE LINE C USE LINE D
Print name exactly as account is to be registered:
A._________________________________________________ ___-____-_____
NAME (FIRST, MIDDLE, LAST) SOCIAL SECURITY NUMBER
B._________________________________________________ ___-____-_____
NAME (FIRST, MIDDLE, LAST) SOCIAL SECURITY NUMBER
C._________________________________________________
CUSTODIAN'S NAME (FIRST, MIDDLE, LAST)
_________________________________________________ ____-____-_____
MINOR'S NAME (FIRST, MIDDLE, LAST) MINOR'S SOCIAL SECURITY NUMBER
_________________________________________________ ___-_________
TAX I.D. NUMBER
UNDER THE _____________ UNIFORM GIFTS/TRANSFERS TO MINORS ACT OR
NAME OF STATE
D._________________________________________________ ___-___-_____
NAME (IF A TRUST, INCLUDE DATE OF AGREEMENT) SOCIAL SECURITY NUMBER
---------------------------------------------------------------------------------------------------------------------------------
2 MAILING ADDRESS
---------------------------------------------------------------------------------------------------------------------------------
___________________________________________________
STREET
( )______________________________________________
DAYTIME PHONE NUMBER
___________________________________________________
CITY STATE ZIP
---------------------------------------------------------------------------------------------------------------------------------
3 PURCHASE OF SHARES
---------------------------------------------------------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT $2,500 / / MAKE CHECK PAYABLE TO NORTHSTAR FUNDS. Check enclosed for $__________
/ / Shares purchased and paid for through my/our investment dealer.
Trade Date_______ Order#_______
Number of Shares: Class A_______ Class B_______ Class C_______
Please check the box beside the name of each Northstar Advantage Fund being purchased and enter the dollar amount of each
purchase. All distributions will be reinvested in additional shares unless instructed otherwise.
______________________________________________________________________________________________________________________
/ / HIGH TOTAL RETURN FUND II $_______
Class A / / Class B / / Class C / /
DIVIDENDS / / Cash / / Other*
CAPITAL GAINS / / Cash / / Other*
______________________________________________________________________________________________________________________
/ / MONEY MARKET PORTFOLIO FUND $_______
(Money Market Account)
Class A / / Class B / / Class C / /
DIVIDENDS / / Cash / / Other*
CAPITAL GAINS / / Cash / / Other*
______________________________________________________________________________________________________________________
*Please reinvest my dividends from ________________ to ________________
(Name of Fund) (Name of Fund)
---------------------------------------------------------------------------------------------------------------------------------
4 LETTER OF INTENT, RIGHT OF ACCUMULATION (CLASS A SHARES ONLY)
---------------------------------------------------------------------------------------------------------------------------------
LETTER OF INTENT
Although I/we have made no commitment to do so, I/we intend to invest the dollar amount indicated below within a 13-month
period in shares of one or more of the eligible Northstar Funds.
/ / $100,000 / / $250,000 / / $500,000 / / $1,000,000
RIGHTS OF ACCUMULATION
If this account qualified for a Reduced Sales Charge under the terms of the current Prospectus, please list account numbers:
/ / $100,000 / / $250,000 / / $500,000 / / $1,000,000
- -
---- -------- ---- ---------
---------------------------------------------------------------------------------------------------------------------------------
5 AGREEMENTS AND SIGNATURES
---------------------------------------------------------------------------------------------------------------------------------
I/We am/are of legal age and wish to establish an account in accordance with the terms and conditions of the current applicable
Prospectus, a copy of which has been received and read. I/We understand and agree that neither First Data nor the Northstar Funds
shall be held liable for any loss, liability, cost or expense for acting in accordance with this application, or any section
thereof. I/We acknowledge that the account(s) established by this application will be subject to the telephone exchange and
redemption privileges described in this current prospectus, unless indicated otherwise, with the understanding that the Fund,
Northstar and the Transfer Agent will not be able to verify the authenticity of any telephone or redemption order received from
persons other than registered representatives of Northstar Distributors, Inc. and that they will not be liable for following
telephone exchange or redemption instructions that prove to be fraudulent. Shareholders would bear the loss resulting from
instructions entered by an unauthorized third party.
Under penalties of perjury, I certify (1) that the number shown on this form is my correct taxpayer identification number and (2)
that I am not* subject to backup withholding as a result of a failure to report all interest or dividends, or the Internal Revenue
Service has notified me that I am no longer subject to backup withholding.
*If you are subject to backup withholding, please cross through the word "not" in part (2) above.
---------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL (OR CUSTODIAN) DATE
---------------------------------------------------------------------------------------------------------------------------------
CO-OWNER (OR CORPORATE OFFICER, PARTNER OR TRUSTEE) DATE
---------------------------------------------------------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE
---------------------------------------------------------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE
---------------------------------------------------------------------------------------------------------------------------------
6 FOR DEALER USE ONLY
---------------------------------------------------------------------------------------------------------------------------------
We guarantee the signature(s) and legal capacity of the applicant(s) referred to herein, and in the case of a withdrawal program
we affirm that, in our opinion, the designated withdrawal is reasonable in view of the circumstances involved.
---------------------------------------------------------------------------------------------------------------------------------
DEALER NAME (PLEASE PRINT CAREFULLY) DEALER NO.
---------------------------------------------------------------------------------------------------------------------------------
AUTHORIZED SIGNATURE (MUST BE PROVIDED FOR WITHDRAWAL PROGRAMS, TELEPHONE REDEMPTIONS AND TELEPHONE EXCHANGES)
---------------------------------------------------------------------------------------------------------------------------------
BRANCH NUMBER BRANCH ADDRESS
---------------------------------------------------------------------------------------------------------------------------------
REP NAME (PLEASE PRINT CAREFULLY) FIRST AND LAST NAME PHONE NUMBER (IMPORTANT) REP NUMBER
( )
----------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------
Upon completion of the application, please
return with a check made payable to:
NORTHSTAR FUNDS,
Two Pickwick Plaza, Greenwich, CT 06830
SPECIAL ACCOUNT OPTION
---------------------------------------------------------------------------------------------------------------------------------
7 AUTOMATIC INVESTMENT PLAN
---------------------------------------------------------------------------------------------------------------------------------
Attach a VOIDED CHECK from your bank account and a check for an initial deposit to establish this plan (minimum $25). Please
complete the following information to invest automatically the dollar amount stated below on approximately the 15th / /, 30th
/ / or the 15th and 30th / /, of the month.
The applicant authorizes the Northstar Funds to draw monthly drafts on your bank account number _________ and use the proceeds
($25 minimum) therefrom to purchase shares of Northstar ___________ _____________
FUND NAME $ AMOUNT
Registered in the name(s) of __________________________________________
RESTRICTIONS
Each purchase of shares will be made at the current offering price determined as of the close of business on the day on which
such purchase is made. Automatic investments may be discontinued by either Northstar Funds or the purchaser upon 30 days
written notice to the other.
The Northstar Funds reserves the right to cancel any transaction which was executed in reliance on a draft authorized where the
bank upon which the draft was drawn refused to make payment thereon for any reason.
ATTACH VOID CHECK HERE
---------------------------------------------------------------------------------------------------------------------------------
8 WITHDRAW PROGRAM
---------------------------------------------------------------------------------------------------------------------------------
A Withdrawal Plan is available on Class A shares (non-certificated shares only) provided the Fund being purchased has a value of
$5,000 or more.
Withdrawals with respect to Class B and Class C shares are limited (see the Prospectus) and are conditional upon dividends and
capital gains being automatically reinvested.
1. The amount of each payment shall be ($25 minimum)
--------- -------- --------- --------
FUND NAME $ AMOUNT FUND NAME $ AMOUNT
2. Payments are to be made / / Monthly / / Quarterly / / Semi-Annually / / Annually on the / / 1st or / / 15th of the month
Choose one of the following methods of distribution.
/ / ACH Please have my payments electronically transferred to my bank. I have attached the required voided check and I have
verified that my bank is a member of the Automated Clearing House (ACH).
/ / MAIL Please have my payments mailed. I understand that the payments will be made payable to me and mailed to my account
mailing address unless a special designation is referenced below:
---------------------------------------------------------------------------------------------------------------------------------
NAME (PLEASE PRINT CAREFULLY.)
---------------------------------------------------------------------------------------------------------------------------------
STREET
---------------------------------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE YOUR BANK ACCOUNT NUMBER
---------------------------------------------------------------------------------------------------------------------------------
ATTACH VOID CHECK HERE
---------------------------------------------------------------------------------------------------------------------------------
9 TELEPHONE EXCHANGE REDEMPTION AND EXPEDITED TELEPHONE REDEMPTION
---------------------------------------------------------------------------------------------------------------------------------
Signature guarantees are required if: 1. Redemption is over $50,000.
2. Proceeds are to be sent to address other than record.
ALL SHAREHOLDERS AND THEIR DEALER REPRESENTATIVES WILL AUTOMATICALLY RECEIVE TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES,
(NON-CERTIFICATED SHARES ONLY) UNLESS AN ELECTION NOT TO RECEIVE THESE PRIVILEGES IS EXERCISED BELOW.
/ / DO NOT CODE MY / / DO NOT CODE MY
ACCOUNT FOR TELEPHONE ACCOUNT FOR TELEPHONE
EXCHANGE PRIVILEGE. REDEMPTION PRIVILEGE.
/ / PLEASE WIRE REDEMPTION PROCEEDS TO MY BANK. (I UNDERSTAND THE MINIMUM FOR WIRES IS $1,000.) MY VOIDED CHECK IS ATTACHED.
</TABLE>
APPENDIX
------------------------------------------------------------------------------
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
CORPORATE BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally know as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa 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.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
20
<PAGE>
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
-----------------------------------------------------------------------------
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S ("S&P") CORPORATE
DEBT RATINGS
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB: Debt rated BBB is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than for debt in higher-rated categories.
BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI: The rating CI is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
21
<PAGE>
[LOGO]
PRINCIPAL UNDERWRITER
Northstar Distributors, Inc.
Two Pickwick Plaza
Greenwich, CT 06830
INVESTMENT ADVISER
Northstar Investment Management Corporation
Two Pickwick Plaza
Greenwich, CT 06830
1-800-595-7827
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and, if given or made, such information or representations must not
be relied upon. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
state in which, or to any person to whom it is unlawful to make such an offer.
Neither the delivery of this prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that information herein is correct at
any time subsequent to its date.
TABLE OF CONTENTS
Expense Information ....................................................... 2
Financial Highlights ...................................................... _
Investment Objective and Policies of the Fund ............................. 3
Investment Considerations and Risks ....................................... 3
How Net Asset Value is Determined ......................................... 7
Management of the Fund .................................................... 8
How to Purchase Shares .................................................... 9
Alternative Sales Arrangements ............................................ 9
Investor Services and Account Policies .................................... 13
How to Sell Shares ........................................................ 16
Distribution and Service Plans ........................................... 17
Dividends, Distributions and Taxes ........................................ 17
Performance Information ................................................... 18
General Information ....................................................... 19
Appendix .................................................................. 20
<PAGE>
January __, 1997
STATEMENT OF ADDITIONAL INFORMATION
NORTHSTAR HIGH TOTAL RETURN FUND II
(A Series of Northstar Trust)
Two Pickwick Plaza
Greenwich, Connecticut 06830
(203) 863-6200
(800) 595-7827
This Statement of Additional Information, which is not a prospectus, supplements
and should be read in conjunction with the current Prospectus of the Fund dated
January __, 1997, as each may be revised from time to time. To obtain a copy of
the Fund's Prospectus, please contact Northstar Investment Management
Corporation at the address or phone number listed above.
Northstar Investment Management Corporation ("Northstar" or the "Adviser")
serves as the Fund's investment adviser. Northstar Distributors, Inc. (the
"Underwriter") is the underwriter to the Funds. Northstar Administrators
Corporation (the "Administrator") is the Fund's administrator. The Underwriter
and the Administrator are affiliates of Northstar.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS ................................................... 2
INVESTMENT TECHNIQUES ..................................................... 3
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION ........................... 13
SERVICES OF NORTHSTAR AND THE ADMINISTRATOR ............................... 15
NET ASSET VALUE ........................................................... 16
PURCHASES AND REDEMPTIONS ................................................. 17
SHAREHOLDER SERVICES ...................................................... 18
DIVIDENDS, DISTRIBUTIONS AND TAXES ........................................ 19
UNDERWRITER AND DISTRIBUTION SERVICES ..................................... 24
TRUSTEES AND OFFICERS ..................................................... 26
ORGANIZATIONAL AND RELATED INFORMATION .................................... 32
PERFORMANCE INFORMATION ................................................... 33
FINANCIAL STATEMENTS ...................................................... 36
1
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted investment restrictions numbered 1 through 11 as
fundamental policies. These restrictions cannot be changed without approval by
the holders of a majority (as defined in the Investment Company Act of 1940, as
amended) of such Fund's outstanding voting shares. Investment restrictions
numbered 12 through 17 are not fundamental policies and may be changed by vote
of a majority of the Trust's Board members at any time. The Fund may not:
1. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that it may: (a) borrow from banks but only if,
immediately after such borrowing there is asset coverage of 300%, and (b) enter
into transactions in options, futures, and options on futures ^ and other
transactions not deemed to involve the issuance of senior securities;
2. Underwrite the securities of others;
3. Purchase or sell real property, including real estate limited
partnerships (each of these Funds may purchase marketable securities of
companies that deal in real estate or interests therein, including real estate
investment trusts);
4. Deal in commodities or commodity contracts, except in the manner
described in the current Prospectus and SAI of the Fund;
5. Make loans to other persons (but the Fund may, however, lend
portfolio securities, up to 33% of net assets at the time the loan is made, to
brokers or dealers or other financial institutions not affiliated with the Fund
or Northstar, subject to conditions established by Northstar (See "Lending
Portfolio Securities" in this SAI), and may purchase or hold participations in
loans, in accordance with the investment objectives and policies of the Fund, as
described in the current Prospectus and SAI of the Fund;
6. Participate in any joint trading accounts;
7. Purchase on margin (except that for purposes of this restriction,
the deposit or payment of initial or variation margin in connection with futures
contracts will not be deemed to be purchases of securities on margin);
8. Sell short, except that the Fund may enter into short sales against
the box;
9. Purchase a security (other than U.S. Government obligations) if, as
a result, more than 5% of the Fund's total assets would be invested in
securities of a single issuer;
10. Purchase a security if, as a result, more than 10% of any class
of securities, or more than 10% of the outstanding voting securities of an
issuer, would be held by the Fund;
11. Invest more than 25% of its assets in any one industry or related
group of industries;
12. Invest in a security if, as a result of such investment, more than
5% of its total assets (taken at market value at the time of such investment)
would be invested in securities of
2
<PAGE>
issuers (other than issuers of federal agency obligations) having a record,
together with predecessors or unconditional guarantors, of less than three years
of continuous operation;
13. Purchase securities of other investment companies, except in
connection with a merger, consolidation or sale of assets, and except that these
Funds may purchase shares of other investment companies, subject to such
restrictions as may be imposed by the 1940 Act and rules thereunder or by any
state in which shares of the Fund are registered;
14. Purchase or retain securities of any issuer if 5% of the securities
of such issuer are owned by those officers and directors or trustees of the Fund
or of Northstar who each own beneficially more than 1/2 of 1% of its securities;
15. Make an investment for the purpose of exercising control over
management;
16. Invest more than 15% of its net assets (determined at the time of
investment) in illiquid securities, including securities subject to legal or
contractual restrictions on resale (which may include private placements and
those 144A securities for which the Trustees, pursuant to procedures adopted by
the Fund, have not determined there is a liquid secondary market), repurchase
agreements maturing in more than seven days, options traded over the counter
that a Fund has purchased, securities being used to cover options a Fund has
written, securities for which market quotations are not readily available, or
other securities that, legally or in the Adviser's or Trustees' opinion, may be
deemed illiquid; or
17. Invest in interests in oil, gas or other mineral exploration
development programs (including oil, gas or other mineral leases).
As a fundamental policy, the Fund may borrow money from banks to the extent
permitted under the 1940 Act. As an operating (non-fundamental) policy, the Fund
does not intend to borrow any amount in excess of 10% of its respective assets,
and would do so only for temporary emergency or administrative purposes. In
addition, to avoid the potential leveraging of assets, the Fund will make
additional investments when its borrowings, including those investment
techniques which are regarded as a form of borrowing, are in excess of 5% of
total assets. If theFund should determine to expand its ability to borrow beyond
the current operating policy, the Fund's Prospectus would be amended and
shareholders would be notified.
In addition to the restrictions described above, the Fund may, from time to
time, agree to additional investment restrictions for purposes of compliance
with the securities laws of those state and foreign jurisdictions where the Fund
intends to offer or sell its shares.
INVESTMENT TECHNIQUES
Derivative Instruments. The Fund may invest in Derivative Instruments (as
defined in the Fund's Prospectus) for a variety of reasons, including to hedge
certain market risks, to provide a substitute for purchasing or selling
particular securities or to increase potential income gain.
3
<PAGE>
Derivatives may provide a cheaper, quicker or more specifically focused way for
the Fund to invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit a Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee usually
is supported by a daily payment system (i.e., margin requirements) operated by
the clearing agency in order to reduce overall credit risk. As a result, unless
the clearing agency defaults, there is relatively little counterparty credit
risk associated with Derivatives purchased on an exchange. By contrast, no
clearing agency guarantees over-the-counter Derivatives. Therefore, each party
to an over-the-counter Derivative bears the risk that the counterparty will
default. Accordingly, Northstar and subadviser will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Fund. Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the Derivative to be interested in bidding for
it.
Futures Transactions -- In General. The Fund may enter into futures contracts in
U.S. domestic markets, such as the Chicago Board of Trade and the International
Monetary Market of the Chicago Mercantile Exchange, or on exchanges located
outside the United States, such as the London International Financial Futures
Exchange and the Sydney Futures Exchange Limited. Foreign markets may offer
advantages such as trading opportunities or arbitrage possibilities not
available in the United States. Foreign markets, however, may have greater risk
potential than domestic markets. For example, some foreign exchanges are
principal markets so that no common clearing facility exists and an investor may
look only to the broker for performance of the contract. In addition, any
profits that the Fund might realize in trading could be eliminated by adverse
changes in the exchange rate, or the Fund could incur losses as a result of
those changes. Transactions on foreign exchanges may include both commodities
which are traded on domestic exchanges and those which are not. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to the Fund which could
adversely affect the value of the Fund's net assets. Although the Fund intends
to purchase or sell futures contracts only if there is an active market for such
contracts, no assurance can be given that a liquid market will exist for any
particular contract at any particular time. Many futures exchanges and boards of
trade limit the amount of fluctuation permitted in futures contract prices
during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be
4
<PAGE>
made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could move to
the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Manager's ability
to predict correctly movements in the direction of the relevant market, and, to
the extent the transaction is entered into for hedging purposes, to ascertain
the appropriate correlation between the transaction being hedged and the price
movements of the futures contract. For example, if the Fund uses futures to
hedge against the possibility of a decline in the market value of securities
held in its portfolio and the prices of such securities instead increase, the
Fund will lose part or all of the benefit of the increased value of securities
which it has hedged because it will have offsetting losses in its futures
positions. Furthermore, if in such circumstances the Fund has insufficient cash,
it may have to sell securities to meet daily variation margin requirements. The
Fund may have to sell such securities at a time when it may be disadvantageous
to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Fund may be required to segregate cash or high quality
money market instruments in connection with its commodities transactions in an
amount generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting the Fund's ability otherwise to
invest those assets.
Specific Futures Transactions. The Fund may purchase and sell stock index
futures contracts. A stock index future obligates the Fund to pay or receive an
amount of cash equal to a fixed dollar amount specified in the futures contract
multiplied by the difference between the settlement price of the contract on the
contract's last trading day and the value of the index based on the stock prices
of the securities that comprise it at the opening of trading in such securities
on the next business day.
The Fund may purchase and sell interest rate futures contracts. An interest rate
future obligates the Fund to purchase or sell an amount of a specific debt
security at a future date at a specific price.
The Fund may purchase and sell currency futures. A foreign currency future
obligates the Fund to purchase or sell an amount of a specific currency at a
future date at a specific price.
Options--In General. The Fund may purchase and write (i.e., sell) call or put
options with respect to specific securities. A call option gives the purchaser
of the option the right to buy, and obligates the writer to sell, the underlying
security or securities at the exercise price at any time during the option
period, or at a specific date. Conversely, a put option gives the purchaser of
the option the right to sell, and obligates the writer to buy, the underlying
security or securities at the exercise price at any time during the option
period.
A covered call option written by the Fund is a call option with respect to which
the Fund owns the underlying security or otherwise covers the transaction by
segregating cash or other
5
<PAGE>
securities. A put option written by the Fund is covered when, among other
things, cash or liquid securities having a value equal to or greater than the
exercise price of the option are placed in a segregated account with the Fund's
custodian to fulfill the obligation undertaken. The principal reason for writing
covered call and put options is to realize, through the receipt of premiums, a
greater return than would be realized on the underlying securities alone. The
Fund receives a premium from writing covered call or put options which it
retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Specific Options Transactions. The Fund may purchase and sell call and put
options in respect of specific securities (or groups or "baskets" of specific
securities) or stock indices listed on national securities exchanges or traded
in the over-the-counter market. An option on a stock index is similar to an
option in respect of specific securities, except that settlement does not occur
by delivery of the securities comprising the index. Instead, the option holder
receives an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. Thus, the effectiveness of
purchasing or writing stock index options will depend upon price movements in
the level of the index rather than the price of a particular stock.
The Fund may purchase and sell call and put options on foreign currency. These
options convey the right to buy or sell the underlying currency at a price which
is expected to be lower or higher than the spot price of the currency at the
time the option is exercised or expires.
The Fund may purchase cash-settlement options on interest rate swaps, interest
rate swaps denominated in foreign currency and equity index swaps in pursuit of
its investment objective. Interest rate swaps involve the exchange by the Fund
with another party of their respective commitments to pay or receive interest
(for example, an exchange of floating-rate payments for fixed-rate payments)
denominated in U.S. dollars or foreign currency. Equity index swaps involve the
exchange by the Fund with another party of cash flows based upon the performance
of an index or a portion of an index of securities which usually includes
dividends. A cash-settled option on a swap gives the purchaser the right, but
not the obligation, in return for the premium paid, to receive an amount of cash
equal to the value of the underlying swap as of
6
<PAGE>
the exercise date. These options typically are purchased in privately negotiated
transactions from financial institutions, including securities brokerage firms.
Successful use by the Fund of options will be subject to the ability of
Northstar and ^ the subadviser to predict correctly movements in the prices of
individual stocks, the stock market generally, foreign currencies or interest
rates. To the extent the Manager's predictions are incorrect, the Fund may incur
losses.
SHORT SALES. The Fund may make short sales "against the box." A short-sale is a
transaction in which a party sells a security it does not own in anticipation of
decline in the market value of that security. A short sale is "against the box"
to the extent that the Fund contemporaneously owns or has the right to obtain
securities identical to those sold short. When the Fund makes a short sale, it
must borrow the security sold short and deliver it to the broker-dealer through
which it made the short sale as collateral for its obligation to deliver the
security upon conclusion of the sale. The Fund may have to pay a fee to borrow
particular securities, and is often obligated to pay over any accrued interest
on such borrowed securities.
PRIVATELY ISSUED COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS, INTEREST
OBLIGATIONS AND PRINCIPAL OBLIGATIONS. The Fund may invest up to 5% of its net
assets in Privately Issued Collateralized Mortgage-Backed Obligations ("CMOs"),
Interest Obligations ("IOs") and Principal Obligations ("POs") when Northstar
believes that such investments are consistent with the Fund's investment
objective. Collateralized mortgage obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities. Typically,
privately issued CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie
Mac Certificates, but also may be collateralized by whole loans or private
pass-throughs (such collateral collectively hereinafter referred to as "Mortgage
Assets"). Privately issued CMOs are per se illiquid. Multi-class pass-through
securities are equity interest in a trust composed of Mortgage Assets. Unless
the context indicates otherwise, all references herein to CMOs include
multi-class pass-thorough securities. Payments of principal of and interest on
the Mortgage Assets, and any reinvestment income thereon, are the source of
funds used to pay debt service on the CMOs or make scheduled distribution on the
multi-class pass-through securities.
On a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche", is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
The principal of and interest on the Mortgage Assets may be allocated among the
several classes of a series of a CMO in innumerable ways. The Funds may also
invest in, among others, parallel pay CMOs and Planned Amortization Class CMOs
("PAC Bonds"). Parallel pay CMOs are structured to provide payments of principal
on each payment date to more than one class. These simultaneous payments are
taken into account in calculating the stated maturity date or final distribution
date of each class, which, as with other CMO structures, must be retired by its
stated maturity date or final distribution date but may be retired earlier. PAC
Bonds generally call for payments of a specified amount of principal on each
payment date.
7
<PAGE>
Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities. SMBS may be issued by agencies or instrumentalities of the U.S.
government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.
SMBS are structured with two or more classes of securities that receive
different proportions of the interest and principal distributions on a pool of
Mortgage Assets. A common type of SMBS will have at least one class receiving
only a small portion of the interest and a larger portion of the principal from
the Mortgage Assets, while the other classes will receive primarily interest and
only a small portion of the principal. In the most extreme case, one class will
receive all of the interest (the interest-only or "IO" class), while the other
class will receive all of the principal (the principal-only or "PO" class). The
yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying Mortgage Assets, and
a rapid rate of principal payments may have a material adverse effect on such
security's yield to maturity. If the underlying Mortgage Assets experience
greater than anticipated prepayments of principal, a Fund may fail to recoup
fully its initial investment in these securities. The determination of whether a
particular government-issued IO or PO backed by fixed-rate mortgage is liquid is
made by Northstar under guidelines and standards established by the Board of
Trustees. Such a security may be deemed liquid if it can be disposed of promptly
in the ordinary course of business at a value reasonably close to that used in
the calculation of net asset value per share.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a Fund
buys a money market instrument and obtains a simultaneous commitment from the
seller to repurchase the instrument at a specified time and at an agreed upon
yield. Northstar will use standards set by the Fund's Trustees in reviewing the
creditworthiness of parties to repurchase agreements with such Fund. In
addition, no more than an aggregate of 15% of a Fund's net assets, at the time
of investment, will be invested in illiquid investments, including repurchase
agreements having maturities longer than seven days. In the event of failure of
the executing bank or broker-dealer, a Fund could experience some delay in
obtaining direct ownership of the underlying collateral and might incur a loss
if the value of the security should decline, as well as costs in disposing of
the security.
As an alternative to using repurchase agreements, a Fund may, from time to time,
invest up to 5% of its assets in money market investment companies sponsored by
a third party for short-term liquidity purposes. Such investments are subject to
the non-fundamental investment limitations described herein.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS. The Fund may enter
into reverse repurchase agreements and dollar roll agreements. Under a reverse
repurchase agreement or a dollar roll agreement, a Fund sells securities and
agrees to repurchase them, or substantially similar securities in the case of a
dollar roll agreement, at a mutually agreed upon date and price. At the time the
Fund enters into a reverse repurchase or dollar roll agreement, it will
establish and maintain a segregated account with its custodian, containing cash,
U.S. Government
8
<PAGE>
Securities, or other liquid assets from its portfolio, having a value not less
than the repurchase price (including accrued interest). The Fund does not
account for dollar rolls as a borrowing.
These agreements may involve the risk that the market value of the securities to
be repurchased by a Fund may decline below the price at which the Fund is
obligated to repurchase. Also, in the event the buyer of securities under a
reverse repurchase agreement or a dollar roll agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce the Fund's obligation to
repurchase the securities, and the Fund's use of the proceeds of the reverse
repurchase agreement or the dollar roll agreement may effectively be restricted
pending such a decision.
LENDING PORTFOLIO SECURITIES. The Fund may lend portfolio securities to
broker-dealers and other financial institutions in an amount up to one-third of
the value of its total assets, provided that such loans are callable at any time
by the Fund and are at all times secured by collateral held by the Fund at least
equal to the market value, determined daily, of the loaned securities. The Fund
will continue to receive any income on the loaned securities, while
simultaneously earning interest on cash collateral (which will be invested in
short-term debt obligations) or a securities lending fee (in the case of
collateral in the form of U.S. Government Securities).
There may be risks of delay in recovery of the loaned securities and, in some
cases, loss of rights in the collateral should the borrower of the securities
fail financially. Loans of portfolio securities will only be made to firms
considered by Northstar to be creditworthy under guidelines adopted by the
Trustees.
FIRM COMMITMENTS AND WHEN-ISSUED SECURITIES. The Fund may enter into firm
commitment agreements to purchase securities at an agreed-upon price on a
specified future date. An amount of cash or short-term U.S. Government
Securities equal to the Fund's commitment will be deposited in a segregated
account at the Fund's custodian bank to secure the Fund's obligation. Although
the Fund will generally enter into firm commitments to purchase securities with
the intention of actually acquiring the securities for its portfolio (or for
delivery pursuant to options contracts it has entered into), the Fund may
dispose of a security prior to settlement if Northstar deems it advisable to do
so. A Fund entering into the forward commitment may realize short-term gains or
losses in connection with such sales.
The Fund may enter into To Be Announced ("TBA") sale commitments wherein the
unit price and the estimated principal amount are established upon entering into
the contract, with the actual principal amount being within a specified range of
the estimate. The Fund will enter into TBA sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not received until
the contractual settlement date. During the time a TBA sale commitment is
outstanding, the Fund will maintain, in a segregated account, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price. Unsettled
TBA sale commitments are valued at current market value of the underlying
securities. If the TBA sale commitment is closed through the acquisition of an
offsetting purchase commitment, the Fund realizes a gain or loss on the
9
<PAGE>
commitment without regard to any unrealized gain or loss on the underlying
security. If the Fund delivers securities under the commitment, the Fund
realizes a gain or loss from the sale of the securities, based upon the unit
price established at the date the commitment was entered into.
The Fund may also purchase securities on a when-issued or delayed delivery
basis. In such transactions, the price is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place at a
later date, normally within one month. The value of the security on the
settlement date may be more or less than the price paid as a result of, among
other things, changes in the level of interest rates or other market factors.
Accordingly, there is a risk of loss, which is in addition to the risk of
decline in the value of the Fund's other assets. The Fund will establish a
segregated account with its custodian in which it will maintain cash and
marketable securities equal in value to commitments for when-issued or delayed
delivery securities. While when-issued or delayed delivery securities may be
sold prior to the settlement date, it is intended that the Fund will purchase
such securities with the purpose of actually acquiring them, unless a sale
appears desirable for investment reasons.
FLOATING OR VARIABLE RATE INSTRUMENTS. The Fund may purchase floating or
variable rate bonds, which normally provide that the holder can demand payment
of the obligation on short notice at par with accrued interest. Such bonds are
frequently secured by letters of credit or other credit support arrangements
provided by banks. Floating or variable rate instruments provide for adjustments
in the interest rate at specified intervals (weekly, monthly, semiannually,
etc.). A Fund would anticipate using these bonds as cash equivalents, pending
longer term investment of its funds. Other longer term fixed-rate bonds, with a
right of the holder to request redemption at certain times (often annually,
after the lapse of an intermediate term), may also be purchased by the Fund.
These bonds are more defensive than conventional long-term bonds (protecting to
some degree against a rise in interest rates), while providing greater
opportunity than comparable intermediate term bonds since the Fund may retain
the bond if interest rates decline. By acquiring these kinds of bonds, the Fund
obtains the contractual right to require the issuer of the security, or some
other person (other than a broker or dealer), to purchase the security at an
agreed upon price, which right is contained in the obligation itself rather than
in a separate agreement with the seller or some other person.
ZERO COUPON SECURITIES. Zero coupon securities are fixed income securities that
have been stripped of their unmatured interest coupons. Zero coupon securities
are sold at a (usually substantial) discount and redeemed at face value at their
maturity date without interim cash payments of interest or principal. The amount
of this discount is accredited over the life of the security, and the accretion
constitutes the income earned on the security for both accounting and tax
purposes. Because of these features, the market prices of zero coupon securities
are generally more volatile than the market prices of securities that have a
similar maturity but that pay interest periodically. Zero coupon securities are
likely to respond to a greater degree to interest rate changes than are non-zero
coupon securities with similar maturity and credit qualities. The Fund may
invest a portion of its total assets in "zero coupon" Treasury securities, which
consist of Treasury bills or stripped interest or principal components of U.S.
Treasury bonds or notes.
10
<PAGE>
Zero coupon Treasury bonds or notes consist of stripped interest or principal
components held in STRIPS form issued through the U.S. Treasury's STRIPS
program, which permits the beneficial ownership of the component to be recorded
directly in the Treasury book-entry system. The Fund may also purchase custodial
receipts evidencing beneficial ownership of direct interests in component parts
of U.S. Treasury bonds or notes held by a bank in a custodian or trust account.
ADDITIONAL INFORMATION ON GNMAS. The Fund may invest in U.S. Government
Securities, which are obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. The Fund may also invest in GNMAs from time to
time.
GNMAs are mortgage backed securities representing part ownership of a pool of
mortgage loans, in which the timely payment of principal and interest is
guaranteed by the full faith and credit of the U.S. Government. GNMA may borrow
U.S. Treasury funds to the extent needed to make payments under the guarantee.
The Fund purchases "modified pass-through" type GNMA Certificates for which
principal and interest are guaranteed, rather than the "straight pass through"
Certificates for which such guarantee is not available. The Fund may also
purchase "variable rate" GNMA Certificates and may purchase other types that may
be used with GNMA's guarantee.
When mortgages in the pool underlying a GNMA Certificate are prepaid by
mortgagors or when foreclosure occurs, such principal payments are passed
through to the Certificate holders (such as a Fund). Accordingly, the life of
the GNMA Certificate is likely to be substantially shorter than the stated
maturity of the mortgages in the underlying pool, which will have maturities of
up to 30 years. Because of such variation in prepayment rights, it is not
possible to accurately predict the life of a particular GNMA Certificate.
Payments to holders of GNMA Certificates consist of the monthly distributions of
interest and principal, less the GNMA and issuer's fees. The portion of the
monthly payment that represents a return of principal may be reinvested by a
Fund holding the GNMA in then-available GNMA obligations, which may bear
interest at a rate higher or lower than the obligation from which the payment
was received, or in a differing security. The actual yield to be earned by the
holder of a GNMA Certificate is calculated by dividing such payments by the
purchase price paid for the GNMA Certificate (which may be at a premium or a
discount from the face value of the Certificate). Unpredictable prepayments of
principal, however, can greatly change realized yields. In a period of declining
interest rates it is more likely that mortgages contained in GNMA pools will be
prepaid, thus reducing the effective yield. Moreover, any premium paid on the
purchase of a GNMA Certificate will be lost if the obligation is prepaid. In
periods of falling interest rates, this potential for prepayment may reduce the
general upward price increase of GNMA Certificates that might otherwise occur.
As with other debt instruments, the price of GNMA Certificates is likely to
decrease in times of rising interest rates. Price changes of the GNMA
Certificates held by a Fund have a direct impact on the net asset value per
share of the Fund.
11
<PAGE>
When interest rates rise, the value of a GNMA Certificate will generally
decline. Conversely, when rates fall, the GNMA Certificate value may rise,
although not as much as other debt issues, due to the prepayment feature. As a
result, the price per share the shareholder receives on redemption may be more
or less than the price paid for the shares.
ADDITIONAL INFORMATION ON HIGH YIELD SECURITIES. The Fund may invest in
lower-rated fixed income securities to the extent described in the Prospectus.
The lower ratings of certain securities held by the Fund reflect a greater
possibility that adverse changes in the financial condition of the issuer or
economic conditions in general, or both, or an unanticipated rise in interest
rates, may impair the ability of the issuer to make payments of interest and
principal. The inability (or perceived inability) of issuers to make timely
payment of interest and principal would likely make the values of securities
held by the Fund more volatile and could limit the Fund's ability to sell its
securities at prices approximating the values the Fund had placed on such
securities. In the absence of a liquid trading market for the securities held by
it, the Fund may be unable at times to establish the fair value of such
securities. The rating assigned to a security by Moody's Investors Service, Inc.
or S & P (or by any other nationally recognized securities rating organization)
does not reflect an assessment of the volatility of the security's market value
or the liquidity of an investment in the security.
See the Appendix to the Prospectus for a description of security ratings.
Like those of other fixed income securities, the values of lower-rated
securities fluctuate in response to changes in interest rates. Thus, a decrease
in interest rates will generally result in an increase in the value of the
Fund's assets. Conversely, during periods of rising interest rates, the value of
the Fund's assets will generally decline. In addition, the values of such
securities are also affected by changes in general economic conditions and
business conditions affecting the specific industries of their issuers. Changes
by recognized rating services in their ratings of any fixed income security and
in the ability of an issuer to make payments of interest and principal may also
affect the value of these investments. Changes in the value of portfolio
securities generally will not affect cash income derived from such securities,
but will effect the Fund's net asset value. The Fund will not necessarily
dispose of a security when its rating is reduced below its rating at the time of
purchase, although Northstar will monitor the investment to determine whether
its retention will assist in meeting the Fund's investment objective.
Certain securities held by the Fund may permit the issuer at its option to call,
or redeem, its securities. If an issuer were to redeem securities held by the
Fund during a time of declining interest rates, the Fund may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may invest in loan participations
and loan assignments. The Fund's investment in loan participations typically
will result in the Fund having a contractual relationship only with the Lender
and not with the borrower. The Fund will have the right to receive payments of
principal, interest and any fees to which it is entitled only from the Lender
selling the Participations and only upon receipt by the Lender of the payments
from the borrower. In connection with purchasing Participations, the Fund
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to
12
<PAGE>
the Loan, nor any right of set-off against the borrower, and the Fund may not
directly benefit from any collateral supporting the Loan in which it has
purchased the Participation. As a result, the Fund may be subject to the credit
risk of both the borrower and the Lender that is selling the Participation. In
the event of the insolvency of the Lender selling a Participation, the Fund may
be treated as a general creditor of the Lender and may not benefit from any
set-off between the Lender and the borrower.
When the Fund purchases a loan assignment from Lenders, it will acquire direct
rights against the borrowers on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender. Because there is no liquid market for such securities,
the Fund anticipates that such securities could be sold only to a limited number
of institutional investors. The lack of a liquid secondary market may have an
adverse impact on the value of such securities and the Fund's ability to dispose
of particular assignments or participations when necessary to meet redemptions
of Fund shares, to meet the Fund's liquidity needs or when necessary in response
to a specific economic event, such as deterioration in the creditworthiness of
the borrower. The lack of a liquid secondary market for assignments and
participations also may make it more difficult for the Fund to value these
securities for purposes of calculating its net asset value.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Northstar places orders for the purchase and sale of the Fund's securities,
supervises their execution and negotiates brokerage commissions on behalf of the
Fund. It is the practice of Northstar to seek the best prices and best execution
of orders and to negotiate brokerage commissions that in the Adviser's opinion,
are reasonable in relation to the value of the brokerage services provided by
the executing broker. Brokers who have executed orders for the Fund are asked to
quote a fair commission for their services. If the execution is satisfactory and
if the requested rate approximates rates currently being quoted by the other
brokers selected by Northstar, the rate is deemed by Northstar to be reasonable.
Brokers may ask for higher rates of commission if all or a portion of the
securities involved in the transaction are positioned by the broker, if the
broker believes it has brought the Fund an unusually favorable trading
opportunity, or if the broker regards its research services as being of
exceptional value and payment of such commissions is authorized by Northstar
after the transaction has been consummated. If Northstar more than occasionally
differs with the broker's appraisal of opportunity or value, the broker would
not be selected to execute trades in the future. Northstar believes that the
Fund benefits with a securities industry comprised of many and diverse firms and
that the long-term interest of shareholders of the Fund is best served by its
brokerage policies that include paying a fair commission, rather than seeking to
exploit its leverage to force the lowest possible commission rate.
Over-the-counter purchases and sales are transacted directly with principal
market-makers, except in those circumstances where, in the opinion of Northstar,
better prices and execution are available elsewhere.
13
<PAGE>
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, and forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income markets and equity markets, specific industry groups
and individual issues. Research services will vary from firm to firm, with
broadest coverage generally from the large full-line firms. Smaller firms, in
general, tend to provide information and interpretations on a smaller scale,
frequently with a regional emphasis. In addition, several firms monitor federal,
state, local and foreign political developments; many of the brokers also
provide access to outside consultants. The outside research assistance is
particularly useful to the Adviser's staff, since the brokers, as a group, tend
to monitor a broader universe of securities and other matters than the Adviser's
staff can follow. In addition, the outside research provides Northstar with a
diverse perspective on financial markets. Research and investment information is
provided by these and other brokers at no cost to Northstar and is available for
the benefit of other accounts advised by Northstar and its affiliates; and not
all of this information will be used in connection with the Fund. While this
information may be useful in varying degrees and may tend to reduce the
Adviser's expenses, it is not possible to estimate its value, and, in the
opinion of Northstar, it does not reduce the Adviser's expenses by a
determinable amount. The extent to which Northstar makes use of statistical,
research and other services furnished by brokers is considered by Northstar in
the allocation of brokerage business, but there is no formula by which such
business is allocated. Northstar does so in accordance with its judgment of the
best interests of the Fund and its shareholders.
Purchases and sales of fixed income securities will usually be principal
transactions. Such securities often will be purchased or sold from or to dealers
serving as market makers for the securities at a net price. The Fund will also
purchase such securities in underwritten offerings and will, on occasion,
purchase securities directly from the issuer. Generally, fixed income securities
are traded on a net basis and do not involve brokerage commissions. The cost of
executing fixed income securities transactions consists primarily of dealer
spreads and underwriting commissions.
In purchasing and selling fixed income securities, it is the policy of the Fund
to obtain the best results, while taking into account the dealer's general
execution and operational facilities, the type of transaction involved and other
factors, such as the dealer's risk in positioning the securities involved. While
Northstar generally seeks reasonably competitive spreads or commissions, the
Fund will not necessarily pay the lowest spread or commission available.
The Fund may, under circumstances in which two or more dealers are in a position
to offer comparable results, give preference to a dealer that has provided
statistical or other research services to the Funds. By allocating transactions
in this manner, Northstar is able to supplement its research and analysis with
the views and information of other securities firms.
A change in securities held in the portfolio of a Fund is known as "Portfolio
Turnover" and may involve the payment by a Fund of dealer mark-ups or brokerage
or underwriting commissions and other transaction costs on the sale of
securities, as well as on the reinvestment of the proceeds in other securities.
Portfolio turnover rate for a fiscal year is the percentage
14
<PAGE>
determined by dividing the lesser of the cost of purchases or proceeds from
sales of portfolio securities by the average of the value of portfolio
securities during such year, all excluding securities whose maturities at
acquisition were one year or less. The Fund cannot accurately predict its
portfolio turnover rate, but Northstar anticipates that the Fund's rate will not
exceed 100% under normal market conditions. A 100% annual turnover rate would
occur, for example, if all the securities in the portfolio were replaced once in
a period of one year. The Fund's portfolio turnover rate may be higher than that
described above if the Fund finds it necessary to significantly change its
portfolio to adopt a temporary defensive position or respond to economic or
market events. A high turnover rate would increase commission expenses and may
involve realization of gains that would be taxable to shareholders. The ability
of the Fund to make purchases and sales of securities and to engage in options
and futures transactions will be limited by certain requirements of the Code,
including a requirement that less than 30% of the Fund's annual gross income be
derived from gains on the sale of securities and certain other assets held for
less than three months.
SERVICES OF NORTHSTAR AND THE ADMINISTRATOR
Pursuant to an Investment Advisory Agreement with the Fund, Northstar Investment
Management Corporation acts as the investment adviser to the Fund. In this
capacity, Northstar, subject to the authority of the Trustees of the Fund, is
responsible for furnishing continuous investment supervision to the Fund and is
responsible for the management of each Fund's portfolio.
Northstar is an indirect, majority-owned subsidiary of ReliaStar Financial Corp.
("ReliaStar"). Combined minority interests in Northstar held by members of
senior management of ReliaStar currently equal 20%. ReliaStar is a publicly
traded holding company whose subsidiaries specialize in the life insurance
business. Through ReliaStar Life Insurance Company ("ReliaStar Life") and other
subsidiaries, ReliaStar issues and distributes individual life insurance and
annuities, group life and health insurance and life and health reinsurance, and
provides related investment management services. The address of Northstar is Two
Pickwick Plaza, Greenwich, Connecticut 06830. The address of ReliaStar is 20
Washington Avenue South, Minneapolis, Minnesota 55401.
Northstar charges a fee to the Fund at the annual rate of 0.75%. Northstar has
agreed that if, in any fiscal year, the aggregate expenses of the Fund,
exclusive of taxes, distribution fees, brokerage, interest and (with the prior
consent of any necessary state securities commissions) extraordinary expenses,
but including the management fee, exceed the most restrictive expense
limitations applicable to the Fund under state securities laws or published
regulations thereunder, Northstar will refund on a proportionate basis to the
Fund whose expenses exceeded such limitation the excess over such amount up to
the total fee received by Northstar. Currently, the most restrictive of such
limitations would require Northstar to reimburse such the Fund to the extent
that in any fiscal year such aggregate expenses exceed 2.5% of the first
$30,000,000 of the average net assets, 2.0% of the next $70,000,000 of the
average net assets and 1.5% of any amount of the average net assets in excess of
$100,000,000.
15
<PAGE>
The Fund's Investment Advisory Agreement was approved by the Trustees of the
Northstar Trust on October 29, 1996. The Investment Advisory Agreement will
continue in effect until November 8, 1998 and then will continue in effect from
year to year if specifically approved annually by (a) the Trustees, acting
separately on behalf of each Fund, including a majority of the Disinterested
Trustees, or (b) a majority of the outstanding voting securities of each class
of each Fund as defined in the 1940 Act.
The Fund's Investment Advisory Agreement may be terminated as to any class,
without penalty and at any time, by a similar vote upon not more than 60 days'
nor less than 30 days' written notice by Northstar, the Trustees, or a majority
of the outstanding voting securities of such class of such Fund as defined in
the 1940 Act. Such agreement will automatically terminate in the event of its
assignment, as defined in Section 2(a)(4) of the 1940 Act.
Northstar Administrators Corporation serves as administrator for the Fund,
pursuant to an Administrative Services Agreement with the Fund. Subject to the
supervision of the Board of Trustees, the Administrator provides the overall
business management and administrative services necessary to the proper conduct
of the Fund's business, except for those services performed by Northstar under
the Investment Advisory Agreements, the custodian for the Fund under the
Custodian Agreement, and such other service providers as may be retained by the
Funds from time to time. The Administrator acts as liaison among these service
providers to the Fund. The Administrator is also responsible for ensuring that
the Fund operates in compliance with applicable legal requirements and for
monitoring Northstar for compliance with requirements under applicable law and
with the investment policies and restrictions of the Fund. The Administrator is
an affiliate of Northstar. The address of the Administrator is:
Two Pickwick Plaza, Greenwich, Connecticut 06830.
The Administrative Services Agreement was approved by the Trustees on October
29, 1996 and will continue in effect from year to year thereafter, provided such
continuance is approved annually by a majority of the Trustees. The
Administrator's fee is accrued daily against the value of the Fund's net assets
and is payable by the Fund monthly at an annual rate of .10% of the Fund's
average daily net assets. In addition, the Administrator charges an annual
account fee of $5.00 for each account of beneficial owners of shares in the Fund
for providing certain shareholder services and assisting broker-dealer
shareholder accounts.
NET ASSET VALUE
Equity securities are valued at the last sale price on the exchange or in the
principal OTC market in which such securities are being valued, or lacking any
sales, at the last available bid price. Prices of long-term debt securities are
valued on the basis of last reported sales price, or if no sales are reported,
the value is determined based upon the mean of representative quoted bid or
asked prices for such securities obtained from a quotation reporting system or
from established market makers, or at prices for securities of comparable
maturity, quality and type. Securities (including OTC options) for which market
quotations are not readily available and other assets are valued at their fair
value as determined by or under the direction of the Trustees. Such fair value
may be determined by various methods, including utilizing information furnished
by
16
<PAGE>
pricing services that determine calculations for such securities using methods
based, among other things, upon market transactions for comparable securities
and various relationships between securities that are generally recognized as
relevant.
The net asset value of the Fund's shares fluctuates and is determined separately
for each class as of the close of regular trading on the New York Stock Exchange
(currently 4:00 p.m. EST), on each business day that the Exchange is open. Net
asset value per share is computed by determining the value of the Fund's assets
(securities held plus cash and other assets, including dividend and interest
accrued but not received) less all liabilities of the Fund (including accrued
expenses other than class specific expenses), and dividing the result by the
total number of shares outstanding at such time. The specific expenses borne by
each class of shares will be deducted from that class and will result in
different net asset values and dividends. The net asset value per share of the
Class B and Class C shares of the Fund will generally be lower than that of the
Class A shares because of the higher class-specific expenses borne by each of
the Class B and Class C shares. Under normal market conditions, daily prices for
securities are obtained from independent pricing services. Securities are valued
at market value or, if a market quotation is not readily available, at their
fair value, determined in good faith under procedures established by and under
the supervision of the Trustees. Money market instruments maturing within 60
days are valued using the amortized cost method of valuation. 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,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the instrument. See "How
Net Asset Value is Determined" in the Prospectus.
PURCHASES AND REDEMPTIONS
Shares issued pursuant to the automatic reinvestment of income dividends or
capital gains distributions are not subject to a front-end or contingent
deferred sales load. There is no sales charge for qualified persons.
"Qualified Persons" are the following (a) active or retired Trustees,
Directors, Officers, Partners or Employees (including immediate family) of (i)
Northstar or any of its affiliated companies, (ii) the Funds or any Northstar
affiliated investment company or (iii) dealers having a sales agreement with the
Underwriter, (b) trustees or custodians of any qualified retirement plan or IRA
established for the benefit of a person in (a) above; (c) dealers, brokers or
registered investment advisers that have entered into an agreement with the
Underwriter providing for the use of shares of the Funds in particular
investment products such as "wrap accounts" or other similar managed accounts
for the benefit of the clients of such brokers, dealers and registered
investment advisers, and (d) pension, profit sharing or other benefit plans
created pursuant to a plan qualified under Section 401 of the Code or plans
under Section 457 of the Code, provided that such shares are purchased by an
employer sponsored plan with at least 100 eligible employees. Class A shares of
the Fund may be purchased at net asset value, through a dealer, where the amount
invested represents redemption proceeds from another open-end fund sold with a
sales load and the same or similar investment objective, and PROVIDED the
following conditions are met: such redemption occurred no more than 60 days
17
<PAGE>
prior to the purchase of shares of a Northstar Fund, the redeemed shares were
held for at least six months prior to redemption, and the proceeds of the
redemption are sent directly to Northstar or its agent, or maintained in cash or
a money market fund. No commissions will be paid to dealers in connection with
such purchases. There is also no initial sales charge for "Purchasers" (defined
below) if the initial amount invested in the Funds is at least $1,000,000 or the
Purchaser signs a $1,000,000 Letter of Intent, as hereinafter defined.
REDUCED SALES CHARGES ON CLASS A SHARES. Investors choosing the initial sales
alternative may under certain circumstances be entitled to pay reduced sales
charges. The sales charge varies with the size of the purchase and reduced
charges apply to the aggregate of purchases of a Fund made at one time by any
"Purchaser," which term includes (i) an individual and his/her spouse and their
children under the age of 21, (ii) a trustee or fiduciary purchasing for a
single trust, estate or single fiduciary account (including IRAs, pension,
profit-sharing or other employee benefit trusts created pursuant to a plan
qualified under Section 401 of the Code, a Simplified Employee Pension ("SEP"),
Salary Reduction and other Elective Simplified Employee Pension Accounts
("SARSEP")) and 403(b) and 457 plans, although more than one beneficiary or
participant is involved; and (iii) any other organized group of persons, whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase at a discount of
redeemable securities of a registered investment company. The circumstances
under which "Purchasers" may pay reduced sales charges are described in the
Prospectus.
REDEMPTIONS. The right to redeem shares may be suspended and payment therefor
postponed during periods when the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or, if permitted by rules of the SEC,
during periods when trading on the Exchange is restricted, or during any
emergency that makes it impracticable for any Fund to dispose of its securities
or to determine fairly the value of its net assets or during any other period
permitted by order of the SEC for the protection of investors. Furthermore, the
Transfer Agent will not mail redemption proceeds until checks received for
shares purchased have cleared, but payment will be forwarded immediately upon
the funds becoming available. Class B and Class C shareholders will be subject
to the applicable deferred sales charge, if any, for their shares at the time of
redemption.
SHAREHOLDER SERVICES
EXCHANGES. The following conditions must be met for all exchanges among the
Fund, or other Northstar Funds and the Money Market Portfolio: (i) the shares
that will be acquired in the exchange (the "Acquired Shares") are available for
sale in the shareholder's state of residence; (ii) the Acquired shares will be
registered to the same shareholder account as the shares to be surrendered (the
"Exchanged Shares"); (iii) the Exchanged Shares must have been held in the
shareholder's account for at least 30 days prior to the exchange; (iv) except
for exchanges into the Money Market Portfolios, the account value of the Fund
whose shares are to be acquired must equal or exceed the minimum initial
investment amount required by that Fund after the exchange is implemented; and
(v) a properly executed exchange request has been received by the Transfer
Agent.
18
<PAGE>
The Fund reserves the right to delay the actual purchase of the Acquired Shares
for up to five business days if it determines that it would be disadvantaged by
an immediate transfer of proceeds from the redemption of Exchanged Shares.
Normally, however, the redemption of Exchanged Shares and the purchase of
Acquired Shares will take place on the day that the exchange request is received
in proper form. The Fund reserves the right to terminate or modify its exchange
privileges at any time upon prominent notice to shareholders. Such notice will
be given at least 60 days in advance. It is the policy of Northstar to
discourage and prevent frequent trading by shareholders among Northstar Funds in
response to market fluctuations. Accordingly, in order to maintain a stable
asset base in each Northstar Fund and to reduce administrative expenses borne by
each Fund, Northstar generally restricts shareholders to a maximum of six
exchanges out of a Fund each calendar year. If a shareholder exceeds this limit,
future exchange requests may be denied.
Conversion Feature. Class B shares of each Fund will automatically convert to
Class A shares without a sales charge at the relative net asset values of each
of the classes after eight years from the acquisition of the Class B shares, and
as a result, will thereafter be subject to the lower distribution fee (but same
service fee) under the Class A Rule 12b-1 plan for each Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Code. In order to so qualify, the Fund must, among other
things, (i) derive each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, gains
from the sale of securities or foreign currencies, or other income (including
but not limited to gains from options, futures or forward contracts) derived
with respect to its business of investing in stock, securities or currencies;
(ii) derive less than 30% of its gross income each taxable year from the sale or
other disposition of certain assets, including securities, held for less than
three months (the "30% Limitation"); and (iii) at the end of each quarter of the
taxable year maintain at least 50% of the value of its total assets in cash,
government securities, securities of other regulated investment companies, and
other securities of issuers that represent, with respect to each issuer, no more
than 5% the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and with no more than 25% of its assets invested in
the securities (other than those of the U.S. Government or other regulated
investment companies) of any one issuer or of two or more issuers that the Fund
controls and that are engaged in the same, similar or related trades and
businesses. As a regulated investment company, the Fund generally will not be
subject to federal income tax on its income and gains that it distributes to
shareholders, if at least 90% of its investment company taxable income (which
includes dividends, interest and the excess of any short-term capital gains over
long-term capital losses) for the taxable year is distributed.
An excise tax at the rate of 4% will be imposed on the excess, if any, of the
Fund's "required distribution" over actual distributions in any calendar year.
Generally, the "required distribution" is 98% of a Fund's ordinary income for
the calendar year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 plus undistributed amounts from prior
years. The Fund intends to make distributions sufficient to avoid imposition of
the excise
19
<PAGE>
tax. A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by the Fund during October, November or December
of the year with a record date in such a month and paid by the Fund during
January of the following year. Such distributions will be taxable as if received
on December 31 in the year they are declared by the Fund, rather than the year
in which they are received.
The taxation of equity options and OTC options on debt securities is governed by
Code section 1234. Pursuant to Code section 1234, the premium received by the
Fund for selling a put or call option is not included in income at the time of
receipt. If the option expires, the premium is short-term capital gain to the
Fund. If the Fund enters into a closing transaction, the difference between the
amount paid to close out its position and the premium received is short-term
capital gain or loss. If a call option written by the Fund is exercised, thereby
requiring the Fund to sell the underlying security, the premium will increase
the amount realized upon the sale of such security and any resulting gain or
loss will be a capital gain or loss, and will be long-term or short-term
depending upon the holding period of the security. With respect to a put or call
option that is purchased by the Fund, if the option is sold, any resulting gain
or loss will be a capital gain or loss, and will be long-term or short-term,
depending upon the holding period of the option. If the option expires, the
resulting loss is a capital loss and is long-term or short-term, depending upon
the holding period of the option. If the option is exercised, the cost of the
option, in the case of a call option, is added to the basis of the purchased
security and, in the case of a put option, reduces the amount realized on the
underlying security in determining gain or loss.
Certain options, futures contracts and forward contracts in which the Fund may
invest are "section 1256 contracts." Gains or losses on section 1256 contracts
are generally considered 60% long-term and 40% short-term capital gains or
losses ("60/40 gains or losses"); however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by a Fund at the end
of each taxable year (and, generally, for purposes of the 4% excise tax, on
October 31 of each year) are treated as sold on such date at fair market value,
resulting in unrealized gains or losses being treated as though they were
realized.
Hedging transactions undertaken by the Fund may result in straddles for U.S.
federal income tax purposes. The straddle rules may accelerate income to the
Fund, defer losses to the Fund, and affect the character of gains (or losses)
realized by the Fund. Hedging transactions may increase the amount of short-term
capital gain realized by a Fund that is taxed as ordinary income when
distributed to shareholders. The Fund may make one or more of the various
elections available under the Code with respect to hedging transactions. If the
Fund makes any of the elections, the amount, character and timing of the
recognition of gains or losses from the affected positions will be determined
under rules that vary according to the elections made. The 30% limitation may
limit the extent to which the Fund will be able to engage in transactions in
options, futures contracts and forward contracts.
Under the Code, gains or losses attributable to fluctuations in exchange rates
that occur between the time the Fund accrues interest or other receivables, or
accrues expenses or other liabilities,
20
<PAGE>
denominated in a foreign currency and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and certain options, futures and forward contracts, gains or
losses attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "section 988" gains or losses, may increase or decrease the amount
of the Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
The Fund will not realize gain or loss on a short sale of a security until it
closes the transaction by delivering the borrowed security to the lender. All or
a portion of any gain arising from a short sale may be treated as short-term
capital gain, regardless of the period for which the Fund held the security used
to close the short sale. In addition, the Fund's holding period for any security
that is substantially identical to that which is sold short may be reduced or
eliminated as a result of the short sale.
Investments by the Fund in zero coupon securities will result in income to the
Fund equal to a portion of the excess of the face value of the securities over
their issue price (the "original issue discount") each year that the securities
are held, even though the Fund receives no cash interest payments. This income
is included in determining the amount of income that the Fund must distribute to
maintain its status as a regulated investment company and to avoid the payment
of federal income tax and the 4% excise tax. If the Fund invests in certain high
yield original issue discount obligations issued by corporations, a portion of
the original issue discount accruing on the obligations may be eligible for the
deduction for dividends received by corporations. In such event, a portion of
the dividends of investment company taxable income received from the Fund by its
corporate shareholders may be eligible for this deduction.
Gain derived by the Fund from the disposition of any market discount bonds
(i.e., bonds purchased other than at original issue, where the face value of the
bonds exceeds their purchase price) held by the Fund will be taxed as ordinary
income to the extent of the accrued market discount on the bonds, unless the
Fund elects to include the market discount in income as it accrues.
If the Fund invests in stock of certain foreign corporations that generate
largely passive investment-type income, or which hold a significant percentage
of assets that generate such income (referred to as "passive foreign investment
companies" or "PFICs"), these investments would be subject to special tax rules
designed to prevent deferral of U.S. taxation of the Fund's share of the PFIC's
earnings. In the absence of certain elections to report these earnings on a
current basis, regardless of whether the Fund actually receives any
distributions from the PFIC, investors in the Fund would be required to report
certain "excess distributions" from, and any gain from the disposition of stock
of, the PFIC as ordinary income. This ordinary income would be allocated ratably
to the Fund's holding period for the stock. Any amounts allocated to prior years
would be taxable at the highest rate of tax applicable in that year, increased
by an interest charge determined as though the amounts were underpayments of
tax.
21
<PAGE>
Income received by the Fund from sources within foreign countries may be subject
to withholding and other taxes imposed by such countries. If more than 50% of
the value of a Fund's total assets at the close of its taxable year consists of
securities of foreign corporations, the Fund will be eligible and may elect to
"pass through" to the Fund's shareholders the amount of foreign taxes paid by
the Fund. Pursuant to this election, a shareholder will be required to include
in gross income (in addition to dividends actually received) its pro rata share
of the foreign taxes paid by the Fund, and may be entitled either to deduct its
pro rata share of the foreign taxes in computing its taxable income or to use
the amount as a foreign tax credit against its U.S. Federal income tax
liability, subject to limitations. Each shareholder will be notified within 60
days after the close of the Fund's taxable year whether the foreign taxes paid
by the Fund will "pass through" for that year. If the Fund is not eligible to
make the election to "pass through" to its shareholders its foreign taxes, the
foreign taxes it pays will reduce its investment company taxable income and
distributions by the Fund will be treated as U.S.
source income.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the shareholder's U.S. tax attributable to its foreign source taxable
income. For this purpose, if the pass-through election is made, the source of
the Fund's income flows through to its shareholders. With respect to the Fund,
gains from the sale of securities will be treated as derived from U.S. sources
and certain currency fluctuation gains, including fluctuation gains from foreign
currency denominated debt securities, receivables and payables, and options,
futures and forward transactions, will be treated as ordinary income derived
from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income (as defined for purposes of the
foreign tax credit), including the foreign source passive income passed through
by the Funds.
The current position of the Internal Revenue Service (the "IRS") generally is to
treat a regulated investment company as owning its proportionate share of the
income and assets of any partnership in which it is a partner, in applying the
90% qualifying income requirement, the 30% Limitation and the asset
diversification requirements that, as described above, the Fund must satisfy to
qualify as a regulated investment company under the Code. These requirements may
limit the extent to which the Fund may invest in limited partnerships,
especially in the case of limited partnerships that do not primarily invest in a
diversified portfolio of stocks and securities.
Dividends paid out of the Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. If a portion of the Fund's
income consists of dividends paid by U.S. corporations, a portion of the
dividends paid by the Fund may be eligible for the corporate dividends-received
deduction. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, designated as capital
gain dividends are taxable as long-term capital gains, regardless of how long
the shareholder has held the Fund's shares, and are not eligible for the
dividends-received deduction. Shareholders receiving distributions in the form
of additional shares, rather than cash, generally will have a cost basis in each
such share equal to the net asset value of a share of the Fund on the
reinvestment date. A distribution of an amount in excess of the Fund's current
and accumulated earnings and profits will be treated by a shareholder as a
return of capital that is applied against and reduces the shareholder's basis in
his or her shares. To the extent that the amount of any such distribution
22
<PAGE>
exceeds the shareholder's basis in his or her shares, the excess will be treated
by the shareholder as gain from a sale or exchange of the shares. Shareholders
will be notified annually as to the U.S. federal tax status of distributions,
and shareholders receiving distributions in the form of additional shares will
receive a report as to the net asset value of those shares.
Upon the sale or other disposition of shares of the Fund, a shareholder may
realize a capital gain or loss that will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.
Under certain circumstances, the sales charge incurred in acquiring shares of
the Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund originally
acquired with a sales charge are disposed of within 90 days after the date on
which they were acquired and new shares of a regulated investment company are
acquired without a sales charge or at a reduced sales charge. In that case, the
gain or loss realized on the disposition will be determined by excluding from
the tax basis of the shares all or a portion of the sales charge incurred in
acquiring those shares. This exclusion applies to the extent that the otherwise
applicable sales charge with respect to the newly acquired shares is reduced as
a result of the shareholder having incurred a sales charge paid for the new
shares. This rule may be applied to successive acquisitions of shares of stock.
Distributions by the Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value of a share below a
shareholder's cost for the share, such a distribution nevertheless generally
would be taxable to the shareholder as ordinary income or long-term capital
gain, even though, from an investment standpoint, it may constitute a partial
return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution by a Fund. The
price of shares purchased at that time may include the amount of the forthcoming
distribution, but the distribution generally would be taxable to them.
Some shareholders may be subject to withholding of Federal income tax on
dividends and redemption payments from the Fund ("backup withholding") at the
rate of 31%. Corporate shareholders and certain other shareholders specified in
the Code generally are exempt from such backup withholding. Generally,
shareholders subject to backup withholding will be (i) those for whom a
certified taxpayer identification number is not on file with a Fund, (ii) those
about whom notification has been received (either by the shareholder or by a
Fund) from the IRS that they are subject to backup withholding or (iii) those
who, to a Fund's knowledge, have furnished an incorrect taxpayer identification
number. Generally, to avoid backup withholding, an investor must, at the time an
account is opened, certify under penalties of perjury that the taxpayer
identification number furnished is correct and that he or she is not subject to
backup
23
<PAGE>
withholding.
The foregoing discussion relates solely to U.S. Federal income tax law.
Dividends and distributions also may be subject to state, local and foreign
taxes. Dividends paid by the Fund from income attributable to interest on
obligations of the U.S. Government and certain of its agencies and
instrumentalities may be exempt from state and local taxes in certain states.
Shareholders should consult their tax advisers regarding the possible exclusion
of this portion of their dividends for state and local tax purposes. Non-U.S.
investors also should consult their tax advisers concerning the tax consequences
of ownership of shares of the Fund, including the possibility that distributions
may be subject to a 30% United States withholding tax (or a reduced rate of
withholding provided by treaty).
Shareholders of Class A, Class B and Class C shares may direct that income
dividends and capital gain distributions be paid to them through various options
listed in the "Dividends and Distributions Reinvestment Options" section of the
Fund's current Prospectus. If a shareholder selects either of two such options
(that: (a) income dividends be paid in cash and capital gain distributions be
paid in additional shares of the same class of a designated Fund at net asset
value; or (b) income dividends and capital gain distributions both be paid in
cash), and the dividend/distribution checks cannot be delivered, or, if such
checks remain uncashed for six months, the Fund reserves the right to reinvest
the dividend or distribution in the shareholder's account at the then-current
net asset value and to convert the shareholder's election to automatic
reinvestment in shares of the Fund from which the distributions were made. The
Fund has received from the IRS, rulings to the effect that (i) the
implementation of the multiple class purchase arrangement will not result in a
Fund's dividends or distributions constituting "preferential dividends" under
the Code, and (ii) that any conversion feature associated with a class of shares
does not constitute a taxable event under federal income tax law.
UNDERWRITER AND DISTRIBUTION SERVICES
Pursuant to Underwriting Agreements, Northstar Distributors, Inc. is the
Underwriter for the Fund and as such conducts a continuous offering pursuant to
a "best efforts" arrangement requiring it to take and pay for only such
securities as may be sold to the public. The Underwriter is an affiliate of the
Adviser and the Administrator.
The Underwriting Agreements may be terminated at any time on not more than 60
days' written notice, without payment of a penalty, by the Underwriter, by vote
of a majority of the outstanding class of voting securities of the Fund, or by
vote of a majority of the Trustees, who are not "interested persons" of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements. The Underwriting Agreements will terminate
automatically in the event of their assignment.
In addition to the amount paid to dealers pursuant to the sales charge table in
the Prospectus, the Underwriter from time to time pays, from its own resources
or pursuant to the Plans, a bonus or other incentive to dealers (other than the
Underwriter) that employ a registered representative who sells a minimum dollar
amount of the shares of the Fund during a specific period of time.
24
<PAGE>
Dealers may not use sales of any of the Fund's shares to qualify for or
participate in such programs to the extent such may be prohibited by a dealer's
internal procedures or by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. Such bonuses or
other incentives take the form of payment for travel expenses, including
lodging, incurred in connection with trips taken by qualifying registered
representatives and members of their families to places within or without the
United States, or other bonuses such as certificates for airline tickets, dining
establishments or the cash equivalent of such bonuses. The Underwriter, from
time to time, reallows all or a portion of the sales charge on Class A shares,
which it normally reallows to individual selling dealers. However, such
additional reallowance generally will be made only when the selling dealer
commits to substantial marketing support such as internal wholesaling through
dedicated personnel, internal communications and mass mailings.
The Fund has adopted separate distribution plans under Rule 12b-1 of the 1940
Act for each class of shares of the Fund (collectively the "Plans"). The Plans
permit the Fund to compensate the Underwriter in connection with activities
intended to promote the sale of shares of each class of shares of the Fund.
Pursuant to the Plan for Class A shares, the Fund may compensate the Underwriter
up to 0.30% of average daily net assets of the Fund's Class A shares. Under the
Plans for Class B and Class C shares, the Fund may compensate the Underwriter up
to 1.00% of the average daily net assets attributable to the respective class of
the Fund. Expenditures by the Underwriter under the Plans shall consist of: (i)
commissions to sales personnel for selling shares of the Fund (including
underwriting fees and financing expenses incurred in connection with the sale of
Class B and Class C shares); (ii) compensation, sales incentives and payments to
sales, marketing and service personnel; (iii) payments to broker-dealers and
other financial institutions that have entered into agreements with the
Underwriter in the form of a Dealer Agreement for Northstar Funds for services
rendered in connection with the sale and distribution of shares of the Funds;
(iv) payment of expenses incurred in sales and promotional activities, including
advertising expenditures related to the Funds; (v) the costs of preparing and
distributing promotional materials; (vi) the cost of printing the Fund's
Prospectus and SAI for distribution to potential investors; and (vii) other
activities that are reasonably calculated to result in the sale of shares of the
Fund.
A portion of the fees paid to the Underwriter pursuant to the 12b-1 plans not
exceeding 0.25% annually of the average daily net assets of the Fund's shares
may be paid as compensation for providing services to the Fund's shareholders,
including assistance in connection with inquiries related to shareholder
accounts (the "Service Fee"). In order to receive Service Fees under the Plans,
participants must meet such qualifications as are established in the sole
discretion of the Underwriter, such as services to the Fund's shareholders; or
services providing the Fund with more efficient methods of offering shares to
coherent groups of clients, members or prospects of a participant; or services
permitting purchases or sales of shares, or transmission of such purchases or
sales by computerized tape or other electronic equipment; or other processing.
If the Plans are terminated in accordance with their terms, the obligations of
the Fund to compensate the Underwriter for distribution related services
pursuant to the Plans will cease;
25
<PAGE>
however, subject to approval by the Trustees, including a majority of the
independent Trustees, the Fund may continue to make payments past the date on
which each Plan terminates up to the annual limits set forth in each Plan for
the purpose of compensating the Underwriter for services that were incurred
during the term of the Plan.
The Trustees have concluded that there is a reasonable likelihood that the Plans
will benefit the Fund and its shareholders and that the Plans should result in
greater sales and/or fewer redemptions of Fund shares. On a quarterly basis, the
Trustees will review a report on expenditures under the Plans and the purposes
for which expenditures were made. The Trustees will conduct an additional, more
extensive review annually in determining whether the Plans shall be continued.
By their terms, continuation of the Plans from year to year is contingent on
annual approval by a majority of the Trustees acting on behalf of the Fund and
by a majority of the Trustees who are not "interested persons" (as defined in
the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plans or any related agreements (the "Plan Trustees"). The
Plans provide that they may not be amended to increase materially the costs that
the Fund may bear pursuant to the applicable Plan without approval of the
shareholders of the Fund and that other material amendments to the Plans must be
approved by a majority of the Plan Trustees acting on behalf of the Fund, by
vote cast in person at a meeting called for the purpose of considering such
amendments. The Plans further provide that while each plan is in effect, the
selection and nomination of Trustees who are not "interested persons" shall be
committed to the discretion of the Trustees who are not "interested persons." A
Plan may be terminated at any time by vote of a majority of the Plan Trustees or
a majority of the outstanding Class of shares of the Fund.
TRUSTEES AND OFFICERS
The Trustees and principal Officers of the Fund and their business affiliations
for the past five years are set forth below. Unless otherwise noted, the mailing
address of the Trustees and Officers is Two Pickwick Plaza, Greenwich,
Connecticut 06830.
ROBERT B. GOODE, JR., Trustee. Age: 66. Currently retired. From 1990 to
1991, Chairman of The First Reinsurance Company of Hartford. From 1987 to
1989, President and Director of American Skandia Life Assurance Company.
Since October 1993, Trustee of the Northstar affiliated investment
companies.
PAUL S. DOHERTY, Trustee. Age: 62. President, Doherty, Wallace, Pillsbury
and Murphy, P.C., Attorneys. Director, Tambrands, Inc. Since October 1993,
Trustee of the Northstar affiliated investment companies.
DAVID W. WALLACE, Trustee. Age: 72. Chairman of Putnam Trust Company, Lone
Star Industries and FECO Engineered Systems, Inc. He is also President and
Trustee of Robert R. Young Foundation and Governor of the New York
Hospital. Director of UMC Electronics and Zurn Industries, Inc. Former
Chairman and Chief Executive Officer, Todd Shipyards and Bangor Punta
Corporation, and former Chairman and Chief Executive Officer of National
26
<PAGE>
Securities & Research Corporation. Since October 1993, Trustee of the
Northstar affiliated investment companies.
*MARK L. LIPSON, Trustee and President. Age: 47. Director, Chairman and
Chief Executive Officer of Northstar and Northstar, Inc. Director and
President of Northstar Administrators Corporation and Director and Chairman
of Northstar Distributors, Inc., President and Trustee of the Northstar
affiliated investment companies since October 1993. Prior to August, 1993,
Director, President and Chief Executive Officer of National Securities &
Research Corporation and President and Director/Trustee of the National
Affiliated Investment Companies and certain of National's subsidiaries.
*JOHN G. TURNER, Trustee. Age: 57. Since May 1993, Chairman and CEO of
ReliaStar Financial Corporation and Northwestern National Life Insurance
Co. and Chairman of other ReliaStar Affiliated Insurance Companies since
1995. Since October 1993, Director of Northstar and affiliates. Prior to
May 1993, President and CEO of ReliaStar and Northwestern National.
ALAN L. GOSULE, Trustee. Age: 55. Partner, Rogers & Wells. Director, F.L.
Putnam Investment Management Co., Inc.
DAVID W.C. PUTNAM, Trustee. Age: 67. President, Clerk and Director of F.L.
Putnam Securities Company, Incorporated, F.L. Putnam Investment Management
Company, Incorporated, Interstate Power Company, Inc., Trust Realty Corp.
and Bow Ridge Mining Co.; Director of Anchor Investment Management
Corporation; President and Trustee of Anchor Capital Accumulation Trust,
Anchor International Bond Trust, Anchor Gold and Currency Trust, Anchor
Resources and Commodities Trust and Anchor Strategic Assets Trust.
JOHN R. SMITH, Trustee. Age: 73. From 1970-1991, Financial Vice President
of Boston College; President of New England Fiduciary Company (financial
planning) since 1991; Chairman ^ of Massachusetts Educational Financing
Authority since 1987; Vice Chairman of Massachusetts Health and Education
Authority.
WALTER H. MAY, Trustee. Age: 60. Retired. Former Senior Executive for Piper
Jaffrey, Inc.
THOMAS OLE DIAL, Vice President. Age: 40. Executive Vice President and
Chief Investment Officer - Fixed Income of Northstar and Principal, T.D. &
Associates, Inc. From 1989 to August 1993, Executive Vice President and
Chief Investment Officer - Fixed Income of National Securities and Research
Corporation, Vice President of National Affiliated Investment Companies,
and Vice President of NSR Asset Management Corporation. From 1988 to 1989,
President of Dial Captial Management.
MARGARET D. PATEL, Vice President. Age: 52. Vice President and Managing
Director of Northstar. From 1988 to May 1995, Senior Vice President of BSC.
From 1986 to 1988,
27
<PAGE>
President and Portfolio Manager at Fixed Income Asset Management, Inc.
Prior to 1988, Portfolio Manager at American Capital and The Dreyfus
Corporation.
GEOFFREY WADSWORTH, Vice President. Age: 53. Vice President of Northstar.
Former Vice President and Portfolio Manager with National Securities &
Research Corporation.
AGNES MULLADY, Vice President and Treasurer. Age: 38. Senior Vice President
and Chief Financial Officer of Northstar, Senior Vice President and
Treasurer of Northstar Administrators corporation, and Vice President and
Treasurer of Northstar Distributors, Inc. From 1987 to 1993, Vice President
and Treasurer of National Securities & Research Corporation.
*Deemed to be an "interested person" of the Trust, as defined by the 1940 Act.
Northstar and Northstar Administrators Corporation make their personnel
available to serve as Officers and "Interested Trustees" of the Funds. All
Officers and Interested Trustees of the Funds are compensated by Northstar or
Northstar Administrators Corporation. Trustees who are not "interested persons"
of the Adviser are paid an annual retainer fee of $7,500 for their combined
services as Trustees to the Funds and to retail funds sponsored or advised by
the Adviser, and a per meeting fee of $1,750 for attendance at each joint
meeting of the Funds and the other Northstar retail funds. The Funds also
reimburse Trustees for expenses incurred by them in connection with such
meetings.
As of August 31, 1996, all Trustees and executive officers of each Fund as a
group owned beneficially or of record less than 1% of the outstanding securities
of such Fund. To the knowledge of the Funds, as of August 31, 1996, no
shareholder owned beneficially (b) or of record (r) more than 5% of a Fund's
outstanding shares, except as set forth below:
(1) Income and Growth Fund
Merrill Lynch Pierce Fenner & Smith 12.4%(r)
Jacksonville, Florida
Norwest Bank 11.6%(r)
Minneapolis, Minnesota
(2) High Total Return Fund
Merrill Lynch Pierce Fenner & Smith 25.6%(r)
Jacksonville, Florida
(3) Special Fund
28
<PAGE>
Merrill Lynch Pierce Fenner & Smith 41.6%(r)
Jacksonville, Fla.
(4) Growth Fund
Merrill Lynch Pierce Fenner & Smith 13.8%(r)
Jacksonville, Fla.
(5) Balance Sheet Opportunities Fund
Merrill Lynch Pierce Fenner & Smith 8.7%(r)
Jacksonville, Fla.
(6) Government Securities Fund
Merrill Lynch Pierce Fenner & Smith 13%(r)
Jacksonville, Fla.
Order of St. Benedict of New Jersey 6%(b)
Morristown, NJ
Donaldson Lufkin Jenrette 11%(r)
Jersey City, NJ
Donaldson Lufkin Jenrette 10.3%(r)
Jersey City, NJ
Donaldson Lufkin Jenrette 10.7%(r)
Jersey City, NJ
Donaldson Lufkin Jenrette 10.5%(r)
Jersey City, NJ
(7) Strategic Income Fund
29
<PAGE>
Merrill Lynch Pierce Fenner & Smith 19.6% (r)
Jacksonville, Florida
Norwest Bank 8.9% (r)
Minneapolis, Minnesota
Northern Life Insurance Company 11.5% (r)
Minneapolis, MN
(8) High Yield Fund
Merrill Lynch Pierce Fenner & Smith 38.6% (r)
Jacksonville, Fla.
30
<PAGE>
COMPENSATION TABLE
Period ended December 31, 1995
<TABLE>
<CAPTION>
Pension Benefits Total Compensation
Accrued as Part of Estimated Annual from All Funds in
Fund Expenses Benefits upon Northstar Complex(b)
Compensation from Retirement
Fund
<S> <C> <C> <C> <C>
Robert B. Goode, Jr. (a) 0 0 13,750
Paul S. Doherty (a) 0 0 15,250
David W. Wallace (a) 0 0 15,250
Mark L. Lipson (a) 0 0 0
John G. Turner (a) 0 0 0
Alan L. Gosule (a) 0 0 14,950
David W.C. Putnam (a) 0 0 22,750
John R. Smith (a) 0 0 15,350
</TABLE>
(a) See table below for Fund specific compensation.
(b) Compensation paid by the Northstar Trust funds, the Northstar
Variable Trust funds and the remaining six funds, Northstar Special, Growth,
Balance Sheet Opportunities, Government Securities, Strategic Income and High
Yield Funds, formerly advised by BSC.
INDIVIDUAL FUND
FISCAL YEAR COMPENSATION TABLES
<TABLE>
<CAPTION>
Income and Growth High Total Return Special(c) Growth(c)
<S> <C> <C> <C> <C>
Robert B. Goode, Jr. 2,043 2,043 708 708
Paul S. Doherty 2,043 2,043 2,208 708
David W. Wallace 2,043 2,043 2,208 708
Mark L. Lipson 0 0 0 0
John G. Turner 0 0 0 0
Alan L. Gosule 708 708 3,409 1,909
David W.C. Putnam 708 708 3,366 2,985
John R. Smith 833 833 3,433 1,934
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Balance Sheet Government Strategic Income(c) High Yield(c)
Opportunities(c) Securities(c)
<S> <C> <C> <C> <C>
Robert B. Goode, Jr. 708 708 708 708
Paul S. Doherty 708 708 708 708
David W. Wallace 708 708 708 708
Mark L. Lipson 0 0 0 0
John G. Turner 0 0 0 0
Alan L. Gosule 1,908 1,908 1,908 1,908
David W.C. Putnam 2,906 5,258 4,775 1,460
John R. Smith 1,933 1,933 1,933 1,933
</TABLE>
(c) Prior to June 2, 1995 the Trustees who were not interested persons,
other than David Putnam, were paid a per fund fee of $500 for each full calendar
year during which services were rendered to the Funds. In addition, they were
paid a per fund fee of $250 for attending each of the Trustees' meetings, $100
per fund for attending each audit committee meeting, $100 audit committee
retainer per fund and were reimbursed for out-of-pocket expenses. Mr. Putnam,
former Chairman of these Funds, received a fee of $30,000 per annum.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. has been selected as the independent accountants of the
Fund. Coopers & Lybrand L.L.P. audits the Funds' annual financial statements and
expresses an opinion thereon.
CUSTODIAN
Custodial Trust Company, Princeton, New Jersey, acts as custodian for the Fund.
TRANSFER AGENT
The Fund through its officers acts as its own transfer agent and fund accounting
agent.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on October 31. The Fund will send financial
statements to its shareholders at least semi-annually. An annual report
containing financial statements audited by the independent accountants will be
sent to shareholders each year.
ORGANIZATIONAL AND RELATED INFORMATION
Northstar Trust (formerly Northstar Advantage Trust), and two of its series
Income and Growth Fund (formerly Northstar Advantage Income and Growth Fund) and
High Total Return Fund (formerly Northstar Advantage High Total Return Fund),
was organized in 1993. Northstar Growth + Value Fund was organized in 1996.
32
<PAGE>
The shares of the Fund, when issued, will be fully paid and non-assessable, have
no preference, preemptive, or similar rights, and will be freely transferable.
There will normally be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Shareholders may, in accordance with the Declaration of Trust, cause a meeting
of shareholders to be held for the purpose of voting on the removal of Trustees.
Meetings of the shareholders will be called upon written request of shareholders
holding in the aggregate not less than 10% of the outstanding shares of the Fund
or class having voting rights. Except as set forth above and subject to the 1940
Act, the Trustees will continue to hold office and appoint successor Trustees.
Under Massachusetts law, there is a remote possibility that shareholders of a
business trust could, under certain circumstances, be held personally liable as
partners for the obligations of such trust. The Amended and Restated Declaration
of Trust for the Fund contains provisions intended to limit such liability and
to provide indemnification out of Fund property of any shareholder charged or
held personally liable for obligations or liabilities of a Fund solely by reason
of being or having been a shareholder of the Fund and not because of such
shareholder's acts or omissions or for some other reason. Thus, 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.
PERFORMANCE INFORMATION
Performance information for the Fund may be compared in reports and promotional
literature to (1) the S&P 500, Dow Jones Industrial Average ("DJIA"), or other
unmanaged indices, so that investors may compare the Fund's results to those of
a group of unmanaged securities that are widely regarded by investors as
representative of the securities markets in general; (ii) other groups of mutual
funds tracked by Lipper Analytical Services, Inc., a widely used independent
research firm that 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; (iii)
the Consumer Price Index (measure for inflation) to assess the real rate of
return from an investment in a Fund; and (iv) well known monitoring sources of
CD performance rates, such as Solomon Brothers, Federal Reserve Bulletin,
American Bankers and Tower Data/The Wall Street Journal. Unmanaged indices may
assume the reinvestment of dividends, but generally do not reflect deductions
for administrative and management costs and expenses. Performance rankings are
based on historical information and are not intended to indicate future
performance.
In addition, the Fund may, from time to time, include various measures of a
Fund's performance, including the current yield, the tax-equivalent yield and
the average annual total return of shares of the Fund in advertisements,
promotional literature or reports to shareholders or prospective investors. Such
materials may occasionally cite statistics to reflect a Fund's volatility risk.
Average Annual Total Return. Standardized quotations of average annual total
return ("Standardized Return") for each class of shares will be expressed in
terms of the average annual
33
<PAGE>
compounded rate of return for a hypothetical investment in such class of shares
over periods of 1, 5 and 10 years or up to the life of the class of shares,
calculated for each class separately pursuant to the following formula:
P(1+T) TO THE POWER OF n = ERV ^
Where:
P = a hypothetical initial payment of $1,000
T = the average annual total return
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period).
All total return figures reflect the deduction of a proportional share of each
Class's expenses (on an annual basis), the deduction of the maximum initial
sales load (in the case of Class A shares) and the maximum contingent deferred
sales charge applicable to a complete redemption of the investment (in the case
of Class B, Class C and Class T shares), and assume that all dividends and
distributions are reinvested when paid.
Yield. Quotations of yield for a specific class of shares of the Fund will be
based on all investment income attributable to that class earned during a
particular 30-day (or one month) period (including dividends and interest), less
expenses accrued during the period ("net investment income"), and will be
computed by dividing the net investment income per share of that class earned
during the period by the maximum offering price per share on the last day of the
month, according to the following formula:
Yield = 2[(a-b + 1) TO THE POWER OF 6 -1]
---------------------------------
cd
Where:
a = dividends and interest earned during the period attributable to a
specific class of shares
b = expenses accrued for the period attributable to that class (net of
reimbursements)
c = the average daily number of shares of that class
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
34
<PAGE>
The maximum offering price includes a maximum contingent deferred sales load of
5% for Class B shares, and 1%, for Class C shares.
All accrued expenses are taken into account as follows. Accrued expenses include
all recurring expenses that are charged to all shareholder accounts in
proportion to the length of the base period, including but not limited to
expenses under the Fund's distribution plans. Except as noted, the performance
results take the contingent deferred sales load into account.
Non-Standardized Total Return. In addition to the performance information
described above, the Fund may provide total return information that is not
calculated according to the formula set forth above ("Non-Standardized Return").
Neither initial nor contingent deferred sales charges are taken into account in
calculating Non-Standardized Return. Excluding a Fund's sales charge from total
return calculation produces a higher total return figure.
OTHER INFORMATION CONCERNING FUND PERFORMANCE
A Fund may quote its performance in various ways, using various types of
comparisons to market indices, other funds or investment alternatives, or to
general increases in the cost of living. All performance information supplied by
the Fund in advertising is historical and is not intended to indicate future
returns. The Fund's share prices and total returns fluctuate in response to
market conditions and other factors, and the value of the Fund's shares when
redeemed may be more or less than their original cost.
Evaluations of Fund performance made by independent sources may also be used in
advertisements concerning the Fund, including reprints of, or selections from,
editorials or articles about a Fund. These editorials or articles may include
quotations of performance from other sources, such as Lipper or Morningstar.
Sources for Fund performance information and articles about the Fund may include
the following: BANXQUOTE, BARRON'S, BUSINESS WEEK, CDA INVESTMENT TECHNOLOGIES,
INC., CHANGING TIMES, CONSUMER DIGEST, FINANCIAL WORLD, FORBES, FORTUNE,
IBC/DONOGHUES'S MONEY FUND REPORT, IBBOTSON ASSOCIATES, INC., INVESTMENT COMPANY
DATA, INC., INVESTOR'S DAILY, LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND
PERFORMANCE ANALYSIS, MONEY, MUTUAL FUND VALUES, THE NEW YORK TIMES, PERSONAL
INVESTING NEWS, PERSONAL INVESTOR, SUCCESS, USA TODAY, U.S. NEWS AND WORLD
REPORT, WALL STREET JOURNAL, WIESENBERGER INVESTMENT COMPANIES SERVICES, and
WORKING WOMAN.
When comparing yield, total return and investment risk of shares of the Fund
with other investments, investors should understand that certain other
investments have different risk characteristics than an investment in shares of
the Fund. For example, certificates of deposit may have fixed rates of return
and may be insured as to principal and interest by the FDIC, while a Fund's
returns will fluctuate and its share values and returns are not guaranteed.
Money market accounts offered by banks also may be insured by the FDIC and may
offer stability of principal. U.S. Treasury securities are guaranteed as to
principal and interest by the full faith and credit of the U.S. government.
Money market mutual funds may seek to offer a fixed price per share.
35
<PAGE>
The performance of a Fund is not fixed or guaranteed. Performance quotations
should not be considered to be representative of performance of the Fund for any
period in the future. The performance of a Fund is a function of many factors
including its earnings, expenses and number of outstanding shares. Fluctuating
market conditions; purchases, sales and maturities of portfolio securities;
sales and redemptions of shares of beneficial interest, and changes in operating
expenses are all examples of items that can increase or decrease the Fund's
performance.
FINANCIAL STATEMENTS
The Northstar Trust's audited financial statements dated October 31, 1995 and
the report of the independent accountants, Coopers & Lybrand L.L.P. with respect
to such financial statements, are hereby incorporated by reference to the Annual
Report to Shareholders of the Northstar Trust for the fiscal year ended October
31, 1995.
The audited financial statements of Special Fund, Growth Fund, Balance Sheet
Opportunities Fund, Government Securities Fund, Strategic Income Fund and High
Yield Fund as of and for the fiscal period ended December 31, 1995 and the
report of the independent accountants, Coopers & Lybrand L.L.P., with respect to
such financial statements are hereby incorporated by reference to the Annual
Report to Shareholders of The Advantage Family of Funds for the fiscal year
ended December 31, 1995.
36
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Not Applicable
(b) Exhibits:
(1) Declaration of Trust*
(2) By-Laws*
(3) N/A
(4) N/A
(5) Form of Investment Advisory Agreement
(6) Forms of Underwriting Agreements
(7) N/A
(8) Custody Agreement*
(9) Administrative Services Agreement*
(10) Opinion of Counsel
(11) N/A
(12) N/A
(13) N/A
(14 N/A
(15) Form of Distribution and Service Plan
(16) Performance Information*
(17) N/A
(18) N/A
* Filed as part of PEA No. 8 and incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant
There are no persons controlled by or under common control with Registrant.
Item 26. Number of Holders of Securities
As of January 31, 1996, the Registrant had no security holders.
Item 27. Indemnification
Section 4.3 of Registrant's Declaration of Trust provides the following:
(a) Subject to the exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust
shall be indemnified by the Trust to the fullest extent permitted by
law against all liability and against all expenses reasonably incurred
or paid by him in connection with
<PAGE>
any claim, action, suit or proceeding in which he becomes involved as a
party or otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the settlement
thereof; and
(ii) the word "claim", "action", "suit" or "proceeding" shall apply to
all claims, actions or suits or proceedings (civil, criminal,
administrative or other including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust, a series thereof, or the
Shareholders by reason of a final adjudication by a court or other
body before which a proceeding was brought or that he engaged in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in reasonable belief
that his action was in the best interest of the Trust; and
(iii) in the event of a settlement or other disposition not involving a
final adjudication as provided in paragraph (b) (i) or (b) (ii)
resulting in a payment by a Trustee or officer, unless there has
been a determination that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office:
(A) by the court or other body approving the settlement
or other disposition; or
(B) based upon the review of readily available facts (as
opposed to full trial-type inquiry) by (x) vote of a
majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested
Trustees then in office act on the matter) or (y)
written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a person who has ceased to be such Trustee
or officer and shall inure to the benefit of the heirs, executors,
administrators and assigns of such a person. Nothing contained herein
shall affect any rights to indemnification to which personnel of the Trust
other than Trustees and officers may be entitled by contract or otherwise
under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of
this Section 4.3 may be advanced by the Trust prior to final disposition
thereof upon receipt of an undertaking by or on behalf of the recipient to
repay such amount if it is ultimately determined that he is
<PAGE>
not entitled to indemnification under this Section 4.3, provided that
either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient or the Trust
shall be insured against losses arising out of any such
advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on
the matter) or an independent legal counsel in a written
opinion shall determine, based upon a review of readily
available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the recipient ultimately
will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is not (i) an
Interested Person of the Trust (including anyone who has been exempted from
being an Interested Person by any rule, regulation or order of the Commission),
or (ii) involved in the claim, action, suit or proceeding.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore, 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 a Trustee, officer or controlling person of the Registrant in
connection with the successful defense of any action suit or proceeding) is
asserted by such Trustee, officer or controlling person 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 be governed by final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
See "Management of the Fund" in the Prospectus and Services of the Adviser and
Administrator" and "Trustees and Officers" in the Statement of Additional
Information, each of which is included in the Registration Statement.
Set forth is a list of each officer and director of the Adviser indicating each
business, profession, vocation or employment of a substantial nature in which
each such person has been engaged since July 31, 1994.
Position with Other Substantial
Investment Business, Profession
Name Adviser Vocation or Employment
John Turner Director Chairman and CEO, ReliaStar Financial
Corp; Director of Northstar Affiliates;
Trustee and Chairman, Northstar
Affiliated Investment Companies.
<PAGE>
John Flittie Director President, ReliaStar Financial Corp.
Director, Northstar Affilates.
Mark L. Lipson Chairman/CEO Director and Officer of Northstar
Director Distributors, Inc., Northstar
Administrators Corp. and NWNL
Northstar, Inc. Trustee and President,
Northstar Affiliated Investment
Companies.
Robert J. Adler Executive Vice President, Northstar Distributors, Inc.
President, Sales &
Marketing
Thomas Ole Dial Executive Vice Vice President, Northstar Affiliated
President-Chief Investment Companies, and Principal, TD
Investment Officer, Associates Inc.
Fixed Income
Margaret Patel Vice President/ Vice President, Northstar Affiliate
Managing Director Investment Cos. Former Vice President
and Portfolio Manager for Boston
Security Cousellors, Inc.
Geoffrey Wadsworth Vice President/ Vice President - Northstar Affiliated
Investments and Investment Companies.
Portfolio Manager
Jeffrey Aurigemma Vice President - Vice President - Northstar Affiliated
Investments Investment Companies.
Michael Graves Vice President Vice President - Northstar Affiliated
Investments Investment Companies
Agnes Mullady Sr. Vice President Vice President & Treasurer of Northstar
and CFO Affiliates and the Northstar Affiliated
Investment Companies.
Gertrude Purus Vice President Vice President Northstar Distributors
Operations and Northstar Administrators Corp.
Stephen Vondrak Vice President Vice President - Northstar
Sales/Marketing Distributors, Inc. Former Regional
Marketing Manager with Roger Engemann
and Associates from 1991-1994.
Mark Sfarra Vice President- Vice President - Northstar
Marketing Distributors, Inc.
<PAGE>
Item 29 . Principal Underwriter
(a) See "Management of the Funds - The Adviser and Affiliated Service Providers"
and "How to Purchase Shares" in the Prospectus and "Underwriter and Distribution
Services" in the Statement of Additional Information, both of which are included
in this Post-Effective Amendment to the Registration Statement. Unless otherwise
indicated, the principal business address for each person is c/o Northstar, Two
Pickwick Plaza, Greenwich, CT 06830.
(b) (1) (2) (3)
Name and Principal Position and Offices Position and Offices
Address with Underwriter with Registrant
John Turner Director Trustee, Chairman
20 Washington Ave. South
Minneapolis, MN
John Flittie Director None
20 Washington Ave. South
Minneapolis, MN
Mark L. Lipson Chairman & Director Trustee and President
Robert J. Adler President None
Mark Blinder Reg. Vice President None
Richard Francis Reg. Vice President None
Daniel Leonard Reg. Vice President None
Stephen O'Brien Reg. Vice President None
David Linton Reg. Vice President None
Charles Dolce Reg. Vice President None
Hyman Glasman Reg. Vice President None
Stephen Vondrak Vice President None
Mark Sfarra Vice President None
Gertrude Purus Vice President None
Agnes Mullady Vice President & Treasurer Vice President &
Treasurer
<PAGE>
Item 30. Location of Accounts and Records
Custodial Trust Company maintains the following records as Custodian for the
Fund:
(1) Receipts and delivery of securities including certificate numbers;
(2) Receipts and disbursement of cash; (3) Records of securities in
transfer, securities in physical possession, securities owned and
securities loaned.
Northstar Administrators Corporation maintains the following records as Fund
Accounting Agent for the Fund:
(1) Fund Accounting Records.
Northstar High Total Return Fund II maintains the following records at Two
Pickwick Plaza, Greenwich, CT 06830, acting through its officers as Transfer
Agent and Blue Sky Administrator for the Fund.
(1) Shareholder Records;
(2) Share accumulation accounts: Details as to dates and number of shares
of each accumulation, price of each accumulation;
(3) Fund Accounting Records;
(4) State Securities Regisitration Records.
All other records required by item 30(a) are maintained at the office of the
Administrator, Two Pickwick Plaza, Greenwich, CT 06830.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
(a) Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Trustees when
requested in writing to do so by the holders of at least 10% of the Trusts'
outstanding shares of beneficial interest and in connection with such meeting to
comply with the provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.
(b) Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders upon
request and without charge.
(c) 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 the Funds registration statement.
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Greenwich and State of
Connecticut on the 3rd day of January, 1997.
NORTHSTAR TRUST
/s/Mark L. Lipson
Mark L. Lipson, President*
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/John G. Turner Chairman/Trustee January 3, 1997
John G. Turner*
/s/Mark L. Lipson President/Trustee January 3, 1997
Mark L. Lipson*
/s/Paul S. Doherty Trustee January 3, 1997
Paul S. Doherty*
/s/David W. Wallace Trustee January 3, 1997
David W. Wallace*
/s/Robert B. Goode, Jr. Trustee January 3, 1997
Robert B. Goode, Jr.*
/s/Walter H. May Trustee January 3, 1997
Walter H. May*
/s/Alan L. Gosule Trustee January 3, 1997
Alan L. Gosule*
/s/David W.C. Putnam Trustee January 3, 1997
David W. C. Putnam*
/s/John R. Smith Trustee January 3, 1997
John R. Smith*
/s/Agnes Mullady Principal Financial January 3, 1997
Agnes Mullady and Accounting Officer
By:/s/Agnes Mullady
*Agnes Mullady - Attorney-in-Fact. Executed pursuant to powers of attorney
filed with PEA Nos. 6 and 7
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Under
Part C of Form N-1A Name of Exhibit
5 Form of Advisory Agreement
6 Forms of Underwriting Agreements
10 Opinion of Counsel
15 Form of Distribution and Service Plan
Exhibit 5
NORTHSTAR TRUST
INVESTMENT ADVISORY AGREEMENT
As Amended October 29, 1996
AGREEMENT made this 8th day of November 1993, by and between NORTHSTAR
TRUST, a Massachusetts business trust, (the "Trust") and NORTHSTAR INVESTMENT
MANAGEMENT CORPORATION., a Delaware business corporation (the "Adviser").
The Trust is an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
consisting of the series named on schedule 1 hereto (each "Fund" and
collectively the "Funds"), as such schedule may be revised from time to time.
The Trust desires to retain the Adviser to render investment advisory
services to the Funds, and the Adviser is willing to render such investment
advisory on the terms set forth below.
The parties agree as follows:
1. The Trust hereby appoints the Adviser to act as investment adviser
to the Trust and the Funds for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to render the
services described, for the compensation provided, in this Agreement.
2. Subject to the supervision of the Trustees, the Adviser shall manage
the investment operations of the Funds and the composition of each Fund's
portfolio, including the purchase and retention and disposition of portfolio
securities, in accordance with each Fund's investment objectives, policies and
restrictions as stated in the Trust's Prospectus and Statement of Additional
Information (as defined below) subject to the following understandings:
(a) The Adviser shall provide supervision of each Fund's investments
and determine from time to time what investments will be made, held or disposed
of or what securities will be purchased and retained, sold or loaned by each
Fund, and what portion of the assets will be invested or held uninvested as
cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations under
this Agreement, shall (i) act in conformity with the Declaration of Trust, By-
Laws, Prospectus and Statement of Additional Information of the Trust, with the
instructions and directions of the Trustees and (ii)
<PAGE>
conform to and comply with the requirements of the Investment Company Act and
all other applicable federal and state laws and regulations.
(d) (i) The Adviser shall determine the securities to be purchased or
sold by each Fund and will place orders pursuant to its determinations with or
through such persons, brokers or dealers to carry out the policy with respect to
brokerage as set forth in the Trust's Prospectus and Statement of Additional
Information or as the Trustees may direct from time to time. In providing each
Fund with investment supervision, the Adviser will give primary consideration to
securing the most favorable price and efficient execution. The Adviser may also
consider the financial responsibility, research and investment information and
other services and research related products provided by brokers or dealers who
may effect or be a party to any such transactions or other transactions to which
other clients of the Adviser may be a party. The Funds recognize that the
services and research related products provided by such brokers may be useful to
the Adviser in connection with its services to other clients.
(ii) When the Adviser deems the purchase or sale of a security to be in
the best interest of a Fund as well as other clients, the Adviser, to the extent
permitted by applicable laws and regulations, may aggregate the securities to be
sold or purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transactions, will
be made by the Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to each Fund and to such other
clients.
(e) The Adviser shall maintain, or cause to be maintained, all books
and records required under the Investment Company Act to the extent not
maintained by the custodian of the Trust. The Adviser shall render to the
Trustees such periodic and special reports as the Trustees may reasonably
request.
(f) The Adviser shall provide the Trust's custodian on each business
day information relating to all transactions concerning each Fund's assets.
(g) The investment management services of the Adviser to the Trust and
to each Fund under this Agreement are not to be deemed exclusive, and the
Adviser shall be free to render similar services to others.
3. The Trust has delivered to the Adviser copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) Declaration of Trust, as amended, as filed with the Secretary of
the Commonwealth of Massachusetts (such Declaration of Trust, as in effect on
the date hereof and as further amended from time to time, are herein called the
"Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date hereof
and as amended from time to time, are herein called the "By-Laws");
<PAGE>
(c) Certified resolutions of the Trustees authorizing the appointment
of the Adviser and approving this Agreement on behalf of the Trust and each
Fund;
(d) Registration Statement on Form N-lA under the Investment Company
Act and the Securities Act of 1933, as amended from time to time (the
"Registration Statement"), as filed with the Securities and Exchange Commission
(the "Commission"), relating to the Trust and shares of beneficial interest of
each Fund and all amendments thereto.
(e) Notification of Registration of the Trust under the Investment
Company Act on Form N-8A as filed with the Commission and all amendments
thereto;
(f) Prospectus and Statement of Additional Information included in the
Registration Statement, as amended from time to time. All references to this
Agreement, the Prospectus and the Statement of Additional Information shall be
to such documents as most recently amended or supplemented and in effect.
4. The Adviser shall authorize and permit any of its directors,
officers and employees who may be elected as trustees or officers of the Trust
and/ or the Funds to serve in the capacities in which they are elected. All
services to be furnished by the Adviser under this Agreement may be furnished
through such directors, officers or employees of the Adviser.
5. The Adviser agrees that all records which it maintains for the Trust
and/or the Funds are property of the Trust and/or the Funds. The Adviser will
surrender promptly to the Trust and/or the Funds any such records upon either
the Trust's or the Fund's request. The Adviser further agrees to preserve such
records for the periods prescribed in Rule 3la-2 of the Commission under the
Investment Company Act.
6. (i) In connection with the services rendered by the Adviser under
this Agreement, the Adviser will pay all of the following expenses:
(a) the salaries and expenses of all personnel of the Trust, the
Funds and the Adviser required to perform the services to be
provided pursuant to this Agreement, except the fees of the
trustees who are not affiliated persons of the Adviser, and
(b) all expenses incurred by the Adviser, the Trust or by the
Funds in connection the performance of the Adviser's
responsibilities hereunder, other than brokers' commissions
and any issue or transfer taxes chargeable to each respective
Fund in connection with its securities transactions.
7. In the event the expenses of each Fund for any fiscal year
(including the fees payable to the Adviser but excluding interest, taxes,
brokerage commissions, distribution fees and litigation and indemnification
expenses and other extraordinary expenses not incurred in the ordinary course of
the Fund's business) exceed the lowest applicable annual expense limitation
established pursuant to the statutes or regulations of any jurisdictions in
which shares of each
<PAGE>
respective Fund are then qualified for offer and sale, the compensation due the
Adviser will be reduced by the amount of such excess, or, if such reduction
exceeds the compensation payable to the Adviser, the Adviser will pay each Fund,
whose expenses exceed such expense limitation, the amount of such reduction
which exceeds the amount of such compensation.
8. For the services provided and the expenses assumed pursuant to this
Agreement, each Fund will pay to the Adviser as compensation a at the rate set
forth opposite each Funds' name on Schedule 1 hereto, such fee to be accrued
daily and paid monthly..
9. The Adviser may rely on information reasonably believed by it to be
accurate and reliable. Neither the Adviser nor its officers, directors,
employees or agents or controlling persons shall be liable for any error or
judgment or mistake of law, or for any loss suffered by the Trust and/or a Fund
in connection with or arising out of the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
10. As to each Fund, this Agreement shall continue until the date set
forth opposite such Fund's name on Schedule 1 hereto (the "Reapproval Date") and
shall continue automatically for successive annual periods ending on the day of
each year set forth opposite the Fund's name on Schedule 1 hereto (the
"Reapproval Day"), provided that such continuance is specifically approved at
least annually by the affirmative vote of (i) a majority of the Trustees of the
Trust acting separately on behalf of each Fund, who are not interested persons
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) a majority of the Trustees of the Trust or the holders
of a majority of the outstanding voting securities of each respective Fund;
provided however, that this Agreement may be terminated by the Trust, on behalf
of a Fund at any time, without the payment of any penalty, by the Trustees
acting on behalf of a Fund or by vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of a Fund, or by the
Adviser at any time, without the payment of any penalty, on not more than 60
days' nor less than 30 days' written notice to the other party. This Agreement
shall terminate automatically in the event of its assignment provided that a
transaction which does not, under the Investment Company Act, result in a change
of actual control or management of the Adviser's business shall not be deemed to
be an assignment for the purposes of this Agreement.
11. This agreement shall terminate automatically in the event of its
assignment; the term "assignment" for this purpose shall have the meaning
defined in Section 2(a)(4) of the Investment Company Act of 1940.
12. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Adviser who may also be a trustee, officer
or employee of the Trust and/or the Funds to engage in any other business or to
devote his time and attention in part to the management or other aspect of any
business, whether of a similar or dissimilar nature, nor limit
<PAGE>
or restrict the right of the Adviser to engage in any other business or to
render services of any kind to any other person or entity.
13. During the term of this Agreement, the Trust and each Fund agrees
to furnish the Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of each Fund or the public, which
refer in any way to the Adviser, prior to use thereof and not to use such
material if the Adviser reasonably objects in writing within five business days
(or such other time as may be mutually agreed) after receipt. In the event of
termination of the Agreement, the Trust and/or each Fund will continue to
furnish to the Adviser such other information relating to the business affairs
of the Trust and/or each Fund as the Adviser at any time, or from time to time,
reasonably requests in order to discharge its obligations hereunder.
14. This Agreement may be amended by mutual agreement, but only after
authorization of such amendments by the affirmative vote of (i) the holders of
the majority of the outstanding voting securities of each Fund and ( ii) a
majority of the members of the Trustees who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
15. The Adviser, the Trust and the Funds each agree that the name
"Northstar" is proprietary to, and a property right of, the Adviser. The Trusts
and the Funds agree and consent that (i) each will only use the name "Northstar"
as part of its name and for no other purpose, (ii) each will not purport to
grant any third party the right to use the name "Northstar" and (iii) upon the
termination of this Agreement, the Trust and the Funds shall, upon the request
of the Adviser, cease to use the name "Northstar", and shall use its best
efforts to cause its officers, trustees and shareholders to take any and all
actions which the Adviser may request to effect the foregoing.
16. Any notice or other communications required to be given pursuant to
this Agreement shall be deemed to be given if delivered or mailed by registered
mail, postage paid, (1) to the Adviser at Two Greenwich Plaza, Suite 100,
Greenwich, CT 06830, Attention: Secretary; or (2) to the Trust and/or the Funds,
Two Greenwich Plaza, Suite 100, Greenwich, CT 06830, Attention: Secretary.
17. This Agreement shall be governed by and construed in accordance
with the laws of the State of Connecticut. The terms "interested person",
"assignment", and "vote of the majority of the outstanding securities" shall
have the meaning set forth in the Investment Company Act.
18. The Declaration of Trust, establishing the Trust, dated August 18,
1993, 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 "Northstar Series Trust" refers to the Trustees under the
Declaration collectively as trustees, but not individually or personally; and no
Trustee, shareholder, officer, employee or agent of the Trust and/or the Funds
may be held to any personal liability, nor may resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the Trust property only shall be
liable.
<PAGE>
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
written above.
NORTHSTAR TRUST
Attest: By: ____________________________
President
NORTHSTAR INVESTMENT MANAGEMENT
CORPORATION
Attest: __________________ By: _____________________________
Sr. Vice President
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
- ------------------------------- ------------------------------ ---------------------------- ---------------------------
Annual Fee as a Percentage
of Avg. Daily Net Assets
Name of Fund Reapproval Date Reapproval Day
- ------------------------------- ------------------------------ ---------------------------- ---------------------------
<S> <C> <C> <C>
Northstar Income and Growth .75 of 1% on first $250 November 8, 1995 November 8th
Fund million; .70% on the next
$250 million; .65% on the next $250 million;
.60% on the next $250 million; and .55% on
assets in excess of $1 billion.
- ------------------------------- ------------------------------ ---------------------------- ---------------------------
Northstar High Total Return .75 of 1% on first $250 November 8, 1995 November 8th
Fund million; .70% on the next
$250 million; .65% on the next $250 million;
.60% on the next $250 million; and .55% on
assets in excess of $1 billion
- ------------------------------- ------------------------------ ---------------------------- ---------------------------
Northstar Growth + Value Fund 1.00% July 31, 1998 July 31st
- ------------------------------- ------------------------------ ---------------------------- ---------------------------
Northstar High Total Return .75% November 8, 1998 November 8th
Fund II
- ------------------------------- ------------------------------ ---------------------------- ---------------------------
</TABLE>
<PAGE>
Exhibit 6
UNDERWRITING AGREEMENT FOR
CLASS A SHARES OF
NORTHSTAR TRUST
NORTHSTAR HIGH TOTAL RETURN FUND
NORTHSTAR INCOME AND GROWTH FUND
NORTHSTAR GROWTH + VALUE FUND
NORTHSTAR HIGH TOTAL RETURN FUND II
AGREEMENT made and entered into by and between NORTHSTAR HIGH TOTAL
RETURN FUND, NORTHSTAR INCOME AND GROWTH FUND, NORTHSTAR GROWTH + VALUE
FUND and NORTHSTAR HIGH TOTAL RETURN FUND II (each a "Fund" and
collectively the "Funds"), each a series of NORTHSTAR TRUST, a
Massachusetts business trust (the "Trust"), and NORTHSTAR DISTRIBUTORS,
INC., a Minnesota corporation (the "Underwriter").
1. Each Fund hereby appoints the Underwriter as its exclusive agent to
promote the sale and to arrange for the sale of Class A shares of
beneficial interest of each Fund, including both unissued shares and
treasury shares, through broker-dealers of otherwise, in all parts of
the United States and elsewhere throughout the world. Each Fund agrees
to sell and deliver its Class A shares, upon the terms hereinafter set
forth, as long as it has unissued and/or treasury Class A shares
available for sale.
(a) Each Fund hereby authorizes the Underwriter, subject to law and the
Declaration of Trust, to accept, for the respective account of each
Fund, orders for the purchase of its Class A shares, satisfactory to
the Underwriter, as of the time of receipt of such orders by the
dealer-- or as otherwise described in the Prospectus of the Trust.
(b) The public offering price of Class A shares shall be the net asset
value per share (as determined by each Fund) of the outstanding Class A
shares of each Fund. The net asset value shall be regularly determined
on every business day as of the time of the regular closing of the New
York Stock Exchange and the public offering price based upon such net
asset value shall become effective as set forth from time to time in
the Trust's Prospectus; such net asset value shall also be regularly
determined, and the public offering price based thereon shall become
effective, as of such other times for the regular determination of net
asset value as may be required or permitted by rules of the National
Association of Securities Dealers, Inc. or of the Securities and
Exchange Commission. Each Fund shall furnish daily to the Underwriter,
with all possible promptness, a detailed computation of net asset value
of its Class A shares.
The public offering price of such shares shall be equal to the net
asset value, as described above, plus a commission to be fixed from
time to time by the Underwriter not to exceed 6% of the public offering
price, except that such priice per share may be adjusted to the
1
<PAGE>
nearest cent. The Underwriter may fix quantity discounts and other
similar terms not inconsistent with the provisions of the Investment
Company Act of 1940. The Underwriter shall not impose any commission,
permit any quantity discounts or impose any other similar terms in
connection with the sale of Class A shares of each Fund except as
disclosed in the Prospectus of the Trust.
(c) The Underwriter shall be entitled to deduct a commission on all
Class A shares sold equal to the difference between the public offering
price and the net asset value on which such price is based. If any such
commission is received by a Fund, it will pay the commission to the
Underwriter. Out of such commission, the Underwriter may allow to
dealers such concessions as the Underwriter may determine from time to
time. Notwithstanding anything in the Agreement, sales may be made at
net asset value as provided in the Trust's prospectus.
.
2. The Underwriter agrees to devote reasonable time and effort to
enlist investment dealers to sell Class A shares of each Fund and
otherwise promote the sale and distribution and act as Underwriter for
the sale and distribution of the Class A shares of each Fund as such
arrangements may profitably be made; but so long as its does so,
nothing herein contained shall prevent the Underwriter from entering
into similar arrangements with other funds and to engage in other
activities. Each Fund reserves the right to issue Class A shares in
connection with any merger or consolidation of a Fund with any other
investment company or any personal holding company or in connection
with offers of exchange exempted from Section 22(d) of the Investment
Company Act 1940.
3. To the extent a Fund shall offer (as set forth in the Trust's
Prospectus) to provide physical certificates evidencing ownership of
Class A shares, upon receipt by a Fund at its principal place of
business of a written order from the Underwriter, together with
delivery instructions, the Fund shall, as promptly as practicable,
cause certificates for the Class A shares called for in such order to
be delivered or credited in such amounts and in such names as shall be
specified by the Underwriter, against payment therefor in such manner
as may be acceptable to the Fund.
4. All sales literature and advertisements used by the Underwriter in
connection with sales of the Class A shares of each Fund shall be
subject to the approval of the respective Fund to which such literature
relates. Each Fund authorizes the Underwriter in connection with the
sale or arranging for the sale of its Class A shares to give only such
information and to make only such statements or representations as are
contained in the Prospectus or in sales literature or advertisements
approved by each respective Fund or in such financial statements and
reports as are furnished to the Underwriter pursuant to paragraph 6
below. The Funds shall not be responsible in any way for any
information, statements or representations given or made by the
Underwriter or its representatives or agents other than such
information, statements and representations.
2
<PAGE>
5. The Underwriter, as agent of each Fund, is authorized, subject to
the direction of each Fund, to accept Class A shares for redemption at
prices not in excess of their net asset value, determined as prescribed
in the Prospectus of the Trust. Each respective Fund shall reimburse
the Underwriter monthly for its out-of-pocket expenses reasonably
incurred on behalf of each Fund in carrying out the foregoing
authorization, but the Underwriter shall not be entitled to any
commissions or other compensation in respect to such redemptions. The
Underwriter shall report all redemptions promptly to the respective
Funds.
6. Each Fund shall keep the Underwriter fully informed with regard to
its affairs, shall furnish the Underwriter with a certified copy of all
financial statements, and a signed copy of each report, prepared by
independent public accountants and with such reasonable number of
printed copies of each annual and other periodic report of each Fund as
the Underwriter may request, and shall cooperate fully in the efforts
of the Underwriter to sell and arrange for the sale of its Class A
shares and in the performance by the Underwriter of all its duties
under this Agreement.
7. Each Fund will pay or cause to be paid expenses (including counsel
fees and disbursements) of any registration of its Class A shares of
beneficial interest under, but not limited to, Federal, state or other
regulatory authority, fees of filing periodic reports with regulatory
bodies and of preparing, setting in type and printing the Prospectus
and any amendments thereto prepared for use in connection with the
offering of Class A shares of each Fund, for fees and expenses incident
to the issuance of Class A shares of beneficial interest, such as the
cost of stock certificates (if offered), issuance taxes, fees of the
transfer agent, including the cost of preparing and mailing notices to
shareholders pertaining to transactions with respect to shareholders'
accounts, dividend disbursing agent's costs, including the cost for
preparing and mailing notices confirming shares acquired by
shareholders pursuant to the reinvestment of dividends and
distributions, and the mailing to shareholders of prospectuses, and
notices and reports as may be required from time to time by regulatory
bodies or for such other purposes, except for purposes of sales by the
Underwriter as outlined in paragraph 8 hereof.
8. The Underwriter shall pay all of its own costs and expenses (other
than expenses and costs heretofore deemed payable by the Funds and
other than expenses which one or more dealers may bear pursuant to any
agreement with the Underwriter) incident to the sale and distribution
of the shares issued or sold hereunder including (a) expenses of
printing copies of the Prospectus to be used in connection with the
sale of Class A shares of each Fund at printer's overrun costs; (b)
expenses of printing and distributing or disseminating any other
literature, advertising or selling aids in connection with the offering
of Class A shares for sale (however, the expenses referred to in (a)
and (b) do not include expenses incurred in connection with the
preparation, printing and distribution of the Prospectus or any report
or other communication to shareholders, to the extent that such
expenses are necessarily incurred to effect compliance by each Fund
with any Federal or state law or other regulatory bodies); and (c)
expenses of advertising in connection with such offering; provided,
however, that the Underwriter shall not be
3
<PAGE>
required to pay for any such expenses to the extent that they are paid
pursuant to a Fund's distribution plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940.
9. Each Fund agrees to register, from time to time as necessary,
additional Class A shares with the Securities & Exchange Commission,
State and other regulatory bodies and to pay the related filing fees
therefor and to file such amendments, reports and other documents as
may be necessary in order that there may be no untrue statement of a
material fact in the Registration Statement or Prospectus or that their
may be no omission to state a material fact therein necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. As used in this Agreement, the
term " Registration Statement" shall mean the Registration Statement
most recently filed by the Trust with the Securities & Exchange
Commission and effective under the Securities Act of 1933, as amended,
as such Registration Statement is amended from time to time, and the
term "Prospectus" shall mean the most recent form of prospectus
authorized by the Trust for use by the Underwriter and by dealers.
10. This Agreement may be terminated at any time on not more than 60
days written notice, without payment of a penalty, by the Underwriter,
by vote of a majority of the class of outstanding voting securities of
each respective Fund or by vote of a majority of the Trustees, acting
separately on behalf of each Fund, who are not "interested persons" of
the Funds and who have not direct or indirect financial interest in the
operation of the Plan or in any agreements.
11. This Agreement shall terminate automatically in the event of its
assignment. The term "assignment" for this purpose shall have the
meaning defined in Section 2(a) (4) of the Investment Company Act of
1940.
12. This Agreement has been approved by the Trustees of the Trust on
behalf of the Funds and shall continue in effect for two years from its
effective date. Thereafter, this Agreement shall continue for
successive annual periods, provided that such continuance is
specifically approved annually by a majority of the Trustees who are
not interested persons of the parties hereto as defined in the
Investment Company Act of 1940 and either (a) by vote of the Trustees
of the Trust or (b) by vote of a majority or the outstanding voting
securities of each Fund, as defined in the Investment Company Act of
1940.
13. The Declaration of Trust, establishing the Trust, dated August 18,
1993, 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 of the Trust
refers to the Trustees under the Declaration collectively as trustees,
but not individually or personally; and no Trustee, shareholder
officer, employee or agent of the Trust and/or the Funds may be held to
any personal liablility, nor may resort be had to their private
property for the satisfaction of any obligation or claim or otherwise
in connection with affairs of the Trust, but the Trust property only
shall be liable.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized and to become
effective as of this 8th day of November, 1993.
Attest: NORTHSTAR TRUST
By: ________________________ By: _____________________________
Attest: NORTHSTAR DISTRIBUTORS, INC.
By: ________________________ By: _____________________________
As Amended, October 29, 1996
5
<PAGE>
UNDERWRITING AGREEMENT FOR
CLASS B SHARES OF
NORTHSTAR TRUST
NORTHSTAR HIGH TOTAL RETURN FUND
NORTHSTAR INCOME AND GROWTH FUND
NORTHSTAR GROWTH + VALUE FUND
NORTHSTAR HIGH TOTAL RETURN FUND II
AGREEMENT made and entered into by and between NORTHSTAR HIGH TOTAL
RETURN FUND, NORTHSTAR INCOME AND GROWTH FUND, NORTHSTAR GROWTH + VALUE
FUND and NORTHSTAR HIGH TOTAL RETURN FUND II (each a "Fund" and
collectively the "Funds"), each a series of NORTHSTAR TRUST, a
Massachusetts business trust (the "Trust"), and NORTHSTAR DISTRIBUTORS,
INC., a Minnesota corporation (the "Underwriter").
1. Each Fund hereby appoints the Underwriter as its exclusive agent to
promote the sale and to arrange for the sale of Class B shares of
beneficial interest of each Fund, including both unissued shares and
treasury shares, through broker-dealers of otherwise, in all parts of
the United States and elsewhere throughout the world. Each Fund agrees
to sell and deliver its Class B shares, upon the terms hereinafter set
forth, as long as it has unissued and/or treasury Class B shares
available for sale.
(a) Each Fund hereby authorizes the Underwriter, subject to law and the
Declaration of Trust, to accept, for the respective account of each
Fund, orders for the purchase of its Class B shares, satisfactory to
the Underwriter, as of the time of receipt of such orders by the
dealer-- or as otherwise described in the Prospectus of the Trust.
(b) The public offering price of Class B shares shall be the net asset
value per share (as determined by each Fund) of the outstanding Class B
shares of each Fund. The net asset value shall be regularly determined
on every business day as of the time of the regular closing of the New
York Stock Exchange and the public offering price shall become
effective as set forth from time to time in the Prospectus; such net
asset value shall also be regularly determined, and the public offering
price shall become effective, as of such other times for the regular
determination of net asset value as may be required or permitted by
rules of the National Association of Securities Dealers, Inc. or of the
Securities and Exchange Commission. Each Fund shall furnish daily to
the Underwriter, with all possible promptness, a detailed computation
of net asset value of its Class B shares.
(c) As compensation for providing services under this Agreement, (i)
the Underwriter shall receive from each Fund distribution and service
fees under the terms and conditions set forth in each respective
Distribution Plan for each Fund adopted under Rule 12b-1 under the
Investment Company Act of 1940, as amended, as that Plan may be amended
from time to time and subject to any further limitations on such fees
as the Trustees may
6
<PAGE>
impose, and (ii) the Underwriter shall receive from each Fund all
contingent deferred sales charges applied on redemption of Class B
shares of such Fund. Whether and to what extent a contingent deferred
sales charge will be imposed with respect to a redemption shall be
determined in accordance with, and in a manner set forth in, the
Trust's Prospectus.
(d) The Underwriter may reallow any or all of the distribution and
services fees and contingent deferred sales charges which it is paid
under the Agreement to such dealers as the Underwriter may from time to
time determine.
(e) The Underwriter may fix quantity discounts and other similar
variances or waivers of the contingent deferred sales charge not
inconsistent with the provisions of the Investment Company Act of 1940;
provided however, that the Underwriter shall not impose any commission,
permit any quantity discount, or impose any other similar waiver or
variance in connection with the sale of Class B shares except as
disclosed in the Prospectus of the Trust.
2. The Underwriter agrees to devote reasonable time and effort to
enlist investment dealers to sell Class B shares of each Fund and
otherwise promote the sale and distribution and act as Underwriter for
the sale and distribution of the Class B shares of each Fund as such
arrangements may profitably be made; but so long as its does so,
nothing herein contained shall prevent the Underwriter from entering
into similar arrangements with other funds and to engage in other
activities. Each Fund reserves the right to issue Class B shares in
connection with any merger or consolidation of a Fund with any other
investment company or any personal holding company or in connection
with offers of exchange exempted from Section 22(d) of the Investment
Company Act 1940.
3. To the extent a Fund shall offer (as set forth in the Trust's
Prospectus) to provide physical certificates evidencing ownership of
Class B shares, upon receipt by a Fund at its principal place of
business of a written order from the Underwriter, together with
delivery instructions, the Fund shall, as promptly as practicable,
cause certificates for the Class B shares called for in such order to
be delivered or credited in such amounts and in such names as shall be
specified by the Underwriter, against payment therefor in such manner
as may be acceptable to the Fund.
4. All sales literature and advertisements used by the Underwriter in
connection with sales of the Class B shares of each Fund shall be
subject to the approval of the respective Fund to which such literature
relates. Each Fund authorizes the Underwriter in connection with the
sale or arranging for the sale of its Class B shares to give only such
information and to make only such statements or representations as are
contained in the Prospectus or in sales literature or advertisements
approved by each respective Fund or in such financial statements and
reports as are furnished to the Underwriter pursuant to paragraph 6
below. The Funds shall not be responsible in any way for any
information,
7
<PAGE>
statements or representations given or made by the Underwriter or its
representatives or agents other than such information, statements and
representations.
5. The Underwriter, as agent of each Fund, is authorized, subject to
the direction of each Fund, to accept Class B shares for redemption at
prices determined as prescribed in the Prospectus of the Trust. Such
price shall reflect the subtraction of the applicable contingent
deferred sales charge, if any, computed in accordance with and in the
manner set forth in the Trust's Prospectus. Each respective Fund shall
reimburse the Underwriter monthly for its out-of-pocket expenses
reasonably incurred on behalf of each Fund in carrying out the
foregoing authorization. The Underwriter shall report all redemptions
promptly to the respective Funds.
6. Each Fund shall keep the Underwriter fully informed with regard to
its affairs, shall furnish the Underwriter with a certified copy of all
financial statements, and a signed copy of each report, prepared by
independent public accountants and with such reasonable number of
printed copies of each annual and other periodic report of each Fund as
the Underwriter may request, and shall cooperate fully in the efforts
of the Underwriter to sell and arrange for the sale of its Class B
shares and in the performance by the Underwriter of all its duties
under this Agreement.
7. Each Fund will pay or cause to be paid expenses (including counsel
fees and disbursements) of any registration of its Class B shares of
beneficial interest under, but not limited to, Federal, state or other
regulatory authority, fees of filing periodic reports with regulatory
bodies and of preparing, setting in type and printing the Prospectus
and any amendments thereto prepared for use in connection with the
offering of Class B shares of each Fund, for fees and expenses incident
to the issuance of Class B shares of beneficial interest, such as the
cost of stock certificates (if offered), issuance taxes, fees of the
transfer agent, including the cost of preparing and mailing notices to
shareholders pertaining to transactions with respect to shareholders'
accounts, dividend disbursing agent's costs, including the cost for
preparing and mailing notices confirming shares acquired by
shareholders pursuant to the reinvestment of dividends and
distributions, and the mailing to shareholders of prospectuses, and
notices and reports as may be required from time to time by regulatory
bodies or for such other purposes, except for purposes of sales by the
Underwriter as outlined in paragraph 8 hereof.
8. The Underwriter shall pay all of its own costs and expenses (other
than expenses and costs heretofore deemed payable by the Funds and
other than expenses which one or more dealers may bear pursuant to any
agreement with the Underwriter) incident to the sale and distribution
of the shares issued or sold hereunder including (a) expenses of
printing copies of the Prospectus to be used in connection with the
sale of Class B shares of each Fund at printer's overrun costs; (b)
expenses of printing and distributing or disseminating any other
literature, advertising or selling aids in connection with the offering
of Class B shares for sale (however, the expenses referred to in (a)
and (b) do not include expenses incurred in connection with the
preparation, printing and distribution of the Prospectus or any report
or other communication to shareholders, to the extent that
8
<PAGE>
such expenses are necessarily incurred to effect compliance by each
Fund with any Federal or state law or other regulatory bodies); and (c)
expenses of advertising in connection with such offering; provided,
however, that the Underwriter shall not be required to pay for any such
expenses to the extent that they are paid pursuant to a Fund's
distribution plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940.
9. Each Fund agrees to register, from time to time as necessary,
additional Class B shares with the Securities & Exchange Commission,
State and other regulatory bodies and to pay the related filing fees
therefor and to file such amendments, reports and other documents as
may be necessary in order that there may be no untrue statement of a
material fact in the Registration Statement or Prospectus or that their
may be no omission to state a material fact therein necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. As used in this Agreement, the
term " Registration Statement" shall mean the Registration Statement
most recently filed by the Trust with the Securities & Exchange
Commission and effective under the Securities Act of 1933, as amended,
as such Registration Statement is amended from time to time, and the
term "Prospectus" shall mean the most recent form of prospectus
authorized by the Trust for use by the Underwriter and by dealers.
10. This Agreement may be terminated at any time on not more than 60
days written notice, without payment of a penalty, by the Underwriter,
by vote of a majority of the class of outstanding voting securities of
each respective Fund or by vote of a majority of the Trustees, acting
separately on behalf of each Fund, who are not "interested persons" of
the Funds and who have not direct or indirect financial interest in the
operation of the Plan or in any agreements.
11. This Agreement shall terminate automatically in the event of its
assignment. The term "assignment" for this purpose shall have the
meaning defined in Section 2(a) (4) of the Investment Company Act of
1940.
12. This Agreement has been approved by the Trustees of the Trust on
behalf of the Funds and shall continue in effect for two years from its
effective date. Thereafter, this Agreement shall continue for
successive annual periods, provided that such continuance is
specifically approved annually by a majority of the Trustees who are
not interested persons of the parties hereto as defined in the
Investment Company Act of 1940 and either (a) by vote of the Trustees
of the Trust or (b) by vote of a majority or the outstanding voting
securities of each Fund, as defined in the Investment Company Act of
1940.
13. The Declaration of Trust, establishing the Trust, dated August 18,
1993, 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 of the Trust
refers to the Trustees under the Declaration collectively as trustees,
but not individually or personally; and no Trustee, shareholder
officer, employee or agent of the Trust and/or
9
<PAGE>
the Funds may be held to any personal liablility, nor may resort be had
to their private property for the satisfaction of any obligation or
claim or otherwise in connection with affairs of the Trust, but the
Trust property only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized and to become
effective as of this 8th day of November, 1993.
Attest: NORTHSTAR TRUST
By: ________________________ By: _____________________________
Attest: NORTHSTAR DISTRIBUTORS, INC.
By: ________________________ By: _____________________________
As Amended, October 29, 1996
10
<PAGE>
UNDERWRITING AGREEMENT FOR
CLASS C SHARES OF
NORTHSTAR TRUST
NORTHSTAR HIGH TOTAL RETURN FUND
NORTHSTAR INCOME AND GROWTH FUND
NORTHSTAR GROWTH + VALUE FUND
NORTHSTAR HIGH TOTAL RETURN FUND II
AGREEMENT made and entered into by and between NORTHSTAR HIGH TOTAL
RETURN FUND, NORTHSTAR INCOME AND GROWTH FUND, NORTHSTAR GROWTH + VALUE
FUND and NORTHSTAR HIGH TOTAL RETURN FUND II (each a "Fund" and
collectively the "Funds"), series of NORTHSTAR TRUST, a Massachusetts
business trust (the "Trust"), and NORTHSTAR DISTRIBUTORS, INC., a
Minnesota corporation (the "Underwriter").
1. Each Fund hereby appoints the Underwriter as its exclusive agent to
promote the sale and to arrange for the sale of Class C shares of
beneficial interest of each Fund, including both unissued shares and
treasury shares, through broker-dealers of otherwise, in all parts of
the United States and elsewhere throughout the world. Each Fund agrees
to sell and deliver its Class C shares, upon the terms hereinafter set
forth, as long as it has unissued and/or treasury Class C shares
available for sale.
(a) Each Fund hereby authorizes the Underwriter, subject to law and the
Declaration of Trust, to accept, for the respective account of each
Fund, orders for the purchase of its Class C shares, satisfactory to
the Underwriter, as of the time of receipt of such orders by the
dealer-- or as otherwise described in the Prospectus of the Trust.
(b) The public offering price of Class C shares shall be the net asset
value per share (as determined by each Fund) of the outstanding Class C
shares of each Fund. The net asset value shall be regularly determined
on every business day as of the time of the regular closing of the New
York Stock Exchange and the public offering price shall become
effective as set forth from time to time in the Prospectus; such net
asset value shall also be regularly determined, and the public offering
price shall become effective, as of such other times for the regular
determination of net asset value as may be required or permitted by
rules of the National Association of Securities Dealers, Inc. or of the
Securities and Exchange Commission. Each Fund shall furnish daily to
the Underwriter, with all possible promptness, a detailed computation
of net asset value of its Class C shares.
(c) As compensation for providing services under this Agreement, (i)
the Underwriter shall receive from each Fund distribution and service
fees under the terms and conditions set forth in the Class C
Distribution Plan for each Fund adopted under Rule 12b-1 under the
Investment Company Act of 1940, as amended, as that Plan may be amended
from time to time and subject to any further limitations on such fees
as the Trustees may
11
<PAGE>
impose, and (ii) the Underwriter shall receive from each Fund all
contingent deferred sales charges applied on redemption of Class C
shares of such Fund. Whether and to what extent a contingent deferred
sales charge will be imposed with respect to a redemption shall be
determined in accordance with, and in a manner set forth in, the
Trust's Prospectus.
(d) The Underwriter may reallow any or all of the distribution and
services fees and contingent deferred sales charges which it is paid
under the Agreement to such dealers as the Underwriter may from time to
time determine.
(e) The Underwriter may fix quantity discounts and other similar
variances or waivers of the contingent deferred sales charge not
inconsistent with the provisions of the Investment Company Act of 1940;
provided however, that the Underwriter shall not impose any commission,
permit any quantity discount, or impose any other similar waiver or
variance in connection with the sale of Class C shares except as
disclosed in the Prospectus of the Trust.
2. The Underwriter agrees to devote reasonable time and effort to
enlist investment dealers to sell Class C shares of each Fund and
otherwise promote the sale and distribution and act as Underwriter for
the sale and distribution of the Class B shares of each Fund as such
arrangements may profitably be made; but so long as its does so,
nothing herein contained shall prevent the Underwriter from entering
into similar arrangements with other funds and to engage in other
activities. Each Fund reserves the right to issue Class C shares in
connection with any merger or consolidation of a Fund with any other
investment company or any personal holding company or in connection
with offers of exchange exempted from Section 22(d) of the Investment
Company Act 1940.
3. To the extent a Fund shall offer (as set forth in the Trust's
Prospectus) to provide physical certificates evidencing ownership of
Class C shares, upon receipt by a Fund at its principal place of
business of a written order from the Underwriter, together with
delivery instructions, the Fund shall, as promptly as practicable,
cause certificates for the Class C shares called for in such order to
be delivered or credited in such amounts and in such names as shall be
specified by the Underwriter, against payment therefor in such manner
as may be acceptable to the Fund.
4. All sales literature and advertisements used by the Underwriter in
connection with sales of the Class C shares of each Fund shall be
subject to the approval of the respective Fund to which such literature
relates. Each Fund authorizes the Underwriter in connection with the
sale or arranging for the sale of its Class C shares to give only such
information and to make only such statements or representations as are
contained in the Prospectus or in sales literature or advertisements
approved by each respective Fund or in such financial statements and
reports as are furnished to the Underwriter pursuant to paragraph 6
below. The Funds shall not be responsible in any way for any
information,
12
<PAGE>
statements or representations given or made by the Underwriter or its
representatives or agents other than such information, statements and
representations.
5. The Underwriter, as agent of each Fund, is authorized, subject to
the direction of each Fund, to accept Class C shares for redemption at
prices determined as prescribed in the Prospectus of the Trust. Such
price shall reflect the subtraction of the applicable contingent
deferred sales charge, if any, computed in accordance with and in the
manner set forth in the Trust's Prospectus. Each respective Fund shall
reimburse the Underwriter
monthly for its out-of-pocket expenses reasonably incurred on behalf
of each Fund in carrying out the foregoing authorization. The
Underwriter shall report all redemptions promptly to the respective
Funds.
6. Each Fund shall keep the Underwriter fully informed with regard to
its affairs, shall furnish the Underwriter with a certified copy of all
financial statements, and a signed copy of each report, prepared by
independent public accountants and with such reasonable number of
printed copies of each annual and other periodic report of each Fund as
the Underwriter may request, and shall cooperate fully in the efforts
of the Underwriter to sell and arrange for the sale of its Class C
shares and in the performance by the Underwriter of all its duties
under this Agreement.
7. Each Fund will pay or cause to be paid expenses (including counsel
fees and disbursements) of any registration of its Class C shares of
beneficial interest under, but not limited to, Federal, state or other
regulatory authority, fees of filing periodic reports with regulatory
bodies and of preparing, setting in type and printing the Prospectus
and any amendments thereto prepared for use in connection with the
offering of Class C shares of each Fund, for fees and expenses incident
to the issuance of Class C shares of beneficial interest, such as the
cost of stock certificates (if offered), issuance taxes, fees of the
transfer agent, including the cost of preparing and mailing notices to
shareholders pertaining to transactions with respect to shareholders'
accounts, dividend disbursing agent's costs, including the cost for
preparing and mailing notices confirming shares acquired by
shareholders pursuant to the reinvestment of dividends and
distributions, and the mailing to shareholders of prospectuses, and
notices and reports as may be required from time to time by regulatory
bodies or for such other purposes, except for purposes of sales by the
Underwriter as outlined in paragraph 8 hereof.
8. The Underwriter shall pay all of its own costs and expenses (other
than expenses and costs heretofore deemed payable by the Funds and
other than expenses which one or more dealers may bear pursuant to any
agreement with the Underwriter) incident to the sale and distribution
of the shares issued or sold hereunder including (a) expenses of
printing copies of the Prospectus to be used in connection with the
sale of Class C shares of each Fund at printer's overrun costs; (b)
expenses of printing and distributing or disseminating any other
literature, advertising or selling aids in connection with the offering
of Class C shares for sale (however, the expenses referred to in (a)
and (b) do not include expenses incurred in connection with the
preparation, printing and distribution of the Prospectus or any report
or other communication to shareholders, to the extent that
13
<PAGE>
such expenses are necessarily incurred to effect compliance by each
Fund with any Federal or state law or other regulatory bodies); and (c)
expenses of advertising in connection with such offering; provided,
however, that the Underwriter shall not be required to pay for any such
expenses to the extent that they are paid pursuant to a Fund's
distribution plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940.
9. Each Fund agrees to register, from time to time as necessary,
additional Class C shares with the Securities & Exchange Commission,
State and other regulatory bodies and to pay the related filing fees
therefor and to file such amendments, reports and other documents as
may be necessary in order that there may be no untrue statement of a
material fact in the Registration Statement or Prospectus or that their
may be no omission to state a material fact therein necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. As used in this Agreement, the
term " Registration Statement" shall mean the Registration Statement
most recently filed by the Trust with the Securities & Exchange
Commission and effective under the Securities Act of 1933, as amended,
as such Registration Statement is amended from time to time, and the
term "Prospectus" shall mean the most recent form of prospectus
authorized by the Trust for use by the Underwriter and by dealers.
10. This Agreement may be terminated at any time on not more than 60
days written notice, without payment of a penalty, by the Underwriter,
by vote of a majority of the class of outstanding voting securities of
each respective Fund or by vote of a majority of the Trustees, acting
separately on behalf of each Fund, who are not "interested persons" of
the Funds and who have not direct or indirect financial interest in the
operation of the Plan or in any agreements.
11. This Agreement shall terminate automatically in the event of its
assignment. The term "assignment" for this purpose shall have the
meaning defined in Section 2(a) (4) of the Investment Company Act of
1940.
12. This Agreement has been approved by the Trustees of the Trust on
behalf of the Funds and shall continue in effect for two years from its
effective date. Thereafter, this Agreement shall continue for
successive annual periods, provided that such continuance is
specifically approved annually by a majority of the Trustees who are
not interested persons of the parties hereto as defined in the
Investment Company Act of 1940 and either (a) by vote of the Trustees
of the Trust or (b) by vote of a majority or the outstanding voting
securities of each Fund, as defined in the Investment Company Act of
1940.
13. The Declaration of Trust, establishing the Trust, dated August 18,
1993, 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 of the Trust
refers to the Trustees under the Declaration collectively as trustees,
but not individually
14
<PAGE>
or personally; and no Trustee, shareholder officer, employee or agent
of the Trust and/or the Funds may be held to any personal liablility,
nor may resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with affairs of the
Trust, but the Trust property only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized and to become
effective as of this 31st day of March, 1994.
Attest: NORTHSTAR TRUST
By: ________________________ By: _____________________________
Attest: NORTHSTAR DISTRIBUTORS, INC.
By: ________________________ By: _____________________________
As Amended, October 29, 1996
15
<PAGE>
Exhibit 10
Law Offices of
DECHERT PRICE & RHOADS
1500 K STREET, N.W.
WASHINGTON, DC 20005-1208
October 29, 1996
Northstar Trust
Two Pickwick Plaza
Greenwich, Connecticut 06830
Dear Sir or Madam:
In connection with the registration under the Securities Act of 1933 of an
indefinite number of shares of beneficial interest of Northstar High Total
Return Fund II (the "Fund"), a series of Northstar Trust (the "Trust"), we have
examined such matters as we have deemed necessary, and we are of the opinion
that, as permitted by the Trust's Declaration of Trust, and assuming that the
Trust or its agent receives consideration for such Shares in accordance with the
provisions of its Declaration of Trust, the Shares will be legally and validly
issued, will be fully paid, and will be non-assessable by the Trust.
We hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 11 to the Trust's Registration Statement on Form N-1A filed with
the Securities and Exchange Commission (File No. 33-67852) for the registration
under the Securities Act of 1933 of an indefinite number of the Fund's shares,
and to the use of our name in the prospectus and statement of additional
information contained therein, and any amendments thereto.
Very truly yours,
/s/DECHERT PRICE & RHOADS
<PAGE>
Exhibit 15
NORTHSTAR TRUST
DISTRIBUTION AND SERVICE PLAN
As Amended October 29, 1996
The following is the Distribution Plan (the "Plan") for Northstar Trust (the
"Trust") consisting of the series named on Schedule 1 hereto, as such schedule
may be revised from time to time (each, a "Fund").
1. In connection with the sale and promotion of the shares of each Fund and the
furnishing of services to the shareholders of each Fund, each Fund shall pay
Northstar Distributors, Inc. (the "Distributor"), or any successor authorized to
act as underwriter, in respect of each class set forth on Schedule 1 (each, a
"Class"), at the end of each month, an annual fee not to exceed the amount set
forth in Schedule 1. With respect to each Class, such expenditures may consist
of: (i) commissions to sales personnel for selling the applicable Class of
shares of the Funds;(ii) compensation, sales incentives and payments to sales,
marketing and service personnel relating to the applicable Class; (iii) payments
to broker-dealers and other financial institutions which have entered into
agreements with the Distributor in the form of the Dealer Agreement for
Northstar Affiliated Investment Companies for services rendered in connection
with the sale and distribution of the applicable Class of shares; (iv) payment
of expenses incurred in sales and promotional activities, including advertising
expenditures related to the applicable Class of shares; (v) the costs of
preparing and distributing promotional materials relating to the applicable
Class of shares; (vi) the cost of printing the Trust's Prospectus and Statement
of Additional Information for distribution to potential investors; and (vii)
such other similar services that the Trustees determine are reasonably
calculated to result in the sale of the applicable Class of shares; provided,
however, a portion of such amount paid to the Distributor, which portion shall
be equal to or less than .25% annually of the average daily net assets of the
Fund shares may be paid for reimbursing the costs of providing services to the
shareholder, including assistance in connection with inquiries related to
shareholder accounts (the "Service Fee").
Amounts paid or payable by each Fund under this Plan or any agreement with any
person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's-length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees, in the exercise of reasonable business
judgment, in light of their fiduciary duties under state law and Sections 36(a)
and (b) of the Investment Company Act of 1940, as amended (the "Act") and based
upon appropriate business estimates and projections.
<PAGE>
2. At least quarterly in each year that this Plan remains in effect, each Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by each Fund, shall prepare and
furnish to the Trustees for their review, and the Trustees shall review, a
written report complying with the requirements of Rule 12b-1 under the Act
regarding the amounts expended by each Fund under the Plan and the purposes for
which such expenditures were made.
3. This Plan shall not take effect until it, together with any related
agreements, have been approved (a) by a vote of at least the majority of the
Trustees, acting separately on behalf of each Fund, as well as a vote of at
least a majority of the Trustees, acting separately on behalf of each Fund, who
are not interested persons (as defined in the Act) of each Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
related agreements (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on the Plan or any related agreements, and if
required under the 1940 Act (b) by a vote of at least a majority (as defined in
the Act) of the outstanding Class A shares of each Fund.
4. This Plan shall remain in effect for one year from the date of its execution
and may be continued thereafter if specifically approved at least annually by
vote of at least a majority of the Trustees, acting separately on behalf of each
Fund, as well as a majority of the Disinterested Trustees. As to each Class,
this Plan may be amended at any time, provided that (a) the Plan may not be
amended to increase materially the amount of the distribution fees or Service
Fees payable hereunder pursuant to in Paragraph 1 hereof without the approval of
at least a majority (as defined in the Act) of the outstanding shares of the
applicable Class and (b) all material amendments to this Plan must be approved
by a vote of the Trustees, acting separately on behalf of each Fund, and of the
Disinterested Trustees.
5. While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons (as defined in the Act) shall be committed to the
discretion of the Disinterested Trustees then in office.
6. With respect to each Class, any related agreements shall be in writing and
each shall provide that (a) such agreement shall be subject to termination,
without penalty, by vote of a majority (as defined in the Act) of the
outstanding voting shares of the applicable Class on not more than 60' days'
written notice to any other party to the agreement; and (b) such agreement shall
terminate automatically in the event of its assignment.
7. With respect to each Class, this Plan may be terminated at any time by a vote
of a majority of the Disinterested Trustees, acting separately on behalf of each
respective Fund, or by vote of a majority (as defined in the Act) of the
outstanding voting shares of the applicable Class of each Fund. In the event
this Plan is terminated or otherwise discontinued with respect to a Fund, the
Fund no longer will be obligated to reimburse the Distributor for distribution
related expenses incurred under the Plan, unless payment by the Fund of all or
any of such unreimbursed expenses shall be specifically approved by the
Trustees, including a majority of the Disinterested Trustees, of the Funds.
<PAGE>
8. The Funds shall preserve copies of this Plan and any related agreements and
all reports made pursuant to paragraph 2 hereof, and any information, estimates,
projections and other materials that serve as a basis therefor, considered by
the Trustees, for a period of not less than six years from the date of thisPlan,
or the agreements or reports, as the case may be, the first two years in an
easily accessible place.
9. The Declaration of Trust, establishing the Trust, dated August 18, 1993, 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 "Northstar Trust" refers to the Trustees under the
Declaration collectively as trustees, but not individually or personally; and no
Trustee, shareholder, officer, employee or agent of the Trust and/or the Funds
may be held to any personal liability, nor may resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the Trust property only shall be
liable.
Dated: November 8, 1993
As Amended October 29, 1996
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Name of Fund Maximum Class A Fee Maximum Class B Fee Maximum Class C Fee
- ------------------------------ ---------------------------- --------------------------- ----------------------------
<S> <C> <C> <C>
Northstar High Total Return .30 of 1% 1.00% 1.00%
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Northstar Income and Growth .30 of 1% 1.00% 1.00%
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Northstar Growth + Value Fund .30 of 1% 1.00% 1.00%
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Northstar High Total Return .30 of 1% 1.00% 1.00%
Fund II
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
