As filed with the Securities and Exchange Commission on April 21, 1997
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. 18
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20
NORTHSTAR TRUST
(Exact name of Registrant as specified in charter)
TWO PICKWICK PLAZA, GREENWICH, CT 06830
(Address 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 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>
X 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)
- -- 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 International Value Fund
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>
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; Other 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 Arrangements; 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
<PAGE>
CROSS REFERENCE SHEET
---------------------
Form N-1A Part B Item Statement of Additional Information
--------------------- -----------------------------------
Caption
-------
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, the Supervisor and
Other Services the Administrator; 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>
NORTHSTAR INTERNATIONAL VALUE FUND PROSPECTUS
APRIL 21, 1997
This prospectus contains important information about investing in the Northstar
International Value Fund. Please read it carefully before you invest and keep it
for future reference. Your investment is not a bank deposit, is not insured or
guaranteed by the FDIC, the Federal Reserve Board or any other government
agency, is affected by market fluctuations - there is no guarantee that the fund
will achieve its objective. Like all mutual funds, 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.
What's inside
(bullseye graphic appears here) objective
(compass graphic appears here) investment
strategy
(safe graphic appears here) holdings
(balance scale graphic appears here) risks
(coin graphic appears here) what you pay
to invest
(currency graphic appears here) how the fund
has performed
These pages contain a
description of the fund, including its objective, investment strategy, types of
holdings, risks and portfolio managers.
You'll also find:
What you pay to invest. A list
of the fees and expenses you pay - both directly and indirectly - when you
invest in the fund.
How the fund has performed. A chart that shows the fund's
financial performance by share class.
Northstar International Value Fund 4
Meet the portfolio managers 6
Your guide to buying, selling and
exchanging shares of the Northstar International Value Fund 9
Mutual fund earnings and your taxes 16
The business of mutual funds 18
The risks of investing in mutual funds 20
Where to go for more information 24
(telephone graphic appears here)
If you have any questions about the Northstar
International Value Fund or about choosing suitable investments, please call us
at 1-800-595-7827.
3
<PAGE>
Northstar International Value Fund
Registrant
Northstar International Value Fund
Portfolio managers
Charles Brandes, Jeff Busby
Objective
(bulleye graphic appears here)
This fund's investment objective is long-term capital appreciation.
Investment
strategy
(compass graphic appears here)
The fund invests primarily in
foreign companies with a market capitalization of greater than
$1 billion, but it may hold up to 25% of its assets in companies with smaller
market capitalization.
The portfolio managers apply the technique of "value investing" by seeking
stocks that their research indicate are priced well below their long-term value.
This gives the fund both a possible margin of safety against price declines, and
an opportunity for profit.
Holdings
(safe graphic appears here)
The fund holds common stocks, preferred
stocks, American, European and Global depository receipts, as well as
convertible securities. It may also invest in other higher-risk securities and
engage in other investment practices. These are described on page 20. Under
normal circumstances, it will invest 65% of its total assets in securities of
companies located in at least three countries other than the U.S., located in
Western Europe, North and South America, Australia, Asia and other nations. Up
to 25% of its assets may be invested in securities of issuers located in
countries with emerging markets.
Risks
(balance scale graphic appears here)
Because it invests in equities, the fund is affected by changes in the stock
market. It is also subject to the risks associated with investing in smaller
companies, foreign securities and emerging markets. Please refer to the section
beginning on page 20, The risks of investing in mutual funds.
What you pay
to invest
There are two types of fees and
expenses when you invest in mutual funds: fees, including sales charges,
you pay directly when you buy or sell shares, and operating
expenses paid each year by the fund.
Fees you pay directly
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Maximum sales charge on your initial
investment (as a % of offering price) % 4.75 none none
Maximum deferred sales charge % none (1) 5.00 (2) 1.00 (2)
</TABLE>
Operating expenses paid each year by the fund
(as a % of average net assets)
Class A Class B Class C
Management fee(3) % 1.00 1.00 1.00
12b-1 fee(4) % 0.30 1.00 1.00
Other expenses % 0.50 0.50 0.50
Total fund
operating expenses
after reimbursement % 1.80 2.50 2.50
Example
Here's an example of what you would pay in expenses if you invested $1,000,
reinvested all your dividends, the fund earned an average annual return of 5%,
and annual operating expenses remained at the current level. Keep in mind that
this is only an example -- actual expenses and performance may vary.
Year 1 Year 3 Year 5 Year 10
Class A
with redemptions $ 65 101 140 249
Class B
with redemptions $ 75 108 153 266 (5)
without redemptions $ 25 78 133 266 (5)
Class C
with redemptions $ 35 78 133 284
without redemptions $ 25 78 133 284
(1) Except for purchases of $1 million or more, when you sell any of the shares
within 18 months of when you bought them. Please see page 11 for details.
(2) This charge decreases over time. Please see page 11 for details.
(3) The adviser, subadviser and administrator have agreed to waive fees until
the net assets of the fund exceed $50 million.
(4) Because of the 12b-1 fee, long-term shareholders may pay more than the
maximum permitted front-end sales charge.
(4) Class B shares convert to Class A shares after year 8. This figure uses
Class A expenses for years 9 and 10.
<PAGE>
How the fund has performed
(currency graphic appears here)
The following chart shows the fund's financial performance as a series of
Brandes Investment Trust,(1) by share class. The figures have been audited by
Ernst & Young, LLP, independent accountants.
Northstar International Value Fund
<TABLE>
<CAPTION>
Class A Class C
Year ended October 31, 1996 1995 (2) 1996 1995 (2)
<S> <C> <C> <C> <C>
Operating performance
Net asset value at the beginning of the period $ 13.26 12.50 13.22 12.50
Net investment income $ 0.23 0.15 0.09 0.10
Net realized and unrealized gain on investments $ 1.38 0.61 1.41 0.62
Total from investment operations $ 1.61 0.76 1.50 0.72
Dividends from net investment income $(0.06) -- (0.04) --
Dividends from net realized gain on investments
sold $ -- -- -- --
Total distributions $(0.06) -- (0.04) --
Net asset value at the end of the period $14.81 13.26 14.68 13.22
Total investment return (3) % 6.09 9.39(4) 5.46 8.89(4)
Ratios and supplemental data
Net assets at the end of the period ($000s) $16,777 5,188 14,530 5,749
Ratio of expenses to average net assets % 1.85 1.85(4) 2.50 2.50(4)
Ratio of expense reimbursement to
average net assets % 0.97 6.08(4) 1.21 6.08(4)
Ratio of net investment income to
average net assets % 1.52 1.67(4) 0.62 1.13(4)
Average commissions per share $0.0314 -- 0.0314 --
Portfolio turnover rate % 74 -- 74 --
</TABLE>
(1) The fund commenced operations on March 6, 1995 as the Brandes International
Fund, a series of the Brandes Investment Trust. It was reorganized on April
21, 1997 as the Northstar International Value Fund, a series of the
Northstar Trust.
(2) Share classes A & C commenced operations on March 6, 1995.
(3) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(4) Annualized.
(telephone graphic appears here)
If you have any questions, please call 1-800-595-7827.
International Value Fund 5
<PAGE>
Meet the portfolio
managers
Portfolio
managers
Charles Brandes
Charles Brandes, who has over 29 years of investment management experience. He
founded the general partner of Brandes Investment Partners, L.P. in 1974 and
owns a controlling interest in it. At Brandes Investment Partners, L.P., he
serves as a Managing Partner and senior member of the investment committee.
Mr. Brandes earned his BA in Economics from Bucknell University. He is a
Chartered Financial Analyst and a member of the Association for Investment
Management and Research.
Jeff Busby
Jeff Busby, who has over 11 years of
investment management experience. At Brandes Investment Partners, L.P., he
serves as a Managing Partner and senior member of the investment committee. He
is also responsible for overseeing all trading activities for the firm.
Mr. Busby earned his BS in Chemical Engineering from Northwestern University and
his MBA in Finance from the University of Califoria, Berkeley. He is a Chartered
Financial Analyst and a member of the Association for Investment Management and
Research and the Financial Analysts Society.
Charles Brandes and Jeff Busby are co-portfolio managers of the fund. They
structure the portfolio from a buy list determined by their firm's investment
committee, of which they are senior members.
Sub-adviser
Brandes Investment Partners, L.P
A registered investment adviser, Brandes Investment Partners, L.P. is
sub-adviser for the fund. The company was formed in May 1996 as the successor to
its general partner, Brandes Investment Partners, Inc.
Brandes Investment Partners, L.P. currently manages over $10 billion in
international and global portfolios.
6
<PAGE>
Performanc
profile:
Brandes Investment Partners
These figures demonstrate the historical track record of Brandes Investment
Partners, L.P. The figures have been provided by Brandes Investment Partners,
L.P. and have not been audited or verified. They do not indicate how the
Northstar International Value Fund or Brandes Investment Partners, L.P. will
perform in the future.
The charts below illustrate the past performance of Brandes Investment Partners,
L.P. in managing accounts with investment objectives, policies and techniques
substantially similar, though not identical, to those of the Northstar
International Value Fund. The charts show average annual returns for a composite
of the actual performance of all international equity accounts managed by
Brandes Investment Partners from 1990 until the present, and average annual
returns for the Northstar International Value Fund. The fund commenced
operations on March 6, 1995 as the Brandes International Fund, a series of the
Brandes Investment Trust. It was reorganized on April 21, 1997 as the Northstar
International Value Fund, a series of the Northstar Trust. These figures reflect
changes in share prices and reinvestment of dividends and distributions, and are
after deduction of all fund fees and expenses. The accounts were not subject to
the same types of expenses as the fund or the requirements of the Investment
Company Act of 1940 or the Internal Revenue Code, the limitations of which might
have adversely affected performance results. Included for comparison are
performance figures of the Morgan Stanley Capital International (MSCI) EAFE
Index, an unmanaged index of securities listed on exchanges in markets in
Europe, Australia and the Far East. It has been adjusted to reflect reinvestment
of dividends. The results presented below may not equate with the return
experienced by any particular account or shareholder as a result of timing of
investments and redemptions and the effect of taxes on any client or
shareholder.
Brandes International MSCI
Equity Composite EAFE
(%)(a) Index (%)
One year, ended March 31, 1997 21.82 1.45
Three years, ended March 31, 1997 11.77 6.53
Five years, ended March 31, 1997 14.51 10.57
Average annual return 16.53 5.36
since July 1, 1990
(graph appears here, plot points are below)
Brandes International Equity Composite MSCI EAFE Index
1990 0.98 0.79
0.99 0.87
1.10 0.93
1991 1.13 0.88
1.26 0.96
1.38 0.98
1.43 0.86
1992 1.52 0.88
1.47 0.89
1.47 0.93
1.58 1.04
1993 1.65 1.14
1.82 1.22
2.07 1.23
2.01 1.27
1994 1.96 1.34
2.10 1.34
2.01 1.32
2.00 1.35
1995 2.12 1.36
2.20 1.41
2.28 1.47
1996 2.31 1.51
2.41 1.54
2.44 1.54
2.65 1.56
2.81 1.54
(a) the first annual returns presented (right) were calculated on a time-weighed
and asset-weighed, total return basis, including reinvestments of all dividends,
interest and income on a cash basis, realized and unrealized gain or losses are
are net of applicable investment advisory fees, brokerage commissions, custodial
fees and execution costs and any applicable foreign withholding taxes, without
provision for federal and state income taxes, if any. The Brandes composite
results include all actual, fee-paying, fully discretionary international equity
accounts under management for at least one month beginning July 1, 1990, other
than wrap fee accounts. The weighed-average management fee during the period
from July 1, 1990 through December 31, 1996 was 0.96% per year. Securities
transactions are accounted for on the trade date and cash accounting is
utilized. Cash and equivalents are included in performance results. Starting
with calendar year 1992 through calendar year 1995, the net annual returns for
the Brandes composite have been examined by a Big Six accounting firm in
accordance with AIMR Level II verification standards. The examination of net
annual total returns for calendar year 1996 has not yet been completed. Copies
of their reports and a complete list and description of Brandes' composites are
available upon request.
If you have any questions, please call 1-800-595-7827.
7
<PAGE>
Meet the portfolio
managers
Performance
profile: Brandes Investment Partners, continued
Northstar MSCI
International EAFE
Value Fund (%) Index (%)
One year, ended March 31, 1997 21.88 1.45
Average annual total return since March 6, 1995 37.86 17.46
(Graph appears below, point points are as follows)
Northstar International Value Fund MSCI EAFE Index
1995 1.00 1.00
1.03 1.04
1.04 1.02
1.04 1.00
1.08 1.07
1.07 1.03
1.07 1.05
1.04 1.02
1.07 1.05
1996 1.10 1.09
1.13 1.10
1.12 1.10
1.11 1.12
1.16 1.15
1.16 1.13
1.16 1.14
1997 1.12 1.10
1.14 1.11
1.17 1.13
1.17 1.13
1.25 1.17
1.27 1.16
1.31 1.11
1.31 1.13
1.35 1.14
8
<PAGE>
Your guide to buying,
selling and exchanging shares
of Northstar funds
There are three steps to take when you want to buy, sell or exchange shares of
our funds:
o first, choose a share class
o second, open a Northstar account and make your first investment
o third, choose one of several ways to buy, sell or exchange shares.
Choosing
a share class
The Northstar International Value Fund is available in Class A, Class B and
Class C shares.
The chart below summarizes the differences between the share classes -- your
choice of share class will depend on how much you are investing and for how
long. Large investments qualify for a reduced Class A sales charge and avoid the
higher distribution fees of classes B and C. Investments in Class B and Class C
shares don't have a front-end sales charge but there is a restriction on the
amount you can invest at one time. Your financial adviser can help you, or feel
free to call us for more information.
You'll find actual expenses charged to the fund beginning on page 4.
Maximum Class A no limit Brokerage firms may have lower maximums.
amount you Class B $500,000 Please consult your financial adviser.
can buy Class C $750,000
Front end Class A yes, varies by size of investment
sales charge Class B none
Class C none
Deferred Class A only on investments of $1 million or more
sales charge if you sell within 18 months
Class B yes, if you sell within 5 years
Class C yes, if you sell within 1 year
Service fee Class A .25% per year
Class B .25% per year
Class C .25% per year
Distribution Class A .05% per year
fee Class B .75% per year
Class C .75% per year
Conversion Class B Class B shares convert to Class A after 8 years
(telephone graphic appears here)
If you have any
questions, please call 1-800-595-7827.
9
<PAGE>
Your guide to
buying, selling and exchanging shares
of Northstar funds
Front end sales charges
(Class A shares only)
<TABLE>
<CAPTION>
Your investment Front-end sales charge Amount retained by dealers
as a percentage as a percentage as a percentage
of your net investment of offering price of offering price
<S> <C> <C> <C>
up to $99,999 4.99 4.75 4.00
$100,000 to $249,999 3.90 3.75 3.10
$250,000 to $499,999 2.83 2.75 2.30
$500,000 to $999,999 2.04 2.00 1.70
$1,000,000 and over -- -- --
</TABLE>
Ways to reduce front-end sales charges
There are three ways you can reduce your sales charges.
1. Take advantage of purchases you've already made Rights of accumulation let
you combine the value of all the Class A shares you already own with your
current investment in other Northstar funds to calculate your sales charge.
2. Take advantage of purchases you intend to make By signing a non-binding
letter of intent, you can combine investments you plan to make over a 13
month period to calculate the sales charge you'll pay on each investment.
3. Buy as part of a group of investors You can combine your investments with
others in a recognized group when calculating your sales charge. The
following is a general list of the groups Northstar recognizes for this
benefit.
o you, your spouse and your children under the age of 21
o a trustee or fiduciary for a single trust, estate or fiduciary
account (including qualifying pension, profit sharing and other
employee benefit trusts)
o any other organized group that has been in existence for at least
six months, and wasn't formed solely for the purpose of investing at
a discount.
4. You may not have to pay front-end sales charges or a CDSC if you are:
o an active or retired trustee, director, officer, partner or employee
(including immediate family) of
- Northstar or any of its affiliated companies
- any Northstar affiliated investment company
- a dealer that has a sales agreement with the distributor
o a trustee or custodian of any qualified retirement plan or IRA
established for the benefit of anyone in the point above
o a dealer, broker or registered investment adviser who has entered
into an agreement with the distributor providing for the use of
shares of the fund in particular investment products such as "wrap
accounts" or other similar managed accounts for the benefits of
your clients
o a service provider for Northstar, any Northstar affiliated company,
or any Northstar affiliated investment company
o a Brandes employee, officer or partner.
You won't pay a sales charge when you buy Class A shares of the fund through a
dealer by transferring the proceeds of the sale of another open-end fund, so
long as:
o you have held the shares in the fund you're selling for at least six
months, and you paid a sales charge when you bought them
o you send the proceeds of the sale directly to Northstar or our agent
or hold them in cash or a money market fund
o you buy the shares of the fund within 60 days of the sale, and
o the fund has the same or a similar investment objective.
Pension, profit sharing and other benefit plans created pursuant to a plan
qualified under Section 401 of the Code or plans under Section 456 of the Code
don't pay a front-end sales charge or a CDSC, as long as the shares are
purchased by an employer sponsored plan with at least 50 eligible employees.
If you think you might be eligible to reduce your sales charges using any of
these methods, please call us or consult the Statement of Additional
Information.
10
<PAGE>
Deferred sales charges (Classes A, B, & C)
We deduct a contingent deferred sales charge (CDSC) from the proceeds when you
sell shares as indicated below. CDSC is charged on the current market value of
the shares, or on the price you paid for them, whichever is less. You aren't
charged a CDSC on shares you acquired by reinvesting your dividends, or on
amounts representing appreciation. When you ask us to sell shares, we will sell
those that are exempt from the CDSC first, and then sell the shares you have
held the longest. This helps keep your CDSC as low as possible. Class A shares
There is generally no CDSC on Class A shares, except for purchases of $1 million
or more, when you sell them within 18 months of when you bought them.
Your investment CDSC on shares
being sold
First $1,000,000 to $2,499,999 1.00%
$2,500,000 to $4,999,999 0.50%
$5,000,000 and over 0.25%
Class B & C shares
Years after you Class B Class C
bought the shares
1st year 5.00% 1.00%
2nd year 4.00% none
3rd year 3.00% none
4th year 2.00% none
5th year 2.00% none
after 5 years none none
When the CDSC might be waived
We may waive the CDSC for Class B and Class C shares if:
o the shareholder dies or becomes disabled
o you're selling your shares through our systematic withdrawal program
o you're selling shares of a retirement plan and you are over 70 1/2 years old
o you're exchanging Class B or C shares for the same class of shares of
another Northstar fund
o you fall into any of the categories listed in point 4 on page 10.
If you think you might be eligible for a CDSC waiver, please call us or consult
the Statement of Additional Information.
(telephone graphic appears here)
If you have any questions, please call 1-800-595-7827.
11
<PAGE>
Your guide to
buying, selling and exchanging shares
of Northstar funds
Opening a Northstar account
Once you've chosen the share class you prefer, you're ready to open an account.
First, determine how much money you want to invest. The minimum initial
investment is:
o $2,500 for non-retirement accounts
o $250 for retirement accounts
o $25 if you are investing using our automatic investment plan (see page 14).
Next, open an account in one of two ways:
o give a check to your broker, who will open an account for you, or
o complete the application enclosed with this prospectus and mail it to us,
along with your check, made payable to Northstar Funds.
Buying, selling and exchanging
Once you've opened an account and made your first investment, you can choose one
of three ways to buy, sell or exchange shares of Northstar funds: o through your
broker o directly, by mail or over the telephone o using one of our automatic
plans. We'll send you a confirmation statement every time you make a transaction
that affects your account balance, except when we pay distributions.
Instructions for each option appear in the chart on page 14, but here are a few
things you should know before you begin.
How shares are priced
The price you pay or receive when you buy, sell or exchange shares is determined
by the fund's net asset value (NAV) per share and share class. NAV is calculated
each business day at the close of regular trading on the New York Stock Exchange
(usually 4:00 Eastern Standard Time) by dividing the net assets of each fund
class by the number of shares outstanding. To calculate NAV, we determine the
fair market value of the fund's portfolio securities using the method described
in the Statement of Additional Information. When you're buying shares, you'll
pay the NAV that is next calculated after we receive your order in proper form,
plus any sales charges that apply. When you're selling shares, you'll receive
the NAV that is next calculated after we receive your order in proper form, less
any deferred sales charges that apply.
Some rules for buying
o The minimum amount of each investment after your first one is:
- $100 for non-retirement accounts
- $25 for retirement accounts
- $25 if you are investing using
our automatic investment plan
(see page 14).
o We record most shares on our books electronically. We will issue a
certificate if you ask us to in writing, however most of our shareholders
prefer not to have their shares in certificate form because certificated
shares can't be sold or exchanged by telephone or using the systematic
withdrawal program.
o We have the right to refuse a request to buy shares.
12
<PAGE>
Some rules for selling
o Selling your shares may result in a deferred sales charge. Please refer to
the table on page 11.
o We'll pay you within three days from the time we receive your request to
sell, unless you're selling shares you recently paid for by check. In that
case, we'll pay you when your check has cleared, which may take up to 15
days.
o If you are a corporation, partnership, executor, administrator, trustee,
custodian, guardian or you are selling shares of a retirement plan, you'll
need to complete special documentation and give us your request in writing.
Please call us for information.
o You can reinvest part or all of the proceeds of any shares you sell without
paying a sales charge. You must let us know in writing 30 days from the day
you sold the shares, and buy the same class of shares you sold. We will
reimburse you for any CDSC you paid. Please see page 16 for information
about how this can affect your taxes.
o You won't pay a service charge when you sell your shares, but your dealer
may charge you a fee.
o If selling shares results in the value of your account falling below $500,
we have the right to close your account, so long as your account has been
open for at least a year. We'll let you know 60 days in advance, and if you
don't bring the account balance above $500, we'll sell your shares, mail the
proceeds to you and close your account. We may also close your account if
you give us an incorrect social security number or taxpayer identification
number.
o In unusual circumstances, we may temporarily suspend the processing of
requests to sell.
Some rules for exchanging
o When you exchange shares, you are selling shares of one fund and using the
proceeds to buy shares of another fund. Please see page 16 for information
about how this can affect your taxes.
o Before you make an exchange, be sure to read the sections of the prospectus
that discuss the shares you're exchanging to.
o You can exchange shares of any Northstar fund for the same class of shares
of any other Northstar fund, or for shares of The Cash Management Fund
without a sales charge. You will, however, pay a sales charge if you buy
shares of The Cash Management Fund, and then exchange them for Class A
shares of any of the Northstar funds.
o For the purposes of calculating CDSC, shares you exchange will continue to
age from the day you first purchased them, even if you're exchanging into
The Cash Management Fund.
o We'll let you know 60 days in advance if we want to make any changes to
these rules.
(telephone graphic appears here)
If you have any questions, please call 1-800-595-7827.
13
<PAGE>
Your guide to
buying, selling and exchanging shares
of Northstar funds
Ways to buy, sell or exchange
When to use
this option
Through your dealer
o buy
o sell
o exchange
By mail
Please call us if you have any questions--we can't process your request until we
have all of the documents we need.
o buy
o sell
o exchange
By telephone
To sign up for this service, complete section 9 of the
application or call us at 1-800-595-7827.
o sell
o exchange
Automatic investment plan
To sign up for this service, complete section 7 of the
application or call us at 1-800-595-7827.
o buy
Systematic withdrawal program
To sign up for this service, complete section 8 of the
application or call us at 1-800-595-7827.
o sell
14
<PAGE>
How to use it
If you're buying shares, make your check payable to Northstar Funds and give it
to your dealer, who will forward it to us. When you're selling, give your
written request to your dealer, who may charge you a fee for this service.
Send your request to buy, sell or exchange in writing to:
Northstar Funds, c/o
First Data Investor Services Group Inc.
P.O. Box 5131
Westborough MA 01581-5131
Your letter should tell us
o your account number
o your social security number or taxpayer identification number
o the name the account is registered in
o the fund name and share class you're buying or selling, and, for exchanges,
the fund name and share class you're exchanging to
o the dollar value or number of shares you want to buy, sell or exchange. If
you're buying include a check payable to Northstar Funds with your request.
If you're selling or exchanging, your request must be signed by all
registered owners of the account.
We'll ask you to guarantee the signatures if:
o you are selling more than $50,000 worth of shares
o your address of record has changed in the past 30 days
o you want us to send the payment to someone other than the registered owner,
to an address other than the address of record, or in any form other than by
check.
Signatures can be guaranteed by a bank, a member of the national stock exchange
or another eligible institution.
You can sell or exchange up to $50,000 of your shares by telephone.
Call us at 1-800-595-7827 between 8:30 a.m. and 4:00 pm Eastern Standard Time.
When you're calling with your request, we'll ask you for your name, social
security number, broker of record or other identification. If we don't ask for
these things and process an unauthorized telephone transaction, we are
responsible for any losses to your account. Otherwise you are responsible for
any unauthorized use of the telephone transaction service.
We'll mail the proceeds of the sale to the address of record or wire $1,000 or
more to any commercial bank in the U.S. that is a member of the Federal Reserve
System. There is no fee for this service.
You can authorize us to automatically withdraw a minimum of $25 each month from
your bank account and use it to buy shares in Northstar funds.
There's no charge for this service, but your bank may charge you a small set-up
or transaction fee. You can cancel the program at any time.
You can ask us to automatically transfer money from your Northstar account into
your bank account.
We will sell shares or share fractions on your behalf monthly or quarterly, and
automatically deposit the proceeds into your bank account. There may be a sales
charge on shares we sell on your behalf.
You must have at least $5,000 worth of shares in your account to participate in
this program. The minimum transfer amount is $25.
It isn't to your advantage to buy and sell shares of the same fund at the same
time, so you can't set up an systematic withdrawal program for an account you've
already signed up on an automatic investment plan.
(telephone graphic appears here)
If you have any questions, please call 1-800-595-7827.
15
<PAGE>
Mutual fund earnings and your taxes
How the fund
pays distributions
The fund distributes virtually all of its net investment income and net capital
gains to shareholders once a year in the form of dividends.
As a shareholder, you are entitled to a share of the income and capital gains
the fund distributes. The amount you receive is based on the number of shares
you own.
Distribution options
You can take your distributions as cash or reinvest them in the same class of
shares of any Northstar fund. You specify your preference when you open your
account.
You can choose to reinvest your distrubtions in one of three ways:
o reinvest both income dividends and capital gain distributions to buy
additional Class A, B or C shares of any Northstar fund you choose
o receive income dividends in cash and reinvest capital gain distributions to
buy additional Class A, B or C shares of any Northstar fund you choose
o receive both income dividends and capital gain distributions in cash.
You can change your distribution instructions at any time by notifying us by
phone (if going to the address of record), or in writing.
If you don't specify how you would like to receive your distributions, we'll
automatically reinvest both income dividends and capital gain distributions in
additional shares of the same fund.
16
<PAGE>
How your
distributions
are taxed
The fund intends to meet the requirements for being a tax-qualified regulated
investment company, which means it generally does not pay federal income tax on
the earnings it distributes to shareholders.
As a result, distributions that you receive will generally be considered to be
taxable in your hands. Income distributions, whether you take them as cash or
reinvest them, are taxable as ordinary income. Capital gain distributions are
taxable as long-term capital gains, regardless of how long you've held the
shares.
Distributions may also be subject to state, local or foreign taxes.
If income distributed to you includes dividends paid by U.S. corporations, part
of the dividends the fund pays may be eligible for the corporate
dividends-received deduction.
Timing your purchase
If you buy shares of the fund just before it makes a distribution, you will pay
the full price but part of your investment will come back to you as a taxable
distribution. Unless you are investing in a tax-deferred account, such as an
IRA, this is not to your advantage because you'll pay tax on the dividend but
will not have shared in the increase in the net asset value of the fund.
When distributions are declared
For tax purposes, distributions declared by the fund in October, November or
December and paid to you in January are taxable in the calendar year in which
they were declared. Backup withholding tax We'll notify you each year of the tax
status of dividends and distributions. If we don't have your tax identification
number, or if you have been told by the IRS that you are subject to backup
withholding tax, we may be required to withhold U.S. federal income tax on any
distributions at the rate of 31%.
When you sell your shares
When you sell or exchange shares you will realize a capital gain or loss,
depending on the difference between what your shares cost you and what you
receive for them. A capital gain or loss will be long-term or short-term,
depending on the length of time you held the shares.
In your federal income tax return you report a capital gain as income and a
capital loss as a deduction.
Consult your tax adviser
The information above is general in nature. You should consult your tax adviser
to discuss how investing in Northstar funds affects your personal tax situation.
(telephone graphic appears here)
If you have any questions, please call 1-800-595-7827.
17
<PAGE>
The business
of mutual funds
How the fund is organized and managed
The Northstar International Value Fund is a diversified mutual fund. It is a
series of the Northstar Trust (formerly the Northstar Advantage Trust), which is
registered as an investment company with the SEC.
The trustees oversee the business affairs of the fund and are responsible for
major decisions about the fund's investment objectives and policies.
The fund does not hold regular shareholder meetings, but may hold special
meetings. A special meeting is called if investors holding at least 10% of the
outstanding shares of the fund request it. Certain objectives and policies of
the fund may only be changed by shareholder vote. A shareholder vote is required
to change the investment objective of the fund because the fund investment
objective is fundamental.
The day-to-day management of the fund is handled by the following companies and
advisers appointed by the trustees:
Investment adviser
Oversees the investment advice of the subadviser. The investment adviser is paid
out of the fund's management fee, which is listed on page 4.
Northstar Investment
Management Corporation Two Pickwick Plaza Greenwich, CT 06830 Portfolio managers
and sub-advisers You'll find profiles of the fund's portfolio managers and
sub-adviser beginning on page 6.
Administrator
Provides administrative, compliance and accounting services to the fund. The
administrator receives an annual administrative services fee from the fund of
.10% of the the fund's average daily net assets, plus $5 per account per year.
Northstar Administrators
Corporation Two Pickwick Plaza
Greenwich, CT 06830
Distributor
Markets the fund and distributes shares through brokers and other financial
representatives.
Northstar Distributors, Inc.
Two Pickwick Plaza
Greenwich, CT 06830
Custodian
Holds all the fund's assets.
Custodian and fund accounting agent:
State Street Bank and Trust Company
225 Franklin Street Boston, MA 02110
Transfer agent
Handles shareholder record-keeping and statements, distribution of dividends and
processing of orders to buy and sell shares.
First Data Investor Services Group,
Inc. 4400 Computer Drive
Westborough, MA 01581-5120
18
<PAGE>
How dealers are compensated
Dealers receive payment for selling shares of the Northstar International Value
Fund in three ways:
They receive a commission when you buy shares The amount of
the commission depends on the amount you invest and the share class you buy.
Sales commissions are detailed in the chart below.
o Class A investments
(% of offering price)
Commission received Amount
by dealers out of paid by the
sales charges you pay distributor
up to $99,999 4.00 --
$100,000 to $249,999 3.10 --
$250,000 to $499,999 2.30 --
$500,000 to $999,999 1.70 --
$1,000,000 to $2,499,999 0.00 1.00
$2,500,000 to $4,999,999 0.00 0.50
$5,000,000 and over 0.00 0.25
o Class B investments
Receives 4% of sale price from the distributor.
o Class C investments
Receives 1% of sale price from the distributor.
They are paid a fee by the distributor
for servicing your account
They receive a service fee depending on the average net asset value of the class
of shares their clients hold in the fund. These fees are paid from the 12-b1 fee
deducted from each fund class. In addition to covering the cost of commissions
and service fees, the 12-b1 fee is used to pay for other expenses such as sales
literature, prospectus printing and distribution and compensation to the
distributor and its wholesalers. You'll find the 12-b1 fees listed in the fund
information on page 4. Service and distribution fee percentages appear on page
9.
They may receive additional benefits and rewards
Selling shares of the fund
may make dealers eligible for awards or to participate in sales programs
sponsored by Northstar. The costs of these benefits and rewards are not deducted
from the assets of the fund--they are paid from the distributor's own resources.
The distributor may also pay additional compensation to dealers including Advest
Inc. out of its own resources for marketing and other services to shareholders.
If you have any questions, please call 1-800-595-7827.
19
<PAGE>
The risks of investing
in mutual funds
Risk is the potential that your investment will lose money or not earn as much
as you hope. Mutual funds have varying degrees of risk, depending on the
securities they invest in. There is no guarantee that a fund will achieve its
investment objective.
You'll find a discussion of the key risk factors associated with the
International Value Fund on page 4. This section provides information about the
risks associated with different kinds of securities. It also lists additional
investment practices that may involve elements of risk.
Equities
o Give the buyer ownership rights in the issuer. Common and preferred stocks,
convertible securities and stock purchase rights are types of equities.
o The market value of an equity security may go up or down rapidly depending
on market conditions. This affects the value of the shares of a fund, and
the value of your investment.
o Securities of smaller companies may be subject to more abrupt or erratic
market movements because they are traded in lower volume and are subject to
greater changes in earnings and growth prospects.
Foreign investments
o Securities issued by companies located in foreign countries.
o Subject to all of the risks associated with equity securities. There are
also other risks that can affect the value of foreign investments:
- foreign markets may be less regulated, have less volume and be less
liquid
- foreign securities may be less liquid and more volatile
- the value of the securities are affected by changes in currency
exchange rates and exchange control regulations
- the value of foreign securities may be affected by adverse political
and economic developments, seizure or nationalization of foreign
deposits, and government restrictions
- there is often less information available about foreign companies
and many countries do not have the same accounting, auditing and
financial reporting standards that we have in the United States.
Emerging markets
o Investments in emerging markets have additional risks: developing
countries have economic structures that are less mature, they have
less stable political systems and may have high inflation and rapidly
changing interest and currency exchange rates, and their securities markets
are substantially less developed.
Depository receipts
o American, European and Global depository receipts are typically
issued by U.S. banks or trust companies. They are based on ownership
of securities issued by foreign companies, and are traded on U.S.
exchanges.
20
<PAGE>
Other, higher risk
securities
Illiquid securities --the fund is limited to 5% of its net asset value
o Securities that can't be sold quickly at a reasonable price, or that can't
be sold on the open market. Includes restricted securities and private
placements.
o Used to seek higher profits.
o There may be fewer market players which can result in lower prices, and
sales can take longer to complete.
o Following guidelines established by the trustees of the fund, Brandes may
consider a security that can't be sold on the open market to be liquid if it
can be sold to institutional investors (Rule 144A) or on foreign markets.
Derivative securities
The fund does not currently intend to make use of any derivatives, including
transactions in currency forwards for hedging purposes.
Investment practices
Repurchase agreements -- the fund is limited to 5% of its net asset value
o Buying a security from a bank or dealer who must buy it back at a fixed
price on a specified day. Repurchase agreements that mature after more than
seven days are considered to be illiquid investments. Any one investment in
this type of repurchase agreement can only be 5% of the fund's net asset
value.
o Used for temporary defensive purposes or to generate income from cash
balances.
o The bank or dealer may not be able to buy back the security.
Short-term trading -- no limit
o Selling a security soon after you buy it.
o Used when the fund needs to be more liquid, in response to changes in
interest rates and economic or other developments, or when a security has
reached its price or yield objective.
o May result in higher costs for brokerage commissions, dealer mark-ups and
other transactions costs, as well as taxable capital gains.
Temporary investments -- no limit
o Temporarily maintaining part or all of the fund's assets in cash or in U.S.
Government securities, commercial paper, banker's acceptances, repurchase
agreements and certificates of deposit.
o Used for temporary and defensive purposes in periods of unusual market
conditions.
o Provides lower returns.
When-issued securities and forward
commitments -- no limit
o A commitment to buy a security on a specific day in the future at a
specified price.
o Used to realize short-term profits.
o If made through a dealer, there is a risk that the dealer won't complete the
sale, and that the fund will lose out on a good yield or price.
o There is also a risk that the value of the security will change before the
transaction is settled, resulting in short-term losses instead of gains.
(telephone graphic appears here)
If you have any questions, please call 1-800-595-7827.
21
<PAGE>
Where to go
for more information
You'll find more information about the Northstar International Value Fund in
our:
Annual report
The annual report contains information about fund performance, the financial
statements and the auditor's reports. Because this is a new fund, its Annual
Report won't be available until December 1997.
Statement of Additional Information (SAI)
The SAI contains complete information about the Northstar International Value
Fund. The SAI is legally part of this prospectus (it is incorporated by
reference).
A current SAI has been filed with the Securities and Exchange Commission.
Please write or call for a free copy of the Annual report or the SAI:
The Northstar Funds
2 Pickwick Plaza
Greenwich, CT
06830
1-800-595-7827
<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.
/ / INTERNATIONAL VALUE FUND $_______
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
( )
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
------------------------------------------------
Upon completion of the application, please
return with a check made payable to:
NORTHSTAR FUNDS,
c/o FIRST DATA, Box 8758, Providence, RI 02940
<TABLE>
<CAPTION>
<S> <C>
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>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
APRIL 21, 1997
NORTHSTAR International Value Fund
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 April 21, 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 has engaged
Brandes Investment Partners, Inc. ("Brandes" or the "Subadviser") to serve as
subadviser to the Northstar International Value Fund, subject to the
supervision of Northstar. Northstar Distributors, Inc. (the "Underwriter") is
the underwriter to the Fund. 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......................... 7
SERVICES OF NORTHSTAR, THE SUBADVISER
AND THE ADMINISTRATOR....................................... 9
NET ASSET VALUE......................................................... 11
PURCHASES AND REDEMPTIONS............................................... 13
DIVIDENDS, DISTRIBUTIONS AND TAXES...................................... 14
UNDERWRITER AND DISTRIBUTION SERVICES................................... 20
TRUSTEES AND OFFICERS................................................... 22
OTHER INFORMATION....................................................... 25
PERFORMANCE INFORMATION................................................. 26
FINANCIAL STATEMENTS.................................................... 29
<PAGE>
INVESTMENT RESTRICTIONS
- ------------------------------------------------------------------------------
Northstar International Value Fund. The Fund has adopted investment
restrictions numbered 1 through 6 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 the Fund's outstanding voting
shares. Investment restrictions numbered 7 through 12 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. Issue senior securities, except to the extent permitted under the
Investment Company Act of 1940, borrow money or pledge its assets, except that
the Fund may borrow on an unsecured basis from banks for temporary or emergency
purposes or for the clearance of transactions in amounts not exceeding 10% of
its total assets (not including the amount borrowed), provided that it will not
make investments while borrowings in excess of 5% of the value of its total
assets are outstanding;
2. Act as underwriter (except to the extent the Fund may be deemed
to be an underwriter in connection with the sale of securities in its
investment portfolio);
3. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in any one industry (other than U.S.
Government securities), except that the Fund reserves the right to invest all of
its assets in shares of another investment company;
4. Purchase or sell real estate or interests in real estate or real estate
limited partnerships (although the Fund may purchase and sell securities which
are secured by real estate, securities of companies which invest or deal in real
estate and securities issued by real estate investment trusts);
5. Purchase or sell commodities or commodity futures contracts, except
that the Fund may purchase and sell stock index futures contracts for hedging
purposes to the extent permitted under applicable federal and state laws and
regulations and except that the Fund may engage in foreign exchange forward
contracts;
6. Make loans (except for purchases of debt securities consistent with the
investment policies of the Fund and except for repurchase agreements);
7. Make short sales of securities or maintain a short position, except for
short sales against the box;
8. Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of transactions;
9. Write put or call options, except that the Fund may (i) write covered
call options on individual securities and on stock indices; (ii) purchase put
and call options on securities which are eligible for purchase by the Fund and
on stock indices; and (iii) engage in closing transactions with respect to its
<PAGE>
options writing and purchases, in all cases subject to applicable federal and
state laws and regulations;
10. Purchase any security if as a result the Fund would then hold more
than 10% of any class of voting securities of an issuer (taking all common stock
issues as a single class, all preferred stock issues as a single class, and all
debt issues as a single class), except that the Fund reserves the right to
invest all of its assets in a class of voting securities of another investment
company;
11. Invest more than 10% of its assets in the securities of other
investment companies or purchase more than 3% of any other investment company's
voting securities or make any other investment in other investment companies
except as permitted by federal and state law, except that the Fund reserves the
right to invest all of its assets in another investment company;
12. Invest more than 15% of its net assets in illiquid securities.
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. 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 the 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.
<PAGE>
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 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. In the
case of dramatically rising or falling markets, the loss from investing
in futures is potentially unlimited.
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
<PAGE>
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 will engage in futures transactions only as a hedge against the
risk of unexpected changes in the values of securities held or intended to be
held by the Fund. As a general rule, the Fund will not purchase or sell futures
if, immediately thereafter, more than 25% of its net assets would be hedged. In
addition, the Fund will not purchase or sell futures or related options if,
immediately thereafter, the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for such options would exceed 5% of
the market value of the Fund's net assets.
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 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.
<PAGE>
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 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.
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 the Fund. In
<PAGE>
addition, no more than an aggregate of 15% of the 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, the 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.
LENDING PORTFOLIO SECURITIES. The Fund may lend portfolio securities to
broker-dealers and other financial institutions in an amount up to 30% 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.
WHEN-ISSUED SECURITIES. The Fund may 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.
Risks of International Investing
Investments in foreign securities involve special risks, including
currency fluctuations, political or economic instability in the country of issue
and the possible imposition of exchange controls or other laws or restrictions.
In addition, securities prices in foreign markets are generally subject to
different economic, financial, political and social factors than are the prices
of securities in U.S. markets. With respect to some foreign countries there may
be the possibility of expropriation or confiscatory taxation, limitations on
liquidity of securities of political or economic developments which could affect
the foreign investments of the Fund. Moreover, securities of foreign issuers
generally will not be registered with the SEC, and such issuers will generally
not be subject to the SEC's reporting requirements. Accordingly, there is likely
to be less publicly available information concerning certain of the foreign
issuers of securities held by the Fund than is available concerning U.S.
companies. Foreign companies are also generally not subject to uniform
accounting, auditing and financial reporting standards or to practices and
requirements comparable to those applicable to U.S. companies. There may also be
less government supervision and regulation of foreign broker-dealers, financial
institutions and listed companies than exists in the U.S. These factors could
make foreign investments, especially those in developing countries, more
volatile. All of the above issues should be considered before investing in the
Fund.
Emerging Markets and Related Risks
The Fund may invest up to 25% of its assets in securities of companies
located in countries with emerging securities markets. Emerging markets are the
capital markets of any country that in the opinion of the Adviser is generally
considered a developing country by the international financial community.
Currently, these markets include, but are not limited to, the markets of
Argentina, Brazil, Chile, China, Colombia, Czech Republic, Greece, Hungary,
India, Indonesia, Israel, Korea, Malaysia, Mexico, Pakistan, Peru, the
Philippines, Poland, Portugal, Slovak Republic, Sri Lanka, Taiwan, Thailand,
Turkey, Venezuela and countries that comprise the former Soviet Union. As
opportunities to invest in other emerging markets countries develop, the Fund
expects to expand and diversify further the countries in which it invests.
Investing in emerging market securities involves risks which are in
addition to the usual risks inherent in foreign investments. Some emerging
markets countries may have fixed or managed currencies that are not
free-floating against the U.S. dollar. Further, certain currencies may not be
traded internationally. Certain of these currencies have experienced a steady
devaluation relative to the U.S. dollar. Any devaluations in the currencies in
which the Fund's portfolio securities are denominated may have a detrimental
impact on the Fund.
Some countries with emerging securities markets 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 negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some countries may differ
favorably or unfavorably from the U.S. economy in such respects as rate of
growth of gross domestic product, the rate of inflation, capital reinvestment,
resource self-sufficiency, number and depth of industries forming the economy's
base, governmental controls and investment restrictions that are subject to
political change and balance of payments position. Further, there may be greater
difficulties or restrictions with respect to investments made in emerging
markets countries.
Emerging securities markets typically have substantially less volume
than U.S. markets, securities in many of such markets are less liquid, and their
prices often are more volatile than securities of comparable U.S. companies.
Such markets often have different clearance and settlement procedures for
securities transactions, and in some markets there have been times when
settlements have been unable to keep pace with the volume of transactions,
making it difficult to conduct transactions. Delays in settlement could result
in temporary periods when assets which the Fund desires to invest in emerging
markets may be uninvested. Settlement problems in emerging markets countries
also could cause the Fund to miss attractive investment opportunities.
Satisfactory custodial services may not be available in some emerging markets
countries, which may result in the Fund incurring additional costs and delays in
the transportation and custody of such securities.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
------------------------------------------------------------------------------
Northstar or the Sub-adviser may place orders for the purchase and sale of
the Fund's securities, supervise their execution and negotiate brokerage
commissions on behalf of the Fund. For purposes of the remainder of this
section, "Portfolio Transactions and Brokerage Allocation," discussion of
Northstar includes the Subadviser. 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
<PAGE>
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 special 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.
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 Northstar's staff, since the brokers, as a group, tend to
monitor a broader universe of securities and other matters than Northstar'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 Northstar's
expenses, it is not possible to estimate its value, and, in the opinion of
Northstar, it does not reduce Northstar'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.
<PAGE>
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 Fund. 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 the Fund is known as
"Portfolio Turnover" and may involve the payment by the 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
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.
The placement of portfolio transactions with broker-dealers who sell
shares of the Fund is subject to rules adopted by the National Association of
Securities Dealers, Inc. ("NASD"). Provided the Trust's officers are satisfied
that the Fund is receiving the most favorable price and execution available,
Northstar may also consider the sale of the Fund's shares as a factor in the
selection of broker-dealers to execute its portfolio transactions.
The Fund does not effect securities transactions through broker-dealers in
accordance with any formula, nor does it effect securities transactions through
such broker-dealers solely for selling shares of the Fund. However, as stated
above, broker-dealers who execute transactions for the Fund may from time to
time effect purchases of shares of the Fund for their customers.
<PAGE>
SERVICES OF NORTHSTAR, THE SUBADVISER 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,
and subject to delegation of certain responsibilities to Brandes Investment
Partners, Inc. as the Subadviser for the Fund, is responsible for furnishing
continuous investment supervision to the Fund and is responsible for the
management of the Fund's portfolio.
Northstar is an indirect, majority-owned subsidiary of ReliaStar Financial
Corp. ("ReliaStar"). ReliaStar's address is 20 Washington Avenue South,
Minneapolis, Minnesota 55401. Combined minority interests in Northstar held by
members of senior management currently equal 20%. ReliaStar is a publicly traded
holding company whose subsidiaries specialize in the life insurance business.
Through ReliaStar Life Insurance Company 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.
Northstar charges a fee under the advisory agreement to the Fund at an
annual rate of 1.00% of the Fund's average daily net assets. This fee is accrued
daily and payable monthly. Northstar, Northstar Administrators Corporation and
Brandes Investment Partners, L.P. have agreed to waive their fees until the
assets of the Fund exceed $50 million.
The Investment Advisory Agreement for the Fund was originally approved by
the Trustees of the Northstar Trust on January 23, 1997, and by the sole
Shareholder of the Fund on January 23, 1997. The Investment Advisory Agreement
will continue in effect until January 23, 1999 and then will continue in effect
from year to year if specifically approved annually by (a) the Trustees, acting
on behalf of the Fund, including a majority of the Disinterested Trustees, or
(b) a majority of the outstanding voting securities of each class of the 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 the 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.
<PAGE>
Pursuant to a Subadvisory Agreement between Northstar and Brandes
Investment Partners, L.P. ("Brandes"), dated February 24, 1997, Brandes acts as
Subadviser to the Fund. In this capacity, Brandes, subject to the supervision
and control of Northstar and the Trustees of the Fund, will manage the Fund's
portfolio investments, consistently with their investment objective, and will
execute any of the Fund's investment policies that it deems appropriate to
utilize from time to time. Fees payable under the Subadvisory Agreement will
accrue daily and be paid monthly by Northstar. As compensation for its services,
Northstar will pay Brandes at the annual rate of 50% of the management fee that
the Fund pays Northstar. Brandes' address is 12750 High Bluff Drive, San Diego,
California 92130. Charles Brandes, who controls the general partner of Brandes,
serves as one of the managing directors of Brandes. The Subadvisory Agreement
for the Fund was approved by the Trustees of the Fund on January 23, 1997. The
Subadvisory Agreement may be terminated without payment of any penalty by
Northstar, Brandes, the Trustees of the Fund, or the shareholders of the Fund on
not more than 60 days' and not less than 30 days' prior written notice.
Otherwise, the Subadvisory Agreement will remain in effect for two years and
will, thereafter, continue in effect from year to year, subject to the annual
approval of the Trustees of the Fund, or the vote of a majority of the
outstanding voting securities of the Fund, and the vote, cast in person at a
meeting duly called and held, of a majority of the Trustees of the Fund who are
not parties to the Subadvisory Agreement or "interested persons" (as defined in
the 1940 Act) of any such Party.
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 Agreement, the custodian for the Fund under the
Custodian Agreement, the transfer agent for the Fund under the Transfer Agency
Agreement, and such other service providers as may be retained by the Fund 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
January 23, 1997 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
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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
<PAGE>
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 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.
Trading in securities in foreign securities markets is normally completed
well before the close of the New York Stock Exchange. In addition foreign
securities trading may not take place on all days on which the New York Stock
Exchange is open for trading, and may occur in certain foreign markets on days
on which the Fund's net asset value is not calculated. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of the New York Stock Exchange will not be reflected in
the calculation of net asset value unless the Board of Trustees deems that the
particular event would materially affect net asset value, in which case an
adjustment will be made. Assets or liabilities expressed in foreign currencies
are translated , in determining net asset value, into U.S. dollars based on the
spot exchange rates at 1:00 p.m., EST, or at such other rates as Northstar may
determine to be appropriate.
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, 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 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.
<PAGE>
PURCHASES AND REDEMPTIONS
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Shares issued pursuant to the automatic reinvestment of income dividend
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 Fund 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 Fund 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 50 eligible employees, (e) service providers of (i) Northstar or any of
its affiliated companies or (ii) the Funds or any Northstar affiliated
investment company and (f) Brandes employees, officers and partners. 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 prior to the purchase of shares of the 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 Fund 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 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 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
<PAGE>
any emergency that makes it impracticable for the 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.
EXCHANGES. The following conditions must be met for all exchanges among
the 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.
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 the Northstar
Funds in response to market fluctuations. Accordingly, in order to maintain a
stable asset base in each 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 the 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 the 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
<PAGE>
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 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 a 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
<PAGE>
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 the 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, 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.
<PAGE>
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.
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 the 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 Funds, 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 Fund.
<PAGE>
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.
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 relevant 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
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.
<PAGE>
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 the 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 the Fund, (ii)
those about whom notification has been received (either by the shareholder or by
the Fund) from the IRS that they are subject to backup withholding or (iii)
those who, to the 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 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 the 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 the 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.
<PAGE>
UNDERWRITER AND DISTRIBUTION SERVICES
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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 of the Fund, 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. 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)
<PAGE>
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 Fund; (iv) payment of expenses incurred in sales
and promotional activities, including advertising expenditures related to the
Fund; (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; 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.
<PAGE>
TRUSTEES AND OFFICERS
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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 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 ReliaStar 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, Inc., F.L. Putnam Investment
Management Company, Inc., 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.
<PAGE>
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.
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.
<PAGE>
As of December 31, 1996 all Trustees and executive officers of the Fund
as a group owned beneficially or of record less than 1% of the outstanding
securities of the Fund. To the knowledge of the Fund, as of December 31, 1996,
no shareholder owned beneficially (b) or of record (r) more than 5% of the
Fund's outstanding shares.
COMPENSATION TABLE
PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PENSION BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON FROM ALL FUNDS IN
FUND FUND EXPENSES RETIREMENT NORTHSTAR COMPLEX(B)
<S> <C> <C> <C> <C>
Robert B. Goode, Jr...................... (a)13,000 0 0 13,500
Paul S. Doherty.......................... (a)14,000 0 0 14,500
David W. Wallace......................... (a)14,000 0 0 14,500
Mark L. Lipson........................... (a) 0 0 0 0
John G. Turner........................... (a) 0 0 0 0
Alan L. Gosule........................... (a)14,000 0 0 14,500
David W.C. Putnam........................ (a)10,000 0 0 10,000
John R. Smith............................ (a)14,000 0 0 14,500
Walter H. May............................ (a)13,000 0 0 13,500
</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.
26
<PAGE>
INDIVIDUAL FUND
FISCAL YEAR COMPENSATION TABLES
<TABLE>
<CAPTION>
INCOME AND GROWTH HIGH TOTAL RETURN GROWTH + VALUE SPECIAL(C) GROWTH(C)
<S> <C> <C> <C> <C> <C>
Robert B. Goode, Jr.................. 2,063 1,563 0 1,563 1,563
Paul S. Doherty...................... 2,313 1,813 0 1,646 1,646
David W. Wallace..................... 2,313 1,813 0 1,646 1,646
Mark L. Lipson....................... 0 0 0 0 0
John G. Turner....................... 0 0 0 0 0
Alan L. Gosule....................... 2,313 1,813 0 1,646 1,646
David W.C. Putnam.................... 2,063 1,563 0 1,188 1,188
John R. Smith........................ 2,312 2,312 0 1,646 1,646
Walter H. May....................... 2,000 1,500 0 1,583 1,583
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET GOVERNMENT
OPPORTUNITIES(C) SECURITIES(C) STRATEGIC INCOME(C) HIGH YIELD(C)
<S> <C> <C> <C> <C>
Robert B. Goode, Jr.................................. 1,563 1,563 1,563 1,563
Paul S. Doherty...................................... 1,646 1,646 1,646 1,646
David W. Wallace..................................... 1,646 1,646 1,646 1,646
Mark L. Lipson....................................... 0 0 0 0
John G. Turner....................................... 0 0 0 0
Alan L. Gosule....................................... 1,646 1,646 1,646 1,646
David W.C. Putnam.................................... 1,188 1,188 1,188 1,188
John R. Smith........................................ 1,646 1,646 1,646 1,646
Walter H. May........................................ 1,583 1,583 1,583 1,583
</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 outofpocket
expenses. Mr. Putnam, former Chairman of these Funds, received a fee of
$30,000 per annum.
OTHER INFORMATION
- -------------------------------------------------------------------------------
Independent Accountants. Coopers & Lybrand L.L.P. has been selected as
the independent accountants of the Fund. Coopers & Lybrand L.L.P. audits the
Fund's annual financial statements and expresses an opinion thereon.
Custodian. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian, and fund accounting agent for
the Fund.
Transfer Agent. First Data Investor Services Group, Inc., 4400 Computer
Drive, Westborough, Massachusetts 01581-5120, acts as the transfer agent for the
Fund.
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, Northstar Income and Growth
Fund (formerly "Northstar Advantage Income and Growth Fund") and Northstar High
Total Return Fund (formerly "Northstar Advantage High Total Return Fund"), were
organized in 1993. Northstar Growth + Value Fund was organized in 1996.
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.
<PAGE>
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 the 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 (i) 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 the 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
the 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 the 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 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:
Average Annual Total Return = P(1+T) to the power of n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = the average annual total return
<PAGE>
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 and Class C 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
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.
<PAGE>
Non-Standardized 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 a
total return calculation produces a higher total return figure.
The 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 the 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 total return, yield and investment risk of shares of a 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.
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.
<PAGE>
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
<PAGE>
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 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.
Trading in securities in foreign securities markets is normally completed
well before the close of the New York Stock Exchange. In addition foreign
securities trading may not take place on all days on which the New York Stock
Exchange is open for trading, and may occur in certain foreign markets on days
on which the Fund's net asset value is not calculated. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of the New York Stock Exchange will not be reflected in
the calculation of net asset value unless the Board of Trustees deems that the
particular event would materially affect net asset value, in which case an
adjustment will be made. Assets or liabilities expressed in foreign currencies
are translated , in determining net asset value, into U.S. dollars based on the
spot exchange rates at 1:00 p.m., EST, or at such other rates as Northstar may
determine to be appropriate.
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, 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 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.
<PAGE>
PURCHASES AND REDEMPTIONS
------------------------------------------------------------------------------
Shares issued pursuant to the automatic reinvestment of income dividend
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 Fund 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 Fund 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 50 eligible employees, (e) service providers of (i) Northstar or any of
its affiliated companies or (ii) the Funds or any Northstar affiliated
investment company and (f) Brandes employees, officers and partners. 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 prior to the purchase of shares of the 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 Fund 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 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 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
<PAGE>
any emergency that makes it impracticable for the 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.
EXCHANGES. The following conditions must be met for all exchanges among
the 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.
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 the Northstar
Funds in response to market fluctuations. Accordingly, in order to maintain a
stable asset base in each 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 the 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 the 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
<PAGE>
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 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 a 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
<PAGE>
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 the 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, 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.
<PAGE>
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.
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 the 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 Funds, 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 Fund.
<PAGE>
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.
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 relevant 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
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.
<PAGE>
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 the 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 the Fund, (ii)
those about whom notification has been received (either by the shareholder or by
the Fund) from the IRS that they are subject to backup withholding or (iii)
those who, to the 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 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 the 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 the 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.
<PAGE>
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 of the Fund, 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. 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)
<PAGE>
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 Fund; (iv) payment of expenses incurred in sales
and promotional activities, including advertising expenditures related to the
Fund; (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; 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.
<PAGE>
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 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 ReliaStar 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, Inc., F.L. Putnam Investment
Management Company, Inc., 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.
<PAGE>
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.
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.
<PAGE>
As of December 31, 1996 all Trustees and executive officers of the Fund
as a group owned beneficially or of record less than 1% of the outstanding
securities of the Fund. To the knowledge of the Fund, as of December 31, 1996,
no shareholder owned beneficially (b) or of record (r) more than 5% of the
Fund's outstanding shares.
COMPENSATION TABLE
PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PENSION BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON FROM ALL FUNDS IN
FUND FUND EXPENSES RETIREMENT NORTHSTAR COMPLEX(B)
<S> <C> <C> <C> <C>
Robert B. Goode, Jr...................... (a)13,000 0 0 13,500
Paul S. Doherty.......................... (a)14,000 0 0 14,500
David W. Wallace......................... (a)14,000 0 0 14,500
Mark L. Lipson........................... (a) 0 0 0 0
John G. Turner........................... (a) 0 0 0 0
Alan L. Gosule........................... (a)14,000 0 0 14,500
David W.C. Putnam........................ (a)10,000 0 0 10,000
John R. Smith............................ (a)14,000 0 0 14,500
Walter H. May............................ (a)13,000 0 0 13,500
</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.
26
<PAGE>
INDIVIDUAL FUND
FISCAL YEAR COMPENSATION TABLES
<TABLE>
<CAPTION>
INCOME AND GROWTH HIGH TOTAL RETURN GROWTH + VALUE SPECIAL(C) GROWTH(C)
<S> <C> <C> <C> <C> <C>
Robert B. Goode, Jr.................. 2,063 1,563 0 1,563 1,563
Paul S. Doherty...................... 2,313 1,813 0 1,646 1,646
David W. Wallace..................... 2,313 1,813 0 1,646 1,646
Mark L. Lipson....................... 0 0 0 0 0
John G. Turner....................... 0 0 0 0 0
Alan L. Gosule....................... 2,313 1,813 0 1,646 1,646
David W.C. Putnam.................... 2,063 1,563 0 1,188 1,188
John R. Smith........................ 2,312 2,312 0 1,646 1,646
Walter H. May....................... 2,000 1,500 0 1,583 1,583
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET GOVERNMENT
OPPORTUNITIES(C) SECURITIES(C) STRATEGIC INCOME(C) HIGH YIELD(C)
<S> <C> <C> <C> <C>
Robert B. Goode, Jr.................................. 1,563 1,563 1,563 1,563
Paul S. Doherty...................................... 1,646 1,646 1,646 1,646
David W. Wallace..................................... 1,646 1,646 1,646 1,646
Mark L. Lipson....................................... 0 0 0 0
John G. Turner....................................... 0 0 0 0
Alan L. Gosule....................................... 1,646 1,646 1,646 1,646
David W.C. Putnam.................................... 1,188 1,188 1,188 1,188
John R. Smith........................................ 1,646 1,646 1,646 1,646
Walter H. May........................................ 1,583 1,583 1,583 1,583
</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 outofpocket
expenses. Mr. Putnam, former Chairman of these Funds, received a fee of
$30,000 per annum.
OTHER INFORMATION
- -------------------------------------------------------------------------------
Independent Accountants. Coopers & Lybrand L.L.P. has been selected as
the independent accountants of the Fund. Coopers & Lybrand L.L.P. audits the
Fund's annual financial statements and expresses an opinion thereon.
Custodian. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian, and fund accounting agent for
the Fund.
Transfer Agent. First Data Investor Services Group, Inc., 4400 Computer
Drive, Westborough, Massachusetts 01581-5120, acts as the transfer agent for the
Fund.
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, Northstar Income and Growth
Fund (formerly "Northstar Advantage Income and Growth Fund") and Northstar High
Total Return Fund (formerly "Northstar Advantage High Total Return Fund"), were
organized in 1993. Northstar Growth + Value Fund was organized in 1996.
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.
<PAGE>
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 the 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 (i) 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 the 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
the 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 the 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 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:
Average Annual Total Return = P(1+T) to the power of n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = the average annual total return
<PAGE>
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 and Class C 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
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.
<PAGE>
Non-Standardized 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 a
total return calculation produces a higher total return figure.
The 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 the 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 total return, yield and investment risk of shares of a 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.
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.
<PAGE>
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
The Northstar Trust's audited financial statements dated October 31, 1996
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, 1996.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Not Applicable
(b) Exhibits
(1) Declaration of Trust(1)
(2) By-Laws(1)
(3) N/A
(4) N/A
(5)(a) Form of Investment Advisory Agreement(1)
(b) Form of Subadvisory Agreement for Northstar
International Value Fund*
(6) Forms of Underwriting Agreements(1)
(7) N/A
(8) Custody Agreement*
(9) Administrative Services Agreement(1)
(10) Opinion of Counsel*
(11)(a) Consent of Independent Accountants
(Ernst & Young)*
(b) Consent of Independent Accountants
(Coopers & Lybrand)*
(12) N/A
(13) N/A
(14) N/A
(15) Form of Distribution and Service Plan(1)
(16) N/A
(17) N/A
(18) Multiple Class Plan Pursuant to Rule 18f-3(1)
(1) Filed as part of PEA No. 12 and incorporated herein by reference.
* Filed herewith.
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 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
<PAGE>
(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 not entitled to
indemnification under this Section 4.3, provided that either:
<PAGE>
(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 Northstar, the
Subadviser and the 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.
<TABLE>
<CAPTION>
Position with Other Substantial
Investment Business, Profession
Name Adviser Vocation or Employment
- ----------------------------------------------------------------------------
<S> <C>
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 Affiliates.
Mark L. Lipson Chairman/CEO Director and Officer of Northstar
Director Distributors, Inc., Northstar Administrators
Corp. and 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
Geoffrey Wadsworth Vice President/ Vice President - Northstar Affiliated
Investments and Investment Companies.
Portfolio Manager
Peter Bakst Vice President- Vice President - Northstar Affiliated
Investments Investment Companies and Portfolio
Manager, Director - High Yield Debt
Group for CS First Boston Corp.,
President of Presidio Capital
Management and Managing Director at
BT Securities Corp.
Ryan Johanson Vice President- Vice President - Northstar Affiliated
Investments Investment Companies and Portfolio
Manager, Director of Global Market
Risk Management, and Senior Manager
of Banque Indosuez.
Jeffrey Aurigemma Vice President - Vice President - Northstar Affiliated
Investments Investment Companies and Portfolio
Manager.
Michael Graves Vice President Vice President - Northstar Affiliated
Investments Investment Companies and Portfolio
Manager.
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 and
Operations Northstar Administrators Corp.
<PAGE>
Stephen Vondrak Vice President Vice President - Northstar Distributors, Inc.
Sales/Marketing Former Regional Marketing
Manager with Roger Engemann
and Associates from 1991-1994.
Mark Sfarra Vice President - Vice President - Northstar Distributors, Inc.
Marketing
</TABLE>
For information as to the business, profession, vocation or employment of a
substantial nature of the Subadviser, Brandes Investment Partners, L.P., and its
officers, reference is made to form ADV filed under the Investment Advisers Act
of 1940 by Brandes Investment Partners, L.P. (File No. 801-24896).
Item 29. Principal Underwriter
(a) See "Management of the Fund - The Investment 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
<PAGE>
Scott Casselberry Reg. Vice President None
Richard Galloway Reg. Vice President None
Stephen Vondrak Vice President None
Mark Sfarra Vice President None
Gertrude Purus Vice President None
Agnes Mullady Vice President Vice President
& Treasurer & Treasurer
Item 30. Location of Accounts and Records
State Street Bank and Trust Company maintains the following records at 225
Franklin Street, Boston, Massachusetts 02110, as Custodian and Fund Accounting
Agent 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; and
(4) Fund Accounting Records.
First Data Investor Services Group ("First Data") maintains the following
records at One Exchange Place, 11 Floor, Boston, Massachusetts 02109, 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; and
(4) State Securities Registration Records.
All other records required by item 30(a) are maintained at the office of the
Administrator, Two Pickwick Plaza, Greenwich, CT 06830 and the office of the
Subadviser, 12750 High Bluff Drive, San Diego, CA 92130.
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.
<PAGE>
(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 Fund's registration statement.
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certified that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933, and 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 11th day of April, 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 April 11, 1997
-----------------
John G. Turner*
/s/Mark L. Lipson President/Trustee April 11, 1997
-----------------
Mark L. Lipson*
/s/Paul S. Doherty Trustee April 11, 1997
------------------
Paul S. Doherty*
/s/David W. Wallace Trustee April 11, 1997
-------------------
David W. Wallace*
/s/Robert B. Goode, Jr. Trustee April 11, 1997
-----------------------
Robert B. Goode, Jr.*
/s/Walter H. May Trustee April 11, 1997
----------------
Walter H. May*
/s/Alan L. Gosule Trustee April 11, 1997
-----------------
Alan L. Gosule*
/s/David W.C. Putnam Trustee April 11, 1997
--------------------
David W. C. Putnam*
/s/John R. Smith Trustee April 11, 1997
-----------------
John R. Smith*
/s/Agnes Mullady Principal Financial April 11, 1997
---------------- and Accounting Officer
Agnes Mullady
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(b) Form of Subadvisory Agreement for the
Northstar International Value Fund
8 Custody Agreement
10 Opinion of Counsel
11(a) Consent of Independent Accountants
(Ernst & Young)
(b) Consent of Independent Accountants
(Coopers & Lybrand)
Exhibit 5(b)
NORTHSTAR INTERNATIONAL VALUE FUND
SUBADVISORY AGREEMENT
AGREEMENT made this 28th day of February, 1997 by and between Northstar
Investment Management Corporation, Delaware Corporation (hereinafter the
"Adviser"), investment adviser for the Northstar International Value Fund
(hereinafter the "Fund") a series of the Northstar Trust (the "Trust") and
Brandes Investment Partners, L.P., a California limited partnership
(hereinafter the "Subadviser").
WHEREAS, the Adviser has been retained by the Trust on behalf of the Fund
to provide investment advisory services to the Fund pursuant to an Investment
Advisory Agreement made on November 8, 1993 as amended January 23, 1997
(the "Investment Advisory Agreement"); and
WHEREAS, the Fund's Trustees, including a majority of the Trustees who are
not "interested persons," as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), and the Fund's shareholders have approved the
appointment of the Subadviser to perform certain investment advisory services
for the Fund pursuant to this Subadvisory Agreement with the Adviser and the
Subadviser is willing to perform such services for the Fund;
WHEREAS, the Subadviser is a registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual convenants
herein contained, it is agreed between the Adviser and the Subadviser as
follows:
1. APPOINTMENT. The Adviser hereby appoints the Subadviser to perform
advisory services to the Fund for the periods and on the terms set forth
in this Subadvisory Agreement. The Subadviser accepts such appointment and
agrees to furnish the services herein set forth, for the compensation herein
provided.
2. DUTIES OF SUBADVISER. The Adviser hereby authorizes Subadviser to
manage the investment and reinvestment of cash and investments comprising
those assets of the Fund with power on behalf of and in the name of the Fund
at Subadviser's discretion, subject at all times to the supervision of the
Adviser and the Trustees of the Fund:
(a) to direct the purchase, subscription or other acquisition, and the
sale, redemption, and exchange of investments, subject to the duty to render to
the Trustees of the Fund and the Adviser written reports of the composition
of the portfolio of the Fund as often as the Adviser or the Trustees of the Fund
shall reasonably require;
(b) to make all decisions relating to the manner, method and timing of
investment transactions, to select brokers, dealers and other intermediaries
by or through whom such transactions will be effected, and to engage such
consultants, analysts and experts in connection therewith as may be considered
necessary or appropriate;
(c) to direct banks, brokers or custodians to disburse funds or assets
solely in order to execute investment transactions for the Fund, provided the
Subadviser have no authority to direct the transfer of the Fund's funds
or assets to itself or other affiliated persons and shall have no authority
over the disbursement (as opposed to investment decisions) of funds or assets
nor any custody of any of the Fund's funds or assets; and
(d) to take all other actions as may be considered necessary or
appropriate to discharge its duties hereunder; PROVIDED THAT any specific or
general directions which the Trustees of the Fund or the Adviser may give in
writing to the Subadviser with regard to any of the foregoing powers shall,
unless the contrary expressly stated herein, override the general authority
given by this provision to the extent that the Trustees of the Fund may, at any
time and from time to time, direct, either generally or to a limited extent and
either alone or in concert with the
<PAGE>
Adviser or the Subadviser (provided that such directions would not cause the
Subadviser to violate any fiduciary duties or any laws with regard to the
Subadviser's duties and responsibilities), all or any of the same as they
shall think fit and, in particular, the Adviser shall have the right to direct
the Subadviser to place trades through brokers and other agents of the Adviser's
choice, subject to such brokers or agents executing such trades on a "best
execution basis", i.e. at the best price and/or with research or other services
which render the broker's services the most appropriate for the Subadviser's
needs, and further that the Subadviser is satisfied that the dealing and
execution quality of such brokers are satisfactory to the Subadviser; and
PROVIDED FURTHER that nothing herein shall be construed as giving the Subadviser
power to manage the aforesaid cash and investments in such a manner as would
cause the Fund to be considered a "dealer" in stocks, securities or commodities
for U.S. federal income tax purposes.
The Adviser shall monitor and review the performance of the Subadviser
under this Agreement, including but not limited to the Subadivser's performance
of the duties delineated in subparagraphs (a)-(b) above.
The Subadviser further agrees that, in performing its duties hereunder, it
will:
(a) (i) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code of 1986, as amended,
(the "Code") and all other applicable federal and state laws and regulations,
the Prospectus and Statement of Additional Information for the Fund, and with
any applicable procedures adopted by the Trustees in writing and made available
to Subadviser; (ii) manage the Fund in accordance with the investment
requirements for regulated investment companies under Subchapter M of the Code
and regulations issued thereunder, and (iii) direct the placement of orders
pursuant to its investment determinations for the Fund directly with the
issuer, or with any broker or dealer, in accordance with applicable policies
expressed in the Fund's Prospectus and/or Statement of Additional Information
and in accordance with applicable legal requirements;
(b) furnish to the Fund whatever non-proprietary reports the Fund may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition the Subadviser will keep the Fund and the Trustees
informed of developments materially affecting the Fund's portfolio and shall,
on the Subadviser's own initiative, furnish to the Fund from time to time
whatever information the Subadviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Northstar Administrators
Corporation (the "Administrator"), the Adviser, and the Fund, promptly upon
their request, such copies of its investment records and ledgers with respect
to the Fund as may be required to assist the Adviser, the Administrator and the
Fund in their compliance with applicable laws and regulations. The Subadviser
will furnish the Trustees with such periodic and special reports regarding the
Fund as they may reasonably request;
(d) immediately notify the Adviser and the Fund in the event that the
Subadviser or any of its affiliates (i) becomes aware that it is subject to
a statutory disqualification that prevents the Subadviser from serving as an
investment adviser pursuant to this Subadvisory Agreement; or (ii) becomes
aware that it is the subject of an administrative proceeding or enforcement
action by the Securities and Exchange Commission ("SEC") or other regulatory
authority. The Subadviser further agrees to notify the Fund and the Adviser
immediately of any material fact known to the Subadviser respecting or relating
to the Subadviser that is not contained in the Fund's Registration Statement,
or any amendment or supplement thereto, but that is required to be disclosed
therein, of any statement contained therein respecting or relating to the
Subadviser that becomes untrue in any material respect. The Adviser shall
likewise immediately notify the Subadviser if it becomes aware of any
regulatory action of the type described in this subparagraph 2(d) respecting
or relating to the Fund, the Adviser, or any Affiliates of the Adviser.
3. ALLOCATION OF CHARGES AND EXPENSES. The Subadviser shall pay all expenses
associated with the management of its business operations in performing its
responsibilities hereunder, including the cost of its own overhead, research,
compensation and expenses of its partners, officers and employees, and other
internal operating
2
<PAGE>
costs. The Fund shall bear its own overhead and other internal operating
costs (whether incurred directly or by the Adviser or the Subadviser)
including, without limitation:
(a) the costs incurred by the Fund in the preparation and printing of its
Prospectus or any offering literature (including any form of advertisement
or other solicitation materials calculated to lead to investors subscribing
for shares);
(b) all fees and expenses on behalf of the Fund to the Transfer Agent and
the Custodian;
(c) the reasonable fees and expenses of accountants, auditors, lawyers
and other professional advisors to the Fund;
(d) any interest, fee or charge payable on or on account of any borrowing
by the Fund;
(e) fiscal and governmental charges and duties relating to the purchase,
sale, issue or redemption of shares and increases in authorized share capital
of the Fund;
(f) the fees of any stock exchange or over-the-counter market on which
the shares may from time to time be listed, quoted or dealt in and the expenses
of obtaining any such listing, quotation or permission to deal;
(g) the fees and expenses (if any) payable to Trustees;
(h) brokerage, fiscal or governmental charges or duties in respect of or in
connection with the acquisition, holding or disposal of any of the assets of
the Fund or otherwise in connection with its business;
(i) the expenses of publishing details and prices of shares in newspapers
and other publications;
(j) all expenses incurred in the convening of meetings of shareholders or
in the preparation of agreements or other documents relating to the Fund or in
relation to the safe custody of the documents of title of any investments;
(k) all Trustees communication costs; and
(l) all premiums and costs for Fund insurance and blanket fidelity bonds.
4. COMPENSATION. The Subadviser agrees to waive all compensation until the
Fund's net assets exceed $50 million. After the Fund's net assets exceed $50
million, the Adviser will pay the Subadviser at the end of each calendar month
an advisory fee computed daily at an annual rate equal to fifty (50) percent
of the management fee that the Fund pays the Adviser.
5. BOOKS AND RECORDS. The Subadviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable
legal provisions, and to preserve such records for the periods and in the
manner required by applicable laws or regulations. The Subadviser also agrees
that records it maintains and preserves pursuant to Rules 31a-2 under the
1940 Act (excluding trade secrets or intellectual property rights) in
connection with its services hereunder are the property of the Fund and will
be surrendered promptly to the Fund upon its request and the Subadviser further
agrees that it will furnish to regulatory authorities having the requisite
authority any information or reports in connection with its services hereunder
which may be requested in order to determine whether the operations of the Fund
are being conducted in accordance with applicable laws and regulations.
6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Subadviser shall
exercise its best business judgment and reasonable care in rendering the
services provided by it under this Subadvisory Agreement. The Subadviser shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund or the holders of
3
<PAGE>
the Fund's shares or by the Adviser in connection with the matters to which
this Subadvisory Agreement relates, provided that nothing in this Subadvisory
Agreement shall be deemed to protect or purport to protect the Subadviser
against liability to the Fund or to holders of the Fund's shares or to the
Adviser to which the Subadviser would otherwise be subject by reason of willful
misfeasance, bad faith or negligence on its part in the performance of its
duties or by reason of the Subadviser's reckless disregard of its obligations
and duties under the Subadvisory Agreement. As used in this Section 6, the
term "Subadviser" shall include any officers, directors, employees or other
affiliates of the Subadviser performing services for the Fund.
7. SERVICES NOT EXCLUSIVE. It is understood that, except as may be
otherwise be agreed by the Adviser and the Subadviser, the services of the
Subadviser are not exclusive. The Subadviser is not required to recommend to
the Fund the same investments it recommends to its other clients. In connection
with purchases or sales of portfolio securities for the account of the Fund,
neither the Subadviser nor any of its partners officers or employees shall act
as principal or agent or receive any commission. If the Subadviser provides any
advice to its clients concerning the shares of the Fund, the Subadviser shall
act solely as investment counsel for such clients and not in any way on behalf
of the Fund.
8. DURATION AND TERMINATION. This Subadvisory Agreement shall continue in
effect for a period of two years unless sooner terminated as provided herein
and shall continue automatically for successive annual periods provided that
such continuance is specifically approved at least annually by the affirmative
vote of (i) a majority of the Trustees of the Trust who are not interested
persons of the Trust (as defined in the 1940 Act), 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 the Fund (as defined in the 1940 Act). Notwithstanding the
foregoing, this Subadvisory Agreement may be terminated: (a) at any time
without penalty by the Fund or Adviser upon the vote of a majority of the
Trustees or by vote of the majority of the Fund's outstanding voting
securities (as defined in the 1940 Act), upon sixty (60) days' written notice
to the Subadviser, or (b) by the Subadviser at any time without penalty, upon
(60) days' written notice to the Fund or Adviser. This Subadvisory Agreement
will also terminate automatically in the event of its assignment (as defined
in the 1940 Act) or the assignment or termination of the Investment Advisory
Agreement.
9. AMENDMENTS. No provision of this Subadvisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by both parties, and no material amendment of this Subadvisory
Agreement shall be effective until approved by an affirmative vote of (i) a
majority of the outstanding voting securities of the Fund, and (ii) a majority
of the Trustees of the Fund, including a majority of Trustees who are not
interested persons of any party to this Subadvisory Agreement, cast in person
at a meeting called for the purpose of voting on such approval, if such
approval is required by applicable law.
10. INDEMNIFICATION. (a) The Adviser hereby agrees to indemnify the
Subadviser from and against all liabilities, losses, expenses, reasonable
attorneys' fees and costs or damages (other than liabilities, losses,
expenses, attorneys fees and costs or damages arising from the Subadviser
failing to meet the standard of care required hereunder in the performance
by the Subadviser of, or its failure to perform, the services required
hereunder), arising from: (i) the Adviser's (or its affiliates' an
their respective agents' and employees') failure to perform its duties or
assume its obligations hereunder, or from its wrongful actions or omissions,
including, but not limited to claims asserted or threatened by any shareholder
of the Fund, governmental or regulatory agency, or any other person;
(ii) claims arising from any wrongful act by the Fund or any of the Fund's
trustees, officers, employees, or representatives, or by the Adviser, its
officers, employees or representatives, or from any actions by the Fund's
distributors or any representative of the Fund; (iii) any action or claim
against the Subadviser based on any alleged untrue statement or misstatement
of material fact in any registration statement, prospectus, shareholder report
or other information or materials relating to the Fund or shares issued by
the Fund or any amendment thereof or supplement thereto, or the failure or
alleged failure to state therein a material fact required to be stated in
order that the statements therein are not misleading, providing that such claim
is not based upon information provided to the Adviser by the Subadviser or
approved by the Subadviser in the manner provided in paragraph 12(b) of this
Agreement, or which facts or information the Subadviser failed to provide or
disclose. With respect to any claim for which the Subadviser shall be entitled
to indemnity hereunder, the Adviser shall assume the reasonable expenses
4
<PAGE>
and costs (including any reasonable attorneys' fees and costs) of the Suba
of investigating and/or defending any claim asserted or threatened by any
party, subject always to the Adviser first receiving a written undertaking
from the Subadviser to repay any amounts paid on its behalf in the event
and to the extent of any subsequent final determination by a court that
the Subadviser was not entitled to indemnification hereunder in respect of
such claim.
(b) The Subadviser hereby agrees to indemnify the Adviser, its affiliates
and the Fund from and against all liabilities, losses, expenses, reasonable
attorneys' fees and costs or damages (other than liabilities, losses, expenses,
attorneys fees and costs or damages arising from the Adviser's failure to
perform its responsibilities hereunder or claims arising from its acts or
failure to act in performing this Agreement) arising from Subadviser's or
or its agents' and employees' failure to perform its duties and assume its
obligations hereunder, or from any failure of Subadviser to meet the standard
of care set forth in Section 6 of this Agreement, including any action or claim
against the Adviser based on any alleged untrue statement or misstatement of a
material fact made or provided by or with the consent of Subadviser contained
in any registration statement, prospectus, shareholder report or other
information or materials relating to the Fund or shares issued by the Fund, or
the failure or alleged failure to state a material fact therein required to be
stated in order that the statements therein are not misleading, which fact
should have been made or provided by the Subadviser to the Adviser. With
respect to any claim for which the Adviser is entitled to indemnity
hereunder, the Subadviser shall assume the reasonable expenses and costs
(including any reasonable attorneys' fees and costs) of the Adviser of
investigating and/or defending any claim asserted or threatened by any
party, subject always to the Subadviser first receiving a written
undertaking from the Adviser to repay any amounts paid on its behalf in
the event and to the extent of any subsequent final determination by a court
that the Adviser was not entitled to indemnification hereunder in respect
of such claim.
(c) In the event that the Subadviser or Adviser is or becomes a party to
any action or proceedings in respect of which indemnification may be sought
hereunder, the party seeking indemnification (the "Indemnitee") shall
promptly notify the other party thereof. After becoming notified of the same,
the party from whom indemnification is sought (the "Indemnitor") shall be
entitled to participate in any such action or proceeding and shall assume
any payment for the full defense of the Indemnitee therein with counsel
reasonably satisfactory to the party seeking indemnification. The Indemnitor
shall not, in connection with any action or proceeding or separate but similar
or related actions or proceedings in the same jurisdiction arising out of the
same general allegation or circumstances, be liable for the fees or expenses of
more than one separate firm of attorneys at any time for Indemnities. After
properly assuming the defense thereof, the Indemnitor shall not be liable
hereunder to the Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with the defense thereof, other than
damages, if any, by way of judgment, settlement, or otherwise pursuant to this
provisions. The Indemnitor shall not be liable hereunder for any settlement of
any action or claim effected without its written consent, which consent shall
not be unreasonably withheld. The Indemnitee shall fully cooperate with the
Indemnitor in the defense of any claim and any litigation or other legal
proceedings resulting from the claim. The Indemnitee may participate in the
defense of the claim and any litigation or other legal proceedings resulting
from the claim. The Indemnitee may employ separate counsel to participate
in such defense, and the fees and expenses of such counsel shall not be at the
expense of the Indemnitee, but only if the employment thereof (a) has been
specifically authorized in writing by the Indemnitor, which authorization
shall not be unreasonably withheld and (b) relates to the defense of any
claim or any litigation or other legal proceedings resulting from the claim
to the extent the claim or any litigation or other legal proceedings resulting
from the claim seeks injunctive, specific performance or other nonmonetary
relief involving or affecting the business, operations or assets of the
Indemnitee (or an Affiliate of the Indemnitee). The provisions of this
Section 10 shall survive the termination of this Agreement.
11. INDEPENDENT CONTRACTOR. Subadviser shall for all purposes of this
Agreement be deemed to be an independent contractor and, except as otherwise
expressly provided herein, shall have no authority to act for, bind or
represent the Fund in any way or otherwise be deemed to be an agent of the
Fund. Likewise, the Fund, the Adviser and their respective affiliates, agents
and employees shall not be deemed agents of the Subadviser and shall have no
authority to bind Subadviser.
12. USE OF NAMES. (a) The Fund may, subject to sub-clause (b) below, use
the name, "Brandes Investment Partners, L.P.," ("Brandes") or the name of any
principal of Brandes, or any component, abbreviation or other name
5
<PAGE>
derived therefrom for promotional purposes only for so long as this Subad
Agreement (or any extension, renewal or amendment thereof) continues in
force, unless the Subadviser or such principal shall specifically consent
in writing to such continued use thereafter. Any permitted use by the Fund
during the term hereof of the name of the Subadviser or any of its principals,
or any derivative thereof, shall in no way prevent the Subadviser or any of
its shareholders or any of their successors, from using or permitting the use
of such name (whether singly or in any combination with any other words) for,
by or in connection with an entity or enterprise other than the Fund. At the
conclusion of this Subadvisory Agreement or in the event of any termination of
this Subadvisory Agreement for any reason, each of the authorized parties and
their respective employees, representatives, affiliates, and associates agree
that they shall immediately cease using each such name and any derivatives
of said names for any purpose whatsoever.
(b) The Adviser and its affiliates on one hand, and the Subadviser on the
other, shall not publish or distribute, and the Adviser shall cause the Fund
not to publish or distribute to Fund shareholders, prospective investors,
sales agents or members of the public, any disclosure document, offering
literature (including any form of advertisement or other solicitation
materials calculated to lead investors to subscribe for and purchase shares of
the Fund) or other documents referring by name to the Subadviser or its
affiliates on one hand and the Adviser or its affiliates on the other, unless
the other party shall have consented in writing to such references in the form
and context in which they appear; provided however, that where the Adviser or
the Fund timely seeks to obtain approval of the Subadviser of disclosure
required to be contained in any documents required to be filed by the Fund with
any governmental agency, and such approval is not forthcoming on or before the
date on which such documents are required by law to be filed, the Subadviser
shall be deemed to have consented to such disclosure.
13. CHANGE IN IDENTITY. The Subadviser shall notify the Adviser of any
change in the identity or control of its general or limited partners
promptly after such change occurs.
14. MISCELLANEOUS.
(a) This Subadvisory Agreement shall be governed by the laws of the
State of Massachusetts (without regard to principles of conflicts of law),
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Subadvisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof
or otherwise affect their construction or effect.
(c) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed to constitute one and the same instrument.
15. NOTICES. Any notice, instruction or other instrument required or
permitted to be given hereunder may be delivered in person to the offices of
the parties as set forth therein during normal business hours, or delivered or
sent by prepaid registered mail, express mail or by facsimile to the parties
at such offices or such other address as may be notified by either party from
time to time addressed to its President. Such notice, instruction or other
instrument shall be deemed to have been served, in the case of a registered
letter at the expiration of seventy-two (72) hours after posting; in the case
of express mail, within twenty-four (24) hours after dispatch; and in the case
of facsimile, immediately on dispatch; and if delivered outside normal business
hours it shall be deemed to have been received at the next time after delivery
or transmission when normal business hours commence. Evidence that the notice,
instruction or other instrument was properly addressed, stamped and put into
the post shall be conclusive evidence of posting.
16. ATTORNEY'S FEES. In the event of a material breach of this Agreement by
any party hereto, the prevailing party, as determined by the trier of fact,
shall be entitled to reasonable attorneys' fees and costs as determined by the
court in such action, in addition to any other damages awarded.
6
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the date and year set
forth above.
Northstar Investment Management Corporation
By: ______________________________________
Mark L. Lipson
Chairman and CEO
Brandes Investment Partners, L.P.
By: _______________________________________
Charles H. Brandes
Managing Director
7
<PAGE>
CUSTODIAN CONTRACT
Between
NORTHSTAR/NWNL TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held By It .................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States ................3
2.1 Holding Securities ........................................3
2.2 Delivery of Securities ....................................3
2.3 Registration of Securities ................................8
2.4 Bank Accounts .............................................9
2.5 Availability of Federal Funds ............................10
2.6 Collection of Income .....................................10
2.7 Payment of Fund Monies ...................................11
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased ..........................14
2.9 Appointment of Agents ....................................15
2.10 Deposit of Fund Assets in Securities System ..............15
2.10A Fund Assets Held in the Custodian's Direct
Paper System .............................................18
2.11 Segregated Account .......................................20
2.12 Ownership Certificates for Tax Purposes ..................21
2.13 Proxies ..................................................22
2.14 Communications Relating to Portfolio
Securities ...............................................22
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States ...........................23
3.1 Appointment of Foreign Sub-Custodians ....................23
3.2 Assets to be Held ........................................23
3.3 Foreign Securities Depositories ..........................24
3.4 Agreements with Foreign Banking Institutions .............24
3.5 Access of Independent Accountants of the Fund ............25
3.6 Reports by Custodian .....................................25
3.7 Transactions in Foreign Custody Account ..................26
3.8 Liability of Foreign Sub-Custodians ......................27
3.9 Liability of Custodian ...................................27
3.10 Reimbursement for Advances ...............................28
3.11 Monitoring Responsibilities ..............................29
3.12 Branches of U.S. Banks ...................................29
3.13 Tax Law ..................................................30
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund ................................................31
5. Proper Instructions ..................................................32
6. Actions Permitted Without Express Authority ..........................33
7. Evidence of Authority ................................................33
<PAGE>
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income ....................34
9. Records ..............................................................34
10. Opinion of Fund's Independent Accountants ............................35
11. Reports to Fund by Independent Public Accountants ....................35
12. Compensation of Custodian ............................................36
13. Responsibility of Custodian ..........................................36
14. Effective Period, Termination and Amendment ..........................38
15. Successor Custodian ..................................................40
16. Interpretive and Additional Provisions ...............................41
17. Additional Funds .....................................................42
18. Massachusetts Law to Apply ...........................................42
19. Prior Contracts ......................................................42
20. Shareholder Communications Election ..................................42
<PAGE>
CUSTODIAN CONTRACT
This Contract between Northstar/NWNL Trust, a business trust
organized and existing under the laws of Massachusetts, having its principal
place of business at Two Pickwick Plaza, Greenwich, Connecticut 06830
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in four series,
Northstar Growth Fund, Northstar Income and Growth Fund, Northstar Multi-Sector
Bond Fund and Northstar High Yield Bond Fund (such series together with all
other series subsequently established by the Fund and made subject to this
Contract in accordance with paragraph 17, being herein referred to as the
"Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic
<PAGE>
securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Declaration of
Trust. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian
all securities and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect to all
securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
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<PAGE>
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System" and (b) commercial
paper of an issuer for which State Street Bank and Trust Company acts as
issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian pursuant to Section
2.1OA.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
-3-
<PAGE>
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.9 or into the name
or nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
-4-
<PAGE>
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for
-5-
<PAGE>
definitive securities; provided that, in any such case, the
new securities and cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a
-6-
<PAGE>
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described
-7-
<PAGE>
from time to time in the currently effective prospectus and
statement of additional information of the Fund, related to
the Portfolio ("Prospectus"), in satisfaction of requests by
holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund on behalf
of the applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee signed
by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of the
Portfolio to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the
name of the Portfolio or in the name of any nominee of the Fund on
behalf of the Portfolio or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Portfolio, unless the
Fund has authorized in writing the appointment of a nominee to
-8-
<PAGE>
be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or
nominee name of any agent appointed pursuant to Section 2.9 or in
the name or nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on behalf of the
Portfolio under the terms of this Contract shall be in "street name"
or other good delivery form. If, however, the Fund directs the
Custodian to maintain securities in "street name", the Custodian
shall utilize its best efforts only to timely collect income due the
Fund on such securities and to notify the Fund on a best efforts
basis only of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange
offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Portfolio,
other than cash maintained by the Portfolio in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the
Banking Department
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of the Custodian or in such other banks or trust companies as it may
in its discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each
such bank or trust company and the funds to be deposited with each
such bank or trust company shall on behalf of each applicable
Portfolio be approved by vote of a majority of the Board of Trustees
of the Fund. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the
Fund on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the
Fund on behalf of a Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received in payment
for Shares of such Portfolio which are deposited into the
Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held
hereunder to which each Portfolio shall be entitled either by law or
pursuant to custom in the securities business, and shall
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collect on a timely basis all income and other payments with respect
to bearer domestic securities if, on the date of payment by the
issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of
the foregoing, the Custodian shall detach and present for payment
all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the
Fund with such information or data as may be necessary to assist the
Fund in arranging for the timely delivery to the Custodian of the
income to which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for
the account of the Portfolio but only (a) against the
delivery
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of such securities or evidence of title to such options,
futures contracts or options on futures contracts to the
Custodian (or any bank, banking firm or trust company
doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated
by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in the name
of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case
of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.10
hereof; (c) in the case of a purchase involving the
Direct Paper System, in accordance with the conditions
set forth in Section 2.10A; (d) in the case of
repurchase agreements entered into between the Fund on
behalf of the Portfolio and the Custodian, or another
bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate
form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities
or
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(ii) against delivery of the receipt evidencing purchase
by the Portfolio of securities owned by the Custodian
along with written evidence of the agreement by the
Custodian to repurchase such securities from the
Portfolio or (e) for transfer to a time deposit account
of the Fund in any bank, whether domestic or foreign;
such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund as defined
in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by
the Portfolio, including but not limited to the
following payments for the account of the Portfolio:
interest, taxes, management, accounting, transfer agent
and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
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5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing documents
of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt of,
in addition to Proper Instructions from the Fund on
behalf of the Portfolio, a certified copy of a
resolution of the Board of Trustees or of the Executive
Committee of the Fund signed by an officer of the Fund
and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to
be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is
to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of
a Portfolio is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions from
the Fund on behalf of such Portfolio to so pay in advance, the Custodian
shall be absolutely liable to the Fund for such securities to the
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same extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such of
the provisions of this Article 2 as the Custodian may from time to time
direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
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Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i)
receipt of advice from the Securities System that payment for
such securities has been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Portfolio. Copies of all advices from the Securities System of
transfers of securities for the
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account of the Portfolio shall identify the Portfolio, be
maintained for the Portfolio by the Custodian and be provided
to the Fund at its request. Upon request, the Custodian shall
furnish the Fund on behalf of the Portfolio confirmation of
each transfer to or from the account of the Portfolio in the
form of a written advice or notice and shall furnish to the
Fund on behalf of the Portfolio copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the
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Portfolio resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent
to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
an account
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("Account") of the Custodian in the Direct Paper System which
shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish
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to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf
of each such Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
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transactions by the Portfolio, (ii) for purposes of segregating cash or
government securities in connection with options purchased, sold or
written by the Portfolio or commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the purposes of compliance
by the Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the Securities
and Exchange Commission relating to the maintenance of segregated accounts
by registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
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2.13 Proxies. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights
in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers
of the securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer or
any other similar transaction, the
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Portfolio shall notify the Custodian at least three business days prior to
the date on which the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside of
the United States
3.1 Appointment of Foreign Sub-Custodians
The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Portfolio's securities and other assets maintained
outside the United States the foreign banking institutions and foreign
securities depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a certified resolution of the
Fund's Board of Trustees, the Custodian and the Fund may agree to amend
Schedule A hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct
the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash
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equivalents in such amounts as the Custodian or the Fund may determine to
be reasonably necessary to effect the Portfolio's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such arrangements shall
include entry into agreements containing the provisions set forth in
Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set forth
in Exhibit 1 hereto and shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or
its creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records will
be maintained
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identifying the assets as belonging to each applicable Portfolio; (d)
officers of or auditors employed by, or other representatives of the
Custodian, including to the extent permitted under applicable law the
independent public accountants for the Fund, will be given access to the
books and records of the foreign banking institution relating to its
actions under its agreement with the Custodian; and (e) assets of the
Portfolios held by the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance of such
foreign banking institution under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of the Portfolio(s) held by foreign sub-custodians, including
but not limited to an identification of entities having possession of the
Portfolio(s) securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account maintained
by a foreign banking institution for the
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Custodian on behalf of each applicable Portfolio indicating, as to
securities acquired for a Portfolio, the identity of the entity having
physical possession of such securities.
3.7 Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of this Section 3.7, the
provision of Sections 2.2 and 2.7 of this Contract shall apply, mutatis
mutandis to the foreign securities of the Fund held outside the United
States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the account
of each applicable Portfolio may be effected in accordance with the
customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities
to the purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold
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any such nominee harmless from any liability as a holder of record of such
securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.12 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization,
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expropriation, currency restrictions, or acts of war or terrorism or any
loss where the sub-custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this paragraph 3.9, in
delegating custody duties to State Street London Ltd., the Custodian shall
not be relieved of any responsibility to the Fund for any loss due to such
delegation, except such loss as may result from (a) political risk
(including, but not limited to, exchange control restrictions,
confiscation, expropriation, nationalization, insurrection, civil strife
or armed hostilities) or (b) other losses (excluding a bankruptcy or
insolvency of State Street London Ltd. not caused by political risk) due
to Acts of God, nuclear incident or other losses under circumstances where
the Custodian and State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to advance
cash or securities for any purpose for the benefit of a Portfolio
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time
held for the account of the
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applicable Portfolio shall be security therefor and should the Fund fail
to repay the Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of such Portfolios assets to the
extent necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection with
the initial approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.12 Branches of U.S Banks
(a) Except as otherwise set forth in this Contract, the provisions hereof
shall not apply where the custody of
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the Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the responsibility
of the Fund to notify the Custodian of the obligations imposed on the Fund
or the Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including responsibility
for withholding and other taxes, assessments or other governmental
charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to
use reasonable efforts
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to assist the Fund with respect to any claim for exemption or refund under
the tax law of jurisdictions for which the Fund has provided such
information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when
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presented to the Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time between the Fund and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialled by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three - party agreement which requires a segregated asset account in
accordance with Section 2.11.
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6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Fund on behalf of
the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings with the
securities and property of the Portfolio except as otherwise directed by the
Board of Trustees of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such
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vote may be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940,
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with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder. All such records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be open for inspection
by duly authorized officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities owned by each
Portfolio and held by the Custodian and shall, when requested to do so by the
Fund and for such compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-lA, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a
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<PAGE>
Securities System, relating to the services provided by the Custodian under this
Contract; such reports, shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund to provide reasonable assurance that
any material inadequacies would be disclosed by such examination, and, if there
are no such inadequacies, the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act
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upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody or any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
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If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement)
for the benefit of a Portfolio including the purchase or sale of foreign
exchange or of contracts for foreign exchange or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or
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<PAGE>
an Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities System by such Portfolio as required by
Rule 17f-4 under the Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under Section 2.10A hereof
in the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the initial use of
the Direct Paper System by such Portfolio; provided further, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Declaration of
Trust, and further provided, that the Fund on behalf of one or more of the
Portfolios may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
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<PAGE>
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided
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profits, as shown by its last published report, of not less than $25,000,000,
all securities, funds and other properties held by the Custodian on behalf of
each applicable Portfolio and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract on behalf of each
applicable Portfolio and to transfer to an account of such successor custodian
all of the securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a
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<PAGE>
writing signed by both parties and shall be annexed hereto, provided, that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Declaration of Trust of the
Fund. No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to Northstar Growth Fund, Northstar Income and Growth Fund, Northstar
Multi-Sector Bond Fund and Northstar High Yield Bond Fund with respect to which
it desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
20. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to
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respond to requests by issuers of securities for the names, addresses and
holdings of beneficial owners of securities of that issuer held by the bank
unless the beneficial owner has expressly objected to disclosure of this
information. In order to comply with the rule, the Custodian needs the Fund to
indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
YES [X] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [ ] The Custodian is not authorized to release the
Fund's name, address, and share positions.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 15th day of April, 1994.
ATTEST NORTHSTAR/NWNL TRUST
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- -------------------------- -----------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- -------------------------- -----------------------------------
Executive Vice President
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Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of Northstar/NWNL Trust
for use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
- ---------------------------------
Fund's Authorized Officer
Date: ___________________________
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Exhibit 1
SUBCUSTODIAN AGREEMENT
AGREEMENT made this_______________________; between State Street Bank and
Trust Company, A Massachusetts Trust Company (hereinafter referred to as the
"Custodian"), having its principal place of business at 225 Franklin Street,
Boston, MA, and _____________________________ (hereinafter referred to as the
"Subcustodian"), a bank organized under the laws of _________________________
and having its registered office at______________________________________
___________________________________________________________________________.
WHEREAS, Custodian has been appointed to act as Trustee, Custodian or
Subcustodian of securities and monies on behalf of certain of its customers
including, without limitation, collective investment undertakings, investment
companies subject to the U.S. Investment Company Act of 1940, as amended, and
employee benefit plans subject to the U.S. Employee Retirement Income Security
Act of 1974, as amended;
WHEREAS, Custodian wishes to establish Accounts (the "Accounts") with the
Subcustodian to hold and maintain certain property for which Custodian is
responsible as custodian; and
WHEREAS, Subcustodian agrees to establish the Accounts and to hold and
maintain all Property in the Accounts in accordance with the terms and
conditions herein set forth.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the Custodian and the Subcustodian agree as follows:
I. The Account
A. Establishment of the Account
Custodian hereby requests that Subcustodian establish for each client of
the Custodian an Account which shall be composed of:
1. A Custody Account for any and all Securities (as hereinafter
defined) from time to time received by Subcustodian therefor, and
2. A Deposit Account for any and all Cash (as hereinafter
defined) from time to time received by Subcustodian therefor.
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B. Use of the Account
The Account shall be used exclusively to hold, acquire, transfer or
otherwise care for, on behalf of Custodian as custodian and the customers of
Custodian and not for Custodian's own interest, Securities, and such Cash or
cash equivalents as are transferred to Subcustodian or as are received in
payment of any transfer of, or as payment on, or interest on, or dividend from,
any such Securities (herein collectively called "Cash").
C. Transfer of Property in the Account
Beneficial ownership of the Securities and Cash in the Account shall be
freely transferable without payment of money or value other than for safe
custody and administration.
D. Ownership and Segregation of Property in Account
The ownership of the property in the Account, whether Securities,
Cash or both, and whether any such property is held by Subcustodian in an
Eligible Depository, shall be clearly recorded on Subcustodian's books as
belonging to Custodian on behalf of Custodian's customers, and not for
Custodian's own interest and, to the extent that Securities are physically held
in the Account, such Securities shall also be physically segregated from the
general assets of Subcustodian, the assets of Custodian in its individual
capacity and the assets of Subcustodian's other customers. In addition,
Subcustodian shall maintain such other records as may be necessary to identify
the property hereunder as belonging to each Account.
E. Registration of Securities in the Account
Securities which are eligible for deposit in a depository as provided for
in Paragraph III may be maintained with the depository in an account for
Subcustodian's customers. Securities which are not held in a depository and that
are ordinarily held in registered form will be registered in the name of the
Sub-custodian or in the name of Sub-custodian's nominee, unless alternate
Instructions are furnished by Custodian.
II. Services to be Provided by the Subcustodian
The Services Subcustodian will provide to Custodian and the manner in
which such services will be performed will be as set forth below in this
Agreement.
A. Services Performed Pursuant to Instructions
All transactions involving the Securities and Cash in the Account shall be
executed solely in accordance with Custodian's Instructions as that term is
defined in paragraph IV hereof, except those described in Paragraph B below.
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B. Services to be Performed without Instructions
Subcustodian will, unless it receives Instructions from Custodian to the
contrary:
1. Collect Cash
Promptly collect and receive all dividends, income, principal, proceeds
from transfer and other payments with respect to property held in the Account,
and present for payment all Securities held in the Account which are called,
redeemed or retired or otherwise become payable and all coupons and other income
items which call for payment upon presentation, and credit Cash receipts
therefrom to the Deposit Account.
2. Exchange Securities
Promptly exchange Securities where the exchange is purely ministerial
including, without limitation, the exchange of temporary Securities for those in
definitive form and the exchange of warrants, or other documents of entitlement
to Securities, for the Securities themselves.
3. Sale of Rights and Fractional Interests
Whenever notification of a rights entitlement or a fractional interest
resulting from a rights issue, stock dividend or stock split is received for the
Account and such rights entitlement or fractional interest bears an expiration
date, Subcustodian will promptly endeavor to obtain Custodian's Instructions,
but should these not be received in time for Subcustodian to take timely action,
Subcustodian is authorized to sell such rights entitlement or fractional
interest and to credit the Account.
4. Execute Certificates
Execute in Custodian's name for the Account, whenever Subcustodian deems
it appropriate, such ownership and other certificates as may be required to
obtain the payment of income from the Securities held in the Account.
5. Pay Taxes and Receive Refunds
To pay or cause to be paid from the Account any and all taxes and levies
in the nature of taxes imposed on the property in the Account by any
governmental authority, and to take all steps necessary to obtain all tax
exemptions, privileges or other benefits, including reclaiming and recovering
any withholding tax, relating to the Account and to execute any declarations,
affidavits, or certificates of ownership which may be necessary in connection
therewith.
6. Prevent Losses
Take such steps as may be reasonably necessary to secure, or otherwise
prevent the loss of, entitlements attached to or otherwise relating to property
held in the Account.
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C. Additional Services
1. Transmission of Notices of Corporate Action
By such means as will permit Custodian to take timely action with respect
thereto, Subcustodian will promptly notify Custodian upon receiving notices or
reports, or otherwise becoming aware, of corporate actions affecting Securities
held in the Account (including, but not limited to, calls for redemption,
mergers, consolidations, reorganizations, recapitalizations, tender offers,
rights offerings, exchanges, subscriptions and other offerings) and dividend,
interest and other income payments relating to such Securities.
2. Communications Regarding the Exercise of Entitlements
Upon request by Custodian, Subcustodian will promptly deliver, or cause
any Eligible Depository authorized and acting hereunder to deliver, to Custodian
all notices, proxies, proxy soliciting materials and other communications that
call for voting or the exercise of rights or other specific action (including
material relative to legal proceedings intended to be transmitted to security
holders) relating to Securities held in the Account to the extent received by
Subcustodian or said Eligible Depository, such proxies or any voting instruments
to be executed by the registered holder of the Securities, but without
indicating the manner in which such Securities are to be voted.
3. Monitor Financial Service
In furtherance of its obligations under this Agreement, Subcustodian will
monitor a leading financial service with respect to announcements and other
information respecting property held in the Account, including announcements and
other information with respect to corporate actions and dividend, interest and
other income payments.
III. Use of Securities Depository
Subcustodian may, with the prior written approval of Custodian, maintain
all or any part of the Securities in the Account with a securities depository or
clearing agency which is incorporated or organized under the laws of a country
other than the United States of America and is supervised or regulated by a
government agency or regulatory authority in the foreign jurisdiction having
authority over such depositories or agencies, and which operates (a) the central
system for handling of designated securities or equivalent book entries in
__________________________________ or (b) a transnational system for the central
handling of securities or equivalent book entries (herein called "Eligible
Depository"), provided however, that, while so maintained, such Securities shall
be subject only to the directions of Subcustodian, and that Subcustodian duties,
obligations and responsibilities with regard to such
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Securities shall be the same as if such Securities were held by Subcustodian on
its premises.
IV. Claims Against Property in the Account
The property in the account shall not be subject to any right, charge,
security interest, lien or claim of any kind (collectively "Charges") in favor
of Subcustodian or any Eligible Depository or any creditor of Subcustodian or of
any Eligible Depository except a claim for payment by Subcustodian for such
property's safe custody or administration in accordance with the terms of this
Agreement. Subcustodian will immediately notify Custodian of any attempt by any
party to assert any Charge against the property held in the Account and shall
take all lawful actions to protect such property from such Charges until
Custodian has had reasonable time to respond to such notice.
V. Subcustodian's Warranty
Subcustodian Represents and Warrants That:
(A) It is a branch of a "qualified U.S. bank" or it is an "eligible
foreign custodian" as those terms are defined in Rule 17f-5 of the Investment
Company Act of 1940, a copy of which is attached hereto as Attachment A (the
"Rule"), and Subcustodian shall immediately notify Custodian, in writing or by
other authorized means, in the event that there appears to be a substantial
likelihood that Subcustodian will cease to qualify under the Rule as currently
in effect or as hereafter amended, or
(b) It is the subject of an exemptive order issued by the United States
Securities and Exchange Commission which order permits Custodian to employ
Subcustodian notwithstanding the fact that Subcustodian fails to qualify under
the terms of the Rule, and Subcustodian shall immediately notify Custodian, in
writing or by other authorized means, if for any reason it is no longer covered
by such exemptive order.
Upon receipt of any such notification required under (A) or (B) of
this section, Custodian may terminate this Agreement immediately without prior
notice to Subcustodian.
VI. Definitions
A. Instructions
The term "Instructions" means
1. instructions in writing signed by authorized individuals designated
as such by Custodian;
2. telex or tested telex instructions of Custodian;
3. other forms of instructions in computer readable form as shall
customarily be used for the transmission of like information, and
4. such other forms of communication as from time to time may be agreed
upon by Custodian and Subcustodian, which Subcustodian believes in good
faith to have been given by Custodian or which are transmitted with proper
testing or
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authentication pursuant to terms and conditions which custodian may specify.
Unless otherwise expressly provided, all Instructions shall continue in
full force and effect until canceled or superseded. Subcustodian shall act in
accordance with Instructions and shall not be liable for any act or omission in
respect of any Instruction except in the case of willful default, negligence,
fraud, bad faith, willful misconduct, or reckless disregard of duties on the
part of Subcustodian. Subcustodian in executing all Instructions will take
relevant action in accordance with accepted industry practice and local
settlement practices.
B. Account
The term "Account" means collectively the Custody Account, and the Deposit
Account.
C. Securities
The term "Securities" includes, without limitation, stocks, shares, bonds,
debentures, debt securities (convertible or non-convertible), notes, or other
obligations or securities and any certificates, receipts, futures contracts,
foreign exchange contracts, options, warrants, scrip or other instruments
representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or in any
property or assets.
VII Miscellaneous Provisions
A. Statements Regarding the Account
Subcustodian will supply Custodian with such statements regarding the
Account as Custodian may request, including the identity and location of any
Eligible Depository authorized and acting hereunder. In addition, Subcustodian
will supply custodian an advice or notification of any transfers of Securities
to or from the Account indicating, as to Securities acquired for the Account, if
applicable, the Eligible Depository having physical possession of such
securities.
B. Examination of Books and Records
Subcustodian agrees that its books and records relating to the Account and
Sub-custodian's actions under this agreement shall be open to the physical,
on-premises inspection and audit at reasonable times by officers of, auditors
employed by, or other representatives of Custodian including (to the extent
permitted under the laws of ___________________) the independent public
accountants for any customer of Custodian whose property is being held
hereunder) and such books and records shall be retained for such period as shall
be agreed upon by Custodian and Subcustodian.
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As Custodian may reasonably request from time to time, Subcustodian will
furnish its auditor's reports on its system of internal controls, and
Subcustodian will use its best efforts to obtain and furnish similar reports of
any Eligible Depository authorized and acting hereunder.
C. Standard of Care
In holding, maintaining, servicing and disposing of Property under this
Agreement, and in fulfilling any other obligations hereunder, Subcustodian shall
exercise the same standard of care that it exercises over its own assets,
provided that Subcustodian shall exercise at least the degree of care and
maintain adequate insurance as expected of a prudent professional Subcustodian
for hire and shall assume the burden of proving that it has exercised such care
in its maintenance of Property held by Subcustodian in its Accounts. The
maintenance of the Property in an Eligible Depository shall not affect
Subcustodian's standard of care, and Subcustodian will remain as fully
responsible for any loss or damage to such securities as if it had itself
retained physical possession of them. Subcustodian shall indemnify and hold
harmless Custodian and each of Custodian's customers from and against any loss,
damage, cost, expense, liability or claim (including reasonable attorney's fees)
arising out of or in connection with the improper or negligent performance or
the nonperformance of the duties of Subcustodian.
Subcustodian shall be responsible for complying with all provisions of the
laws of _________________________, or any other law, applicable to Subcustodian
in connection with its duties hereunder, including (but not limited to) the
payment of all transfer taxes or other taxes and compliance with any currency
restrictions and securities laws in connection with its duties as Subcustodian.
D. Loss of Cash or Securities
Subcustodian agrees that, in the event of any loss of Securities or Cash
in the Account, Subcustodian will use its best efforts to ascertain the
circumstances relating to such loss and will promptly report the same to
Custodian and shall use every legal means available to it to effect the quickest
possible recovery.
E. Compensation of Subcustodian
Custodian agrees to pay to Subcustodian from time to time such
compensation for its services and such out-of-pocket or incidental expenses of
Subcustodian pursuant to this Agreement as may be mutually agreed upon in
writing from time to time.
F. Operating Requirements
The Subcustodian agrees to follow such Operating Requirements as the
Custodian may establish from time to
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time. A copy of the current Custodian Operating Requirements is attached as
Attachment B to this Agreement.
G. Termination
This Agreement may be terminated by Subcustodian or Custodian on 60 days'
written notice to the other party, sent by registered mail, provided that any
such notice, whether given by Subcustodian or Custodian, shall be followed
within 60 days by Instructions specifying the names of the persons to whom
Subcustodian shall deliver the Securities in the Account and to whom the Cash in
the Account shall be paid. If within 60 days following the giving of such notice
of termination, Subcustodian does not receive such Instructions, Subcustodian
shall continue to hold such Securities and Cash subject to this Agreement until
such Instructions are given. The obligations of the parties under this Agreement
shall survive the termination of this Agreement.
H. Notices
Unless otherwise specified in this Agreement, all notices and
communications with respect to matters contemplated by this Agreement shall be
in writing, and delivered by mail, postage prepaid, telex, SWIFT, or other
mutually agreed telecommunication methods to the following addresses (or to such
other address as either party hereto may from time to time designate by notice
duly given in accordance with this paragraph):
To Subcustodian:
To Custodian: State Street Bank and Trust Company
Securities Operations/
Network Administration
P.O. Box 1631
Boston, Massachusetts 02105
I. Confidentiality
Subcustodian and Custodian shall each use its best efforts to maintain the
confidentiality of the property in the Account and the beneficial owners
thereof, subject, however, to the provisions of any laws requiring disclosure.
In addition, Subcustodian shall safeguard any test keys, identification codes or
other security devices which Custodian shall make available to it. The
Subcustodian further agrees it will not disclose the existence of this Agreement
or any current business relationship unless
8
<PAGE>
compelled by applicable law or regulation or unless it has secured the
Custodian's written consent.
J. Assignment
This Agreement shall not be assignable by either party but shall bind any
successor in interest of Custodian and Subcustodian respectively.
K. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of ___________________________________. To the extent inconsistent with
this Agreement or Custodian's Operating Requirements as attached hereto,
Subcustodian's rules and conditions regarding accounts generally or custody
accounts specifically shall not apply.
CUSTODIAN: STATE STREET BANK AND TRUST COMPANY
By:
-----------------------------------
Date:
---------------------------------
AGREED TO BY SUBCUSTODIAN:
By:
-------------------------------- ----------------------------
Date:
------------------------------
9
<PAGE>
Northstar
[LOGO] State Street
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02101
Telephone (617) 786-3000
MASTER REPURCHASE AGREEMENT
Between: State Street Bank and Trust Company
and VARIOUS NORTHSTAR INVESTMENT CO ADVISED FUNDS LISTED ON ANNEX I
-----------------------------------------------------------------
1. Applicability
From time to time the parties hereto may enter into transactions in which
one party ("Seller") agrees to transfer to the other ("Buyer") securities or
financial instruments ("Securities") against the transfer of funds by Buyer,
with a simultaneous agreement by Buyer to transfer to Seller such Securities at
a date certain or on demand, against the transfer of funds by Seller. Each such
transaction shall be referred to herein as a "Transaction" and shall be governed
by this Agreement, including any supplemental terms or conditions contained in
Annex I hereto, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to any party, (i) the commencement
by such party as debtor of any case or proceeding under any bankruptcy,
insolvency, reorganization, liquidation, dissolution or similar law, or such
party seeking the appointment of a receiver, trustee, custodian or similar
official for such party or any substantial part of its property, or (ii) the
commencement of any such case or proceeding against such party, or another
seeking such an appointment, or the filing against a party of an application for
a protective decree under the provisions of the Securities Investor Protection
Act of 1970, which (A) is consented to or not timely contested by such party,
(B) results in the entry of an order for relief, such an appointment, the
issuance of such a protective decree or the entry of an order having a similar
effect, or (C) is not dismissed within 15 days, (iii) the making by a party of a
general assignment for the benefit of creditors, or (iv) the admission in
writing by a party of such party's inability to pay such party's debts as they
become due;
(b) "Additional Purchased Securities", Securities provided by Seller to
Buyer pursuant to Paragraph 4(a) hereof;
(c) "Buyer's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage (which may be equal to
the percentage that is agreed to as the Seller's Margin Amount under
subparagraph (q) of this Paragraph), agreed to by Buyer and Seller prior to
entering into the Transaction, to the Repurchase Price for such Transaction as
of such date;
(d) "Confirmation", the meaning specified in Paragraph 3(b) hereof;
(e) "Income", with respect to any Security at any time, any principal
thereof then payable and all interest, dividends or other distributions thereon;
(f) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(g) "Margin Excess", the meaning specified in Paragraph 4(b) hereof;
(h) "Market Value", with respect to any Securities as of any date, the
price for such Securities on such date obtained from a generally recognized
source agreed to by the parties or the most recent closing bid quotation from
such a source, plus accrued Income to the extent not included therein (other
than any Income credited or transferred to, or applied to the obligations of,
Seller pursuant to Paragraph 5 hereof) as of such date (unless contrary to
market practice for such Securities);
(i) "Price Differential", with respect to any Transaction hereunder as of
any date, the aggregate amount obtained by daily application of the Pricing Rate
for such Transaction to the Purchase Price for such Transaction on a 360 day per
year basis for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending on (but excluding)
the date of determination (reduced by any amount of such Price Differential
previously paid by Seller to Buyer with respect to such Transaction);
<PAGE>
(j) "Pricing Rate", the per annum percentage rate for determination of the
Price Differential;
(k) "Prime Rate", the prime rate of U.S. money center commercial banks as
published in The Wall Street Journal;
(l) "Purchase Date", the date on which Purchased Securities are
transferred by Seller to Buyer;
(m) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Securities are transferred by Seller to Buyer, and (ii) thereafter,
such price increased by the amount of any cash transferred by Buyer to Seller
pursuant to Paragraph 4(b) hereof and decreased by the amount of any cash
transferred by Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to
reduce Seller's obligations under clause (ii) of Paragraph 5 hereof;
(n) "Purchased Securities", the Securities transferred by Seller to Buyer
in a Transaction hereunder, and any Securities substituted therefor in
accordance with Paragraph 9 hereof. The term "Purchased Securities" with respect
to any Transaction at any time also shall include Additional Purchased
Securities delivered pursuant to Paragraph 4(a) and shall exclude Securities
returned pursuant to Paragraph 4(b);
(o) "Repurchase Date", the date on which Seller is to repurchase the
Purchased Securities from Buyer, including any date determined by application of
the provisions of Paragraphs 3(c) or 11 hereof;
(p) "Repurchase Price", the price at which Purchased Securities are to be
transferred from Buyer to Seller upon termination of a Transaction, which will
be determined in each case (including Transactions terminable upon demand) as
the sum of the Purchase Price and the Price Differential as of the date of such
determination, increased by any amount determined by the application of the
provisions of Paragraph 11 hereof;
(q) "Seller's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage (which may be equal to
the percentage that is agreed to as the Buyer's Margin Amount under subparagraph
(c) of this Paragraph), agreed to by Buyer and Seller prior to entering into the
Transaction, to the Repurchase Price for such Transaction as of such date.
3. Initiation; Confirmation; Termination
(a) An agreement to enter into a Transaction may be made orally or in
writing at the initiation of either Buyer or Seller. On the Purchase Date for
the Transaction, the Purchased Securities shall be transferred to Buyer or its
agent against the transfer of the Purchase Price to an account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller
(or both), as shall be agreed, shall promptly deliver to the other party a
written confirmation of each Transaction (a "Confirmation"). The Confirmation
shall describe the Purchased Securities (including CUSIP number, if any),
identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase
Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on
demand, (iv) the Pricing Rate or Repurchase Price applicable to the Transaction,
and (v) any additional terms or conditions of the Transaction not inconsistent
with this Agreement. The Confirmation, together with this Agreement, shall
constitute conclusive evidence of the terms agreed between Buyer and Seller with
respect to the Transaction to which the Confirmation relates, unless with
respect to the Confirmation specific objection is made promptly after receipt
thereof. In the event of any conflict between the terms of such Confirmation and
this Agreement, this Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such demand shall
be made by Buyer or Seller, no later than such time as is customary in
accordance with market practice, by telephone or otherwise on or prior to the
business day on which such termination will be effective. On the date specified
in such demand, or on the date fixed for termination in the case of Transactions
having a fixed term, termination of the Transaction will be effected by transfer
to Seller or its agent of the Purchased Securities and any Income in respect
thereof received by Buyer (and not previously credited or transferred to, or
applied to the obligations of, Seller pursuant to Paragraph 5 hereof) against
the transfer of the Repurchase Price to an account of Buyer.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Buyer is less than the aggregate Buyer's Margin Amount for all such Transactions
(a "Margin Deficit"), then Buyer may by notice to Seller require Seller in such
Transactions, at Seller's option, to transfer to Buyer cash or additional
Securities reasonably acceptable to Buyer ("Additional Purchased Securities"),
so that the cash and aggregate Market Value of the Purchased Securities,
including any such Additional Purchased Securities, will thereupon equal or
exceed such aggregate Buyer's Margin Amount (decreased by the amount of any
Margin Deficit as of such date arising from any Transactions in which such Buyer
is acting as Seller).
(b) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Seller exceeds the aggregate Seller's Margin Amount for all such Transactions at
such time (a "Margin Excess"), then Seller may by notice to Buyer require Buyer
in such Transactions, at Buyer's option, to transfer cash or Purchased
Securities to Seller, so that the aggregate Market Value of the Purchased
Securities, after deduction of any such cash or any Purchased Securities so
transferred, will thereupon not exceed such aggregate Seller's Margin Amount
(increased by the amount of any Margin Excess as of such date arising from any
Transactions in which such Seller is acting as Buyer).
(c) Any cash transferred pursuant to this Paragraph shall be attributed to
such Transactions as shall be agreed upon by Buyer and Seller.
2
<PAGE>
(d) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer or Seller (or both) under
subparagraphs (a) and (b) of this Paragraph may be exercised only where a Margin
Deficit or Margin Excess exceeds a specified dollar amount or a specified
percentage of the Repurchase Prices for such Transactions (which amount or
percentage shall be agreed to by Buyer and Seller prior to entering into any
such Transactions).
(e) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer and Seller under subparagraphs
(a) and (b) of this Paragraph to require the elimination of a Margin Deficit or
a Margin Excess, as the case may be, may be exercised whenever such a Margin
Deficit or Margin Excess exists with respect to any single Transaction hereunder
(calculated without regard to any other Transaction outstanding under this
Agreement).
5. Income Payments
Where a particular Transaction's term extends over an Income payment date
on the Securities subject to that Transaction, Buyer shall, as the parties may
agree with respect to such Transaction (or, in the absence of any agreement, as
Buyer shall reasonably determine in its discretion), on the date such Income is
payable either (i) transfer to or credit to the account of Seller an amount
equal to such Income payment or payments with respect to any Purchased
Securities subject to such Transaction or (ii) apply the Income payment or
payments to reduce the amount to be transferred to Buyer by Seller upon
termination of the Transaction. Buyer shall not be obligated to take any action
pursuant to the preceding sentence to the extent that such action would result
in the creation of a Margin Deficit, unless prior thereto or simultaneously
therewith Seller transfers to Buyer cash or Additional Purchased Securities
sufficient to eliminate such Margin Deficit.
6. Security Interest
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction, and shall
be deemed to have granted to Buyer a security interest in, all of the Purchased
Securities with respect to all Transactions hereunder and all proceeds thereof.
7. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds hereunder shall
be in immediately available funds. All Securities transferred by one party
hereto to the other party (i) shall be in suitable form for transfer or shall be
accompanied by duly executed instruments of transfer or assignment in blank and
such other documentation as the party receiving possession may reasonably
request, (ii) shall be transferred on the book-entry system of a Federal Reserve
Bank, or (iii) shall be transferred by any other method mutually acceptable to
Seller and Buyer. As used herein with respect to Securities, "transfer" is
intended to have the same meaning as when used in Section 8-313 of the New York
Uniform Commercial Code or, where applicable, in any federal regulation
governing transfers of the Securities.
8. Segregation of Purchased Securities
To the extent required by applicable law, all Purchased Securities in the
possession of Seller shall be segregated from other securities in its possession
and shall be identified as subject to this Agreement. Segregation may be
accomplished by appropriate identification on the books and records of the
holder, including a financial intermediary or a clearing corporation. Title to
all Purchased Securities shall pass to Buyer and, unless otherwise agreed by
Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging
in repurchase transactions with the Purchased Securities or otherwise pledging
or hypothecating the Purchased Securities, but no such transaction shall relieve
Buyer of its obligations to transfer Purchased Securities to Seller pursuant to
Paragraphs 3, 4 or 11 hereof, or of Buyer's obligation to credit or pay Income
to, or apply Income to the obligations of, Seller pursuant to Paragraph 5
hereof.
- --------------------------------------------------------------------------------
Required Disclosure for Transactions in Which the Seller Retains Custody of
the Purchased Securities
Seller is not permitted to substitute other securities for those subject
to this Agreement and therefore must keep Buyer's securities segregated at all
times, unless in this Agreement Buyer grants Seller the right to substitute
other securities. If Buyer grants the right to substitute, this means that
Buyer's securities will likely be commingled with Seller's own securities during
the trading day. Buyer is advised that, during any trading day that Buyer's
securities are commingled with Seller's securities, they may be subject to liens
granted by Seller to third parties and may be used by Seller for deliveries on
other securities transactions. Whenever the securities are commingled, Seller's
ability to resegregate substitute securities for Buyer will be subject to
Seller's ability to satisfy any lien or to obtain substitute securities.
- --------------------------------------------------------------------------------
3
<PAGE>
9. Substitution
(a) Seller may, subject to agreement with and acceptance by Buyer,
substitute other Securities for any Purchased Securities. Such substitution
shall be made by transfer to Buyer of such other Securities and transfer to
Seller of such Purchased Securities. After substitution, the substituted
Securities shall be deemed to be Purchased Securities.
(b) In Transactions in which the Seller retains custody of Purchased
Securities, the parties expressly agree that Buyer shall be deemed, for purposes
of subparagraph (a) of this Paragraph, to have agreed to and accepted in this
Agreement substitution by Seller of other Securities for Purchased Securities;
provided, however, that such other Securities shall have a Market Value at least
equal to the Market Value of the Purchased Securities for which they are
substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the other that (i) it
is duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance, (ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party hereto, as
agent for a disclosed principal), (iii) the person signing this Agreement on its
behalf is duly authorized to do so on its behalf (or on behalf of any such
disclosed principal), (iv) it has obtained all authorizations of any
governmental body required in connection with this Agreement and the
Transactions hereunder and such authorizations are in full force and effect and
(v) the execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance, charter, by-law or
rule applicable to it or any agreement by which it is bound or by which any of
its assets are affected. On the Purchase Date for any Transaction Buyer and
Seller shall each be deemed to repeat all the foregoing representations made by
it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer fails to
transfer Purchased Securities upon the applicable Repurchase Date, (ii) Seller
or Buyer fails, after one business day's notice, to comply with Paragraph 4
hereof, (iii) Buyer fails to comply with Paragraph 5 hereof, (iv) an Act of
Insolvency occurs with respect to Seller or Buyer, (v) any representation made
by Seller or Buyer shall have been incorrect or untrue in any material respect
when made or repeated or deemed to have been made or repeated, or (vi) Seller or
Buyer shall admit to the other its inability to, or its intention not to,
perform any of its obligations hereunder (each an "Event of Default"):
(a) At the option of the nondefaulting party, exercised by written notice
to the defaulting party (which option shall be deemed to have been exercised,
even if no notice is given, immediately upon the occurrence of an Act of
Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
(b) In all Transactions in which the defaulting party is acting as Seller,
if the nondefaulting party exercises or is deemed to have exercised the option
referred to in subparagraph (a) of this Paragraph, (i) the defaulting party's
obligations hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable, (ii) to the
extent permitted by applicable law, the Repurchase Price with respect to each
such Transaction shall be increased by the aggregate amount obtained by daily
application of (x) the greater of the Pricing Rate for such Transaction or the
Prime Rate to (y) the Repurchase Price for such Transaction as of the Repurchase
Date as determined pursuant to subparagraph (a) of this Paragraph (decreased as
of any day by (A) any amounts retained by the nondefaulting party with respect
to such Repurchase Price pursuant to clause (iii) of this subparagraph, (B) any
proceeds from the sale of Purchased Securities pursuant to subparagraph (d)(i)
of this Paragraph, and (C) any amounts credited to the account of the defaulting
party pursuant to subparagraph (e) of this Paragraph) on a 360 day per year
basis for the actual number of days during the period from and including the
date of the Event of Default giving rise to such option to but excluding the
date of payment of the Repurchase Price as so increased, (iii) all Income paid
after such exercise or deemed exercise shall be retained by the nondefaulting
party and applied to the aggregate unpaid Repurchase Prices owed by the
defaulting party, and (iv) the defaulting party shall immediately deliver to the
nondefaulting party any Purchased Securities subject to such Transactions then
in the defaulting party's possession.
(c) In all Transactions in which the defaulting party is acting as Buyer.
upon tender by the nondefaulting party of payment of the aggregate Repurchase
Prices for all such Transactions, the defaulting party's right, title and
interest in all Purchased Securities subject to such Transactions shall be
deemed transferred to the nondefaulting party, and the defaulting party shall
deliver all such Purchased Securities to the nondefaulting party.
(d) After one business day's notice to the defaulting party (which notice
need not be given if an Act of Insolvency shall have occurred, and which may be
the notice given under subparagraph (a) of this Paragraph or the notice referred
to in clause (ii) of the first sentence of this Paragraph), the nondefaulting
party may:
(i) as to Transactions in which the defaulting party is acting as
Seller, (A) immediately sell, in a recognized market at such price or
prices as the nondefaulting party may reasonably deem satisfactory, any or
all Purchased Securities subject to such Transactions and apply the
proceeds thereof to the aggregate unpaid Repurchase Prices and any other
amounts owing by the defaulting party hereunder
4
<PAGE>
or (B) in its sole discretion elect, in lieu of selling all or a portion
of such Purchased Securities, to give the defaulting party credit for such
Purchased Securities in an amount equal to the price therefor on such
date, obtained from a generally recognized source or the most recent
closing bid quotation from such a source, against the aggregate unpaid
Repurchase Prices and any other amounts owing by the defaulting party
hereunder; and
(ii) as to Transactions in which the defaulting party is acting as
Buyer, (A) purchase securities ("Replacement Securities") of the same
class and amount as any Purchased Securities that are not delivered by the
defaulting party to the nondefaulting party as required hereunder or (B)
in its sole discretion elect, in lieu of purchasing Replacement
Securities, to be deemed to have purchased Replacement Securities at the
price therefor on such date, obtained from a generally recognized source
or the most recent closing bid quotation from such a source.
(e) As to Transactions in which the defaulting party is acting as Buyer,
the defaulting party shall be liable to the nondefaulting party (i) with respect
to Purchased Securities (other than Additional Purchased Securities), for any
excess of the price paid (or deemed paid) by the nondefaulting party for
Replacement Securities therefor over the Repurchase Price for such Purchased
Securities and (ii) with respect to Additional Purchased Securities, for the
price paid (or deemed paid) by the nondefaulting party for the Replacement
Securities therefor. In addition, the defaulting party shall be liable to the
nondefaulting party for interest on such remaining liability with respect to
each such purchase (or deemed purchase) of Replacement Securities from the date
of such purchase (or deemed purchase) until paid in full by Buyer. Such interest
shall be at a rate equal to the greater of the Pricing Rate for such Transaction
or the Prime Rate.
(f) For purposes of this Paragraph 11, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is acting as
Buyer shall not increase above the amount of such Repurchase Price for such
Transaction determined as of the date of the exercise or deemed exercise by the
nondefaulting party of its option under subparagraph (a) of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting party for
the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a consequence of an Event of
Default, together with interest thereon at a rate equal to the greater of the
Pricing Rate for the relevant Transaction or the Prime Rate.
(h) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other agreement or
applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto and will
enter into each Transaction hereunder in consideration of and in reliance upon
the fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions hereunder and
(iii) that payments, deliveries and other transfers made by either of them in
respect of any Transaction shall be deemed to have been made in consideration of
payments, deliveries and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments, deliveries and other
transfers may be applied against each other and netted.
13. Notices and Other Communications
Unless another address is specified in writing by the respective party to
whom any notice or other communication is to be given hereunder, all such
notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in Annex II attached hereto.
14. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
15. Non-assignability; Termination
The rights and obligations of the parties under this Agreement and under
any Transaction shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. This Agreement may be cancelled by
either party upon giving written notice to the other, except that this Agreement
shall, notwithstanding such notice, remain applicable to any Transactions then
outstanding.
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<PAGE>
16. Governing Law
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflict of law principles thereof.
17. No Waiver, Etc.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Without limitation on any of the foregoing, the failure to give
a notice pursuant to subparagraphs 4(a) or 4(b) hereof will not constitute a
waiver of any right to do so at a later date.
18. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision of the
Employee Retirement Income Security Act of 1974 ("ERISA") are intended to be
used by either party hereto (the "Plan Party") in a Transaction, the Plan Party
shall so notify the other party prior to the Transaction. The Plan Party shall
represent in writing to the other party that the Transaction does not constitute
a prohibited transaction under ERISA or is otherwise exempt therefrom, and the
other party may proceed in reliance thereon but shall not be required so to
proceed.
(b) Subject to the last sentence of subparagraph (a) of this Paragraph,
any such Transaction shall proceed only if Seller furnishes or has furnished to
Buyer its most recent available audited statement of its financial condition and
its most recent subsequent unaudited statement of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph, Seller
shall be deemed (i) to represent to Buyer that since the date of Seller's latest
such financial statements, there has been no material adverse change in Seller's
financial condition which Seller has not disclosed to Buyer, and (ii) to agree
to provide Buyer with future audited and unaudited statements of its financial
condition as they are issued, so long as it is a Seller in any outstanding
Transaction involving a Plan Party.
19. Intent
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the United
States Code, as amended (except insofar as the type of Securities subject to
such Transaction or the term of such Transaction would render such definition
inapplicable), and a "securities contract" as that term is defined in Section
741 of Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate Securities
delivered to it in connection with Transactions hereunder or to exercise any
other remedies pursuant to Paragraph 11 hereof, is a contractual right to
liquidate such Transaction as described in Sections 555 and 559 of Title 11 of
the United States Code, as amended.
20. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a
broker or dealer registered with the Securities and Exchange Commission
("SEC") under Section 15 of the Securities Exchange Act of 1934 ("1934
Act"), the Securities Investor Protection Corporation has taken the
position that the provisions of the Securities Investor Protection Act of
1970 ("SIPA") do not protect the other party with respect to any
Transaction hereunder;
(b) in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer registered
with the SEC under Section 15C of the 1934 Act, SIPA will not provide
protection to the other party with respect to any Transaction hereunder;
and
(c) in the case of Transactions in which one of the parties is a
financial institution, funds held by the financial institution pursuant to
a Transaction hereunder are not a deposit and therefore are not insured by
the Federal Deposit Insurance Corporation, the Federal Savings and Loan
Insurance Corporation or the National Credit Union Share Insurance Fund,
as applicable.
State Street Bank and Trust Company
/s/ [ILLEGIBLE]
Vice President
7/31/95
[Name of Party] NORTHSTAR ADVANTAGE FUNDS
LISTED ON ANNEX I
By /s/ [ILLEGIBLE]
----------------------------
Title Vice President
-------------------------
Date July 27, 1995
--------------------------
6
<PAGE>
ANNEX I
Names and Addresses for Communications Between Parties
State Street Bank and Trust Company
225 Franklin Street, Boston, Massachusetts 02101
(617) 654-3461
18919 NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
18921 NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
18920 NORTHSTAR ADVANTAGE HIGH YIELD FUND
NORTHSTAR ADVANTAGE INCOME FUND
18918 NORTHSTAR ADVANTAGE GROWTH FUND
18917 NORTHSTAR ADVANTAGE SPECIAL FUND
7
LAW OFFICES OF
DECHERT PRICE & RHOADS
(letterhead)
April 18, 1997
Northstar Trust
Two Pickwick Plaza
Greenwich, Connecticut 06830
Ladies and Gentlemen:
As counsel to the Northstar International Value Fund (the "Fund"), a
series of Northstar Trust (the "Trust"), we are familiar with the Trust's
registration under the Investment Company Act of 1940 and with the registration
statement relating to its shares of beneficial interest under the Securities
Act of 1933 (File No. 33-67852) (the "Registration Statement"). We have also
examined such other corporate records, agreements, documents and instruments as
we deemed appropriate.
On the basis of the foregoing, we are of the opinion that the shares
of beneficial interest of the Fund being registered under the Securities Act of
1933 in the Registration Statement will be legally and validly issued, fully
paid and non-assessable by the Fund.
We hereby consent to the filing of this opinion with and as part of
the Registration Statement.
Very truly yours,
/s/ Dechert Price & Rhoads
Exhibit 11(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "How the fund has
performed" in Post Effective Amendment No. 18 to the Registration Statement on
Form N-1A and related Prospectus of Northstar Trust.
/s/ Ernst & Young LLP
---------------------------
Ernst & Young LLP
Los Angeles, California
April 16, 1997
<PAGE>
(Coopers & Lybrand letterhead appears here)
Exhibit 11(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 18 to the Registration Statement of Northstar Trust on Form N-1A (File No.
33-67852) of our report dated December 6, 1996, on our audit of the financial
statements and financial highlights of Northstar Trust, which report is included
in the Annual Report to Shareholders for Northstar Trust for the year ended
Otober 31, 1996, which is also incorporated by reference in this Post-Effective
Amendment to the Registration Statement.
We also consent to the references to our firm under the captions "Other
Information" and "Financial Statements" in the Statement of Additional
Information.
Coopers & Lybrand L.L.P.
New York, New York
April 1
