<PAGE>
File No. 33-73140
811-8220
As filed with the Securities and Exchange Commission on February 27, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form N1-A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___
Post-Effective Amendment No. 4
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 5
NORTHSTAR/NWNL TRUST
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(Exact name of Registrant as specified in charter)
Two Pickwick Plaza, Greenwich, CT 06830
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(Address of Principal Executive Offices)
(203) 863-6200
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(Registrant's telephone number)
Mark L. Lipson
c/o Northstar Investment Management Corporation
Two Pickwick Plaza, Greenwich, Connecticut 06830
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(Name and address of agent for service)
Copies of all correspondence to:
Lisa Hurley, Esq.
Northstar Investment Management Corp.
Two Pickwick Plaza
Greenwich, CT 06830
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
immediately upon filing pursuant to paragraph (b)
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on [date] pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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X on April 30, 1996 pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on [date] pursuant to paragraph (a)(2) of Rule 485.
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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 May
6, 1994. Registrant filed the notice required by Rule 24f-2 with respect to
its most recent fiscal year on February 15, 1996.
<PAGE>
NORTHSTAR/NWNL TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A)
UNDER THE SECURITIES ACT OF 1933
PART A
PROSPECTUS OF ALL SERIES OF NORTHSTAR/NWNL TRUST
FORM N-1A PROSPECTUS CAPTION
1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Investment Programs;
Investment Objectives and Policies;
Other Investment Strategies
and Techniques; Risk Factors;
General Information
5. Management of the Fund Management of the Funds
6. Capital Stock and Other How Net Asset Value is
Securities Determined; Dividends,
Distributions and Taxes;
Performance Information;
General Information
7. Purchases of Securities Being Purchase of Shares; How Net Asset
Value is Determined.
8. Redemption or Repurchase Redemption of Shares; How Net Asset
Value is Determined
9. Legal Proceedings Not Applicable
<PAGE>
NORTHSTAR/NWNL TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A)
UNDER THE SECURITIES ACT OF 1933
PART A
PROSPECTUS OF NORTHSTAR GROWTH FUND
FORM N-1A PROSPECTUS CAPTION
1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Investment Objective
and Policies; Other Investment
Strategies and Techniques; Risk
Factors; General Information
5. Management of the Fund Management of the Funds
6. Capital Stock and Other How Net Asset Value is
Securities Determined; Dividends,
Distributions and Taxes;
Performance Information;
General Information
7. Purchases of Securities Being Purchase of Shares; How Net Asset
Value is Determined.
8. Redemption or Repurchase Redemption of Shares; How Net Asset
Value is Determined
9. Legal Proceedings Not Applicable
<PAGE>
NORTHSTAR/NWNL TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A)
UNDER THE SECURITIES ACT OF 1933
PART A
PROSPECTUS OF NORTHSTAR INCOME AND GROWTH FUND
FORM N-1A PROSPECTUS CAPTION
1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Investment Objective
and Policies; Other Investment
Strategies and Techniques; Risk
Factors; General Information
5. Management of the Fund Management of the Funds
6. Capital Stock and Other How Net Asset Value is
Securities Determined; Dividends,
Distributions and Taxes;
Performance Information;
General Information
7. Purchases of Securities Being Purchase of Shares; How Net Asset
Value is Determined.
8. Redemption or Repurchase Redemption of Shares; How Net Asset
Value is Determined
9. Legal Proceedings Not Applicable
<PAGE>
NORTHSTAR/NWNL TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A)
UNDER THE SECURITIES ACT OF 1933
PART A
PROSPECTUS OF NORTHSTAR MULTI-SECTOR BOND FUND
FORM N-1A PROSPECTUS CAPTION
1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Investment Objective
and Policies; Other Investment
Strategies and Techniques; Risk
Factors; General Information
5. Management of the Fund Management of the Funds
6. Capital Stock and Other How Net Asset Value is
Securities Determined; Dividends,
Distributions and Taxes;
Performance Information;
General Information
7. Purchases of Securities Being Purchase of Shares; How Net Asset
Value is Determined.
8. Redemption or Repurchase Redemption of Shares; How Net Asset
Value is Determined
9. Legal Proceedings Not Applicable
<PAGE>
NORTHSTAR/NWNL TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A)
UNDER THE SECURITIES ACT OF 1933
PART A
PROSPECTUS OF NORTHSTAR HIGH YIELD BOND FUND
FORM N-1A PROSPECTUS CAPTION
1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Investment Objective
and Policies; Other Investment
Strategies and Techniques; Risk
Factors; General Information
5. Management of the Fund Management of the Funds
6. Capital Stock and Other How Net Asset Value is
Securities Determined; Dividends,
Distributions and Taxes;
Performance Information;
General Information
7. Purchases of Securities Being Purchase of Shares; How Net Asset
Value is Determined.
8. Redemption or Repurchase Redemption of Shares; How Net Asset
Value is Determined
9. Legal Proceedings Not Applicable
<PAGE>
NORTHSTAR/NWNL TRUST
CROSS REFERENCE SHEET
PART B
FORM N-1A CAPTION IN STATEMENT OF
ADDITIONAL INFORMATION
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 Objectives
and Policies; Investment
Restrictions; Other 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 the Adviser and
Other Services Administrator; Services of the
Subadviser
17. Brokerage Allocation and Portfolio Transactions and
Other Practices Brokerage Allocation; Portfolio
Turnover
18. Capital Stock and Other Securities Purchases, Redemptions and
Exchange Transactions
19. Purchases, Redemptions and Net Asset Value; Purchases,
Pricing Redemption and Exchange
Transaction; Dividends and
Distributions
20. Tax Status Federal Income Tax Status
21. Underwriter Not Applicable
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
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>
PROSPECTUS APRIL 30, 1996
NORTHSTAR/NWNL TRUST
NORTHSTAR GROWTH FUND
NORTHSTAR INCOME AND GROWTH FUND
NORTHSTAR MULTI-SECTOR BOND FUND
NORTHSTAR HIGH YIELD BOND FUND
Two Pickwick Plaza (203) 863-6200
Greenwich, Connecticut, 06830 (800) 595-7827
Northstar Growth Fund, Northstar Income and Growth Fund, Northstar
Multi-Sector Bond Fund and Northstar High Yield Bond Fund (the "Funds") are four
diversified investment portfolios comprising series of the Northstar/ NWNL Trust
(the "Trust"), an open-end, series, management investment company. This
Prospectus sets forth basic information about the Trust and the Funds that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
April 30, 1996, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information is
available without charge upon request to the Trust at the address or telephone
number set forth above.
Shares of the Funds are offered at net asset value and currently are sold to
segregated asset accounts ("Variable Accounts") of Northwestern National Life
Insurance Company ("Northwestern"), Northern Life Insurance Company
("Northern"), and ReliaStar Bankers Security Life Insurance Company ("BSL")
(collectively the "Affiliated Insurance Companies") to serve as an investment
medium for variable annuity or variable life insurance contracts (the "Variable
Contracts") issued by the Affiliated Insurance Companies. The Variable Accounts
of Northwestern, Northern and BSL invest in shares of one or more of the Funds
in accordance with allocation instructions received from Variable Contract
owners. Such allocation rights are described further in the accompanying
Prospectus for the Variable Account.
NORTHSTAR GROWTH FUND ("GROWTH FUND") is a diversified portfolio with an
investment objective of seeking long-term capital growth primarily through
investments in equity securities of companies that are believed to provide above
average potential for capital appreciation.
NORTHSTAR INCOME AND GROWTH FUND ("INCOME AND GROWTH FUND") is a diversified
portfolio with an investment objective of seeking current income balanced with
the objective of achieving capital appreciation. The Fund will seek to achieve
its objective through investments in common and preferred stocks, convertible
securities, investment grade corporate debt securities and government
securities, selected for their prospects of producing income and/or capital
appreciation.
NORTHSTAR MULTI-SECTOR BOND FUND ("MULTI-SECTOR FUND") is a diversified
portfolio with an investment objective of maximizing current income. The Fund
will seek to achieve its objective by investment in the following sectors of the
fixed income securities markets: (a) securities issued or guaranteed as to
principal and interest by the U.S. Government, its agencies, authorities or
instrumentalities; (b) investment grade corporate debt securities (c) investment
grade or comparable quality debt securities issued by foreign corporate issuers,
and securities issued by foreign governments and their political subdivisions,
limited to 35% of assets determined at the time of investment; and (d) high
yield-high risk fixed income securities of U.S. and foreign issuers, limited to
50% of assets determined at the time of investment. See "Risk Factors."
NORTHSTAR HIGH YIELD BOND FUND ("HIGH YIELD FUND") is a diversified
portfolio with an investment objective of seeking high income by investing
predominantly in high yield-high risk lower-rated U.S. dollar-denominated debt
securities. It is the Fund's policy, while investing in income producing
securities, also to maximize total return from a combination of income and
capital appreciation.
THE HIGH YIELD FUND WILL NORMALLY INVEST AT LEAST 65% OF ITS ASSETS IN LOWER
RATED HIGH YIELD-HIGH RISK BONDS, COMMONLY KNOWN AS "JUNK BONDS," AND THE
MULTI-SECTOR FUND MAY INVEST UP TO 50% OF ITS ASSETS IN THESE SECURITIES. THESE
SECURITIES MAY INVOLVE HIGH RISK AND ARE CONSIDERED TO BE SPECULATIVE WITH
REGARD TO PAYMENT OF INTEREST AND RETURN OF PRINCIPAL. INVESTMENT IN THESE FUNDS
MAY NOT BE APPROPRIATE FOR ALL INVESTORS. CONTRACT OWNERS SHOULD CAREFULLY
ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THESE FUNDS. SEE "RISK FACTORS
- - HIGH YIELD SECURITIES."
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF THE
VARIABLE ACCOUNT, WHICH ACCOMPANIES THIS PROSPECTUS. BOTH PROSPECTUSES SHOULD BE
READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Financial Highlights............................................................ 3
Investment Programs............................................................. 4
Investment Objectives and Policies.............................................. 4
Risk Factors.................................................................... 7
Other Investment Strategies and Techniques...................................... 8
Performance Information......................................................... 9
How Net Asset Value is Determined............................................... 10
Management of the Funds......................................................... 11
Purchase of Shares.............................................................. 12
Redemption of Shares............................................................ 12
Dividends, Distributions and Taxes.............................................. 13
General Information............................................................. 13
Appendix........................................................................ A-1
</TABLE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AT
ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
NORTHSTAR/NWNL TRUST FINANCIAL HIGHLIGHTS
The financial highlights for the Trust set forth below present certain
information and ratios as well as performance information about each series of
the Trust for a share outstanding throughout each year or portion thereof.* This
table should be read in conjunction with the audited financial statements of the
Trust dated December 31, 1995 and accompanying notes, which are contained in the
Trust's Annual Report to Shareholders for the fiscal year ended December 31,
1995 incorporated by reference in the Statement of Additional Information, a
copy of which may be obtained without charge from the Trust. The financial
highlights have been audited by Coopers & Lybrand L.L.P., independent
accountants, whose report thereon is also incorporated by reference in the
Statement of Additional Information, and should be read in conjunction with the
related audited financial statements and notes thereto.
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
-----------------------------------------------------------------------------
HIGH YIELD BOND INCOME AND GROWTH
GROWTH FUND MULTI-SECTOR FUND FUND FUND
----------------- ----------------- ----------------- -----------------
1995 1994* 1995 1994* 1995 1994* 1995 1994*
------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period........................... $10.04 $10.00 $ 4.85 $ 5.00 $ 4.69 $ 5.00 $ 9.92 $10.00
Income from investment operations:
Net investment income........... 0.20 0.16 0.42 0.23 0.50 0.28 0.37 0.20
Net realized and unrealized gain
(loss)......................... 2.27 0.19 0.29 (0.15) 0.34 (0.31) 1.73 (0.01)
------ --------- ------ --------- ------ --------- ------ ---------
Total from investment
operations..................... 2.47 0.35 0.71 0.08 0.84 (0.03) 2.10 0.19
------ --------- ------ --------- ------ --------- ------ ---------
Less distributions:
Dividends declared from net
investment income.............. (0.19) (0.16) (0.42) (0.23) (0.49) (0.28) (0.37) (0.20)
Dividends from net realized
gain........................... (0.76) (0.15) 0.00 0.00 0.00 0.00 (0.26) (0.07)
------ --------- ------ --------- ------ --------- ------ ---------
Total distributions............. (0.95) (0.31) (0.42) (0.23) (0.49) (0.28) (0.63) (0.27)
------ --------- ------ --------- ------ --------- ------ ---------
Net Asset Value, end of period.... $11.56 $10.04 $ 5.14 $ 4.85 $ 5.04 $ 4.69 $11.39 $ 9.92
------ --------- ------ --------- ------ --------- ------ ---------
------ --------- ------ --------- ------ --------- ------ ---------
Total Return...................... 24.78% 3.47% 14.97% 1.41% 18.55% (0.95)% 21.39% 2.02%
------ --------- ------ --------- ------ --------- ------ ---------
------ --------- ------ --------- ------ --------- ------ ---------
Ratios/supplemental data:
Net assets end of period
(thousands).................... $3,813 $2,701 $3,766 $2,716 $4,773 $2,588 $7,410 $3,595
------ --------- ------ --------- ------ --------- ------ ---------
------ --------- ------ --------- ------ --------- ------ ---------
Ratio of expenses to average net
assets......................... 0.80% 1.00%(1) 0.80% 1.00%(1) 0.80% 1.00%(1) 0.80% 1.00%(1)
------ --------- ------ --------- ------ --------- ------ ---------
------ --------- ------ --------- ------ --------- ------ ---------
Ratio of expense reimbursement
to average net assets.......... 1.24% 1.45%(1) 1.26% 1.41%(1) 1.31% 1.55%(1) 0.94% 1.43%(1)
------ --------- ------ --------- ------ --------- ------ ---------
------ --------- ------ --------- ------ --------- ------ ---------
Ratio of net investment income
to average net assets.......... 1.77% 2.31%(1) 8.52% 7.03%(1) 10.61% 8.62%(1) 3.63% 3.11%(1)
------ --------- ------ --------- ------ --------- ------ ---------
------ --------- ------ --------- ------ --------- ------ ---------
Portfolio Turnover Rate......... 123% 61% 83% 29% 157% 62% 74% 45%
------ --------- ------ --------- ------ --------- ------ ---------
------ --------- ------ --------- ------ --------- ------ ---------
</TABLE>
- ------------------------
(1)Annualized
* Each Fund commenced operations on May 6, 1994.
3
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INVESTMENT PROGRAMS
Northstar/NWNL Trust (the "Trust") is a Massachusetts business trust
organized as an open-end, diversified, series, management investment company.
Currently the Trust offers four series comprising four separate investment
portfolios - Northstar Growth Fund, Northstar Income and Growth Fund, Northstar
Multi-Sector Bond Fund, and Northstar High Yield Bond Fund (the "Funds"). Each
of the Funds has its own investment objective and investment policies as
described below. The Trustees of the Trust reserve the right to change any of
the investment policies, strategies or practices of any of the Funds, as
described in this Prospectus and the Statement of Additional Information,
without shareholder approval, except in those instances where shareholder
approval is expressly required.
The investment objective of each Fund is a fundamental policy which may not
be changed without the approval of holders of a majority of the outstanding
shares of the Fund. There can, of course, be no assurance that each Fund will
achieve its investment objective since all investments are inherently subject to
market risks.
INVESTMENT OBJECTIVE AND POLICIES
NORTHSTAR GROWTH FUND. The investment objective of the Fund is to seek
long-term capital growth primarily through investments in equity securities
diversified over industries and companies which are believed to provide above
average potential for capital appreciation. Securities in which the Fund will
normally invest include common stocks, preferred stocks, and securities
convertible into common stock, and the Fund may also invest in warrants and
options to purchase common stocks. Under normal conditions, the Fund does not
intend to invest more than 35% of its assets in convertible securities. The Fund
may invest in large seasoned companies which are believed to possess superior
return potential similar to companies with formative growth profiles, and may
invest in small and medium sized companies with above average earnings growth
potential relative to market value. Investing in equity securities of small and
medium-sized companies may involve greater risk than is associated with
investing in more established companies. Small to medium-sized companies often
have limited product and market diversification, fewer financial resources or
may be dependent on a few key managers. Any one of the foregoing may change
suddenly and have an immediate impact on the value of the company's securities.
Furthermore, whenever the securities markets are experiencing rapid price
changes due to national economic trends, secondary growth securities have
historically been subject to exaggerated price changes. Although the Fund will
invest predominantly in equity and equity related securities it may also invest
in non-equity securities, such as corporate bonds or U.S. Government obligations
during periods, when, in the opinion of the Adviser or Subadviser, prevailing
market, financial or economic conditions warrant. Although the Fund selects
securities for long-term investment, the Fund may engage in short-term
transactions.
The Fund may invest up to 20% of its assets in equity securities of foreign
issuers, not more than 10% of which may be invested in issuers that are not
listed on a U.S. Securities exchange. The Fund normally will purchase American
Depository Receipts for foreign securities which are actively traded in a United
States market or on a U.S. securities exchange. While investment in foreign
securities is intended to increase diversification, such investments involve
risks in addition to the credit and market risks normally associated with
domestic securities. See "Risk Factors - Foreign Investments."
NORTHSTAR INCOME AND GROWTH FUND. The Fund's investment objective is to
seek current income balanced with the objective of achieving capital
appreciation. Under normal market conditions, the Fund will invest at least 65%
of its total assets in income-producing securities. In seeking to achieve its
objective, the Fund will invest in equity securities of domestic and foreign
issuers that have prospects for dividend income and growth of capital, including
common stocks, preferred stocks, and securities convertible into common stocks,
and selected investment grade debt securities of domestic and foreign private
and government issuers. These debt securities would include U.S. Government
obligations, foreign and domestic corporate bonds, and bonds issued by foreign
governments considered stable by the Adviser and supported through the authority
to levy taxes by national state or provincial governments or similar political
subdivisions. The proportion of holdings in common stocks, preferred stocks,
other equity-related securities, and debt securities will vary in accordance
with the level of return that can be achieved from these various types of
securities. Under normal conditions, the Fund does not intend to invest more
than 35% of its assets in convertible securities. Securities are also purchased
on the basis of fundamental attraction regarding capital appreciation prospects.
In this way, income is "balanced" with capital. The Fund invests in equity
securities that are listed primarily on the New York Stock Exchange or American
Stock Exchange or that are traded in the over-the-counter market. Equity and
equity-related securities purchased by the Fund will typically be of large
well-established companies, but may also include to a lesser extent small
capitalization companies
4
<PAGE>
selected for their growth potential. Debt securities purchased by the Fund will
only be securities rated investment grade ( I.E., in the top four rating
categories of Moodys or S&P) at the time of purchase. Securities that are in the
lowest investment grade debt category may have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than in the case
with higher grade securities. In the event that an existing holding is
downgraded to below investment grade, the Fund may nevertheless retain the
security.
The Fund may invest up to 20% of its net assets in the securities of foreign
issuers, not more than 10% of which shall be in issuers whose securities are not
listed on a U.S. securities exchange. The Fund normally will purchase American
Depository Receipts for foreign securities which are actively traded in a United
States market or on a U.S. securities exchange. While investment in foreign
securities is intended to increase diversification, such investments involve
risks in addition to the credit and market risks normally associated with
domestic securities. See "Risk Factors - Foreign Investments."
NORTHSTAR MULTI-SECTOR BOND FUND. The Fund's investment objective is to
maximize current income consistent with the preservation of capital. The Fund
will seek to achieve its objective by investing in four sectors of the fixed
income securities markets: (a) securities issued or guaranteed as to principal
and interest by the U.S. Government, its agencies, authorities or
instrumentalities ("U.S. Government Bonds"); (b) corporate debt securities rated
investment grade at the time of purchase ("Investment Grade Bonds"); (c)
investment grade or comparable quality debt securities issued by foreign
corporate issuers and foreign governments and their political subdivisions
("Foreign Bonds"); and (d) high yield-high risk fixed income securities of U.S.
and foreign issuers ("High Yield Bonds"). See the Appendix for a description of
bond ratings. Under normal circumstances, at least 65% of the Fund's total
assets will be invested in these four sectors. Securities that are in the lowest
investment grade debt category may have speculative characteristics and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case with
higher grade securities. See "High Yield Bonds." The Fund's assets generally
will be invested in each market sector but the Fund may invest any amount of its
assets in any one sector (except for High Yield Bonds, in which sector the Fund
will not invest more than 50% of its assets determined at the time of
investment, and no more than 35% of the Fund's assets will be invested in
Foreign Bonds, including foreign High Yield Bonds), and the Fund may choose not
to invest in a sector in order to achieve its investment objective. The Adviser
believes that this strategy may achieve a more stable net asset value since
diversification over several market sectors tends to reduce volatility; however,
there can be no assurance that certain economic and other factors will not cause
fluctuations in the value of the securities held by the Fund, resulting in
fluctuations of the Fund's net asset value.
The following is a description of the four sectors in which the Fund
invests:
U.S. GOVERNMENT BONDS. The U.S. Government Bonds in which the Fund may
invest are (1) U.S. Treasury obligations such as bills, notes and bonds, which
differ only in their interest rates, maturities and times of issuance; and (2)
obligations issued or guaranteed by U.S. Government agencies, authorities and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Government, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury (which
line of credit is equal to the face value of the government obligation), (c)
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality, or (d) the creditworthiness of the
instrumentality. The Fund may invest in U.S. Government Bonds denominated in
foreign currencies and may invest in pass-through securities that are derived
from mortgages. See "Mortgage-Backed Securities" below.
WITH RESPECT TO OBLIGATIONS ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES, AUTHORITIES AND INSTRUMENTALITIES, GUARANTEES AS TO THE TIMELY PAYMENT
OF PRINCIPAL AND INTEREST DO NOT EXTEND TO THE MARKET VALUE OF THE FUND'S
SHARES. THE MARKET VALUE OF U.S. GOVERNMENT BONDS FLUCTUATES AS INTEREST RATES
CHANGE.
INVESTMENT GRADE BONDS. The Fund may invest in all types of long- and
short-term debt obligations of U.S. issuers denominated in U.S. dollars and in
foreign currencies. Investment Grade Bonds will be rated in the top four rating
categories of Moody's or S&P, or deemed to be of comparable quality by the
Adviser if the securities are unrated. Securities rated Baa or BBB (the lowest
investment grade category) are medium grade investment obligations that may have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments, in the case of such obligations. For a more complete
description of ratings, see the Appendix.
FOREIGN BONDS. The Foreign Bonds in which the Fund may invest are issued by
foreign private issuers and foreign governments. Foreign governments will be
limited to those considered stable by the Adviser, and the Fund
5
<PAGE>
will only invest in obligations supported through the authority to levy taxes by
national, state or provincial governments or similar political subdivisions. For
risk considerations involved, see "Risk Factors - Foreign Investments."
Normally, foreign corporate issues in which the Fund will invest will be rated
investment grade or deemed to be of equivalent quality; however, the Fund may
also invest in high yield-high risk securities of foreign private issuers. See
"High Yield Bonds" below and "Risk Factors - High Yield Securities." Normally
the Fund expects to invest its assets in U.S. dollar denominated securities;
however, the Fund may invest up to 35% of assets in non-U.S. dollar denominated
securities. The Fund may hold foreign currency for hedging purposes to
compensate for declines in the U.S. dollar value of foreign currency securities
held by the Fund and against increases in the U.S. dollar value of foreign
currency bonds which the Fund might purchase. The Fund is limited to investing
no more than 35% of its assets in Foreign Bonds, including foreign High Yield
Bonds, determined at the time of investment.
HIGH YIELD BONDS. The High Yield Bonds in which the Fund may invest are
debt obligations of domestic issuers, including High Yield Bonds of domestic
issuers denominated in foreign currencies, and High Yield Bonds of foreign
issuers. The High Yield Bonds that the Fund may purchase are in the lower rating
categories (I.E., BB through CCC by S&P and Ba through Caa by Moody's), or may
be unrated securities. These lower-rated and comparable unrated securities,
while selected for their relatively high yield, may be subject to greater
fluctuations in market value and greater risks of loss of income and principal
than higher-rated securities. High yields often reflect the greater risks
associated with the securities that offer such yields. Because of these greater
risks, High Yield Bonds often carry lower ratings. Economic conditions can
sometimes narrow the spreads between yields on lower-rated (or comparable)
securities and higher-rated securities. If these spreads narrow to such a degree
that the Adviser believes that the yields available on lower-rated or comparable
unrated securities do not justify the higher risks associated with those
securities, the Fund will invest in higher-rated or comparable unrated
securities. The Fund may also invest in High Yield pass-through securities.
Investments in High Yield pass-through securities are subject to prepayment and
reinvestment risks similar to those associated with Mortgage-Backed Securities
described below.
The Adviser evaluates the purchase of High Yield Bonds for the Fund
primarily through the exercise of its own investment and credit analysis and on
the ratings assigned by Moody's and S&P. The Fund will not invest in High Yield
Bonds rated lower than CCC/Caa.
As a fundamental policy, the Fund's investments in High Yield Bonds will be
limited to not more than 50% of its assets, determined at the time of
investment. Any subsequent change in the percentage due to changes in the market
value of portfolio securities or other changes in the total assets will not be
considered a violation of this restriction. See "Risk Factors - High Yield
Securities" below.
The Fund may invest in debt securities of any maturity that pay fixed,
floating or adjustable interest rates. The Fund also may invest in discount
obligations, including zero-coupon securities, which do not pay interest but,
rather, are issued at a significant discount to their maturity values, or
securities that pay interest, at the issuer's option, in additional securities
instead of cash (pay-in-kind securities). The values of debt securities
generally fluctuate inversely with changes in interest rates. This is less
likely to be true for adjustable or floating rate securities, since interest
rate changes are more likely to be reflected in changes in the rates paid on the
securities. However, reductions in interest rates also may translate into lower
distributions paid by the Fund. Additionally, because zero-coupon and
pay-in-kind securities do not pay interest but the Fund nevertheless must accrue
and distribute the income deemed to be earned on a current basis, the Fund may
have to sell other investments to raise the cash needed to make income
distributions. To a lesser extent the Fund may invest in equity or
equity-related securities, including common stock, preferred stock, convertible
securities and rights and warrants attached to debt instruments. Typically the
Fund would purchase a high yield security that is convertible or exchangeable
for equity securities, or which carries the right in the form of a warrant or as
part of a unit with the security to acquire equity securities. The Fund would
ordinarily purchase these securities for their yield characteristics or capital
appreciation potential.
NORTHSTAR HIGH YIELD BOND FUND. The investment objective of the Fund is to
seek high income by investing predominantly in high yield - high risk lower
rated and non-rated U.S. dollar denominated debt securities. It is the Fund's
policy, while investing in income producing securities, also to maximize total
return from a combination of income and capital appreciation.
Under normal market conditions, the Fund will seek to achieve its investment
objective by investing at least 65% of its total assets in higher-yielding,
lower-rated U.S. dollar-denominated debt securities of U.S. and foreign issuers,
which involve special risks and are predominantly speculative in character. The
Fund may invest up to 35% of its assets in non-U.S. dollar denominated
securities. Investments in securities offering the high current income
6
<PAGE>
sought by the Fund, while generally providing greater income and potential
opportunity for gain than investments in higher rated securities, also entail
greater risk. The value of high yield securities (and therefore the net asset
value per share of the Fund) can be expected to increase or decrease in response
to changes in interest rates, real or perceived changes in the credit risks
associated with its portfolio investments, and other factors affecting the
credit markets generally. The Fund may invest up to 50% of its assets in
securities of foreign issuers, subject to a limit of 35% of such assets in
emerging market debt. Emerging markets are countries whose sovereign bonds
generally are rated below investment grade and whose financial markets are not
well-developed. The Fund intends to restrict its investments in emerging markets
to those with sound economies that are expected to experience strong growth with
controlled inflation, and therefore higher-than-average returns, over time. See
"Risk Factors - Foreign Investments."
Most of the debt securities in which the Fund invests are lower rated, and
may include bonds in the lowest rating categories (C for Moody's and D for S&P)
and unrated bonds. Most of the securities will be rated at least Caa by Moody's
or at least CCC by S&P, or if not rated, are of equivalent quality in the
opinion of the Adviser. The Fund may invest up to 10%, and hold up to 25%, of
its assets in securities rated below Caa in the case of Moody's or CCC by S&P.
Such debt securities are highly speculative and may be in default of payment of
interest and/or repayment of principal may be in arrears. The issuers of such
debt securities may be involved in bankruptcy or reorganization proceedings
and/or may be restructuring outstanding debt. Investing in bankrupt and troubled
companies involves special risks. See "Risk Factors - High Yield Securities" and
the Appendix.
The Fund may invest in debt securities of any maturity that pay fixed,
floating or adjustable interest rates. The Fund also may invest in discount
obligations, including zero-coupon securities, which do not pay interest but,
rather, are issued at a significant discount to their maturity values, or
securities that pay interest, at the issuer's option, in additional securities
instead of cash (pay-in-kind securities). The values of debt securities
generally fluctuate inversely with changes in interest rates. This is less
likely to be true for adjustable or floating rate securities, since interest
rate changes are more likely to be reflected in changes in the rates paid on the
securities. However, reductions in interest rates also may translate into lower
distributions paid by the Fund. Additionally, because zero-coupon and
pay-in-kind securities do not pay interest but the Fund nevertheless must accrue
and distribute the income deemed to be earned on a current basis, the Fund may
have to sell other investments to raise the cash needed to make income
distributions. To a lesser extent the Fund may invest in equity or
equity-related securities, including common stock, preferred stock, convertible
securities and rights and warrants attached to debt instruments. Typically the
Fund would purchase a high yield security that is convertible or exchangeable
for equity securities, or which carries the right in the form of a warrant or as
part of a unit with the security to acquire equity securities. The Fund would
ordinarily purchase these securities for their yield characteristics or capital
appreciation potential.
RISK FACTORS
HIGH YIELD SECURITIES. Each of the High Yield Fund and the Multi-Sector
Fund may invest in higher yielding securities that carry lower investment grade
ratings. These high yield - high risk securities are rated below investment
grade by the primary rating agencies (Moody's and S&P). See the Appendix for a
description of bond rating categories. The value of lower rated securities
generally is more dependent on the ability of the company to meet interest and
principal payments than is the case for higher rated securities. Conversely, the
value of higher rated securities may be more sensitive to interest rate
movements than lower rated securities. Companies issuing high yield securities
may not be as strong financially as those issuing bonds with higher credit
ratings. Investments in such companies are considered to be more speculative
than higher quality investments. In addition, the market for lower rated
securities is generally less liquid than the market for higher rated securities,
and adverse publicity and investor perceptions may also have a greater negative
impact on the market for these securities.
Companies issuing high yield bonds are more vulnerable to real or perceived
economic changes (such as rising interest rates), political changes or adverse
developments specific to the company. Adverse economic, political or other
developments may impair the company's ability to service principal and interest
obligations, to meet projected business goals and to obtain additional
financing, particularly if the company is highly leveraged. In the event of a
default, a Fund would experience a reduction of its income and could expect a
decline in the market value of the defaulted securities.
7
<PAGE>
Weighted average composition of the following Funds' portfolios at the end
of their 1995 fiscal year was:
<TABLE>
<CAPTION>
MULTI-SECTOR HIGH YIELD
-------------- ------------
<S> <C> <C>
Investment Grade.................................. 13.6% 3.8%
BB................................................ 23.9 21.0
B................................................. 20.8 50.7
CCC............................................... -- 2.5
CC................................................ -- --
C................................................. -- --
D................................................. -- --
Nonrated.......................................... 2.2 13.6
U.S. Governments, equities and other.............. 39.5 8.4
--- ---
TOTAL............................................. 100% 100%
--- ---
--- ---
</TABLE>
This table does not reflect the current or future composition of any of the
Fund's portfolios.
FOREIGN INVESTMENTS. Each Fund may invest in securities of foreign issuers.
Securities of some foreign companies and governments may be traded in the U.S.,
but many foreign securities are traded primarily in foreign markets. In addition
to generally higher transaction costs associated with foreign investing, risks
of foreign investing include:
CURRENCY RISKS. Each Fund must buy the local currency when it buys a
foreign security, and it sells local currency when it sells the security. The
value of a foreign security held by the Fund will be affected by the value of
the local currency relative to the U.S. dollar, causing the Fund to lose money
at times, despite an increase in the value of the security.
POLITICAL AND ECONOMIC RISKS. Political and economic risks may exist,
particularly in underdeveloped and developing countries which may have
relatively unstable governments and economies based on only a few industries. In
some countries, there is the risk that the government may take over the assets
or operations of a company or that the government may impose taxes or limits on
the removal of the Fund's assets from that country.
REGULATORY RISKS. There is generally less government supervision of foreign
markets, and issuers are not subject to the uniform accounting, auditing and
financial reporting standards and practices applicable to domestic issuers.
There also may be less publicly available information about foreign issuers.
OTHER INVESTMENT STRATEGIES AND TECHNIQUES
Unless otherwise stated, each of the following strategies and techniques may
be utilized by each of the Funds. The Funds may, but do not currently intend to,
engage in certain additional investment techniques not described in this
Prospectus. These techniques and additional information on the securities and
techniques described in the Prospectus are contained in the Statement of
Additional Information.
REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements,
either for temporary defensive purposes or to generate income from its cash
balances. Under a repurchase agreement, the Fund buys a security from a bank or
dealer, which is obligated to buy it back at a fixed price and time. The
security is held in a separate account at the Fund's custodian and constitutes
the Fund's collateral for the bank's or dealer's repurchase obligation.
Additional collateral may be added so that the obligation will at all times be
fully collateralized. However, if the bank or dealer defaults or enters into
bankruptcy, the Fund may experience costs and delays in liquidating the
collateral, and may experience a loss if it is unable to demonstrate its right
to the collateral in a bankruptcy proceeding. Repurchase agreements maturing
more than seven days in the future are considered illiquid, and each Fund will
invest no more than 5% of its net assets in such repurchase agreements at any
time, and under normal market conditions, will limit its investments in
repurchase agreements to 15% of its net assets.
WHEN-ISSUED SECURITIES. Each Fund may acquire securities on a "when-issued"
basis by contracting to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until settlement. If
made through a dealer, the contract is dependent on the dealer completing the
sale. The dealer's failure could deprive the Fund of an advantageous yield or
price. These contracts may be considered securities and involve risk to the
extent that the value of the underlying security changes prior to settlement.
Each Fund may realize short-term profits or losses if the contracts are sold.
Transactions in when-issued securities may be limited by certain Internal
Revenue Code requirements.
8
<PAGE>
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
illiquid securities, including restricted securities or private placements. An
illiquid security is a security that cannot be sold quickly in the normal course
of business. Some securities cannot be sold to the U.S. public because of their
terms or because of SEC regulations. The Adviser may determine that securities
that cannot be sold to the U.S. public, but that can be sold to institutional
investors ("Rule 144A" securities) or on foreign markets, are liquid, following
guidelines established by the Trustees of each Fund.
TRADING AND PORTFOLIO TURNOVER. Each Fund generally intends to purchase
securities for long-term investment. However, short-term transactions may result
from liquidity needs, securities having reached a price or yield objective,
changes in interest rates or the credit standing of an issuer, or by reason of
economic or other developments not foreseen at the time of the initial
investment decision. Portfolio turnover rates are usually not a factor in making
buy and sell decisions. Each Fund may purchase a security in anticipation of
relatively short-term price gains. Each Fund may also sell one security and
simultaneously purchase the same or comparable security to take advantage of
short-term differentials in yield or price. Increased portfolio turnover may
result in higher costs for brokerage commissions, dealer mark-ups and other
transaction costs and may also result in taxable capital gains. Short term
trading may also be restricted by certain tax rules.
MORTGAGE-BACKED SECURITIES. Each Fund may invest in mortgage-backed
securities which are securities that directly or indirectly represent an
ownership participation in, or are secured by and payable from, mortgage loans
on real property ("Mortgage-Backed Securities"). Such securities include
mortgage pass-through securities representing participation interests in pools
of residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
government or one of its agencies or instrumentalities. Mortgage pass-through
securities differ from conventional debt securities, which provide for periodic
payment of interest in fixed amounts (usually semi-annually) and principal
payments at maturity or on specified call dates. Mortgage pass-through
securities provide for monthly payments that are a "pass-through" of the monthly
interest and principal payments, including any repayments made by the individual
borrowers on the pooled mortgage loans, net of any fees paid to the guarantor of
such securities and the servicer of the underlying mortgage loans. The
underlying mortgages may be prepaid at any time and such payments are passed
through to the certificate holder as a prepayment of principal. As a result, if
a Fund purchases such a Mortgage-Backed Security at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if the Fund purchases a Mortgage-Backed Security
at a discount, faster than expected prepayments will increase, while slower than
expected prepayment will reduce, yield to maturity.
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties and servicing decisions. Generally, however, prepayments on
fixed rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Mortgage-Backed
Securities may decrease in value as a result of increases in interest rates and
may benefit less than other fixed income securities from declining interest
rates because of the risk of prepayment. Accelerated prepayments on
Mortgage-Backed Securities purchased by the Funds at a premium also impose a
risk of loss of principal because the premium may not have been fully amortized
at the time the principal is repaid in full.
TEMPORARY INVESTMENTS. In periods of unusual market conditions, for
temporary and defensive purposes, when the Adviser considers it appropriate,
each Fund may invest part or all of its assets in cash, U.S. government
securities, commercial paper, bankers' acceptances, repurchase agreements and
certificates of deposit.
INVESTMENT RESTRICTIONS. Each of the Funds has adopted a number of
investment restrictions, as set forth in the Statement of Additional
Information, some of which are fundamental, and therefore, may not be changed
without shareholder approval.
PERFORMANCE INFORMATION
The Funds may, from time to time, include their yield and total returns in
advertisements or reports to shareholders or prospective investors. Performance
information for the Funds will not be advertised or included in sales literature
unless accompanied by comparable performance information for a separate account
to which the Funds offer their shares. Both yield and total return figures are
computed in accordance with formulas specified by the SEC and are based on
historical earnings and are not intended to indicate future performance. The
yield for each Fund will be computed by dividing (a) net investment income over
a 30-day period by (b) an average value of
9
<PAGE>
invested assets (using the average number of shares entitled to receive
dividends at the end of the period), all in accordance with applicable
regulatory requirements. Such amounts will be compounded for six months and then
annualized for a twelve-month period to derive the yield of each Fund.
Standardized quotations of average annual total return for a Fund's shares
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment over a period of 1, 5 and 10 years (or up to the life of
the Fund). Standardized total return quotations reflect the deduction of a
proportional share of expenses (on an annual basis) of a Fund, and assume that
all dividends and distributions are reinvested when paid. The Funds also may
quote supplementally a rate of total return over different periods of time or by
non-standardized means. In addition, the Funds may from time to time publish
materials citing historical volatility for shares of each Fund. Volatility is
the standard deviation of day to day logarithmic price changes expressed as an
annualized percentage.
Performance information for the Funds may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Composite Stock Index
("S&P 500"), Dow Jones Industrial Average ("DJIA"), or other unmanaged indices
so that Contract Owners may compare a Fund's results with those of a group of
unmanaged securities widely regarded by investors as representative of the
securities markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objective, and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds by overall performance or other criteria; (iii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from an investment in
a Fund; and (iv) well known monitoring sources of bank certificates of deposit
performance rates such as Salomon Brothers, FEDERAL RESERVE BULLETIN, AMERICAN
BANKER, Tower Data and 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.
Quotations of yield or total return for the Funds will not take into account
charges or deductions against any separate account to which the Funds' shares
are sold or charges and deductions against the Variable Contracts issued by the
Affiliated Insurance Companies. The Funds' yield and total return should not be
compared with mutual funds that sell their shares directly to the public since
the figures provided do not reflect charges against the Variable Account or the
Variable Contracts. Performance information for each Fund reflects only the
performance of a hypothetical investment in that Fund during the particular time
period on which the calculations are based. Performance information should be
considered in light of each Fund's investment objective and policies,
characteristics and qualities of the portfolio, and the market conditions during
the given time period, and should not be considered as a representation of what
may be achieved in the future. For a description of the methods used to
determine total return for the Funds, see the Statement of Additional
Information.
HOW NET ASSET VALUE IS DETERMINED
The net asset value per share of each Fund is determined at the close of the
general trading session (normally 4:00 p.m.) of the New York Stock Exchange (the
"Exchange") on each business day the Exchange is open. The net asset value of
each Fund is computed by dividing the value of the Fund's securities, plus any
cash and other assets (including dividends and interest accrued but not
collected) less all liabilities (including accrued expenses) by the number of
outstanding shares of each Fund.
Fixed income securities are valued by using independent pricing services,
market quotations, prices provided by market makers, or estimates of market
values obtained from yield data related to instruments or securities with
similar characteristics in accordance with procedures established in good faith
by the Trust's Trustees. Short-term securities with remaining maturities of less
than 60 days are valued at amortized cost unless it is determined by the
Trustees that amortized cost does not reflect the fair value of such
obligations. Other assets are valued at fair value as determined in good faith
by the Trustees.
Generally, trading in foreign securities, as well as trading in corporate
bonds, U.S. government securities, money market instruments and repurchase
agreements, is substantially completed each day at various times prior to the
close of the general trading session of the Exchange. The values of such
securities used in computing the net asset value of the Funds are determined as
of such times. Occasionally, events affecting the value of such securities may
occur between such times and such closing which will not be reflected in the
computation of a Fund's net asset value. If events occur which materially affect
the value of such securities, the securities will be valued at fair market value
as determined in good faith by the Trustees.
10
<PAGE>
MANAGEMENT OF THE FUNDS
THE TRUSTEES. The Trustees of the Trust ("Trustees") oversee the operations
of the Trust and each Fund and perform the various duties imposed on trustees by
the laws of the Commonwealth of Massachusetts and the Investment Company Act of
1940 (the "1940 Act"). The Trustees meet quarterly to review the Funds'
investment policies, performance, expenses and other business affairs and elect
the officers of the Trust annually. The Trustees delegate day to day management
of the Funds to the officers of the Trust.
THE ADVISER AND AFFILIATED SERVICE PROVIDERS. Pursuant to an Investment
Advisory Agreement with the Trust, Northstar Investment Management Corporation
acts as the investment adviser to each Fund. In this capacity, the Adviser,
subject to the authority of the Trustees, is responsible for furnishing
continuous investment supervision to the Funds and is responsible for the
management of the Funds' portfolios. Northstar Administrators Corporation, an
affiliate of the Adviser, furnishes certain administrative, compliance and
accounting services to each Fund. Employees of the Adviser and Administrator
serve as officers of the Funds, and the Adviser provides office space for the
Funds and pays the salaries of all Fund officers and Trustees who are affiliated
with the Adviser.
The Adviser and its affiliates are indirect, majority owned subsidiaries of
ReliaStar Financial Corp. ("ReliaStar"). ReliaStar's address is 20 Washington
Avenue South, Minneapolis, MN 55401. Combined minority interests held by members
of senior management currently equal 20%. ReliaStar is a publicly traded holding
company whose subsidiaries specialize in the life and health insurance
businesses. Through the Affiliated Insurance Companies and other subsidiaries,
ReliaStar issues and distributes individual life insurance, annuities and mutual
funds, group life and health insurance and life and health reinsurance, and
provides related investment management services.
The Adviser's fee is accrued daily against the value of each Fund's net
assets and is payable by each Fund monthly at an annual rate of 0.75% on the
first $250 million of each Fund's average daily net assets scaled down to 0.55%
for assets over $1 billion. The investment advisory fees paid by the Funds are
higher than the fees paid by most mutual funds. The Administrator's fee is
accrued daily against the value of each Fund's net assets and is payable monthly
at an annual rate of .10% of each Fund's average daily net assets.
The Adviser places all orders for the purchase and sale of portfolio
securities. In selecting brokers, the Adviser may consider research and
brokerage services furnished to it. The Adviser also advises other accounts that
may purchase and hold securities in which the Funds may invest and certain
persons affiliated with the Adviser may purchase and hold, directly or
indirectly, securities in which the Funds or other accounts invest, subject to
internal guidelines regarding conflicts of interest.
INVESTMENT PERSONNEL OF ADVISER. Thomas Ole Dial has served as manager of
the Northstar High Yield Bond Fund and Northstar Multi-Sector Bond Fund since
inception of each Fund in May 1994. Mr. Dial has also served as portfolio
manager of the Northstar Advantage High Total Return Fund since its inception in
November 1993, and, since October 1995 as co-manager of the Northstar Advantage
Strategic Income Fund, separate investment companies managed by the Adviser. Mr.
Dial is a Vice President of each Fund and Executive Vice President and Chief
Investment Officer - Fixed Income of the Adviser. Prior to employment by the
Adviser in October 1993, Mr. Dial served as Executive Vice President and Chief
Investment Officer - Fixed Income of National Securities & Research Corporation,
and as portfolio manager for National Bond Fund, National Asset Reserve, and
National Multi-Sector Fixed Income Fund. Prior to National, Mr. Dial managed
high yield securities portfolios through Dial Capital Management and various
financial institutions. Mr. Dial also manages investments for T.D. Partners, a
limited partnership for which the Adviser serves as subadviser.
Ernest Mysogland has served as a manager of the Northstar Income and Growth
Fund and prior to February 1996, served as a manager of the Northstar Growth
Fund since inception of each Fund's operations in May 1994. Mr. Mysogland has
also served as portfolio manager of the Northstar Advantage Income and Growth
Fund, a separate investment company managed by the Adviser, since its inception
in November 1993. Mr. Mysogland is a Vice President of the Funds and Executive
Vice President and Chief Investment Officer - Equities of the Adviser. Prior to
employment by the Adviser, Mr. Mysogland served as Senior Vice President and
Chief Investment Officer - Equities for National Securities and Research
Corporation ("National"), and was portfolio manager for National Income and
Growth Fund, National Total Return Fund, and National Worldwide Opportunities
Fund. Prior to National, Mr. Mysogland served as an investment manager for
Reinoso Asset Management, Gintel Equity Management, L.F. Rothschild Asset
Management, Wertheim Asset Management and Kemper Financial Services.
11
<PAGE>
SUBADVISER; INVESTMENT PERSONNEL OF SUBADVISER. Navellier Fund Management,
Inc. ("Navellier"), a registered investment adviser, serves as subadviser to the
Growth Fund pursuant to a Subadvisory Agreement dated February 1, 1996, between
the Adviser and Navellier. Navellier is a newly-formed company which is
wholly-owned by Louis G. Navellier. The principal address of Navellier is 920
Incline Way, Incline Village, NV 89450. Mr. Navellier, who has managed
investments since 1986, is also the sole shareholder of two other registered
investment advisory firms which, on a combined basis, manage approximately $1.2
billion of assets for individuals, institutions and a Navellier-sponsored
open-end management investment company, the Navellier Series Fund. Louis G.
Navellier serves as portfolio manager for the Fund, with primary responsibility
for the day-to-day investment management. For its services, Navellier will
receive a fee equal to 0.48% of the average daily net assets of the Fund. The
Adviser is responsible for overseeing the investment management provided by
Navellier, and assumes all costs and expenses of the subadvisory arrangement.
CUSTODIAN AND ACCOUNTING SERVICES AGENT. The Funds' custodian and
accounting services agent is State Street Bank and Trust Company, a trust
company organized under the laws of Massachusetts and located at 225 Franklin
Street, Boston, Massachusetts 02110.
PURCHASE OF SHARES
As of the date of the Prospectus, shares of the Funds are offered only for
purchase by the Variable Accounts to serve as an investment medium for the
Variable Contracts issued by the Affiliated Insurance Companies. Shares of the
Funds may be offered in the future to other separate accounts established by one
or more of the Affiliated Insurance Companies or sold to separate accounts of
other affiliated or unaffiliated insurance companies.
Shares of each Fund are sold at their respective net asset values (without a
sales charge) next computed after receipt of a purchase order.
The various Funds may be used independently or in combination. To the extent
that shares of the Funds are sold to the Variable Accounts as the investment
medium for a Variable Contract, the structure of the Funds permits Variable
Contract owners, within the limitations described in their Contracts, to
allocate their accumulated value in the Contracts in response to or in
anticipation of changes in market conditions. The assets of each Fund are
segregated, and a Variable Contract owner's interest is limited to the Fund in
which the Contract's accumulated value is allocated.
The Trust reserves the right to discontinue offering shares of one or more
Funds at any time. In the event that a Fund ceases offering its shares, any
investments allocated by an insurance company investing in the Trust to such
Fund will, subject to any necessary regulatory approvals, be invested in the
Fund deemed appropriate by the Trustees.
Shares of any Fund may be exchanged for shares of any of the other Funds,
all of which are described in this Prospectus. Exchanges are treated as a
redemption of shares of one Fund and a purchase of shares of one or more of the
other Funds and are effected at the respective net asset values per share of
each Series on the date of the exchange. The Trust reserves the right to modify
or discontinue its exchange privilege at any time without notice.
Variable Contract Owners do not deal directly with the Trust to purchase,
redeem, or exchange shares of a Fund, and Variable Contract Owners should refer
to the prospectus for the Variable Account for information on the allocation of
premiums and on transfers of accumulated value among sub-accounts of the
Variable Account.
REDEMPTION OF SHARES
Shares of any Fund may be redeemed on any business day. Redemptions are
effected at the per share net asset value next determined after receipt of the
redemption request. Redemption proceeds normally will be paid within seven days
following receipt of instructions in proper form. The right of redemption may be
suspended by the Trust or the payment date postponed beyond seven days when the
New York Stock Exchange is closed (other than customary weekend and holiday
closing) or for any period during which trading thereon is restricted because an
emergency exists, as determined by the Securities and Exchange Commission,
making disposal of portfolio securities or valuation of net assets not
reasonably practicable, and whenever the Securities and Exchange Commission has
by order permitted such suspension or postponement for the protection of
shareholders. If the Board of Trustees should determine that it would be
detrimental to the best interests of the remaining shareholders of a Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price in
whole or part by a
12
<PAGE>
distribution in kind of securities from the portfolio of the Fund in lieu of
cash, in conformity with applicable rules of the Securities and Exchange
Commission. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage costs in converting the assets into cash.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code ("Code"). Accordingly, a Fund so
qualifying generally will not be subject to federal income taxes to the extent
that it distributes on a timely basis its investment company taxable income and
its net capital gains. Such income and capital gains distributions are
automatically reinvested in additional shares of the Fund, unless the
shareholder elects to receive cash.
Distributions of any investment company taxable income (which includes among
other items, dividends, interest, and any net realized short-term capital gains
in excess of net realized long-term capital losses) are treated as ordinary
income for tax purposes in the hands of the shareholder (Variable Account). Net
capital gains (the excess of any net long-term capital gains over net short-term
capital losses) will, to the extent distributed and classified by a Fund as
capital gain distributions, be treated as long-term capital gains in the hands
of the Variable Account regardless of the length of time the Variable Account
may have held the shares. Income distributions of any net investment income of
the Northstar Growth Fund will be declared and paid annually; any income
distributions from net investment income of the Northstar Income and Growth Fund
will be declared and paid quarterly; any income distributions from net
investment income of the Northstar Multi-Sector Bond Fund and the Northstar High
Yield Bond Fund will be declared daily and paid quarterly. Capital gain
distributions, if any, will be paid at least once annually.
To comply with regulations under section 817(h) of the Code, each Fund is
required to diversify its investments. Generally, a Fund will be required to
diversify its investments so that on the last day of each quarter of a calendar
year no more than 55% of the value of its total assets is represented by any one
investment, no more than 70% is represented by any two investments, no more than
80% is represented by any three investments, and no more than 90% is represented
by any four investments. For this purpose, securities of a given issuer
generally are treated as one investment, but each U.S. Government agency and
instrumentality is treated as a separate issuer. Any security issued,
guaranteed, or insured (to the extent so guaranteed or insured) by the U.S. or
any agency or instrumentality of the U.S. is treated as a security issued by the
U.S. Government or its agency or instrumentality, whichever is applicable.
Compliance with the diversification rules under Section 817(h) of the Code
generally will limit the ability of a Fund to invest greater than 55% of its
total assets in direct obligations of the U.S. Treasury (or any other issuer) or
to invest primarily in securities issued by a single agency or instrumentality
of the U.S. Government.
The Treasury Department announced that it would issue future regulations or
rulings addressing the circumstances in which a variable Contract Owner's
control of the investments of the separate account may cause the Contract Owner,
rather than the insurance company, to be treated as the owner of the assets held
by the separate account. If the Contract Owner is considered the owner of the
securities underlying the separate account, income and gains produced by those
securities would be included currently in the contract owner's gross income. It
is not known what standard will be set forth in the regulations or rulings.
In the event that rules or regulations are adopted, there can be no
assurance that the Funds will be able to operate as currently described in the
Prospectus, or that the Trust will not have to change any Fund's investment
objective or investment policies. While each Fund's investment objective is
fundamental and may be changed only by a vote of a majority of its outstanding
shares, the Trustees have reserved the right to modify the investment policies
of any Fund as necessary to prevent any such prospective rules and regulations
from causing the contract owners to be considered the owners of the shares of a
Fund underlying the Variable Accounts.
Reference is made to the Prospectus for the respective Variable Accounts and
Variable Contracts for information regarding the federal income tax treatment of
distributions to the Variable Accounts. See "Federal Income Tax Status" in the
Funds' Statement of Additional Information for more information on taxes.
GENERAL INFORMATION
ORGANIZATION OF THE FUND
The Trust was organized under Massachusetts law in 1993 as a business trust.
The Declaration of Trust provides that the Trustees are authorized to create an
unlimited number of series. All shares have equal voting rights, except
13
<PAGE>
that only shares of the respective series are entitled to vote on matters
concerning only that series. Each share of each Fund will be given one vote,
unless a different allocation of voting rights is required under applicable law
for a mutual fund that is an investment medium for variable insurance products.
At the date of this Prospectus, there are four existing series of the Trust
(IE., the Funds).
In accordance with current laws, it is anticipated that an insurance company
issuing a variable contract that participates in the Trust will request voting
instructions from Contract Owners and will vote shares or other voting interests
in the separate account in proportion to the voting instructions received. The
Affiliated Insurance Companies and the Variable Accounts are currently the only
shareholders of the Trust, although other separate accounts of the Affiliated
Insurance Companies or other insurance companies may become shareholders in the
future.
The shares of each 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 having voting rights. Except as set forth above and subject to the 1940
Act, the Trustees will continue to hold office and appoint successor Trustees.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees,
officers, employees or agents of the Trust in connection with the Trust's
property or the affairs of the Trust, and requires that notice of the disclaimer
be given in each contract or obligation entered into or executed by the Trust or
its Trustees, officers, employees, or agents. The Declaration of Trust provides
for indemnification out of Trust property for all loss and expense of any
shareholder held personally liable by reason of being or having been a
shareholder of the Trust. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations, and thus should be considered
remote.
REGISTRATION STATEMENT
This Prospectus does not contain all the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the 1933 Act and the 1940 Act, with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and regulation
of the Securities and Exchange Commission. The Registration Statement, including
the exhibits filed therewith, may be examined at the office of the Securities
and Exchange Commission in Washington, D.C.
14
<PAGE>
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND
RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which made the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S ("S&P") CORPORATE DEBT RATINGS
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than for debt in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-) - The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
A-1
<PAGE>
PROSPECTUS APRIL 30, 1996
NORTHSTAR/NWNL TRUST
NORTHSTAR GROWTH FUND
Two Pickwick Plaza (203) 863-6200
Greenwich, Connecticut, 06830 (800) 595-7827
Northstar Growth Fund (the "Fund") is a diversified investment portfolio
comprising a series of the Northstar/ NWNL Trust (the "Trust"), an open-end,
series, management investment company.
Shares of the Fund are currently sold to segregated asset accounts of
Northwestern National Life Insurance Company ("Northwestern National") and to
variable annuity separate accounts of Northern Life Insurance Company, an
affiliate of Northwestern National (the "Affiliated Insurance Companies"), to
serve as the investment medium for variable annuity contracts (the "Variable
Contracts") issued by the Affiliated Insurance Companies. The variable accounts
of the Affiliated Insurance Companies (the "Variable Accounts") invest in shares
of the Fund in accordance with allocation instructions received from Variable
Contract owners. Such allocation rights are described further in the
accompanying Prospectus for the Variable Account.
The Fund is a diversified portfolio with an investment objective of seeking
long-term capital growth primarily through investments in equity securities of
companies that are believed to provide above average potential for capital
appreciation.
Northstar Investment Management Corporation is the investment adviser for
the Fund; Navellier Fund Management Inc. serves as a subadviser and its
professional staff selects and supervises the investments in the Fund's
portfolio. See "Management of the Fund."
This Prospectus sets forth basic information about the Trust and the Fund
that prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
April 30, 1996, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information is
available without charge upon request to the Trust at the address or telephone
number set forth above.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AT
ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF THE
VARIABLE ACCOUNT, WHICH ACCOMPANIES THIS PROSPECTUS. BOTH PROSPECTUSES SHOULD BE
READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
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.
N200.103
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Highlights............................................................ 3
Investment Objective and Policies............................................... 3
Risk Factors.................................................................... 4
Other Investment Strategies and Techniques...................................... 4
Performance Information......................................................... 5
How Net Asset Value is Determined............................................... 6
Management of the Fund.......................................................... 6
Purchase of Shares.............................................................. 7
Redemption of Shares............................................................ 8
Dividends, Distributions and Taxes.............................................. 8
General Information............................................................. 9
</TABLE>
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights for the Fund set forth below present certain
information and ratios as well as performance information about the Fund for a
share outstanding throughout each year or portion thereof. This table should be
read in conjunction with the audited financial statements of the Trust dated
December 31, 1995 and accompanying notes, which are contained in the Trust's
Annual Report to Shareholders for the fiscal year ended December 31, 1995
incorporated by reference in the Statement of Additional Information, a copy of
which may be obtained without charge from the Trust. The financial highlights
have been audited by Coopers & Lybrand L.L.P., independent accountants, whose
report thereon is also incorporated by reference in the Statement of Additional
Information, and should be read in conjunction with the related audited
financial statements and notes thereto. The Fund commenced operations in May,
1994.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Net Asset Value, beginning of the period................................................ $ 10.04 $ 10.00
--------- ---------
Income from investment operations:
Net Investment income............................................................. 0.20 0.16
Net gain (loss) on investments (both realized and unrealized)..................... 2.27 0.19
--------- ---------
Total from investment operations................................................ 2.47 0.35
Less distributions:
Dividends (from net investment income).............................................. (0.19) (0.16)
Distribution (from realized gains).................................................. (0.76) (0.15)
--------- ---------
Total Distributions............................................................... (0.95) (0.31)
Net Asset Value, end of the period...................................................... $ 11.56 $ 10.04
--------- ---------
--------- ---------
Total Return............................................................................ 24.78% 3.47%
Ratios/Supplemental Data:
Net Assets, end of period (in thousands)................................................ $ 3,813 $ 2,701
Ratio of expenses to average net assets................................................. 0.80% 1.00%*
Ratio of expense reimbursement to average net assets.................................... 1.24% 1.45%*
Ratio of net investment income to average net assets.................................... 1.77% 2.31%*
Portfolio Turnover Rate................................................................. 1.23% 61%
</TABLE>
- ------------------------
*Annualized
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek long-term capital growth
primarily through investments in equity securities diversified over industries
and companies which are believed to provide above average potential for capital
appreciation. Securities in which the Fund will normally invest include common
stocks, preferred stocks, and securities convertible into common stock, and the
Fund may also invest in warrants and options to purchase common stocks. Under
normal conditions, the Fund does not intend to invest more than 35% of its
assets in convertible securities. The Fund may invest in large seasoned
companies which are believed to possess superior return potential similar to
companies with formative growth profiles, and may invest in small and medium
sized companies with above average earnings growth potential relative to market
value. Investing in equity securities of small and medium-sized companies may
involve greater risk than is associated with investing in more established
companies. Small to medium-sized companies often have limited product and market
diversification, fewer financial resources, or may be dependent on a few key
managers. Any one of the foregoing may change suddenly and have an immediate
impact on the value of the company's securities. Furthermore, whenever the
securities markets are experiencing rapid price changes due to national economic
trends, secondary growth securities have historically been subject to
exaggerated price changes. Although the Fund will invest predominantly in equity
and equity related securities, it may also invest in non-equity securities, such
as corporate bonds or U.S. Government obligations during periods, when, in the
opinion of the Adviser or Subadviser, prevailing market, financial or economic
conditions warrant. Although the Fund selects securities for long-term
investment, the Fund may engage in short-term transactions.
3
<PAGE>
The Fund may invest up to 20% of its assets in equity securities of foreign
issuers, not more than 10% of which may be invested in issuers that are not
listed on a U.S. securities exchange. The Fund normally will purchase American
Depository Receipts for foreign securities which are actively traded in a United
States market or on a U.S. securities exchange. While investment in foreign
securities is intended to increase diversification, such investments involve
risks in addition to the credit and market risks normally associated with
domestic securities. See "Risk Factors - Foreign Investments."
The Trustees of the Trust reserve the right to change any of the investment
policies, strategies or practices of the Fund, as described in this Prospectus
and the Statement of Additional Information, without shareholder approval,
except in those instances where shareholder approval is expressly required. The
investment objective of the Fund is a fundamental policy which may not be
changed without the approval of holders of a majority of the outstanding shares
of the Fund. There can, of course, be no assurance that the Fund will achieve
its investment objective since all investments are inherently subject to market
risks.
RISK FACTORS
FOREIGN INVESTMENTS. The Fund may invest in securities of foreign issuers.
Securities of some foreign companies and governments may be traded in the U.S.,
but many foreign securities are traded primarily in foreign markets. In addition
to generally higher transaction costs associated with foreign investing, risks
of foreign investing include:
CURRENCY RISKS. The Fund must buy the local currency when it buys a foreign
security, and it sells local currency when it sells the security. The value of a
foreign security held by the Fund will be affected by the value of the local
currency relative to the U.S. dollar, causing the Fund to lose money at times,
despite an increase in the value of the security.
POLITICAL AND ECONOMIC RISKS. Political and economic risks may exist,
particularly in underdeveloped and developing countries which may have
relatively unstable governments and economies based on only a few industries. In
some countries, there is the risk that the government may take over the assets
or operations of a company or that the government may impose taxes or limits on
the removal of the Fund's assets from that country.
REGULATORY RISKS. There is generally less government supervision of foreign
markets, and issuers are not subject to the uniform accounting, auditing and
financial reporting standards and practices applicable to domestic issuers.
There also may be less publicly available information about foreign issuers.
OTHER INVESTMENT STRATEGIES AND TECHNIQUES
Each of the following strategies and techniques may be utilized by the Fund.
The Funds may, but does not currently intend to, engage in certain additional
investment techniques not described in this Prospectus. These techniques and
additional information on the securities and techniques described in the
Prospectus are contained in the Statement of Additional Information.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements, either
for temporary defensive purposes or to generate income from its cash balances.
Under a repurchase agreement, the Fund buys a security from a bank or dealer,
which is obligated to buy it back at a fixed price and time. The security is
held in a separate account at the Fund's custodian and constitutes the Fund's
collateral for the bank's or dealer's repurchase obligation. Additional
collateral may be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters into
bankruptcy, the Fund may experience costs and delays in liquidating the
collateral, and may experience a loss if it is unable to demonstrate its right
to the collateral in a bankruptcy proceeding. Repurchase agreements maturing
more than seven days in the future are considered illiquid, and the Fund will
invest no more than 5% of its net assets in such repurchase agreements at any
time. Under normal market conditions, the Fund will limit its investments in
repurchase agreements to 15% of its net assets.
WHEN-ISSUED SECURITIES. The Fund may acquire securities on a "when-issued"
basis by contracting to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until settlement. If
made through a dealer, the contract is dependent on the dealer completing the
sale. The dealer's failure could deprive the Fund of an advantageous yield or
price. These contracts may be considered securities and involve risk to the
extent that the value of the underlying security changes prior to settlement.
The Fund may realize short-term profits or losses if the contracts are sold.
Transactions in when-issued securities may be limited by certain Internal
Revenue Code requirements.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities, including restricted securities or private placements. An
illiquid security is a security that cannot be sold quickly in the normal course
of
4
<PAGE>
business. Some securities cannot be sold to the U.S. public because of their
terms or because of SEC regulations. The Adviser may determine that securities
that cannot be sold to the U.S. public, but that can be sold to institutional
investors ("Rule 144A" securities) or on foreign markets, are liquid, following
guidelines established by the Trustees of the Fund.
TRADING AND PORTFOLIO TURNOVER. The Fund generally intends to purchase
securities for long-term investment. However the Fund may purchase a security in
anticipation of relatively short-term price gains, and short-term transactions
may result from liquidity needs, securities having reached a price or yield
objective, changes in interest rates or the credit standing of an issuer, or by
reason of economic or other developments not foreseen at the time of the initial
investment decision. Portfolio turnover rates are usually not a factor in making
buy and sell decisions. The Fund may also sell one security and simultaneously
purchase the same or a comparable security to take advantage of short-term
differentials in yield or price. Increased portfolio turnover may result in
higher costs for brokerage commissions, dealer mark-ups and other transaction
costs and may also result in taxable capital gains. Short term trading may also
be restricted by certain tax rules.
MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed
securities which are securities that directly or indirectly represent an
ownership participation in, or are secured by and payable from, mortgage loans
on real property. Such securities include mortgage pass-through securities
representing participation interests in pools of residential mortgage loans
originated by U.S. governmental or private lenders and guaranteed, to the extent
provided in such securities, by the U.S. government or one of its agencies or
instrumentalities. Mortgage pass-through securities differ from conventional
debt securities, which provide for periodic payment of interest in fixed amounts
(usually semi-annually) and principal payments at maturity or on specified call
dates. Mortgage pass-through securities provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments, including any
repayments made by the individual borrowers on the pooled mortgage loans, net of
any fees paid to the guarantor of such securities and the servicer of the
underlying mortgage loans. The underlying mortgages may be prepaid at any time
and such payments are passed through to the certificate holder as a prepayment
of principal. As a result, if the Fund purchases such a mortgage-backed security
at a premium, a prepayment rate that is faster than expected will reduce yield
to maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity. Conversely, if the Fund
purchases a mortgage-backed security at a discount, faster than expected
prepayments will increase, while slower than expected prepayment will reduce,
yield to maturity.
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties and servicing decisions. Generally, however, prepayments on
fixed rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Mortgage-backed
securities may decrease in value as a result of increases in interest rates and
may benefit less than other fixed income securities from declining interest
rates because of the risk of prepayment. Accelerated prepayments on
mortgage-backed securities purchased by the Fund at a premium also impose a risk
of loss of principal because the premium may not have been fully amortized at
the time the principal is repaid in full.
TEMPORARY INVESTMENTS. In periods of unusual market conditions, for
temporary and defensive purposes, when the Adviser considers it appropriate, the
Fund may invest part or all of its assets in cash, U.S. government securities,
commercial paper, bankers' acceptances, repurchase agreements and certificates
of deposit.
INVESTMENT RESTRICTIONS. The Fund has adopted a number of investment
restrictions, as set forth in the Statement of Additional Information, some of
which are fundamental, and, therefore, may not be changed without shareholder
approval.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. Performance
information for the Fund will not be advertised or included in sales literature
unless accompanied by comparable performance information for a separate account
to which the Fund offers its shares. Both yield and total return figures are
computed in accordance with formulas specified by the SEC and are based on
historical earnings and are not intended to indicate future performance. The
yield for the Fund will be computed by dividing (a) net investment income over a
30-day period by (b) an average value of invested assets (using the average
number of shares entitled to receive dividends at the end of the period), all in
accordance with applicable regulatory requirements. Such amounts will be
compounded for six months and then annualized for a twelve-month period to
derive the yield of the Fund.
5
<PAGE>
Standardized quotations of average annual total return for the Fund's shares
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment over a period of 1, 5 and 10 years (or up to the life of
the Fund). Standardized total return quotations reflect the deduction of a
proportional share of expenses (on an annual basis) of the Fund, and assume that
all dividends and distributions are reinvested when paid. The Fund also may
quote supplementally a rate of total return over different periods of time or by
non-standardized means. In addition, the Fund may from time to time publish
materials citing historical volatility for shares of the Fund. Volatility is the
standard deviation of day to day logarithmic price changes expressed as an
annualized percentage.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Composite Stock Index
("S&P 500"), Dow Jones Industrial Average ("DJIA"), or other unmanaged indices
so that contract owners may compare the Fund's results with those of a group of
unmanaged securities widely regarded by investors as representative of the
securities markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objective, and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds by 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 bank certificates of deposit
performance rates such as Salomon Brothers, FEDERAL RESERVE BULLETIN, AMERICAN
BANKER, Tower Data and 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.
Quotations of yield or total return for the Fund will not take into account
charges or deductions against any separate account to which the Fund's shares
are sold or charges and deductions against the Variable Contracts issued by the
Affiliated Insurance Companies. The Fund's yield and total return should not be
compared with mutual funds that sell their shares directly to the public since
the figures provided do not reflect charges against the Variable Account or the
Variable Contracts. Performance information for the Fund reflects only the
performance of a hypothetical investment in the Fund during the particular time
period on which the calculations are based. Performance information should be
considered in light of the Fund's investment objective and policies,
characteristics and qualities of the portfolio, and the market conditions during
the given time period, and should not be considered as a representation of what
may be achieved in the future. For a description of the methods used to
determine total return for the Fund, see the Statement of Additional
Information.
HOW NET ASSET VALUE IS DETERMINED
The net asset value per share of the Fund is determined at the close of the
general trading session (currently 4:00 p.m.) of the New York Stock Exchange
(the "Exchange") on each business day the Exchange is open. The net asset value
of the Fund is computed by dividing the value of the Fund's securities, plus any
cash and other assets (including dividends and interest accrued but not
collected) less all liabilities (including accrued expenses) by the number of
shares of the Fund outstanding.
Fixed income securities are valued by using independent pricing services,
market quotations, prices provided by market makers, or estimates of market
values obtained from yield data related to instruments or securities with
similar characteristics in accordance with procedures established in good faith
by the Trustees. Short-term securities with remaining maturities of less than 60
days are valued at amortized cost unless it is determined by the Trustees that
amortized cost does not reflect the fair value of such obligations. Other assets
are valued at fair value as determined in good faith by the Trustees.
Generally, trading in foreign securities, as well as trading in corporate
bonds, U.S. government securities, money market instruments and repurchase
agreements, is substantially completed each day at various times prior to the
close of the general trading session of the Exchange. The values of such
securities used in computing the net asset value of the Fund are determined as
of such times. Occasionally, events affecting the value of such securities may
occur between such times and such closing which will not be reflected in the
computation of a Fund's net asset value. If events occur which materially affect
the value of such securities, the securities will be valued at fair market value
as determined in good faith by the Trustees.
MANAGEMENT OF THE FUND
THE TRUSTEES. The Trustees of the Trust oversee the operations of the Trust
and the Fund and perform the various duties imposed on trustees by the laws of
the Commonwealth of Massachusetts and the Investment
6
<PAGE>
Company Act of 1940 (the "1940 Act"). The Trustees meet quarterly to review the
Fund's investment policies, performance, expenses and other business affairs and
elect the officers of the Trust annually. The Trustees delegate day to day
management of the Fund to the officers of the Trust.
THE ADVISER AND AFFILIATED SERVICE PROVIDERS. Pursuant to an Investment
Advisory Agreement with the Trust, Northstar Investment Management Corporation
acts as the investment adviser to the Fund. In this capacity, the Adviser,
subject to the authority of the Trustees, is responsible for furnishing
continuous investment supervision to the Fund and is responsible for the
management of the Fund's portfolios. Northstar Administrators Corporation, an
affiliate of the Adviser, furnishes certain administrative, compliance and
accounting services to the Fund. Employees of the Adviser and Administrator
serve as officers of the Fund, and the Adviser provides office space for the
Fund and pays the salaries of all Fund officers and Trustees who are affiliated
with the Adviser.
The Adviser and its affiliates are indirect, majority owned subsidiaries of
ReliaStar Financial Corp. ("ReliaStar"). ReliaStar's address is 20 Washington
Avenue South, Minneapolis, MN 55401. Combined minority interests held by members
of senior management currently equal 20%. ReliaStar is a publicly traded holding
company whose subsidiaries specialize in the life and health insurance
businesses. Through the Affiliated Insurance Companies and other subsidiaries,
ReliaStar issues and distributes individual life insurance, annuities and mutual
funds, group life and health insurance and life and health reinsurance, and
provides related investment management services.
The Adviser's fee is accrued daily against the value of the Fund's net
assets and is payable by the Fund monthly at an annual rate of 0.75% on the
first $250 million of the Fund's average daily net assets scaled down to 0.55%
for assets over $1 billion. The investment advisory fees paid by the Fund is
higher than the fees paid by most mutual funds. The Administrator's fee is
accrued daily against the value of the Fund's net assets and is payable monthly
at an annual rate of .10% of the Fund's average daily net assets.
The Adviser places all orders for the purchase and sale of portfolio
securities. In selecting brokers, the Adviser may consider research and
brokerage services furnished to it. The Adviser also advises other accounts that
may purchase and hold securities in which the Fund may invest and certain
persons affiliated with the Adviser may purchase and hold, directly or
indirectly, securities in which the Fund or other accounts invest, subject to
internal guidelines regarding conflicts of interest.
THE SUBADVISER. Navellier Fund Management, Inc. ("Navellier"), a registered
investment adviser, serves as subadviser to the Growth Fund pursuant to a
Subadvisory Agreement dated February 1, 1996, between the Adviser and Navellier.
Navellier is a newly-formed company which is wholly-owned by Louis G. Navellier.
The principal address of Navellier is 920 Incline Way, Incline Village, NV
89450. Mr. Navellier, who has managed investments since 1986, is also the sole
shareholder of two other registered investment advisory firms which, on a
combined basis, manage approximately $1.2 billion of assets for individuals,
institutions and a Navellier-sponsored open-end management investment company,
the Navellier Series Fund. Louis G. Navellier serves as portfolio manager for
the Fund, with primary responsibility for the day-to-day investment management.
For its services, Navellier will receive a fee equal to 0.48% of the average
daily net assets of the Fund. The Adviser is responsible for overseeing the
investment management provided by Navellier, and assumes all costs and expenses
of the subadvisory arrangement.
THE CUSTODIAN AND ACCOUNTING SERVICES AGENT. The Fund's custodian and
accounting services agent is State Street Bank and Trust Company, a trust
company organized under the laws of Massachusetts and located at 225 Franklin
Street, Boston, Massachusetts 02110.
PURCHASE OF SHARES
As of the date of the Prospectus, shares of the Fund are offered only for
purchase by the Variable Accounts to serve as an investment medium for the
Variable Contracts issued by the Affiliated Insurance Companies. Shares of the
Fund may be offered in the future to other separate accounts established by the
Affiliated Insurance Companies or sold to separate accounts of other affiliated
or unaffiliated insurance companies, and may be offered in the future to serve
as an investment medium for variable life insurance policies.
Shares of the Fund are sold at the net asset value (without a sales charge)
next computed after receipt of a purchase order. The Trust reserves the right to
discontinue offering shares of the Fund at any time. In the event that the Fund
ceases offering its shares, any investments allocated by an insurance company
investing in the Trust to the Fund will, subject to any necessary regulatory
approvals, be invested in another fund within the Trust deemed appropriate by
the Trustees.
7
<PAGE>
Shares of the Fund may be exchanged for shares of any other fund within the
Trust that is available as an investment option under a particular Variable
Contract. The other funds of the Trust are described in separate prospectuses.
Exchanges are treated as a redemption of shares of one fund and a purchase of
shares of one or more of the other funds, and are effected at the respective net
asset values per share of each fund on the date of the exchange. The Trust
reserves the right to modify or discontinue its exchange privilege at any time
without notice.
Variable Contract Owners do not deal directly with the Trust to purchase,
redeem, or exchange shares of the Fund, and Variable Contract Owners should
refer to the prospectus for the Variable Account for information on the
allocation of premiums and on transfers of accumulated value among sub-accounts
of the Variable Account.
REDEMPTION OF SHARES
Shares of the Fund may be redeemed on any business day. Redemptions are
effected at the per share net asset value next determined after receipt of the
redemption request. Redemption proceeds normally will be paid within seven days
following receipt of instructions in proper form. The right of redemption may be
suspended by the Trust or the payment date postponed beyond seven days when the
New York Stock Exchange is closed (other than customary weekend and holiday
closing) or for any period during which trading thereon is restricted because an
emergency exists, as determined by the Securities and Exchange Commission,
making disposal of portfolio securities or valuation of net assets not
reasonably practicable, and whenever the Securities and Exchange Commission has
by order permitted such suspension or postponement for the protection of
shareholders. If the Trustees should determine that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption price in whole or part
by a distribution in kind of securities from the portfolio of the Fund in lieu
of cash, in conformity with applicable rules of the Securities and Exchange
Commission. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage costs in converting the assets into cash.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code ("Code"). Accordingly, provided
the Fund so qualifies, it generally will not be subject to federal income taxes
to the extent that it distributes on a timely basis its investment company
taxable income and its net capital gains. Such income and capital gains
distributions are automatically reinvested in additional shares of the Fund,
unless the shareholder elects to receive cash.
Distributions of any investment company taxable income (which includes among
other items, dividends, interest, and any net realized short-term capital gains
in excess of net realized long-term capital losses) are treated as ordinary
income for tax purposes in the hands of the shareholder (Variable Account). Net
capital gains (the excess of any net long-term capital gains over net short-term
capital losses) will, to the extent distributed, be treated as long-term capital
gains in the hands of the Variable Account regardless of the length of time the
Variable Account may have held the shares. Income distributions of any net
investment income of the Fund will be declared and paid annually, and capital
gains distribution, if any, will be paid at least once annually.
To comply with regulations under section 817(h) of the Code, the Fund is
required to diversify its investments. Generally, the Fund will be required to
diversify its investments so that on the last day of each quarter of a calendar
year no more than 55% of the value of its total assets is represented by any one
investment, no more than 70% is represented by any two investments, no more than
80% is represented by any three investments, and no more than 90% is represented
by any four investments. For this purpose, securities of a given issuer
generally are treated as one investment, but each U.S. Government agency and
instrumentality is treated as a separate issuer.
Any security issued, guaranteed, or insured (to the extent so guaranteed or
insured) by the U.S. or any agency or instrumentality of the U.S. is treated as
a security issued by the U.S. Government or its agency or instrumentality,
whichever is applicable.
Compliance with the diversification rules under Section 817(h) of the Code
generally will limit the ability of the Fund to invest greater than 55% of its
total assets in direct obligations of the U.S. Treasury (or any other issuer) or
to invest primarily in securities issued by a single agency or instrumentality
of the U.S. Government.
The Treasury Department announced that it would issue future regulations or
rulings addressing the circumstances in which a variable Contract Owner's
control of the investments of the separate account may cause the Contract Owner,
rather than the insurance company, to be treated as the owner of the assets held
by the
8
<PAGE>
separate account. If the Contract Owner is considered the owner of the
securities underlying the separate account, income and gains produced by those
securities would be included currently in the contract owner's gross income. It
is not known what standard will be set forth in the regulations or rulings.
In the event that rules or regulations are adopted, there can be no
assurance that the Fund will be able to operate as currently described in the
Prospectus, or that the Trust will not have to change the Fund's investment
objective or investment policies. While the Fund's investment objective is
fundamental and may be changed only by a vote of a majority of its outstanding
shares, the Trustees have reserved the right to modify the investment policies
of the Fund as necessary to prevent any such prospective rules and regulations
from causing the contract owners to be considered the owners of the shares of
the Fund underlying the Variable Account.
Reference is made to the Prospectus for the Variable Account and Variable
Contracts for information regarding the federal income tax treatment of
distributions to the Variable Account. See "Taxation" in the Fund's Statement of
Additional Information for more information on taxes.
GENERAL INFORMATION
ORGANIZATION OF THE FUND
The Trust was organized under Massachusetts law in 1993 as a business trust.
The Declaration of Trust provides that the Trustees are authorized to create an
unlimited number of series. All shares have equal voting rights, except that
only shares of the respective series are entitled to vote on matters concerning
only that series. Each share of the Fund will be given one vote, unless a
different allocation of voting rights is required under applicable law for a
mutual fund that is an investment medium for variable insurance products. At the
date of this Prospectus, there are four existing series of the Trust, one of
which is the Fund.
In accordance with current laws, it is anticipated that an insurance company
issuing a variable contract that participates in the Trust will request voting
instructions from Contract Owners and will vote shares or other voting interests
in the separate account in proportion to the voting instructions received. The
Affiliated Insurance Companies and the Variable Accounts are currently the only
shareholders of the Trust, although other separate accounts of the Affiliated
Insurance Companies, their affiliates, or other insurance companies may become
shareholders in the future.
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 having voting rights. Except as set forth above and subject to the 1940
Act, the Trustees will continue to hold office and appoint successor Trustees.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees,
officers, employees or agents of the Trust in connection with the Trust's
property or the affairs of the Trust, and requires that notice of the disclaimer
be given in each contract or obligation entered into or executed by the Trust or
its Trustees, officers, employees, or agents. The Declaration of Trust provides
for indemnification out of Trust property for all loss and expense of any
shareholder held personally liable by reason of being or having been a
shareholder of the Trust. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations, and thus should be considered
remote.
REGISTRATION STATEMENT
This Prospectus does not contain all the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the 1933 Act and the 1940 Act, with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and regulation
of the Securities and Exchange Commission. The Registration Statement, including
the exhibits filed therewith, may be examined at the office of the Securities
and Exchange Commission in Washington, D.C.
9
<PAGE>
PROSPECTUS APRIL 30, 1996
NORTHSTAR/NWNL TRUST
NORTHSTAR INCOME AND GROWTH FUND
Two Pickwick Plaza (203) 863-6200
Greenwich, Connecticut, 06830 (800) 595-7827
Northstar Income and Growth Fund (the "Fund") is a diversified investment
portfolio comprising a series of the Northstar/NWNL Trust (the "Trust"), an
open-end, series, management investment company.
Shares of the Fund are currently sold to segregated asset accounts of
Northwestern National Life Insurance Company ("Northwestern National") and to
variable annuity separate accounts of ReliaStar Bankers Security Life Insurance
Company and Northern Life Insurance Company, affiliates of Northwestern National
(the "Affiliated Insurance Companies") to serve as the investment medium for
variable annuity and variable life insurance contracts (the "Variable
Contracts") issued by the Affiliated Insurance Companies. The variable accounts
of the Affiliated Insurance Companies ("Variable Accounts") invest in shares of
the Fund in accordance with allocation instructions received from Variable
Contract owners. Such allocation rights are described further in the
accompanying Prospectus for the Variable Account.
The Fund is a diversified portfolio with an investment objective of seeking
current income balanced with the objective of achieving capital appreciation.
The Fund will seek to achieve its objective through investments in common and
preferred stocks, convertible securities, investment grade corporate debt
securities and government securities, selected for their prospects of producing
income and/or capital appreciation.
Northstar Investment Management Corporation is the investment adviser for
the Fund and its professional staff selects and supervises the investments in
the Fund's portfolio. See "Management of the Fund."
This Prospectus sets forth basic information about the Trust and the Fund
that prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
April 30, 1996, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information is
available without charge upon request to the Trust at the address or telephone
number set forth above.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AT
ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF THE
VARIABLE ACCOUNT, WHICH ACCOMPANIES THIS PROSPECTUS. BOTH PROSPECTUSES SHOULD BE
READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Highlights............................................................ 3
Investment Objective and Policies............................................... 3
Risk Factors.................................................................... 4
Other Investment Strategies and Techniques...................................... 4
Performance Information......................................................... 5
How Net Asset Value is Determined............................................... 6
Management of the Fund.......................................................... 7
Purchase of Shares.............................................................. 7
Redemption of Shares............................................................ 8
Dividends, Distributions and Taxes.............................................. 8
General Information............................................................. 9
</TABLE>
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights for the Fund set forth below present certain
information and ratios as well as performance information about the Fund for a
share outstanding throughout each year or portion thereof. This table should be
read in conjunction with the audited financial statements of the Trust dated
December 31, 1995 and accompanying notes, which are contained in the Trust's
Annual Report to Shareholders for the fiscal year ended December 31, 1995
incorporated by reference in the Statement of Additional Information, a copy of
which may be obtained without charge from the Trust. The financial highlights
have been audited by Coopers & Lybrand L.L.P., independent accountants, whose
report thereon is also incorporated by reference in the Statement of Additional
Information, and should be read in conjunction with the related audited
financial statements and notes thereto. The Fund commenced operations in May,
1994.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31
------------------------
1995 1994
----------- -----------
<S> <C> <C>
Net Asset Value, beginning of the period............................................ $ 9.92 $ 10.00
----------- -----------
Income from investment operations:
Net investment income......................................................... 0.37 0.20
Net gain (loss) on investments (both realized and unrealized)................. 1.73 (0.01)
----------- -----------
Total from investment operations............................................ 2.10 0.19
Less distributions:
Dividends (from net investment income).......................................... (0.37) (0.20)
Distribution (from realized gains).............................................. (0.26) (0.07)
----------- -----------
Total Distributions........................................................... (0.63) (0.27)
----------- -----------
Net Asset Value, end of the period.................................................. $ 11.39 $ 9.92
----------- -----------
----------- -----------
Total Return........................................................................ 21.39% 2.02%
Ratios/Supplemental Data:
Net Assets, end of period (in thousands)............................................ $ 7,410 $ 3,595
Ratio of expenses to average net assets............................................. 0.80% 1.00%*
Ratio of expense reimbursement to average net assets................................ 0.94% 1.43%*
Ratio of net investment income to average net assets................................ 3.63% 3.11%*
Portfolio Turnover Rate............................................................. 74% 45.42%
</TABLE>
- ------------------------
*Annualized
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek current income balanced with the
objective of achieving capital appreciation. Under normal market conditions, the
Fund will invest at least 65% of its total assets in income-producing
securities. In seeking to achieve its objective, the Fund will invest in equity
securities of domestic and foreign issuers that have prospects for dividend
income and growth of capital, including common stocks, preferred stocks, and
securities convertible into common stocks, and selected investment grade debt
securities of domestic and foreign private and government issuers. These debt
securities would include U.S. Government obligations, foreign and domestic
corporate bonds, and bonds issued by foreign governments considered stable by
the Adviser and supported through the authority to levy taxes by national state
or provincial governments or similar political subdivisions. The proportion of
holdings in common stocks, preferred stocks, other equity-related securities,
and debt securities will vary in accordance with the level of return that can be
achieved from these various types of securities. Under normal conditions, the
Fund does not intend to invest more than 35% of its assets in convertible
securities. Securities are also purchased on the basis of fundamental attraction
regarding capital appreciation prospects. In this way, income is "balanced" with
capital. The Fund invests in equity securities that are listed primarily on the
New York Stock Exchange or American Stock Exchange or that are traded in the
over-the-counter market. Equity and equity-related securities purchased by the
Fund will typically be of large well-established companies, but may also include
to a lesser extent small capitalization companies selected for their growth
potential. Debt securities purchased by the Fund will only be securities rated
investment grade (I.E., in the top four rating categories of Moodys or S&P) or
deemed to be of equivalent quality by the Adviser at the time of purchase.
Securities that are in the lowest investment grade debt category may have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case with higher grade securities. In the
event that an existing holding is downgraded to below investment grade, the Fund
may nevertheless retain the security.
3
<PAGE>
The Fund may invest up to 20% of its net assets in the securities of foreign
issuers, not more than 10% of which shall be in issuers whose securities are not
listed on a U.S. securities exchange. The Fund normally will purchase American
Depository Receipts for foreign securities which are actively traded in a United
States market or on a U.S. securities exchange. While investment in foreign
securities is intended to increase diversification, such investments involve
risks in addition to the credit and market risks normally associated with
domestic securities. See "Risk Factors - Foreign Investments."
The Trustees of the Trust reserve the right to change any of the investment
policies, strategies or practices of the Fund, as described in this Prospectus
and the Statement of Additional Information, without shareholder approval,
except in those instances where shareholder approval is expressly required. The
investment objective of the Fund is a fundamental policy which may not be
changed without the approval of holders of a majority of the outstanding shares
of the Fund. There can, of course, be no assurance that the Fund will achieve
its investment objective since all investments are inherently subject to market
risks.
RISK FACTORS
FOREIGN INVESTMENTS. The Fund may invest in securities of foreign issuers.
Securities of some foreign companies and governments may be traded in the U.S.,
but many foreign securities are traded primarily in foreign markets. In addition
to generally higher transaction costs associated with foreign investing, risks
of foreign investing include:
CURRENCY RISKS. The Fund must buy the local currency when it buys a foreign
security, and it sells local currency when it sells the security. The value of a
foreign security held by the Fund will be affected by the value of the local
currency relative to the U.S. dollar, causing the Fund to lose money at times,
despite an increase in the value of the security.
POLITICAL AND ECONOMIC RISKS. Political and economic risks may exist,
particularly in underdeveloped and developing countries which may have
relatively unstable governments and economies based on only a few industries. In
some countries, there is the risk that the government may take over the assets
or operations of a company or that the government may impose taxes or limits on
the removal of the Fund's assets from that country.
REGULATORY RISKS. There is generally less government supervision of foreign
markets, and issuers are not subject to the uniform accounting, auditing and
financial reporting standards and practices applicable to domestic issuers.
There also may be less publicly available information about foreign issuers.
OTHER INVESTMENT STRATEGIES AND TECHNIQUES
Each of the following strategies and techniques may be utilized by the Fund.
The Fund may, but does not currently intend to, engage in certain additional
investment techniques not described in this Prospectus. These techniques and
additional information on the securities and techniques described in the
Prospectus are contained in the Statement of Additional Information.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements, either
for temporary defensive purposes or to generate income from its cash balances.
Under a repurchase agreement, the Fund buys a security from a bank or dealer,
which is obligated to buy it back at a fixed price and time. The security is
held in a separate account at the Fund's custodian and constitutes the Fund's
collateral for the bank's or dealer's repurchase obligation. Additional
collateral may be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters into
bankruptcy, the Fund may experience costs and delays in liquidating the
collateral, and may experience a loss if it is unable to demonstrate its right
to the collateral in a bankruptcy proceeding. Repurchase agreements maturing
more than seven days in the future are considered illiquid, and a Fund will
invest no more than 5% of its net assets in such repurchase agreements at any
time, and under normal market conditions, will limit its investments in
repurchase agreements to 15% of its net assets.
WHEN-ISSUED SECURITIES. The Fund may acquire securities on a "when-issued"
basis by contracting to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until settlement. If
made through a dealer, the contract is dependent on the dealer completing the
sale. The dealer's failure could deprive the Fund of an advantageous yield or
price. These contracts may be considered securities and involve risk to the
extent that the value of the underlying security changes prior to settlement.
The Fund may realize short-term profits or losses if the contracts are sold.
Transactions in when-issued securities may be limited by certain Internal
Revenue Code requirements.
4
<PAGE>
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities, including restricted securities or private placements. An
illiquid security is a security that cannot be sold quickly in the normal course
of business. Some securities cannot be sold to the U.S. public because of their
terms or because of SEC regulations. The Adviser may determine that securities
that cannot be sold to the U.S. public, but that can be sold to institutional
investors ("Rule 144A" securities) or on foreign markets, are liquid, following
guidelines established by the Trustees of the Fund.
TRADING AND PORTFOLIO TURNOVER. The Fund generally intends to purchase
securities for long-term investment. However, the Fund may purchase a security
in anticipation of relatively short-term price gains and short-term transactions
may result from liquidity needs, securities having reached a price or yield
objective, changes in interest rates or the credit standing of an issuer, or by
reason of economic or other developments not foreseen at the time of the initial
investment decision. Portfolio turnover rates are usually not a factor in making
buy and sell decisions. The Fund may also sell one security and simultaneously
purchase the same or a comparable security to take advantage of short-term
differentials in yield or price. Increased portfolio turnover may result in
higher costs for brokerage commissions, dealer mark-ups and other transaction
costs and may also result in taxable capital gains. Short term trading may also
be restricted by certain tax rules.
MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed
securities which are securities that directly or indirectly represent an
ownership participation in, or are secured by and payable from, mortgage loans
on real property. Such securities include mortgage pass-through securities
representing participation interests in pools of residential mortgage loans
originated by U.S. governmental or private lenders and guaranteed, to the extent
provided in such securities, by the U.S. government or one of its agencies or
instrumentalities. Mortgage pass-through securities differ from conventional
debt securities, which provide for periodic payment of interest in fixed amounts
(usually semi-annually) and principal payments at maturity or on specified call
dates. Mortgage pass-through securities provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments, including any
repayments made by the individual borrowers on the pooled mortgage loans, net of
any fees paid to the guarantor of such securities and the servicer of the
underlying mortgage loans. The underlying mortgages may be prepaid at any time
and such payments are passed through to the certificate holder as a prepayment
of principal. As a result, if the Fund purchases such a mortgage-backed security
at a premium, a prepayment rate that is faster than expected will reduce yield
to maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity. Conversely, if the Fund
purchases a mortgage-backed security at a discount, faster than expected
prepayments will increase, while slower than expected prepayment will reduce,
yield to maturity.
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties and servicing decisions. Generally, however, prepayments on
fixed rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Mortgage-backed
securities may decrease in value as a result of increases in interest rates and
may benefit less than other fixed income securities from declining interest
rates because of the risk of prepayment. Accelerated prepayments on
mortgage-backed securities purchased by the Fund at a premium also impose a risk
of loss of principal because the premium may not have been fully amortized at
the time the principal is repaid in full.
TEMPORARY INVESTMENTS. In periods of unusual market conditions, for
temporary and defensive purposes, when the Adviser considers it appropriate, the
Fund may invest part or all of its assets in cash, U.S. government securities,
commercial paper, bankers' acceptances, repurchase agreements and certificates
of deposit.
INVESTMENT RESTRICTIONS. The Fund has adopted a number of investment
restrictions, as set forth in the Statement of Additional Information, some of
which are fundamental, and, therefore, may not be changed without shareholder
approval.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. Performance
information for the Fund will not be advertised or included in sales literature
unless accompanied by comparable performance information for a separate account
to which the Fund offers its shares. Both yield and total return figures are
computed in accordance with formulas specified by the SEC and are based on
historical earnings and are not intended to indicate future performance. The
yield for the Fund will be computed by dividing (a) net investment income over a
30-day period by (b) an average value of invested assets
5
<PAGE>
(using the average number of shares entitled to receive dividends at the end of
the period), all in accordance with applicable regulatory requirements. Such
amounts will be compounded for six months and then annualized for a twelve-month
period to derive the yield of the Fund.
Standardized quotations of average annual total return for the Fund's shares
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment over a period of 1, 5 and 10 years (or up to the life of
the Fund). Standardized total return quotations reflect the deduction of a
proportional share of expenses (on an annual basis) of the Fund, and assume that
all dividends and distributions are reinvested when paid. The Fund also may
quote supplementally a rate of total return over different periods of time or by
non-standardized means. In addition, the Fund may from time to time publish
materials citing historical volatility for shares of the Fund. Volatility is the
standard deviation of day to day logarithmic price changes expressed as an
annualized percentage.
Performance information for the Fund may be compared, in reports and
promotional literature, to a combination of: (i) the Standard & Poor's 500
Composite Stock Index ("S&P 500"), Dow Jones Industrial Average ("DJIA"), and
the Lipper Intermediate Investment Grade Bond Index, or other unmanaged indices
so that contract owners may compare the Fund's results with those of a group of
unmanaged securities widely regarded by investors as representative of the
securities markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objective, and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds by 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 bank certificates of deposit
performance rates such as Salomon Brothers, FEDERAL RESERVE BULLETIN, AMERICAN
BANKER, Tower Data and 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.
Quotations of yield or total return for the Fund will not take into account
charges or deductions against any separate account to which the Fund's shares
are sold or charges and deductions against the Variable Contracts issued by the
Affiliated Insurance Companies. The Fund's yield and total return should not be
compared with mutual funds that sell their shares directly to the public since
the figures provided do not reflect charges against the Variable Account or the
Variable Contracts. Performance information for the Fund reflects only the
performance of a hypothetical investment in the Fund during the particular time
period on which the calculations are based. Performance information should be
considered in light of the Fund's investment objective and policies,
characteristics and qualities of the portfolio, and the market conditions during
the given time period, and should not be considered as a representation of what
may be achieved in the future. For a description of the methods used to
determine total return for the Fund, see the Statement of Additional
Information.
HOW NET ASSET VALUE IS DETERMINED
The net asset value per share of the Fund is determined at the close of the
general trading session (currently 4:00 p.m.) of the New York Stock Exchange
(the "Exchange") on each business day the Exchange is open. The net asset value
of the Fund is computed by dividing the value of the Fund's securities, plus any
cash and other assets (including dividends and interest accrued but not
collected) less all liabilities (including accrued expenses) by the number of
shares of the Fund outstanding.
Fixed income securities are valued by using independent pricing services,
market quotations, prices provided by market makers, or estimates of market
values obtained from yield data related to instruments or securities with
similar characteristics in accordance with procedures established in good faith
by the Trustees. Short-term securities with remaining maturities of less than 60
days are valued at amortized cost unless it is determined by the Trustees that
amortized cost does not reflect the fair value of such obligations. Other assets
are valued at fair value as determined in good faith by the Trustees.
Generally, trading in foreign securities, as well as trading in corporate
bonds, U.S. government securities, money market instruments and repurchase
agreements, is substantially completed each day at various times prior to the
close of the general trading session of the Exchange. The values of such
securities used in computing the net asset value of the Fund are determined as
of such times. Occasionally, events affecting the value of such securities may
occur between such times and such closing which will not be reflected in the
computation of a Fund's net asset value. If events occur which materially affect
the value of such securities, the securities will be valued at fair market value
as determined in good faith by the Trustees.
6
<PAGE>
MANAGEMENT OF THE FUND
THE TRUSTEES. The Trustees of the Trust oversee the operations of the Trust
and the Fund and perform the various duties imposed on trustees by the laws of
the Commonwealth of Massachusetts and the Investment Company Act of 1940 (the
"1940 Act"). The Trustees meet quarterly to review the Fund's investment
policies, performance, expenses and other business affairs and elect the
officers of the Trust annually. The Trustees delegate day to day management of
the Fund to the officers of the Trust.
THE ADVISER AND AFFILIATED SERVICE PROVIDERS. Pursuant to an Investment
Advisory Agreement with the Trust, Northstar Investment Management Corporation
acts as the investment adviser to the Fund. In this capacity, the Adviser,
subject to the authority of the Trustees, is responsible for furnishing
continuous investment supervision to the Fund and is responsible for the
management of the Fund's portfolios. Northstar Administrators Corporation, an
affiliate of the Adviser, furnishes certain administrative, compliance and
accounting services to the Fund. Employees of the Adviser and Administrator
serve as officers of the Fund, and the Adviser provides office space for the
Fund and pays the salaries of all Fund officers and Trustees who are affiliated
with the Adviser.
The Adviser and its affiliates are indirect, majority owned subsidiaries of
ReliaStar Financial Corp. ("ReliaStar"). ReliaStar's address is 20 Washington
Avenue South, Minneapolis, MN 55401. Combined minority interests held by members
of senior management currently equal 20%. ReliaStar is a publicly traded holding
company whose subsidiaries specialize in the life and health insurance
businesses. Through the Affiliated Insurance Companies and other subsidiaries,
ReliaStar issues and distributes individual life insurance, annuities and mutual
funds, group life and health insurance and life and health reinsurance, and
provides related investment management services.
The Adviser's fee is accrued daily against the value of the Fund's net
assets and is payable by the Fund monthly at an annual rate of 0.75% on the
first $250 million of the Fund's average daily net assets scaled down to 0.55%
for assets over $1 billion. The investment advisory fees paid by the Fund is
higher than the fees paid by most mutual funds. The Administrator's fee is
accrued daily against the value of the Fund's net assets and is payable monthly
at an annual rate of .10% of the Fund's average daily net assets.
The Adviser places all orders for the purchase and sale of portfolio
securities. In selecting brokers, the Adviser may consider research and
brokerage services furnished to it. The Adviser also advises other accounts that
may purchase and hold securities in which the Fund may invest and certain
persons affiliated with the Adviser may purchase and hold, directly or
indirectly, securities in which the Fund or other accounts invest, subject to
internal guidelines regarding conflicts of interest.
INVESTMENT PERSONNEL OF ADVISER. Ernest Mysogland has served as a manager
of the Northstar Income and Growth Fund since inception of the Fund's operations
in May 1994. Until February of 1996, Mr. Mysogland also served as portfolio
manager of the Northstar Growth Fund, a separate series of the Trust, and has
served as portfolio manager of the Northstar Advantage Income and Growth Fund, a
separate investment company managed by the Adviser, since its inception in
November 1993. Mr. Mysogland is a Vice President of the Funds and Executive Vice
President and Chief Investment Officer - Equities of the Adviser. Prior to
employment by the Adviser, Mr. Mysogland served as Senior Vice President and
Chief Investment Officer - Equities for National Securities and Research
Corporation ("National"), and was portfolio manager for National Income and
Growth Fund, National Total Return Fund, and National Worldwide Opportunities
Fund. Prior to National, Mr. Mysogland served as an investment manager for
Reinoso Asset Management, Gintel Equity Management, L.F. Rothschild Asset
Management, Wertheim Asset Management and Kemper Financial Services.
THE CUSTODIAN AND ACCOUNTING SERVICES AGENT. The Fund's custodian and
accounting services agent is State Street Bank and Trust Company, a trust
company organized under the laws of Massachusetts and located at 225 Franklin
Street, Boston, Massachusetts 02110.
PURCHASE OF SHARES
As of the date of the Prospectus, shares of the Fund are offered only for
purchase by the Variable Accounts to serve as an investment medium for the
Variable Contracts issued by the Affiliated Insurance Companies. Shares of the
Fund may be offered in the future to other separate accounts established by the
Affiliated Insurance Companies or sold to separate accounts of other affiliated
or unaffiliated insurance companies.
Shares of the Fund are sold at the net asset value (without a sales charge)
next computed after receipt of a purchase order. The Trust reserves the right to
discontinue offering shares of the Fund at any time. In the event that
7
<PAGE>
the Fund ceases offering its shares, any investments allocated by an insurance
company investing in the Trust to the Fund will, subject to any necessary
regulatory approvals, be invested in another fund within the Trust deemed
appropriate by the Trustees.
Shares of the Fund may be exchanged for shares of any other fund within the
Trust that is available as an investment option under a particular Variable
Contract. The other funds of the Trust are described in separate prospectuses.
Exchanges are treated as a redemption of shares of one fund and a purchase of
shares of one or more of the other funds, and are effected at the respective net
asset values per share of each fund on the date of the exchange. The Trust
reserves the right to modify or discontinue its exchange privilege at any time
without notice.
Variable Contract Owners do not deal directly with the Trust to purchase,
redeem, or exchange shares of the Fund, and Variable Contract Owners should
refer to the prospectus for the Variable Account for information on the
allocation of premiums and on transfers of accumulated value among sub-accounts
of the Variable Account.
REDEMPTION OF SHARES
Shares of the Fund may be redeemed on any business day. Redemptions are
effected at the per share net asset value next determined after receipt of the
redemption request. Redemption proceeds normally will be paid within seven days
following receipt of instructions in proper form. The right of redemption may be
suspended by the Trust or the payment date postponed beyond seven days when the
New York Stock Exchange is closed (other than customary weekend and holiday
closing) or for any period during which trading thereon is restricted because an
emergency exists, as determined by the Securities and Exchange Commission,
making disposal of portfolio securities or valuation of net assets not
reasonably practicable, and whenever the Securities and Exchange Commission has
by order permitted such suspension or postponement for the protection of
shareholders. If the Trustees should determine that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption price in whole or part
by a distribution in kind of securities from the portfolio of the Fund in lieu
of cash, in conformity with applicable rules of the Securities and Exchange
Commission. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage costs in converting the assets into cash.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code ("Code"). Accordingly, provided
the Fund so qualifies, it generally will not be subject to federal income taxes
to the extent that it distributes on a timely basis its investment company
taxable income and its net capital gains. Such income and capital gains
distributions are automatically reinvested in additional shares of the Fund,
unless the shareholder elects to receive cash.
Distributions of any investment company taxable income (which includes among
other items, dividends, interest, and any net realized short-term capital gains
in excess of net realized long-term capital losses) are treated as ordinary
income for tax purposes in the hands of the shareholder (Variable Account). Net
capital gains (the excess of any net long-term capital gains over net short-term
capital losses) will, to the extent distributed and classified by the Fund as
capital gain distributions, be treated as long-term capital gains in the hands
of the Variable Account regardless of the length of time the Variable Account
may have held the shares. Income distributions of any net investment income of
the Fund will be declared and paid quarterly. Capital gains distributions, if
any, will be paid at least once annually.
To comply with regulations under section 817(h) of the Code, the Fund is
required to diversify its investments. Generally, the Fund will be required to
diversify its investments so that on the last day of each quarter of a calendar
year no more than 55% of the value of its total assets is represented by any one
investment, no more than 70% is represented by any two investments, no more than
80% is represented by any three investments, and no more than 90% is represented
by any four investments. For this purpose, securities of a given issuer
generally are treated as one investment, but each U.S. Government agency and
instrumentality is treated as a separate issuer.
Any security issued, guaranteed, or insured (to the extent so guaranteed or
insured) by the U.S. or any agency or instrumentality of the U.S. is treated as
a security issued by the U.S. Government or its agency or instrumentality,
whichever is applicable.
Compliance with the diversification rules under Section 817(h) of the Code
generally will limit the ability of the Fund to invest greater than 55% of its
total assets in direct obligations of the U.S. Treasury (or any other issuer) or
to invest primarily in securities issued by a single agency or instrumentality
of the U.S. Government.
8
<PAGE>
The Treasury Department announced that it would issue future regulations or
rulings addressing the circumstances in which a variable Contract Owner's
control of the investments of the separate account may cause the Contract Owner,
rather than the insurance company, to be treated as the owner of the assets held
by the separate account. If the Contract Owner is considered the owner of the
securities underlying the separate account, income and gains produced by those
securities would be included currently in the contract owner's gross income. It
is not known what standard will be set forth in the regulations or rulings.
In the event that rules or regulations are adopted, there can be no
assurance that the Fund will be able to operate as currently described in the
Prospectus, or that the Trust will not have to change the Fund's investment
objective or investment policies. While the Fund's investment objective is
fundamental and may be changed only by a vote of a majority of its outstanding
shares, the Trustees have reserved the right to modify the investment policies
of the Fund as necessary to prevent any such prospective rules and regulations
from causing the contract owners to be considered the owners of the shares of
the Fund underlying the Variable Account.
Reference is made to the Prospectus for the Variable Account and Variable
Contracts for information regarding the federal income tax treatment of
distributions to the Variable Account. See "Federal Income Tax Status" in the
Fund's Statement of Additional Information for more information on taxes.
GENERAL INFORMATION
ORGANIZATION OF THE FUND
The Trust was organized under Massachusetts law in 1993 as a business trust.
The Declaration of Trust provides that the Trustees are authorized to create an
unlimited number of series. All shares have equal voting rights, except that
only shares of the respective series are entitled to vote on matters concerning
only that series. Each share of the Fund will be given one vote, unless a
different allocation of voting rights is required under applicable law for a
mutual fund that is an investment medium for variable insurance products. At the
date of this Prospectus, there are four existing series of the Trust, one of
which is the Fund.
In accordance with current laws, it is anticipated that an insurance company
issuing a variable contract that participates in the Trust will request voting
instructions from Contract Owners and will vote shares or other voting interests
in the separate account in proportion to the voting instructions received. The
Affiliated Insurance Companies and the Variable Accounts are currently the only
shareholders of the Trust, although other separate accounts of the Affiliated
Insurance Companies, their affiliates or other insurance companies may become
shareholders in the future.
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 having voting rights. Except as set forth above and subject to the 1940
Act, the Trustees will continue to hold office and appoint successor Trustees.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees,
officers, employees or agents of the Trust in connection with the Trust's
property or the affairs of the Trust, and requires that notice of the disclaimer
be given in each contract or obligation entered into or executed by the Trust or
its Trustees, officers, employees, or agents. The Declaration of Trust provides
for indemnification out of Trust property for all loss and expense of any
shareholder held personally liable by reason of being or having been a
shareholder of the Trust. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations, and thus should be considered
remote.
REGISTRATION STATEMENT
This Prospectus does not contain all the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the 1933 Act and the 1940 Act, with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and regulation
of the Securities and Exchange Commission. The Registration Statement, including
the exhibits filed therewith, may be examined at the office of the Securities
and Exchange Commission in Washington, D.C.
9
<PAGE>
PROSPECTUS APRIL 30, 1996
NORTHSTAR/NWNL TRUST
NORTHSTAR MULTI-SECTOR BOND FUND
Two Pickwick Plaza (203) 863-6200
Greenwich, Connecticut, 06830 (800) 595-7827
Northstar Multi-Sector Bond Fund (the "Fund") is a diversified investment
portfolio comprising a series of the Northstar/NWNL Trust (the "Trust"), an
open-end, series, management investment company.
Shares of the Fund are currently sold to segregated asset accounts of
Northwestern National Life Insurance Company ("Northwestern National") and to
variable annuity separate accounts of Northern Life Insurance Company, an
affiliate of Northwestern National (the "Affiliated Insurance Companies") to
serve as the investment medium for variable annuity and/or variable life
insurance contracts (the "Variable Contracts") issued by the Affiliated
Insurance Companies. The variable accounts of the Affiliated Insurance Companies
("Variable Accounts") invest in shares of the Fund in accordance with allocation
instructions received from Variable Contract Owners. Such allocation rights are
described further in the accompanying Prospectus for the Variable Account.
The Fund is a diversified portfolio with an investment objective of
maximizing current income. The Fund will seek to achieve its objective by
investment in the following sectors of the fixed income securities markets: (a)
securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities or instrumentalities; (b) investment grade
corporate debt securities; (c) investment grade or comparable quality debt
securities issued by foreign corporate issuers, and securities issued by foreign
governments and their political subdivisions, limited to 35% of assets
determined at the time of investment; and (d) high yield-high risk U.S.
corporate fixed income securities of U.S. and foreign issuers, limited to 50% of
assets determined at the time of investment. See "Risk Factors."
THE FUND MAY INVEST UP TO 50% OF ITS ASSETS IN LOWER RATED BONDS, COMMONLY
KNOWN AS "JUNK BONDS." THESE SECURITIES MAY INVOLVE HIGH RISK AND ARE CONSIDERED
TO BE SPECULATIVE WITH REGARD TO PAYMENT OF INTEREST AND RETURN OF PRINCIPAL.
INVESTMENT IN THE FUND MAY NOT BE APPROPRIATE FOR ALL INVESTORS. CONTRACT OWNERS
SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THIS FUND.
SEE "RISK FACTORS - HIGH YIELD SECURITIES."
Northstar Investment Management Corporation is the investment adviser for
the Fund and its professional staff selects and supervises the investments in
the Fund's portfolio. See "Management of the Fund."
This Prospectus sets forth basic information about the Trust and the Fund
that prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
April 30, 1996 has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Statement of Additional Information is
available without charge upon request to the Trust at the address or telephone
number set forth above.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AT
ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF THE
VARIABLE ACCOUNT, WHICH ACCOMPANIES THIS PROSPECTUS. BOTH PROSPECTUSES SHOULD BE
READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
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.
N200.101
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Highlights............................................................ 3
Investment Objective and Policies............................................... 3
Risk Factors.................................................................... 5
Other Investment Strategies and Techniques...................................... 6
Performance Information......................................................... 7
How Net Asset Value is Determined............................................... 8
Management of the Fund.......................................................... 8
Purchase of Shares.............................................................. 9
Redemption of Shares............................................................ 9
Dividends, Distributions and Taxes.............................................. 10
General Information............................................................. 11
Appendix........................................................................ A-1
</TABLE>
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights for the Fund set forth below present certain
information and ratios as well as performance information about the Fund for a
share outstanding throughout each year or portion thereof. This table should be
read in conjunction with the audited financial statements of the Trust dated
December 31, 1995 and accompanying notes, which are contained in the Trust's
Annual Report to Shareholders for the fiscal year ended December 31, 1995,
incorporated by reference in the Statement of Additional Information, a copy of
which may be obtained without charge from the Trust. The financial highlights
have been audited by Coopers & Lybrand L.L.P., independent accountants, whose
report thereon is also incorporated by reference in the Statement of Additional
Information and should be read in conjunction with the related audited financial
statements and notes thereto. The Fund commenced operations in May, 1994.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Net Asset Value, beginning of the period............................................................ $ 4.85 $ 5.00
--------- ---------
Income from investment operations:
Net Investment income......................................................................... 0.42 0.23
Net gain (loss) on investments (both realized and unrealized)................................. 0.29 (0.15)
--------- ---------
Total from investment operations............................................................ 0.71 0.08
Less distributions:
Dividends (from net investment income).......................................................... (0.42) (0.23)
Distributions (from realized gains)............................................................. -- --
--------- ---------
Total Distributions........................................................................... (0.42) (0.23)
--------- ---------
Net Asset Value, end of the period.................................................................. $ 5.14 $ 4.85
--------- ---------
--------- ---------
Total Return........................................................................................ 14.97% 1.41%
Ratios/Supplemental Data:
Net Assets, end of period (in thousands)............................................................ $ 3,766 $ 2,716
Ratio of expenses to average net assets............................................................. 0.80% 1.00%*
Ratio of expense reimbursement to average net assets................................................ 1.26% 1.41%*
Ratio of net investment income to average net assets................................................ 8.52% 7.03%*
Portfolio Turnover Rate............................................................................. 83% 29%
</TABLE>
- ------------------------
*Annualized
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to maximize current income consistent
with the preservation of capital. The Fund will seek to achieve its objective by
investing in four sectors of the fixed income securities markets: (a) securities
issued or guaranteed as to principal and interest by the U.S. Government, its
agencies, authorities or instrumentalities ("U.S. Government Bonds"); (b)
corporate debt securities rated investment grade at the time of purchase
("Investment Grade Bonds"); (c) investment grade or comparable quality debt
securities issued by foreign corporate issuers and foreign governments and their
political subdivisions ("Foreign Bonds"); and (d) high yield-high risk fixed
income securities of U.S. and foreign issuers ("High Yield Bonds"). See the
Appendix for a description of bond ratings. Under normal circumstances, at least
65% of the Fund's total assets will be invested in these four sectors.
Securities that are in the lowest investment grade debt category may have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade securities. See "High
Yield Bonds." The Fund's assets generally will be invested in each market sector
but the Fund may invest any amount of its assets in any one sector (except for
High Yield Bonds, in which sector the Fund will not invest more than 50% of its
assets determined at the time of investment, and no more than 35% of the Fund's
assets will be invested in Foreign Bonds, including foreign High Yield Bonds),
and the Fund may choose not to invest in a sector in order to achieve its
investment objective. The Adviser believes that this strategy may achieve a more
stable net asset value since diversification over several market sectors tends
to reduce volatility; however, there can be no assurance that certain economic
and other factors will not cause fluctuations in the value of the securities
held by the Fund, resulting in fluctuations of the Fund's net asset value.
3
<PAGE>
The following is a description of the four sectors in which the Fund
invests:
U.S. GOVERNMENT BONDS. The U.S. Government Bonds in which the Fund may
invest are (1) U.S. Treasury obligations such as bills, notes and bonds, which
differ only in their interest rates, maturities and times of issuance; and (2)
obligations issued or guaranteed by U.S. Government agencies, authorities and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Government, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury (which
line of credit is equal to the face value of the government obligation), (c)
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality, or (d) the creditworthiness of the
instrumentality. The Fund may invest in U.S. Government Bonds denominated in
foreign currencies and may invest in pass-through securities that are derived
from mortgages. See "Mortgage-Backed Securities" below.
WITH RESPECT TO OBLIGATIONS ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES, AUTHORITIES AND INSTRUMENTALITIES, GUARANTEES AS TO THE TIMELY PAYMENT
OF PRINCIPAL AND INTEREST DO NOT EXTEND TO THE MARKET VALUE OF THE FUND'S
SHARES. THE MARKET VALUE OF U.S. GOVERNMENT BONDS FLUCTUATES AS INTEREST RATES
CHANGE.
INVESTMENT GRADE BONDS. The Fund may invest in all types of long- and
short-term debt obligations of U.S. issuers denominated in U.S. dollars and in
foreign currencies. Investment Grade Bonds will be rated in the top four rating
categories of Moody's or S&P, or deemed to be of comparable quality by the
Adviser if the securities are unrated. Securities rated Baa or BBB (the lowest
investment grade category) are medium grade investment obligations that may have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments, in the case of such obligations. For a more complete
description of ratings, see the Appendix.
FOREIGN BONDS. The Foreign Bonds in which the Fund may invest are issued by
foreign private issuers and foreign governments. Foreign governments will be
limited to those considered stable by the Adviser, and the Fund will only invest
in obligations supported through the authority to levy taxes by national, state
or provincial governments or similar political subdivisions. For risk
considerations involved, see "Risk Factors - Foreign Investments." Normally,
foreign corporate issues in which the Fund will invest will be rated investment
grade or deemed to be of equivalent quality; however, the Fund may also invest
in high yield-high risk securities of foreign private issuers. See "High Yield
Bonds" below and "Risk Factors - High Yield Securities." Normally the Fund
expects to invest its assets in U.S. dollar denominated securities; however, the
Fund may invest up to 35% of assets in non-U.S. dollar denominated securities.
The Fund may hold foreign currency for hedging purposes to compensate for
declines in the U.S. dollar value of foreign currency securities held by the
Fund and against increases in the U.S. dollar value of foreign currency bonds
which the Fund might purchase. The Fund is limited to investing no more than 35%
of its assets in Foreign Bonds, including foreign High Yield Bonds, determined
at the time of investment.
HIGH YIELD BONDS. The High Yield Bonds in which the Fund may invest are
debt obligations of domestic issuers, including High Yield Bonds of domestic
issuers denominated in foreign currencies, and High Yield Bonds of foreign
issuers. The High Yield Bonds that the Fund may purchase are in the lower rating
categories (I.E., BB through CCC by S&P and Ba through Caa by Moody's), or may
be unrated securities. These lower-rated and comparable unrated securities,
while selected for their relatively high yield, may be subject to greater
fluctuations in market value and greater risks of loss of income and principal
than higher-rated securities. High yields often reflect the greater risks
associated with the securities that offer such yields. Because of these greater
risks, High Yield Bonds often carry lower ratings. Economic conditions can
sometimes narrow the spreads between yields on lower-rated (or comparable)
securities and higher-rated securities. If these spreads narrow to such a degree
that the Adviser believes that the yields available on lower-rated or comparable
unrated securities do not justify the higher risks associated with those
securities, the Fund will invest in higher-rated or comparable unrated
securities. The Fund may also invest in High Yield pass-through securities.
Investments in High Yield pass-through securities are subject to prepayment and
reinvestment risks similar to those associated with Mortgage-Backed Securities
described below.
The Adviser evaluates the purchase of High Yield Bonds for the Fund
primarily through the exercise of its own investment and credit analysis and on
the ratings assigned by Moody's and S&P. The Fund will not invest in High Yield
Bonds rated lower than CCC/Caa.
As a fundamental policy, the Fund's investments in High Yield Bonds will be
limited to not more than 50% of its assets, determined at the time of
investment. Any subsequent change in the percentage due to changes in the market
value of portfolio securities or other changes in the total assets will not be
considered a violation of this restriction. See "Risk Factors - High Yield
Securities" below.
4
<PAGE>
The Fund may invest in debt securities of any maturity that pay fixed,
floating or adjustable interest rates. The Fund also may invest in discount
obligations, including zero-coupon securities, which do not pay interest but,
rather, are issued at a significant discount to their maturity values, or
securities that pay interest, at the issuer's option, in additional securities
instead of cash (pay-in-kind securities). The values of debt securities
generally fluctuate inversely with changes in interest rates. This is less
likely to be true for adjustable or floating rate securities, since interest
rate changes are more likely to be reflected in changes in the rates paid on the
securities. However, reductions in interest rates also may translate into lower
distributions paid by the Fund. Additionally, because zero-coupon and
pay-in-kind securities do not pay interest but the Fund nevertheless must accrue
and distribute the income deemed to be earned on a current basis, the Fund may
have to sell other investments to raise the cash needed to make income
distributions. To a lesser extent the Fund may invest in equity or
equity-related securities, including common stock, preferred stock, convertible
securities and rights and warrants attached to debt instruments. Typically the
Fund would purchase a high yield security that is convertible or exchangeable
for equity securities, or which carries the right in the form of a warrant or as
part of a unit with the security to acquire equity securities. The Fund would
ordinarily purchase these securities for their yield characteristics or capital
appreciation potential.
The Trustees of the Trust reserve the right to change any of the investment
policies, strategies or practices of the Fund, as described in this Prospectus
and the Statement of Additional Information, without shareholder approval,
except in those instances where shareholder approval is expressly required. The
investment objective of the Fund is a fundamental policy which may not be
changed without the approval of holders of a majority of the outstanding shares
of the Fund. There can, of course, be no assurance that the Fund will achieve
its investment objective since all investments are inherently subject to market
risks.
RISK FACTORS
HIGH YIELD SECURITIES. The Multi-Sector Fund may invest in higher yielding
securities that carry lower investment grade ratings. These high yield - high
risk securities are rated below investment grade by the primary rating agencies
(Moody's and S&P). See the Appendix for a description of bond rating categories.
The value of lower rated securities generally is more dependent on the ability
of the company to meet interest and principal payments than is the case for
higher rated securities. Conversely, the value of higher rated securities may be
more sensitive to interest rate movements than lower rated securities. Companies
issuing high yield securities may not be as strong financially as those issuing
bonds with higher credit ratings. Investments in such companies are considered
to be more speculative than higher quality investments. In addition, the market
for lower rated securities is generally less liquid than the market for higher
rated securities, and adverse publicity and investor perceptions may also have a
greater negative impact on the market for these securities.
Companies issuing high yield bonds are more vulnerable to real or perceived
economic changes (such as rising interest rates), political changes or adverse
developments specific to the company. Adverse economic, political or other
developments may impair the company's ability to service principal and interest
obligations, to meet projected business goals and to obtain additional
financing, particularly if the company is highly leveraged. In the event of a
default, the Fund would experience a reduction of its income and could expect a
decline in the market value of the defaulted securities.
Weighted average composition of the Fund's portfolio at the end of the 1995
fiscal year was:
<TABLE>
<S> <C>
Investment Grade.................................. 13.6
BB................................................ 23.9
B................................................. 20.8
CCC............................................... --
CC................................................ --
C................................................. --
D................................................. --
Nonrated.......................................... 2.2
U.S. Governments, equities and other.............. 39.5
---
TOTAL............................................. % 100
---
---
</TABLE>
This table does not reflect the current or future composition of the Fund's
portfolios.
5
<PAGE>
FOREIGN INVESTMENTS. The Fund may invest in securities of foreign issuers.
Securities of some foreign companies and governments may be traded in the U.S.,
but many foreign securities are traded primarily in foreign markets. In addition
to generally higher transaction costs associated with foreign investing, risks
of foreign investing include:
CURRENCY RISKS. The Fund must buy the local currency when it buys a foreign
security, and it sells local currency when it sells the security. The value of a
foreign security held by the Fund will be affected by the value of the local
currency relative to the U.S. dollar, causing the Fund to lose money at times,
despite an increase in the value of the security.
POLITICAL AND ECONOMIC RISKS. Political and economic risks may exist,
particularly in underdeveloped and developing countries which may have
relatively unstable governments and economies based on only a few industries. In
some countries, there is the risk that the government may take over the assets
or operations of a company or that the government may impose taxes or limits on
the removal of the Fund's assets from that country.
REGULATORY RISKS. There is generally less government supervision of foreign
markets, and issuers are not subject to the uniform accounting, auditing and
financial reporting standards and practices applicable to domestic issuers.
There also may be less publicly available information about foreign issuers.
OTHER INVESTMENT STRATEGIES AND TECHNIQUES
Each of the following strategies and techniques may be utilized by the Fund.
The Fund may, but does not currently intend to, engage in certain additional
investment techniques not described in this Prospectus. These techniques and
additional information on the securities and techniques described in the
Prospectus are contained in the Statement of Additional Information.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements, either
for temporary defensive purposes or to generate income from its cash balances.
Under a repurchase agreement, the Fund buys a security from a bank or dealer,
which is obligated to buy it back at a fixed price and time. The security is
held in a separate account at the Fund's custodian and constitutes the Fund's
collateral for the bank's or dealer's repurchase obligation. Additional
collateral may be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters into
bankruptcy, the Fund may experience costs and delays in liquidating the
collateral, and may experience a loss if it is unable to demonstrate its right
to the collateral in a bankruptcy proceeding. Repurchase agreements maturing
more than seven days in the future are considered illiquid, and the Fund will
invest no more than 5% of its net assets in such repurchase agreements at any
time. Under normal market conditions, the Fund will limit its investments in
repurchase agreements to 15% of its net assets.
WHEN-ISSUED SECURITIES. The Fund may acquire securities on a "when-issued"
basis by contracting to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until settlement. If
made through a dealer, the contract is dependent on the dealer completing the
sale. The dealer's failure could deprive the Fund of an advantageous yield or
price. These contracts may be considered securities and involve risk to the
extent that the value of the underlying security changes prior to settlement.
The Fund may realize short-term profits or losses if the contracts are sold.
Transactions in when-issued securities may be limited by certain Internal
Revenue Code requirements.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities, including restricted securities or private placements. An
illiquid security is a security that cannot be sold quickly in the normal course
of business. Some securities cannot be sold to the U.S. public because of their
terms or because of SEC regulations. The Adviser may determine that securities
that cannot be sold to the U.S. public, but that can be sold to institutional
investors ("Rule 144A" securities) or on foreign markets, are liquid, following
guidelines established by the Trustees of the Fund.
TRADING AND PORTFOLIO TURNOVER. The Fund generally intends to purchase
securities for long-term investment. However, the Fund may purchase a security
in anticipation of relatively short-term price gains and short-term transactions
may result from liquidity needs, securities having reached a price or yield
objective, changes in interest rates or the credit standing of an issuer, or by
reason of economic or other developments not foreseen at the time of the initial
investment decision. Portfolio turnover rates are usually not a factor in making
buy and sell decisions. The Fund may also sell one security and simultaneously
purchase the same or comparable security to take advantage of short-term
differentials in yield or price. Increased portfolio turnover may result in
higher costs for brokerage commissions, dealer mark-ups and other transaction
costs and may also result in taxable capital gains. Short term trading may also
be restricted by certain tax rules.
6
<PAGE>
MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed
securities which are securities that directly or indirectly represent an
ownership participation in, or are secured by and payable from, mortgage loans
on real property. Such securities include mortgage pass-through securities
representing participation interests in pools of residential mortgage loans
originated by U.S. governmental or private lenders and guaranteed, to the extent
provided in such securities, by the U.S. government or one of its agencies or
instrumentalities. Mortgage pass-through securities differ from conventional
debt securities, which provide for periodic payment of interest in fixed amounts
(usually semi-annually) and principal payments at maturity or on specified call
dates. Mortgage pass-through securities provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments, including any
repayments made by the individual borrowers on the pooled mortgage loans, net of
any fees paid to the guarantor of such securities and the servicer of the
underlying mortgage loans. The underlying mortgages may be prepaid at any time
and such payments are passed through to the certificate holder as a prepayment
of principal. As a result, if the Fund purchases such a mortgage-backed security
at a premium, a prepayment rate that is faster than expected will reduce yield
to maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity. Conversely, if the Fund
purchases a mortgage-backed security at a discount, faster than expected
prepayments will increase, while slower than expected prepayment will reduce,
yield to maturity.
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties and servicing decisions. Generally, however, prepayments on
fixed rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Mortgage-backed
securities may decrease in value as a result of increases in interest rates and
may benefit less than other fixed income securities from declining interest
rates because of the risk of prepayment. Accelerated prepayments on
mortgage-backed securities purchased by the Fund at a premium also impose a risk
of loss of principal because the premium may not have been fully amortized at
the time the principal is repaid in full.
TEMPORARY INVESTMENTS. In periods of unusual market conditions, for
temporary and defensive purposes, when the Adviser considers it appropriate, a
Fund may invest part or all of its assets in cash, U.S. government securities,
commercial paper, bankers' acceptances, repurchase agreements and certificates
of deposit.
INVESTMENT RESTRICTIONS. The Fund has adopted a number of investment
restrictions, as set forth in the Statement of Additional Information, some of
which are fundamental, and therefore, may not be changed without shareholder
approval.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. Performance
information for the Fund will not be advertised or included in sales literature
unless accompanied by comparable performance information for a separate account
to which the Fund offers its shares. Both yield and total return figures are
computed in accordance with formulas specified by the SEC and are based on
historical earnings and are not intended to indicate future performance. The
yield for the Fund will be computed by dividing (a) net investment income over a
30-day period by (b) an average value of invested assets (using the average
number of shares entitled to receive dividends at the end of the period), all in
accordance with applicable regulatory requirements. Such amounts will be
compounded for six months and then annualized for a twelve-month period to
derive the yield of the Fund.
Standardized quotations of average annual total return for the Fund's shares
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment over a period of 1, 5 and 10 years (or up to the life of
the Fund). Standardized total return quotations reflect the deduction of a
proportional share of expenses (on an annual basis) of the Fund, and assume that
all dividends and distributions are reinvested when paid. The Fund also may
quote supplementally a rate of total return over different periods of time or by
non-standardized means. In addition, the Fund may from time to time publish
materials citing historical volatility for shares of the Fund. Volatility is the
standard deviation of day to day logarithmic price changes expressed as an
annualized percentage.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Composite Stock Index
("S&P 500"), Dow Jones Industrial Average ("DJIA"), or other unmanaged indices
so that contract owners may compare the Fund's results with those of a group of
unmanaged securities widely regarded by investors as representative of the
securities markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objective, and assets, or
tracked by other services, companies,
7
<PAGE>
publications, or persons who rank mutual funds by 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 bank certificates of deposit performance rates such as
Salomon Brothers, FEDERAL RESERVE BULLETIN, AMERICAN BANKER, Tower Data and 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.
Quotations of yield or total return for the Fund will not take into account
charges or deductions against any separate account to which the Fund's shares
are sold or charges and deductions against the Variable Contracts issued by the
Affiliated Insurance Companies. The Fund's yield and total return should not be
compared with mutual funds that sell their shares directly to the public since
the figures provided do not reflect charges against the Variable Account or the
Variable Contracts. Performance information for the Fund reflects only the
performance of a hypothetical investment in the Fund during the particular time
period on which the calculations are based. Performance information should be
considered in light of the Fund's investment objective and policies,
characteristics and qualities of the portfolio, and the market conditions during
the given time period, and should not be considered as a representation of what
may be achieved in the future. For a description of the methods used to
determine total return for the Fund, see the Statement of Additional
Information.
HOW NET ASSET VALUE IS DETERMINED
The net asset value per share of the Fund is determined at the close of the
general trading session (currently 4:00 p.m.) of the New York Stock Exchange
(the "Exchange") on each business day the Exchange is open. The net asset value
of the Fund is computed by dividing the value of the Fund's securities, plus any
cash and other assets (including dividends and interest accrued but not
collected) less all liabilities (including accrued expenses) by the number of
shares of the Fund outstanding.
Fixed income securities are valued by using independent pricing services,
market quotations, prices provided by market makers, or estimates of market
values obtained from yield data related to instruments or securities with
similar characteristics in accordance with procedures established in good faith
by the Trustees. Short-term securities with remaining maturities of less than 60
days are valued at amortized cost unless it is determined by the Trustees that
amortized cost does not reflect the fair value of such obligations. Other assets
are valued at fair value as determined in good faith by the Trustees. Generally,
trading in foreign securities, as well as trading in corporate bonds, U.S.
government securities, money market instruments and repurchase agreements, is
substantially completed each day at various times prior to the close of the
general trading session of the Exchange. The values of such securities used in
computing the net asset value of the Fund are determined as of such times.
Occasionally, events affecting the value of such securities may occur between
such times and such closing which will not be reflected in the computation of a
Fund's net asset value. If events occur which materially affect the value of
such securities, the securities will be valued at fair market value as
determined in good faith by the Trustees.
MANAGEMENT OF THE FUND
THE TRUSTEES. The Trustees of the Trust oversee the operations of the Trust
and the Fund and perform the various duties imposed on trustees by the laws of
the Commonwealth of Massachusetts and the Investment Company Act of 1940 (the
"1940 Act"). The Trustees meet quarterly to review the Fund's investment
policies, performance, expenses and other business affairs and elect the
officers of the Trust annually. The Trustees delegate day to day management of
the Fund to the officers of the Trust.
THE ADVISER AND AFFILIATED SERVICE PROVIDERS. Pursuant to an Investment
Advisory Agreement with the Trust, Northstar Investment Management Corporation
acts as the investment adviser to the Fund. In this capacity, the Adviser,
subject to the authority of the Trustees, is responsible for furnishing
continuous investment supervision to the Fund and is responsible for the
management of the Fund's portfolios. Northstar Administrators Corporation, an
affiliate of the Adviser, furnishes certain administrative, compliance and
accounting services to the Fund. Employees of the Adviser and Administrator
serve as officers of the Fund, and the Adviser provides office space for the
Fund and pays the salaries of all Fund officers and Trustees who are affiliated
with the Adviser.
The Adviser and its affiliates are indirect, majority owned subsidiaries of
ReliaStar Financial Corp. ("ReliaStar"). ReliaStar's address is 20 Washington
Avenue South, Minneapolis, MN 55401. Combined minority interests held by members
of senior management currently equal 20%. ReliaStar is a publicly traded holding
company whose subsidiaries specialize in the life and health insurance
businesses. Through the Affiliated Insurance Companies and other subsidiaries,
ReliaStar issues and distributes individual life insurance, annuities
8
<PAGE>
and mutual funds, group life and health insurance and life and health
reinsurance, and provides related investment management services.
The Adviser's fee is accrued daily against the value of the Fund's net
assets and is payable by the Fund monthly at an annual rate of 0.75% on the
first $250 million of the Fund's average daily net assets scaled down to 0.55%
for assets over $1 billion. The investment advisory fee paid by the Fund is
higher than the fees paid by most mutual funds. The Administrator's fee is
accrued daily against the value of the Fund's net assets and is payable monthly
at an annual rate of .10% of the Fund's average daily net assets.
The Adviser places all orders for the purchase and sale of portfolio
securities. In selecting brokers, the Adviser may consider research and
brokerage services furnished to it. The Adviser also advises other accounts that
may purchase and hold securities in which the Fund may invest and certain
persons affiliated with the Adviser may purchase and hold, directly or
indirectly, securities in which the Fund or other accounts invest, subject to
internal guidelines regarding conflicts of interest.
INVESTMENT PERSONNEL OF ADVISER. Thomas Ole Dial has served as manager of
the Northstar Multi-Sector Bond Fund since inception of the Fund in May 1994.
Mr. Dial has also served as portfolio manager of the Northstar High Yield Bond
Fund, a separate series of the Trust, and as manager of the Northstar Advantage
High Total Return Fund since its inception in November 1993, and, since October
1995 as co-manager of the Northstar Advantage Strategic Income Fund, separate
investment companies managed by the Adviser. Mr. Dial is a Vice President of
each Fund and Executive Vice President and Chief Investment Officer - Fixed
Income of the Adviser. Prior to employment by the Adviser in October 1993, Mr.
Dial served as Executive Vice President and Chief Investment Officer - Fixed
Income of National Securities & Research Corporation, and as portfolio manager
for National Bond Fund, National Asset Reserve, and National Multi-Sector Fixed
Income Fund. Prior to National, Mr. Dial managed high yield securities
portfolios through Dial Capital Management and various financial institutions.
Mr. Dial also manages investments for T.D. Partners, a limited partnership for
which the Adviser serves as subadviser.
THE CUSTODIAN AND ACCOUNTING SERVICES AGENT. The Fund's custodian and
accounting services agent is State Street Bank and Trust Company, (the
"Custodian"), a trust company organized under the laws of Massachusetts and
located at 225 Franklin Street, Boston, Massachusetts 02110.
PURCHASE OF SHARES
As of the date of the Prospectus, shares of the Fund are offered only for
purchase by the Variable Accounts to serve as an investment medium for the
Variable Contracts issued by the Affiliated Insurance Companies. Shares of the
Fund may be offered in the future to other separate accounts established by the
Affiliated Insurance Companies or sold to separate accounts of other affiliated
or unaffiliated insurance companies, and may be offered in the future to serve
as an investment medium for variable life insurance policies.
Shares of the Fund are sold at the net asset value (without a sales charge)
next computed after receipt of a purchase order. The Trust reserves the right to
discontinue offering shares of the Fund at any time. In the event that the Fund
ceases offering its shares, any investments allocated by an insurance company
investing in the Trust to the Fund will, subject to any necessary regulatory
approvals, be invested in another fund within the Trust deemed appropriate by
the Trustees.
Shares of the Fund may be exchanged for shares of any other fund within the
Trust that is available as an investment option under a particular variable
contract. The other funds of the Trust are described in separate prospectuses.
Exchanges are treated as a redemption of shares of one fund and a purchase of
shares of one or more of the other funds, and are effected at the respective net
asset values per share of each fund on the date of the exchange. The Trust
reserves the right to modify or discontinue its exchange privilege at any time
without notice.
Variable Contract Owners do not deal directly with the Trust to purchase,
redeem, or exchange shares of the Fund, and Variable Contract Owners should
refer to the prospectus for the Variable Account for information on the
allocation of premiums and on transfers of accumulated value among sub-accounts
of the Variable Account.
REDEMPTION OF SHARES
Shares of the Fund may be redeemed on any business day. Redemptions are
effected at the per share net asset value next determined after receipt of the
redemption request. Redemption proceeds normally will be paid within seven days
following receipt of instructions in proper form. The right of redemption may be
suspended by the Trust or the payment date postponed beyond seven days when the
New York Stock Exchange is closed (other than customary weekend and holiday
closing) or for any period during which trading thereon is restricted because an
9
<PAGE>
emergency exists, as determined by the Securities and Exchange Commission,
making disposal of portfolio securities or valuation of net assets not
reasonably practicable, and whenever the Securities and Exchange Commission has
by order permitted such suspension or postponement for the protection of
shareholders. If the Trustees should determine that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption price in whole or part
by a distribution in kind of securities from the portfolio of the Fund in lieu
of cash, in conformity with applicable rules of the Securities and Exchange
Commission. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage costs in converting the assets into cash.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code ("Code"). Accordingly, provided
the Fund so qualifies, it generally will not be subject to federal income taxes
to the extent that it distributes on a timely basis its investment company
taxable income and its net capital gains. Such income and capital gains
distributions are automatically reinvested in additional shares of the Fund,
unless the shareholder elects to receive cash.
Distributions of any investment company taxable income (which includes among
other items, dividends, interest, and any net realized short-term capital gains
in excess of net realized long-term capital losses) are treated as ordinary
income for tax purposes in the hands of the shareholder (Variable Account). Net
capital gains (the excess of any net long-term capital gains over net short-term
capital losses) will, to the extent distributed, be treated as long-term capital
gains in the hands of the Variable Account regardless of the length of time the
Variable Account may have held the shares. Income distributions of any
investment income of the Fund will be declared daily and paid quarterly. Capital
gain distributions, if any, will be paid at least once annually.
To comply with regulations under section 817(h) of the Code, the Fund is
required to diversify its investments. Generally, the Fund will be required to
diversify its investments so that on the last day of each quarter of a calendar
year no more than 55% of the value of its total assets is represented by any one
investment, no more than 70% is represented by any two investments, no more than
80% is represented by any three investments, and no more than 90% is represented
by any four investments. For this purpose, securities of a given issuer
generally are treated as one investment, but each U.S. Government agency and
instrumentality is treated as a separate issuer. Any security issued,
guaranteed, or insured (to the extent so guaranteed or insured) by the U.S. or
any agency or instrumentality of the U.S. is treated as a security issued by the
U.S. Government or its agency or instrumentality, whichever is applicable.
Compliance with the diversification rules under Section 817(h) of the Code
generally will limit the ability of the Fund to invest greater than 55% of its
total assets in direct obligations of the U.S. Treasury (or any other issuer) or
to invest primarily in securities issued by a single agency or instrumentality
of the U.S. Government.
The Treasury Department announced that it would issue future regulations or
rulings addressing the circumstances in which a variable Contract Owner's
control of the investments of the separate account may cause the Contract Owner,
rather than the insurance company, to be treated as the owner of the assets held
by the separate account. If the Contract Owner is considered the owner of the
securities underlying the separate account, income and gains produced by those
securities would be included currently in the contract owner's gross income. It
is not known what standard will be set forth in the regulations or rulings.
In the event that rules or regulations are adopted, there can be no
assurance that the Fund will be able to operate as currently described in the
Prospectus, or that the Trust will not have to change the Fund's investment
objective or investment policies. While the Fund's investment objective is
fundamental and may be changed only by a vote of a majority of its outstanding
shares, the Trustees have reserved the right to modify the investment policies
of the Fund as necessary to prevent any such prospective rules and regulations
from causing the contract owners to be considered the owners of the shares of
the Fund underlying the Variable Account.
Reference is made to the Prospectus for the Variable Account and Variable
Contracts for information regarding the federal income tax treatment of
distributions to the Variable Account. See "Federal Income Tax Status" in the
Fund's Statement of Additional Information for more information on taxes.
10
<PAGE>
GENERAL INFORMATION
ORGANIZATION OF THE FUND
The Trust was organized under Massachusetts law in 1993 as a business trust.
The Declaration of Trust provides that the Trustees are authorized to create an
unlimited number of series. All shares have equal voting rights, except that
only shares of the respective series are entitled to vote on matters concerning
only that series. Each share of the Fund will be given one vote, unless a
different allocation of voting rights is required under applicable law for a
mutual fund that is an investment medium for variable insurance products. At the
date of this Prospectus, there are four existing series of the Trust, one of
which is the Fund.
In accordance with current laws, it is anticipated that an insurance company
issuing a variable contract that participates in the Trust will request voting
instructions from Contract Owners and will vote shares or other voting interests
in the separate account in proportion to the voting instructions received. The
Affiliated Insurance Companies and the Variable Accounts are currently the only
shareholders of the Trust, although other separate accounts of the Affiliated
Insurance Companies, their affiliates or other insurance companies may become
shareholders in the future.
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 having voting rights. Except as set forth above and subject to the 1940
Act, the Trustees will continue to hold office and appoint successor Trustees.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees,
officers, employees or agents of the Trust in connection with the Trust's
property or the affairs of the Trust, and requires that notice of the disclaimer
be given in each contract or obligation entered into or executed by the Trust or
its Trustees, officers, employees, or agents. The Declaration of Trust provides
for indemnification out of Trust property for all loss and expense of any
shareholder held personally liable by reason of being or having been a
shareholder of the Trust. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations, and thus should be considered
remote.
REGISTRATION STATEMENT
This Prospectus does not contain all the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the 1933 Act and the 1940 Act, with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and regulation
of the Securities and Exchange Commission. The Registration Statement, including
the exhibits filed therewith, may be examined at the office of the Securities
and Exchange Commission in Washington, D.C.
11
<PAGE>
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND
RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which made the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S ("S&P") CORPORATE DEBT RATINGS
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than for debt in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-) - The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
A-1
<PAGE>
PROSPECTUS APRIL 30, 1996
NORTHSTAR/NWNL TRUST
NORTHSTAR HIGH YIELD BOND FUND
Two Pickwick Plaza (203) 863-6200
Greenwich, Connecticut, 06830 (800) 595-7827
Northstar High Yield Bond Fund (the "Fund") is a diversified investment
portfolio comprising a series of the Northstar/NWNL Trust (the "Trust"), an
open-end, series, management investment company.
Shares of the Fund are currently sold to segregated asset accounts of
Northwestern National Life Insurance Company ("Northwestern National") and to
variable annuity separate accounts of ReliaStar Bankers Security Life Insurance
Company, an affiliate of Northwestern National (the "Affiliated Insurance
Companies") to serve as an investment medium for variable annuity and variable
life insurance contracts (the "Variable Contracts") issued by the Affiliated
Insurance Companies. The variable accounts of the Affiliated Insurance Companies
("Variable Accounts") invest in shares of one or more of the Funds in accordance
with allocation instructions received from Variable Contract owners. Such
allocation rights are described further in the accompanying Prospectus for the
Variable Account.
The Fund is a diversified portfolio with an investment objective of seeking
high income by investing predominantly in high yield-high risk lower-rated U.S.
dollar-denominated debt securities. It is the Fund's policy, while investing in
income producing securities, also to maximize total return from a combination of
income and capital appreciation.
THE FUND WILL NORMALLY INVEST AT LEAST 65% OF ITS ASSETS IN LOWER RATED
BONDS, COMMONLY KNOWN AS "JUNK BONDS." THESE SECURITIES MAY INVOLVE HIGH RISK
AND ARE CONSIDERED TO BE SPECULATIVE WITH REGARD TO PAYMENT OF INTEREST AND
RETURN OF PRINCIPAL. INVESTMENT IN THIS FUND MAY NOT BE APPROPRIATE FOR ALL
INVESTORS. CONTRACT OWNERS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THIS FUND. SEE "RISK FACTORS - HIGH YIELD SECURITIES."
Northstar Investment Management Corporation is the investment adviser for
the Fund and its professional staff selects and supervises the investments in
the Fund's portfolio. See "Management of the Fund."
This Prospectus sets forth basic information about the Trust and the Fund
that prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
April 30, 1996, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information is
available without charge upon request to the Trust at the address or telephone
number set forth above.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AT
ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF THE
VARIABLE ACCOUNT, WHICH ACCOMPANIES THIS PROSPECTUS. BOTH PROSPECTUSES SHOULD BE
READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Highlights............................................................ 3
Investment Objective and Policies............................................... 3
Risk Factors.................................................................... 4
Other Investment Strategies and Techniques...................................... 5
Performance Information......................................................... 7
How Net Asset Value is Determined............................................... 7
Management of the Fund.......................................................... 8
Purchase of Shares.............................................................. 9
Redemption of Shares............................................................ 9
Dividends, Distributions and Taxes.............................................. 9
General Information............................................................. 10
Appendix........................................................................ A-1
</TABLE>
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights for the Fund set forth below present certain
information and ratios as well as performance information about the Fund for a
share outstanding throughout each year or portion thereof. This table should be
read in conjunction with the audited financial statements of the Trust dated
December 31, 1995 and accompanying notes, which are contained in the Trust's
Annual Report to Shareholders for the fiscal year ended December 31, 1995,
incorporated by reference in the Statement of Additional Information, a copy of
which may be obtained without charge from the Trust. The financial highlights
have been audited by Coopers & Lybrand L.L.P., independent accountants, whose
report thereon is also incorporated by reference in the Statement of Additional
Information and should be read in conjunction with the related audited financial
statements and notes thereto. The Fund commenced operations in May, 1994.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31
-----------------
1995 1994
------- -------
<S> <C> <C>
Net Asset Value, beginning of the
period................................. $ 4.69 $ 5.00
------- -------
Income from investment operations:
Net investment income............. 0.50 0.28
Net gain (loss) on investments
(both realized and unrealized)... 0.34 (0.31)
------- -------
Total from investment
operations..................... 0.84 (0.03)
Less distributions:
Dividends (from net investment
income)............................ (0.49) (0.28)
Distributions (from realized
gains)............................. -- --
------- -------
Total Distributions............... (0.49) (0.28)
------- -------
Net Asset Value, end of the period...... $ 5.04 $ 4.69
------- -------
------- -------
Total Return............................ 18.55% (0.95)%
Ratios/Supplemental Data:
Net Assets, end of period (in
thousands)............................. $ 4,773 $ 2,588
Ratio of expenses to average net
assets................................. 0.80% 1.00%*
Ratio of expense reimbursement to
average net assets..................... 1.31% 1.55%*
Ratio of net investment income to
average net assets..................... 10.61% 8.62%*
Portfolio Turnover Rate................. 157% 62%
</TABLE>
- ------------------------
*Annualized
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek high income by investing
predominantly in high yield - high risk lower rated and non-rated U.S. dollar
denominated debt securities. It is the Fund's policy, while investing in income
producing securities, also to maximize total return from a combination of income
and capital appreciation.
Under normal market conditions, the Fund will seek to achieve its investment
objective by investing at least 65% of its total assets in higher-yielding,
lower-rated U.S. dollar-denominated debt securities of U.S. and foreign issuers,
which involve special risks and are predominantly speculative in character. The
Fund may invest up to 35% of its assets in non-U.S. dollar denominated
securities. Investments in securities offering the high current income sought by
the Fund, while generally providing greater income and potential opportunity for
gain than investments in higher rated securities, also entail greater risk. The
value of high yield securities (and therefore the net asset value per share of
the Fund) can be expected to increase or decrease in response to changes in
interest rates, real or perceived changes in the credit risks associated with
its portfolio investments, and other factors affecting the credit markets
generally. The Fund may invest up to 50% of its assets in securities of foreign
issuers, subject to a limit of 35% of such assets in emerging market debt.
Emerging markets are countries whose sovereign bonds generally are rated below
investment grade and whose financial markets are not well-developed. The Fund
intends to restrict its investments in emerging markets to those with sound
economies that are expected to experience strong growth with controlled
inflation, and therefore higher-than-average returns, over time. See "Risk
Factors - Foreign Investments."
3
<PAGE>
Most of the debt securities in which the Fund invests are lower rated, and
may include bonds in the lowest rating categories (C for Moody's and D for S&P)
and unrated bonds. Most of the securities will be rated at least Caa by Moody's
or at least CCC by S&P, or if not rated, are of equivalent quality in the
opinion of the Adviser. The Fund may invest up to 10%, and hold up to 25%, of
its assets in securities rated below Caa in the case of Moody's or CCC by S&P.
Such debt securities are highly speculative and may be in default of payment of
interest and/or repayment of principal may be in arrears. The issuers of such
debt securities may be involved in bankruptcy or reorganization proceedings
and/or may be restructuring outstanding debt. Investing in bankrupt and troubled
companies involves special risks. See "Risk Factors - High Yield Securities" and
the Appendix.
The Fund may invest in debt securities of any maturity that pay fixed,
floating or adjustable interest rates. The Fund also may invest in discount
obligations, including zero-coupon securities, which do not pay interest but,
rather, are issued at a significant discount to their maturity values, or
securities that pay interest, at the issuer's option, in additional securities
instead of cash (pay-in-kind securities). The values of debt securities
generally fluctuate inversely with changes in interest rates. This is less
likely to be true for adjustable or floating rate securities, since interest
rate changes are more likely to be reflected in changes in the rates paid on the
securities. However, reductions in interest rates also may translate into lower
distributions paid by the Fund. Additionally, because zero-coupon and
pay-in-kind securities do not pay interest but the Fund nevertheless must accrue
and distribute the income deemed to be earned on a current basis, the Fund may
have to sell other investments to raise the cash needed to make income
distributions. To a lesser extent the Fund may invest in equity or
equity-related securities, including common stock, preferred stock, convertible
securities and rights and warrants attached to debt instruments. Typically the
Fund would purchase a high yield security that is convertible or exchangeable
for equity securities, or which carries the right in the form of a warrant or as
part of a unit with the security to acquire equity securities. The Fund would
ordinarily purchase these securities for their yield characteristics or capital
appreciation potential.
The Trustees of the Trust reserve the right to change any of the investment
policies, strategies or practices of the Fund, as described in this Prospectus
and the Statement of Additional Information, without shareholder approval,
except in those instances where shareholder approval is expressly required. The
investment objective of the Fund is a fundamental policy which may not be
changed with out the approval of holders of a majority of the outstanding shares
of the Fund. There can, of course, be no assurance that the Fund will achieve
its investment objective since all investments are inherently subject to market
risks.
RISK FACTORS
HIGH YIELD SECURITIES. The High Yield Fund may invest in higher yielding
securities that carry lower investment grade ratings. These high yield - high
risk securities are rated below investment grade by the primary rating agencies
(Moody's and S&P). See the Appendix for a description of bond rating categories.
The value of lower rated securities generally is more dependent on the ability
of the company to meet interest and principal payments than is the case for
higher rated securities. Conversely, the value of higher rated securities may be
more sensitive to interest rate movements than lower rated securities. Companies
issuing high yield securities may not be as strong financially as those issuing
bonds with higher credit ratings. Investments in such companies are considered
to be more speculative than higher quality investments. In addition, the market
for lower rated securities is generally less liquid than the market for higher
rated securities, and adverse publicity and investor perceptions may also have a
greater negative impact on the market for these securities.
Companies issuing high yield bonds are more vulnerable to real or perceived
economic changes (such as rising interest rates), political changes or adverse
developments specific to the company. Adverse economic, political or other
developments may impair the company's ability to service principal and interest
obligations, to meet projected business goals and to obtain additional
financing, particularly if the company is highly leveraged. In the event of a
default, a Fund would experience a reduction of its income and could expect a
decline in the market value of the defaulted securities.
4
<PAGE>
Weighted average composition of the Fund's portfolio at the end of the 1995
fiscal year was:
<TABLE>
<S> <C>
Investment Grade.................................. 3.8
BB................................................ 21.0
B................................................. 50.7
CCC............................................... 2.5
CC................................................ --
C................................................. --
D................................................. --
Nonrated.......................................... 13.6
U.S. Governments, equities and other.............. 8.4
-----
TOTAL............................................. 100%
-----
-----
</TABLE>
This table does not reflect the current or future composition of the Funds'
portfolios.
FOREIGN INVESTMENTS. The Fund may invest in securities of foreign issuers.
Securities of some foreign companies and governments may be traded in the U.S.,
but many foreign securities are traded primarily in foreign markets. In addition
to generally higher transaction costs associated with foreign investing, risks
of foreign investing include:
CURRENCY RISKS. The Fund must buy the local currency when it buys a foreign
security, and it sells local currency when it sells the security. The value of a
foreign security held by the Fund will be affected by the value of the local
currency relative to the U.S. dollar, causing the Fund to lose money at times,
despite an increase in the value of the security.
POLITICAL AND ECONOMIC RISKS. Political and economic risks may exist,
particularly in underdeveloped and developing countries which may have
relatively unstable governments and economies based on only a few industries. In
some countries, there is the risk that the government may take over the assets
or operations of a company or that the government may impose taxes or limits on
the removal of the Fund's assets from that country.
REGULATORY RISKS. There is generally less government supervision of foreign
markets, and issuers are not subject to the uniform accounting, auditing and
financial reporting standards and practices applicable to domestic issuers.
There also may be less publicly available information about foreign issuers.
GENERAL INVESTMENT STRATEGIES AND TECHNIQUES
Each of the following strategies and techniques may be utilized by the Fund.
The Fund may, but does not currently intend to, engage in certain additional
investment techniques not described in this Prospectus. These techniques and
additional information on the securities and techniques described in the
Prospectus are contained in the Statement of Additional Information.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements, either
for temporary defensive purposes or to generate income from its cash balances.
Under a repurchase agreement, the Fund buys a security from a bank or dealer,
which is obligated to buy it back at a fixed price and time. The security is
held in a separate account at the Fund's custodian and constitutes the Fund's
collateral for the bank's or dealer's repurchase obligation. Additional
collateral may be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters into
bankruptcy, the Fund may experience costs and delays in liquidating the
collateral, and may experience a loss if it is unable to demonstrate its right
to the collateral in a bankruptcy proceeding. Repurchase agreements maturing
more than seven days in the future are considered illiquid, and the Fund will
invest no more than 5% of its net assets in such repurchase agreements at any
time. Under normal market conditions, the Fund will limit its investments in
repurchase agreements to 15% of its net assets.
WHEN-ISSUED SECURITIES. The Fund may acquire securities on a "when-issued"
basis by contracting to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until settlement. If
made through a dealer, the contract is dependent on the dealer completing the
sale. The dealer's failure could deprive the Fund of an advantageous yield or
price. These contracts may be considered securities and involve risk to the
extent that the value of the underlying security changes prior to settlement.
The Fund may realize short-term profits or losses if the contracts are sold.
Transactions in when-issued securities may be limited by certain Internal
Revenue Code requirements.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities, including restricted securities or private placements. An
illiquid security is a security that cannot be sold quickly in the normal course
of
5
<PAGE>
business. Some securities cannot be sold to the U.S. public because of their
terms or because of SEC regulations. The Adviser may determine that securities
that cannot be sold to the U.S. public, but that can be sold to Institutional
investors ("Rule 144A" securities) or on foreign markets, are liquid, following
guidelines established by the Trustees of the Fund.
TRADING AND PORTFOLIO TURNOVER. The Fund generally intends to purchase
securities for long-term investment. However, the Fund may purchase a security
in anticipation of relatively short-term price gains and short-term transactions
may result from liquidity needs, securities having reached a price or yield
objective, changes in interest rates or the credit standing of an issuer, or by
reason of economic or other developments not foreseen at the time of the initial
investment decision. Portfolio turnover rates are usually not a factor in making
buy and sell decisions. The Fund may also sell one security and simultaneously
purchase the same or comparable security to take advantage of short-term
differentials in yield or price. Increased portfolio turnover may result in
higher costs for brokerage commissions, dealer mark-ups and other transaction
costs and may also result in taxable capital gains. Short term trading may also
be restricted by certain tax rules.
MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed
securities which are securities that directly or indirectly represent an
ownership participation in, or are secured by and payable from, mortgage loans
on real property. Such securities include mortgage pass-through securities
representing participation interests in pools of residential mortgage loans
originated by U.S. governmental or private lenders and guaranteed, to the extent
provided in such securities, by the U.S. government or one of its agencies or
instrumentalities. Mortgage pass-through securities differ from conventional
debt securities, which provide for periodic payment of interest in fixed amounts
(usually semi-annually) and principal payments at maturity or on specified call
dates. Mortgage pass-through securities provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments, including any
repayments made by the individual borrowers on the pooled mortgage loans, net of
any fees paid to the guarantor of such securities and the servicer of the
underlying mortgage loans. The underlying mortgages may be prepaid at any time
and such payments are passed through to the certificate holder as a prepayment
of principal. As a result, if a Fund purchases such a mortgage-backed security
at a premium, a prepayment rate that is faster than expected will reduce yield
to maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity. Conversely, if the Fund
purchases a mortgage-backed security at a discount, faster than expected
prepayments will increase, while slower than expected prepayment will reduce,
yield to maturity.
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties and servicing decisions. Generally, however, prepayments on
fixed rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Mortgage-backed
securities may decrease in value as a result of increases in interest rates and
may benefit less than other fixed income securities from declining interest
rates because of the risk of prepayment. Accelerated prepayments on
mortgage-backed securities purchased by the Fund at a premium also impose a risk
of loss of principal because the premium may not have been fully amortized at
the time the principal is repaid in full.
TEMPORARY INVESTMENTS. In periods of unusual market conditions, for
temporary and defensive purposes, when the Adviser considers it appropriate, the
Fund may invest part or all of its assets in cash, U.S. government securities,
commercial paper, bankers' acceptances, repurchase agreements and certificates
of deposit.
INVESTMENT RESTRICTIONS. The Fund has adopted a number of investment
restrictions, as set forth in the Statement of Additional Information, some of
which are fundamental, and therefore, may not be changed without shareholder
approval.
6
<PAGE>
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. Performance
information for the Fund will not be advertised or included in sales literature
unless accompanied by comparable performance information for a separate account
to which the Fund offers its shares. Both yield and total return figures are
computed in accordance with formulas specified by the SEC and are based on
historical earnings and are not intended to indicate future performance. The
yield for the Fund will be computed by dividing (a) net investment income over a
30-day period by (b) an average value of invested assets (using the average
number of shares entitled to receive dividends at the end of the period), all in
accordance with applicable regulatory requirements. Such amounts will be
compounded for six months and then annualized for a twelve-month period to
derive the yield of the Fund.
Standardized quotations of average annual total return for the Fund's shares
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment over a period of 1, 5 and 10 years (or up to the life of
the Fund). Standardized total return quotations reflect the deduction of a
proportional share of expenses (on an annual basis) of the Fund, and assume that
all dividends and distributions are reinvested when paid. The Fund also may
quote supplementally a rate of total return over different periods of time or by
non-standardized means. In addition, the Fund may from time to time publish
materials citing historical volatility for shares of the Fund. Volatility is the
standard deviation of day to day logarithmic price changes expressed as an
annualized percentage.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Composite Stock Index
("S&P 500"), Dow Jones Industrial Average ("DJIA"), or other unmanaged indices
so that Contract Owners may compare the Fund's results with those of a group of
unmanaged securities widely regarded by investors as representative of the
securities markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objective, and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds by 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 bank certificates of deposit
performance rates such as Salomon Brothers, FEDERAL RESERVE BULLETIN, AMERICAN
BANKER, Tower Data and 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.
Quotations of yield or total return for the Fund will not take into account
charges or deductions against any separate account to which the Fund's shares
are sold or charges and deductions against the Variable Contracts issued by the
Affiliated Insurance Companies. The Fund's yield and total return should not be
compared with mutual funds that sell their shares directly to the public since
the figures provided do not reflect charges against the Variable Account or the
Variable Contracts. Performance information for the Fund reflects only the
performance of a hypothetical investment in the Fund during the particular time
period on which the calculations are based. Performance information should be
considered in light of the Fund's investment objective and policies,
characteristics and qualities of the portfolio, and the market conditions during
the given time period, and should not be considered as a representation of what
may be achieved in the future. For a description of the methods used to
determine total return for the Fund, see the Statement of Additional
Information.
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 Internal Revenue Code of 1986, as amended (the "Code"),
including a requirement that less than 30% of the Fund's gross income be derived
from gains on the sale of securities and certain other assets held for less than
three months. See "Dividends, Distributions and Taxes."
HOW NET ASSET VALUE IS DETERMINED
The net asset value per share of the Fund is determined at the close of the
general trading session (currently 4:00 p.m.) of the New York Stock Exchange
(the "Exchange") on each business day the Exchange is open. The net asset value
of the Fund is computed by dividing the value of the Fund's securities, plus any
cash and other assets (including dividends and interest accrued but not
collected) less all liabilities (including accrued expenses) by the number of
shares of the Fund outstanding.
Fixed income securities are valued by using independent pricing services,
market quotations, prices provided by market makers, or estimates of market
values obtained from yield data related to instruments or securities with
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similar characteristics in accordance with procedures established in good faith
by the Trustees. Short-term securities with remaining maturities of less than 60
days are valued at amortized cost unless it is determined by the Trustees that
amortized cost does not reflect the fair value of such obligations. Other assets
are valued at fair value as determined in good faith by the Trustees. Generally,
trading in foreign securities, as well as trading in corporate bonds, U.S.
government securities, money market instruments and repurchase agreements, is
substantially completed each day at various times prior to the close of the
general trading session of the Exchange. The values of such securities used in
computing the net asset value of the Fund are determined as of such times.
Occasionally, events affecting the value of such securities may occur between
such times and such closing which will not be reflected in the computation of a
Fund's net asset value. If events occur which materially affect the value of
such securities, the securities will be valued at fair market value as
determined in good faith by the Trustees.
MANAGEMENT OF THE FUND
THE TRUSTEES. The Trustees of the Trust oversee the operations of the Trust
and the Fund and perform the various duties imposed on trustees by the laws of
the Commonwealth of Massachusetts and the Investment Company Act of 1940 (the
"1940 Act"). The Trustees meet quarterly to review the Fund's investment
policies, performance, expenses and other business affairs and elect the
officers of the Trust annually. The Trustees delegate day to day management of
the Fund to the officers of the Trust.
THE ADVISER AND AFFILIATED SERVICE PROVIDERS. Pursuant to an Investment
Advisory Agreement with the Trust, Northstar Investment Management Corporation
acts as the investment adviser to the Fund. In this capacity, the Adviser,
subject to the authority of the Trustees, is responsible for furnishing
continuous investment supervision to the Fund and is responsible for the
management of the Fund's portfolios. Northstar Administrators Corporation, an
affiliate of the Adviser, furnishes certain administrative, compliance and
accounting services to the Fund. Employees of the Adviser and Administrator
serve as officers of the Fund, and the Adviser provides office space for the
Funds and pays the salaries of all Fund officers and Trustees who are affiliated
with the Adviser.
The Adviser and its affiliates are indirect, majority owned subsidiaries of
ReliaStar Financial Corp. ("ReliaStar"). ReliaStar's address is 20 Washington
Avenue South, Minneapolis, MN 55401. Combined minority interests held by members
of senior management currently equal 20%. ReliaStar is a publicly traded holding
company whose subsidiaries specialize in the life and health insurance
businesses. Through the Affiliated Insurance Companies and other subsidiaries,
ReliaStar issues and distributes individual life insurance, annuities and mutual
funds, group life and health insurance and life and health reinsurance, and
provides related investment management services.
The Adviser's fee is accrued daily against the value of the Fund's net
assets and is payable by the Fund monthly at an annual rate of 0.75% on the
first $250 million of each Fund's average daily net assets scaled down to 0.55%
for assets over $1 billion. The investment advisory fee paid by the Fund is
higher than the fees paid by most mutual funds. The Administrator's fee is
accrued daily against the value of the Fund's net assets and is payable monthly
at an annual rate of .10% of the Fund's average daily net assets.
The Adviser places all orders for the purchase and sale of portfolio
securities. In selecting brokers, the Adviser may consider research and
brokerage services furnished to it. The Adviser also advises other accounts that
may purchase and hold securities in which the Funds may invest and certain
persons affiliated with the Adviser may purchase and hold, directly or
indirectly, securities in which the Funds or other accounts invest, subject to
internal guidelines regarding conflicts of interest.
INVESTMENT PERSONNEL OF ADVISER. Thomas Ole Dial has served as manager of
the Northstar High Yield Bond Fund since inception of the Fund in May 1994. Mr.
Dial has also served as portfolio manager of the Northstar Multi-sector Bond
Fund, a seperate series of the Trust, and serves as manager of the Northstar
Advantage High Total Return Fund since its inception in November 1993, and,
since October 1995 as co-manager of the Northstar Advantage Strategic Income
Fund, separate investment companies managed by the Adviser. Mr. Dial is a Vice
President of each Fund and Executive Vice President and Chief Investment
Officer - Fixed Income of the Adviser. Prior to employment by the Adviser in
October 1993, Mr. Dial served as Executive Vice President and Chief Investment
Officer - Fixed Income of National Securities & Research Corporation, and as
portfolio manager for National Bond Fund, National Asset Reserve, and National
Multi-Sector Fixed Income Fund. Prior to National, Mr. Dial managed high yield
securities portfolios through Dial Capital Management and various financial
institutions. Mr. Dial also manages investments for T.D. Partners, a limited
partnership for which the Adviser serves as subadviser.
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CUSTODIAN AND ACCOUNTING SERVICES AGENT. The Fund's custodian and
accounting services agent is State Street Bank and Trust Company, a trust
company organized under the laws of Massachusetts and located at 225 Franklin
Street, Boston, Massachusetts 02110.
PURCHASE OF SHARES
As of the date of the Prospectus, shares of the Fund are offered only for
purchase by the Variable Accounts to serve as an investment medium for the
Variable Contracts issued by the Affiliated Insurance Companies. Shares of the
Fund may be offered in the future to other separate accounts established by the
Affiliated Insurance Companies or sold to separate accounts of other affiliated
or unaffiliated insurance companies, and may be offered in the future to serve
as an investment medium for variable life insurance policies.
Shares of the Fund are sold at the net asset value (without a sales charge)
next computed after receipt of a purchase order. The Trust reserves the right to
discontinue offering shares of the Fund at any time. In the event that the Fund
ceases offering its shares, any investments allocated by an insurance company
investing in the Trust to the Fund will, subject to any necessary regulatory
approvals, be invested in another fund within the Trust deemed appropriate by
the Trustees.
Shares of the Fund may be exchanged for shares of any other fund within the
Trust that is available as an investment option under a particular Variable
Contract. The other funds of the Trust are described in separate prospectuses.
Exchanges are treated as a redemption of shares of one fund and a purchase of
shares of one or more of the other funds, and are effected at the respective net
asset values per share of each Fund on the date of the exchange. The Trust
reserves the right to modify or discontinue its exchange privilege at any time
without notice.
Variable Contract Owners do not deal directly with the Trust to purchase,
redeem, or exchange shares of the Fund, and Variable Contract Owners should
refer to the prospectus for the Variable Account for information on the
allocation of premiums and on transfers of accumulated value among sub-accounts
of the Variable Account.
REDEMPTION OF SHARES
Shares of the Fund may be redeemed on any business day. Redemptions are
effected at the per share net asset value next determined after receipt of the
redemption request. Redemption proceeds normally will be paid within seven days
following receipt of instructions in proper form. The right of redemption may be
suspended by the Trust or the payment date postponed beyond seven days when the
New York Stock Exchange is closed (other than customary weekend and holiday
closing) or for any period during which trading thereon is restricted because an
emergency exists, as determined by the Securities and Exchange Commission,
making disposal of portfolio securities or valuation of net assets not
reasonably practicable, and whenever the Securities and Exchange Commission has
by order permitted such suspension or postponement for the protection of
shareholders. If the Trustees should determine that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption price in whole or part
by a distribution in kind of securities from the portfolio of the Fund in lieu
of cash, in conformity with applicable rules of the Securities and Exchange
Commission. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage costs in converting the assets into cash.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code ("Code"). Accordingly, provided
the Fund so qualifies, it generally will not be subject to federal income taxes
to the extent that it distributes on a timely basis its investment company
taxable income and its net capital gains. Such income and capital gains
distributions are automatically reinvested in additional shares of the Fund,
unless the shareholder elects to receive cash.
Distributions of any investment company taxable income (which includes among
other items, dividends, interest, and any net realized short-term capital gains
in excess of net realized long-term capital losses) are treated as ordinary
income for tax purposes in the hands of the shareholder (Variable Account). Net
capital gains (the excess of any net long-term capital gains over net short-term
capital losses) will, to the extent distributed and classified by the Fund as
capital gain distributions, be treated as long-term capital gains in the hands
of the Variable Account regardless of the length of time the Variable Account
may have held the shares. Income distributions of any net investment income of
the Fund will be declared daily and paid quarterly. Capital gain distributions,
if any, will be paid at least once annually.
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To comply with regulations under section 817(h) of the Code, the Fund is
required to diversify its investments. Generally, the Fund will be required to
diversify its investments so that on the last day of each quarter of a calendar
year no more than 55% of the value of its total assets is represented by any one
investment, no more than 70% is represented by any two investments, no more than
80% is represented by any three investments, and no more than 90% is represented
by any four investments. For this purpose, securities of a given issuer
generally are treated as one investment, but each U.S. Government agency and
instrumentality is treated as a separate issuer. Any security issued,
guaranteed, or insured (to the extent so guaranteed or insured) by the U.S. or
any agency or instrumentality of the U.S. is treated as a security issued by the
U.S. Government or its agency or instrumentality, whichever is applicable.
Compliance with the diversification rules under Section 817(h) of the Code
generally will limit the ability of the Fund to invest greater than 55% of its
total assets in direct obligations of the U.S. Treasury (or any other issuer) or
to invest primarily in securities issued by a single agency or instrumentality
of the U.S. Government.
The Treasury Department announced that it would issue future regulations or
rulings addressing the circumstances in which a variable Contract Owner's
control of the investments of the separate account may cause the Contract Owner,
rather than the insurance company, to be treated as the owner of the assets held
by the separate account. If the Contract Owner is considered the owner of the
securities underlying the separate account, income and gains produced by those
securities would be included currently in the contract owner's gross income. It
is not known what standard will be set forth in the regulations or rulings.
In the event that rules or regulations are adopted, there can be no
assurance that the Fund will be able to operate as currently described in the
Prospectus, or that the Trust will not have to change the Fund's investment
objective or investment policies. While the Fund's investment objective is
fundamental and may be changed only by a vote of a majority of its outstanding
shares, the Trustees have reserved the right to modify the investment policies
of the Fund as necessary to prevent any such prospective rules and regulations
from causing the contract owners to be considered the owners of the shares of
the Fund underlying the Variable Account.
Reference is made to the Prospectus for the Variable Account and Variable
Contracts for information regarding the federal income tax treatment of
distributions to the Variable Account. See "Federal Income Tax Status" in the
Fund's Statement of Additional Information for more information on taxes.
GENERAL INFORMATION
ORGANIZATION OF THE FUND
The Trust was organized under Massachusetts law in 1993 as a business trust.
The Declaration of Trust provides that the Trustees are authorized to create an
unlimited number of series. All shares have equal voting rights, except that
only shares of the respective series are entitled to vote on matters concerning
only that series. Each share of the Fund will be given one vote, unless a
different allocation of voting rights is required under applicable law for a
mutual fund that is an investment medium for variable insurance products. At the
date of this Prospectus, there are four existing series of the Trust, one of
which is the Fund.
In accordance with current laws, it is anticipated that an insurance company
issuing a variable contract that participates in the Trust will request voting
instructions from Contract Owners and will vote shares or other voting interests
in the separate account in proportion to the voting instructions received. The
Affiliated Insurance Companies and the Variable Accounts are currently the only
shareholders of the Trust, although other separate accounts of the Affiliated
Insurance Companies, their affiliates or other insurance companies may become
shareholders in the future.
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 having voting rights. Except as set forth above and subject to the 1940
Act, the Trustees will continue to hold office and appoint successor Trustees.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees,
officers,
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employees or agents of the Trust in connection with the Trust's property or the
affairs of the Trust, and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust or its
Trustees, officers, employees, or agents. The Declaration of Trust provides for
indemnification out of Trust property for all loss and expense of any
shareholder held personally liable by reason of being or having been a
shareholder of the Trust. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations, and thus should be considered
remote.
REGISTRATION STATEMENT
This Prospectus does not contain all the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the 1933 Act and the 1940 Act, with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and regulation
of the Securities and Exchange Commission. The Registration Statement, including
the exhibits filed therewith, may be examined at the office of the Securities
and Exchange Commission in Washington, D.C.
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APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND
RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which made the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S ("S&P") CORPORATE DEBT RATINGS
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than for debt in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-) - The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
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April 30, 1996
STATEMENT OF ADDITIONAL INFORMATION
NORTHSTAR/NWNL TRUST
TWO PICKWICK PLAZA
GREENWICH, CONNECTICUT 06830
(203) 863-6200 (800) 595-7827
Northstar/NWNL Trust, (the "Trust") is an open-end series management investment
company organized as a Massachusetts business trust. The Trust consists of four
separate series (each a "Fund"), each of which represents shares of beneficial
interest in a separate portfolio of securities and other assets with its own
objective and policies. Each Fund is managed separately by Northstar Investment
Management Corporation, the Funds Adviser. Shares of the Trust are issued and
redeemed in conjunction with investments in and payments under variable
annuity and variable life contracts. Shares of the Trust are currently
offered to separate accounts ("Variable Accounts") of Northwestern National
Life Insurance Company, Northern Life Insurance Company and ReliaStar Bankers
Security Life Insurance Company (the "Affiliated Insurance Companies"). The
Variable Accounts of the Affiliated Insurance Companies invest in shares of
one or more of the Funds in accordance with allocation instructions received
from Variable Contract Owners. Such allocation rights are described further
in the Prospectus for the Variable Account. A summary of the four diversified
investment portfolios comprising series of the Trust (the "Funds") is set
forth herein and in the Prospectus for the Funds. This document is not the
Prospectus of the Funds but is incorporated therein by reference and should
be read in conjunction with the Prospectus dated April 30, 1996. Copies of
the Prospectus may be obtained upon request and without charge by contacting
the Trust at the address or phone number above.
CONTENTS PAGE
Investment Objectives and Policies 2
Investment Restrictions 4
Other Investment Techniques 6
Portfolio Transactions and Brokerage Allocation 14
Portfolio Turnover 16
Services of the Adviser and Administrator 17
Services of the Subadviser 18
Net Asset Value 19
Purchases, Redemptions and Exchange Transactions 19
Dividends and Distributions 20
Federal Income Tax Status 20
Trustees and Officers 22
Other Information 24
Performance Information 25
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INVESTMENT OBJECTIVES AND POLICIES
Northstar Growth Fund, Northstar Income and Growth Fund, Northstar Multi-Sector
Bond Fund and Northstar High Yield Bond Fund (the "Funds") are four diversified
investment portfolios comprising series of the Northstar/NWNL Trust (the
"Trust"), an open-end series management investment company. The investment
objective of each Fund, set forth below, is a fundamental policy which may not
be changed without the approval of the holders of a majority of the outstanding
shares of each Fund. There can be no assurance that each Fund will achieve its
stated investment objective AND THE HIGH YIELD FUND AND MULTI-SECTOR FUND MAY
NOT BE APPROPRIATE FOR ALL INVESTORS. (See "Risk Factors" in the current
Prospectus.) In general, the assets of each Fund are kept fully invested in
securities selected to meet the investment objective of each Fund; however, for
temporary defensive purposes, any part of a Fund's assets may be held from time
to time in cash or cash equivalents. At such times when a Fund's assets are
invested for temporary defensive purposes, the Fund will not be investing in
accordance with its investment objective.
NORTHSTAR GROWTH FUND ("GROWTH FUND"). The Growth Fund has an investment
objective of long-term growth of capital primarily through investments in
equity securities diversified over industries and companies which are believed
to provide above average potential for capital appreciation. Securities in
which the Fund will normally invest include common stocks, preferred stock and
securities convertible into common stock. The Fund may invest in large seasoned
companies which are believed to possess superior return potential similar to
companies with formative growth profiles, and may invest in small and medium
sized companies with above average earnings growth potential relative to market
value. Although the Fund will invest primarily in equity and equity-related
securities, it may also invest in non-equity securities, such as corporate bonds
or U.S. Government obligations during periods, when, in the opinion of the
Fund's Adviser or Subadviser, prevailing market, financial or economic
conditions warrant. The Fund may invest up to 20% of its assets in equity
securities of foreign issuers, not more than 10% of which may be invested in
issuers that are not listed on a U.S. securities exchange.
NORTHSTAR INCOME AND GROWTH FUND ("INCOME AND GROWTH FUND") has an investment
objective of seeking current income balanced with the objective of achieving
capital appreciation. Under normal market conditions, the Fund will invest at
least 65% of its total assets in income-producing securities. In seeking to
achieve its objective, the Fund will invest in equity securities of domestic
and foreign issuers that have prospects for dividend income and growth of
capital, including common stocks, preferred stocks and securities convertible
into common stocks, and selected investment grade debt securities of domestic
and foreign private and government issuers. These debt securities would
include U.S. Government obligations, foreign and domestic corporate bonds,
and bonds issued by foreign governments considered stable by the Adviser and
supported through the authority to levy taxes by national state or provincial
governments or similar political subdivisions. The proportion of holdings in
common stock, preferred stocks, other equity-related securities and debt
securities will vary in accordance with the level of return that can be
achieved from these various types of securities. Securities are also purchased
on the basis of fundamental attraction regarding capital
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appreciation prospects. In this way, income is "balanced" with capital. The
Fund invests in equity securities that are listed primarily on the New York
Stock Exchange or American Stock Exchange or that are traded in the over-the-
counter market. Equity and equity-related securities purchased by the Fund will
typically be of large well-established companies, but may also included to a
lesser extent smaller capitalization companies selected for their growth
potential.
NORTHSTAR MULTI-SECTOR BOND FUND ("MULTI-SECTOR FUND") has an investment
objective to maximize current income. The Fund will seek to achieve its
objective by investing in the following sectors of the fixed income securities
markets: (a) securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies, authorities or instrumentalities ("U.S.
Government Bonds"); (b) investment grade or comparable quality corporate debt
securities ("Investment Grade Bonds"); (c) investment grade or comparable
quality debt securities issued by foreign corporate issuers and debt securities
issued by foreign governments and their political subdivisions ("Foreign
Bonds"); and (d) high yield-high risk fixed income securities of U.S. and
foreign issuers ("High Yield Bonds"). Under normal circumstances, at least 65%
of the Fund's total assets will be invested in these four sectors. The Fund's
assets generally will be invested in each market sector, but the Fund may invest
any amount of its assets in any one sector (except for High Yield Bonds, in
which sector the Fund will not invest more than 50% of its assets determined at
the time of investment, and no more than 35% of the Fund's assets may be
invested in Foreign Bonds, including foreign High Yield Bonds), and the Fund may
choose not to invest in a sector in order to achieve its investment objective.
The Adviser believes this strategy may achieve a more stable net asset value
since diversification over several market sectors tends to reduce volatility;
however, there can be no assurance that certain economic and other factors will
not cause fluctuations in the value of the securities held by the Fund,
resulting in fluctuations of the Fund's net asset value.
NORTHSTAR HIGH YIELD BOND FUND ("HIGH YIELD FUND") has an investment objective
of seeking high income by investing predominantly in high yield-high risk,
lower-rated and non-rated U.S. dollar-denominated debt securities. It is the
Fund's policy, while investing in income producing securities, also to maximize
total return from a combination of income and capital appreciation. Under normal
market conditions, the Fund will seek to achieve its investment objective by
investing at least 65% of its total assets in higher-yielding, lower-rated U.S.
dollar-denominated debt securities of U.S. and foreign issuers, which involve
special risks and are predominantly speculative in character. Investments in
securities offering the high current income sought by the Fund, while generally
providing greater income and potential opportunity for gain than investments in
higher rated securities, also entail greater risk. The value of high yield
securities (and therefore the net asset value per share of the Fund) can be
expected to increase or decrease in response to changes in interest rates, real
or perceived changes in the credit risks associated with its portfolio
investments, and other factors affecting the credit markets generally. (See
"Risk Factors" in the current Prospectus.)
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The Fund is subject to a limit of 50% in investments in securities of foreign
issuers, of which no more than 35% may be in emerging market debt, and not more
than 35% may be in non-U.S. Dollar denominated securities.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies and cannot be
changed without the approval of the holders of a majority of the Fund's
outstanding voting securities (defined in the 1940 Act as the lesser of (a) more
than 50% of the outstanding shares or (b) 67% or more of the shares represented
at a meeting at which more than 50% of the outstanding shares are represented).
All other investment policies or practices are considered by the Funds to be
non-fundamental and accordingly may be changed without shareholder approval. If
a percentage restriction on investment or use of assets set forth below is
adhered to at the time a transaction is effected, later changes in percentage
resulting from changing market values will not be considered a deviation from
this policy.
A Fund may not:
(1) borrow money, issue senior securities, or pledge, mortgage or hypothecate
its assets, except that it may (i) borrow from banks, but only if
immediately after such borrowing there is asset coverage of 300% and
(ii) enter into transactions in options, futures, and options on
futures as described in the Fund's Prospectus and Statement of Additional
Information (the deposit of assets in escrow in connection with the
writing of covered put and call options and the purchase of securities on
a when-issued or delayed delivery basis and collateral arrangements with
respect to initial or variation margin deposits for futures contracts
will not be deemed to be pledges of the Fund's assets);
(2) underwrite the securities of others;
(3) purchase or sell real property, including real estate limited
partnerships (but each Fund may purchase marketable securities of
companies which deal in real estate or interests therein, including real
estate investment trusts);
(4) deal in commodities or commodity contracts except in the manner described
in the current Prospectus and Statement of Additional Information of the
Trust;
(5) make loans to other persons (but each Fund may, however, lend portfolio
securities, up to 33% of net assets at the time the loan is made, to
brokers or dealers or other financial institutions not affiliated with
the Fund or the Adviser, subject to conditions established by the Adviser
(See "Lending of Securities" in the Prospectus), and may purchase or hold
participations in loans in accordance with the investment objectives and
policies of the Fund as described in the current Prospectus and Statement
of Additional Information of the Trust;
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(6) participate in any joint trading accounts;
(7) purchase on margin (except that for purposes of this restriction, the
deposit or payment of initial or variation margin in connection with
futures contracts will not be deemed to be purchases of securities on
margin);
(8) sell short, except that the Fund may enter into short sales against the
box in the manner described in the current Prospectus and Statement of
Additional Information for the Fund;
(9) invest more than 25% of its assets in any one industry or related group
of industries;
(10) with respect to 75% of a Fund's assets, purchase a security (other than
U.S. Government obligations) if as a result more than 5% of the value of
total assets of the Fund would be invested in securities of a single
issuer; or
(11) with respect to 75% of a Fund's assets purchase a security if as a result
more than 10% of any class of securities, or more than 10% of the
outstanding voting securities of an issuer, would be held by the Fund.
In addition, as a fundamental policy, the Multi-Sector Fund will not invest more
than 50% of the Fund's assets in High Yield-High Risk Bonds, determined at the
time of investment.
The following policies are non-fundamental and may be changed without
shareholder approval:
A Fund may not:
(1) purchase securities of other investment companies, except in connection
with a merger, consolidation or sale of assets, and except that the Fund
may purchase shares of other investment companies subject to such
restrictions as may be imposed by the Investment Company Act of 1940 and
rules thereunder or by any state in which shares of the Fund are
registered; and provided further that the Funds may invest all of their
assets in the securities or beneficial interests of a singly pooled
investment fund having substantially the same objectives, policies and
limitations as the Fund.
(2) make an investment for the purpose of exercising control or management;
or
(3) invest more than 15% of its net assets (determined at the time of
investment) in illiquid securities, including securities subject to legal
or contractual restrictions on resale (which may include private
placements and those 144A securities for which the Trustees, pursuant to
procedures adopted by the Fund, have determined there is no liquid
secondary market), repurchase agreements maturing in more than seven
days, options traded over the counter that a Fund has purchased,
securities being used to cover options a Fund has written, securities for
which market quotations are not readily available, or other securities
which legally or in the Adviser's or Trustees' opinion may be deemed
illiquid;
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As a fundamental policy, the Funds may borrow money from banks to the extent
permitted under the Investment Company Act of 1940. As an operating (non-
fundamental) policy, the Funds do not intend to borrow any amount in excess of
10% of their respective assets, and would do so only for temporary emergency or
administrative purposes. In addition, to avoid the potential leveraging of
assets, the Funds will not make additional investments when its borrowings are
in excess of 5% of total assets. If a Fund should determine to expand its
ability to borrow beyond the current operating policy, the Fund's Prospectus
would be amended and shareholders would be notified.
OTHER INVESTMENT TECHNIQUES
MORTGAGE-BACKED SECURITIES. The Funds may invest in mortgage-backed securities
which are securities that directly or indirectly represent an ownership
participation in, or are secured by and payable from, mortgage loans on real
property ("Mortgage-Backed Securities"). Such securities include mortgage pass-
through securities representing participation interests in pools of residential
mortgage loans originated by U.S. governmental or private lenders and
guaranteed, to the extent provided in such securities, by the U.S. government or
one of its agencies or instrumentalities. Mortgage pass-through securities
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semi-annually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments, including any repayments made by the individual borrowers on
the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans. The underlying
mortgages may be prepaid at any time and such payments are passed through to the
certificate holder as a prepayment of principal. As a result, if the Fund
purchases such a Mortgage-Backed Security at a premium, a prepayment rate that
is faster than expected will reduce yield to maturity, while a prepayment rate
that is slower than expected will have the opposite effect of increasing yield
to maturity. Conversely, if the Fund purchases a Mortgage-Backed Security at a
discount, faster than expected prepayments will increase, while slower than
expected prepayment will reduce, yield to maturity.
Prepayments on a pool of mortgage loans are influenced by a variety of economic,
geographic, social and other factors, including changes in mortgagors' housing
needs, job transfers, unemployment, mortgagors' net equity in the mortgaged
properties and servicing decisions. Generally, however, prepayments on fixed
rate mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Mortgage-Backed Securities
may decrease in value as a result of increases in interest rates and may benefit
less than other fixed income securities from declining interest rates because of
the risk of prepayment. Accelerated prepayments on Mortgage-Backed Securities
purchased by the Fund at a premium also impose a risk of loss of principal
because the premium may not have been fully amortized at the time the principal
is repaid in full. See "Risk Factors" in the current Prospectus.
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REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS. Each Fund may enter
into reverse repurchase agreements and dollar roll agreements. A dollar roll
agreement is identical to a reverse repurchase agreement except for the fact
that substantially identical securities may be repurchased. Under a reverse
repurchase agreement or a dollar roll agreement, a Fund sells securities and
agrees to repurchase them, or substantially similar securities in the case of a
dollar roll agreement, at a mutually agreed upon date and price. The Fund does
not account for dollar rolls as a borrowing. At the time the Fund enters into a
reverse repurchase agreement or a dollar roll agreement, it will establish and
maintain a segregated account with its custodian containing cash, U.S.
government securities, or other liquid assets from its portfolio having a value
not less than the repurchase price (including accrued interest).
While the use of reverse repurchase agreements and dollar roll agreements
creates opportunities for increased income, the use of these agreements may
involve the risk that the market value of the securities to be repurchased by a
Fund may decline below the price at which the Fund is obligated to repurchase.
Also, in the event the buyer of securities under a reverse repurchase agreement
or a dollar roll agreement files for bankruptcy or becomes insolvent, such buyer
or its trustee or receiver may receive an extension of time to determine whether
to enforce the Fund's obligation to repurchase the securities, and the Fund's
use of the proceeds of the reverse repurchase agreement or the dollar roll
agreement may effectively be restricted pending such decision. Dollar roll
agreements may be treated as sales for tax purposes.
SECURITIES LENDING. Each Fund may lend portfolio securities to broker/dealers or
other institutional borrowers (up to 33% of net assets at the time the loan is
made), but only when the borrower pledges cash collateral to the Fund and agrees
to maintain such with the Funds' custodian so that it amounts at all times to at
least 100% of the value of the securities loaned. Furthermore, each Fund may
terminate its loans at any time, and must receive compensation that, in total
and in whatever form, is equivalent to the sum of reasonable interest on the
collateral as
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well as dividends, interest, or other distributions paid on the security during
the loan period. The loan agreement shall not reduce the risk of loss or
opportunity for gain by the Fund on the securities transferred pursuant to the
agreement. Upon expiration of the loan, the borrower of the securities will be
obligated to return to that Fund the same number and kind of securities as those
loaned together with any applicable duly executed stock powers and the Funds
must be permitted to exercise all voting rights, if there are any, with respect
to the securities lent. The Funds may pay reasonable fees in connection with
the loan, including reasonable fees to the Funds' custodian for its services.
LOAN PARTICIPATIONS. Each Fund may invest up to 10% of its assets in loan
participations denominated in U.S. dollars when the Adviser believes such an
investment is consistent with a Fund's investment objective. Loan
participations entail the payment by a Fund of a sum to a U.S. bank or other
domestic financial institution which has lent or will lend money to a U.S.
corporation. In exchange for such payment, the bank agrees to pay to that Fund,
to the extent it is received, a specified portion of the principal and interest
in respect of such loan. A Fund has no contractual relationship with the
borrower. Loan participations may be considered illiquid investments and may
entail the credit risk of both the underlying borrower and the bank or financial
institution which is the intermediary. Loan participations are typically
unrated but the Adviser will limit its investment in loan participations based
upon its opinion of the quality of the investment and the Fund's general
limitations with respect to lower rated investments.
ZERO COUPON, STEP COUPON AND PIK BONDS. The Funds may invest its assets in any
combination of zero coupon bonds, step coupon bonds and bonds on which interest
is payable in kind ("PIK bonds"). A zero coupon bond is a bond that does not
pay interest currently for its entire life. Step coupon bonds frequently do not
entitle the holder to any periodic payments of interest for some initial period
after the issuance of the obligation; thereafter, step coupon bonds pay interest
for fixed periods of time at particular interest rates (a "step coupon bond").
In the case of a zero coupon bond, the nonpayment of interest on a current basis
may result from the bond having no stated interest rate, in which case the bond
pays only principal at maturity and is initially issued at a discount from the
face value. Alternatively, a zero coupon obligation may provide for a stated
rate of interest, but provide that such interest is not payable until maturity,
in which case the bond may initially be issued at par. The value to the
investor of a zero coupon or step coupon bond is represented by the economic
accretion either of the difference between the purchase price and the nominal
principal amount (if no interest is stated to accrue) or of accrued, unpaid
interest during the bond's life or payment deferral period. PIK bonds are
obligations which provide that the issuer thereof may, at its option, pay
interest on such bonds in cash or in the form of additional debt securities.
Such securities benefit the issuer by mitigating its need for cash to meet debt
service, but also require a higher rate of return to attract investors who are
willing to defer receipt of such cash. The Fund generally will accrue income on
such investments for tax and accounting purposes, which would be distributed to
the shareholder (Variable Account) from available cash or liquidated assets.
See also "Dividends, Distributions and Taxes." The market prices of zero
coupon, step coupon and PIK bonds are more volatile than the market prices of
securities that pay interest periodically in cash, and are likely to respond to
changes in interest rates to a greater degree than do bonds that have similar
maturities and credit quality on which regular cash payments of interest are
being made.
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COVERED CALL OPTIONS. Each Fund may sell covered call options and purchase
options to close out options previously written. The Funds, in return for the
premium received upon the sale of a call option, gives up the opportunity to
benefit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline. A Fund has no control over when it may be required to sell the
underlying securities, since it may be assigned an exercise notice at any time
prior to the expiration of its obligation as a seller.
Because call options give the purchaser the right to purchase a specified
security at a designated strike price for a limited period of time, the option
is likely to be exercised only when and if the market price of the security
exceeds the strike price. If the market price never exceeds the strike price
during the option term, the purchaser's loss will be limited to the cash premium
paid to the seller of the option. However, if the market price does exceed the
strike price during the option term by an amount greater than the premium paid
for the option, the purchaser may exercise the option and purchase the security
at the strike price and realize a profit to the extent the proceeds exceed the
amount of premiums and transaction costs. In either circumstance, the seller of
the option retains the premium received for the option but forgoes any potential
profit from an increase in the market price of the underlying security over the
strike price. The option will be terminated upon expiration of the option, the
purchase of an identical option in a closing transaction, or delivery of the
underlying security upon the exercise of the option.
Each Fund will sell only covered call options, meaning that a Fund will only
sell a call option on a security which it already owns. The Funds will not
write call options on when-issued securities. In addition, the Funds will not
sell a covered call option if, as a result, the aggregate market value of all
portfolio securities of Fund covering call options or subject to put options
exceeds 10% of the market value of the Fund's net assets.
If a Fund desires to sell a particular security from its portfolio on which it
has written a call option, or purchased a put option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the security.
There is no assurance that the Fund will be able to effect such closing
transactions at a favorable price. If the Fund cannot enter into such a
transaction, it may be required to hold a security that it might otherwise have
sold, in which case it would continue to be at market risk on the security.
SHORT SALES. The Funds may each 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 a decline in the market value of that security. A short sale is
"against the box" to the extent that a Fund contemporaneously owns or has the
right to obtain securities identical to those sold short.
OVER-THE-COUNTER OPTIONS. The Funds may invest in Over-the-Counter options
("OTC options") on U.S. Government securities. OTC options are purchased from
or sold (written) to dealers or financial institutions which have entered into
direct agreements with a Fund. With OTC options, such variables as expiration
date, exercise price and premium will be agreed upon between a Fund and the
transacting dealer, without the intermediation of a third party such as the
Options Clearing Corporation. The Adviser monitors the creditworthiness of
dealers with whom a Fund enters into OTC option transactions under the general
supervision of the Trustees of the
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Funds. If the transaction dealer fails to make or take delivery of the U.S.
Government securities underlying an option it has written in accordance with the
terms of the option as written, the Funds would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Funds will
engage in OTC option transactions only with primary U.S. Government securities
dealers recognized by the Federal Reserve Bank of New York.
STOCK INDEX OPTIONS. The Funds may purchase options to hedge against risks of
broad price movements in the equity markets which in some market environments
may correlate more closely with movements in the value of lower rated bonds than
to changes in interest rates. When a Fund sells an option on a stock index, it
will have to establish a segregated account with its custodian in which the Fund
will deposit cash or cash equivalents or a combination of both in an amount
equal to the market value of the option, and will have to maintain the account
while the option is open. For some options, no liquid secondary market may
exist or the market may cease to exist.
PRIVATELY ISSUED COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS ("CMOs"), INTEREST
OBLIGATIONS ("IOs") AND PRINCIPAL OBLIGATIONS ("POs"). Each Fund may invest up
to 5% of its net assets in Privately Issued Collateralized Mortgage-Backed
Obligations ("CMOs"), Interest Obligations ("IOs") and Principal Obligations
("POs") when the Adviser believes that such investments are consistent with the
Fund's investment objective. Collateralized mortgage obligations or "CMOs" are
debt obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, privately issued CMOs are collateralized by Ginnie Mae,
Fannie Mae or Freddie Mac Certificates, but also may be collateralized by whole
loans or private pass-throughs (such collateral collectively hereinafter
referred to as "Mortgage Assets"). Multi-class pass-through securities are
equity interests in a trust composed of Mortgage Assets. Unless the context
indicates otherwise, all references herein to CMOs include multi-class pass-
through securities. Payments of principal of and interest on the Mortgage
Assets, and any reinvestment income thereon, are the sources of funds used to
pay debt service on the CMOs or make scheduled distributions on the multi-class
pass-through securities.
In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche", is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
The principal of and interest on the Mortgage Assets may be allocated among the
several classes of a series of a CMO in innumerable ways.
The Funds may also invest in, among others, parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally call for payments of a
specified amount of principal on each payment date.
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Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities. SMBS may be issued by agencies or instrumentalities of the U.S.
government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. SMBS are
structured with two or more classes of securities that receive different
proportions of the interest and principal distributions on a pool of Mortgage
Assets. A common type of SMBS will have at least one class receiving only a
small portion of the interest and a larger portion of the principal from the
Mortgage Assets, while the other classes will receive primarily interest and
only a small portion of the principal. In the most extreme case, one class will
receive all of the interest (the interest-only or "IO" class), while the other
class will receive all of the principal (the principal-only or "PO" class). The
yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying Mortgage Assets, and
a rapid rate of principal payments may have a material adverse effect on such
security's yield to maturity. If the underlying Mortgage Assets experience
greater than anticipated prepayments of principal, a Fund may fail to recoup
fully its initial investment in these securities. The determination of whether
a particular government-issued IO or PO backed by fixed-rate mortgages is liquid
is made by the Adviser under guidelines and standards established by the Board
of Trustees. Such a security may be deemed liquid if it can be disposed of
promptly in the ordinary course of business at a value reasonably close to that
used in the calculation of net asset value per share.
FUTURES CONTRACTS, OPTIONS ON FUTURES CONTRACTS AND FOREIGN CURRENCY
TRANSACTIONS. Each Fund may enter into futures contracts, options on futures
contracts and foreign currency transactions. The Funds will enter into these
transactions solely for the purpose of hedging against the effects of changes in
the value of its portfolio securities or those it intends to purchase due to
anticipated changes in interest rates and currency values, and not for the
purpose of speculation.
FUTURES CONTRACTS. Each Fund may enter into both interest rate futures contracts
and foreign currency futures contracts on domestic and foreign exchanges. A
futures contract to sell a debt security or foreign currency (a "short" futures
position), creates an obligation by the seller to deliver a specified amount of
the underlying security or foreign currency at a certain future time and price.
A futures contract to purchase a debt security or foreign currency (a "long"
futures position) creates an obligation by the purchaser to take delivery of a
specified amount of the underlying security or foreign currency at a certain
future time and price. Although the terms of futures contracts specify actual
delivery or receipt of the underlying commodity, futures contracts generally are
closed out before the delivery date without making or taking delivery by
entering into an opposite position in the same commodity on the same (or a
linked) exchange.
Upon entering into a futures contract, a Fund will be required to deposit with a
broker an amount of cash or cash equivalents equal to approximately 1% to 5% of
the contract price, which amount is subject to change by the exchange on which
the contract is traded or by the broker. This amount, which is known as
"initial margin," does not involve the borrowing of funds to finance the
transactions; rather, it is in the nature of a performance bond or good faith
deposit on the contract that will be returned to the Fund upon termination of
the contract, assuming all contractual obligations have been satisfied.
Subsequent payments, known as "variation margin,"
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to and from the broker, will be made daily as the price of the instrument
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable ("marking-to-market").
INTEREST RATE FUTURES CONTRACTS. An interest rate futures contract provides for
the future sale and purchase of a specified amount of a certain debt security at
a stated date, place and price. The Funds may enter into interest rate futures
contracts to protect against fluctuations in interest rates affecting the value
of debt securities that a Fund either holds or intends to acquire. Interest
rate futures contracts currently are based on long-term Treasury Bonds, Treasury
Notes, three-month Treasury Bills and Government National Mortgage Association
modified pass-through mortgage-backed securities ("GNMA pass-through
securities"), and 90-day commercial paper.
FOREIGN CURRENCY FUTURES CONTRACTS. A foreign currency futures contract
provides for the future sale and purchase of a specified amount of a certain
foreign currency at a stated date, place and price. The Funds may enter into
foreign currency futures contracts to attempt to establish the rate at which it
would be entitled to make a future exchange of United States dollars for another
currency. At present, foreign currency futures contracts are based on British
pounds, German deutsche marks, Canadian dollars, Japanese yen, French francs,
Swiss francs, and ECUs.
OPTIONS ON FUTURES CONTRACTS. The Funds may purchase and sell put and call
options on interest rate futures contracts as a hedge against changes in
interest rates and on foreign currency futures contracts as a hedge against
fluctuating currency values, in lieu of purchasing and writing options directly
on the underlying security or currency or purchasing and selling the underlying
futures contracts.
The purchase of an option on an interest rate futures contract will give the
Funds the right to enter into a futures contract to purchase (in the case of a
call option) or to enter into a futures contract to sell (in the case of a put
option) a particular debt security at a specified exercise price at any time
prior to the expiration date of the option. The potential loss related to the
purchase of an option on a futures contract is limited to the premium paid for
the option plus related transaction costs. A call option sold by a Fund exposes
the Fund during the term of the option to the possible loss of an opportunity to
realize appreciation in the market price of the underlying security or to the
possible continued holding of a security which might otherwise have been sold to
protect against depreciation in the market price of the security. In selling
puts, there is a risk that a Fund may be required to buy the underlying security
at a disadvantageous price. Options on interest rate futures contracts
currently are available with respect to Treasury Bonds, Treasury Notes, and
Eurodollars.
OPTIONS ON INTEREST RATE FUTURES. Each Fund may purchase a put option on an
interest rate futures contract to hedge against a decline in the value of its
portfolio securities as a result of rising interest rates. Each Fund may
purchase a call option on an interest rate futures contract to hedge against the
risk of an increase in the price of securities it intends to purchase resulting
from declining interest rates. The Funds may sell put and call options on
interest rates futures contracts as part of closing sale transactions to
terminate its option positions.
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OPTIONS ON FOREIGN CURRENCY FUTURES. The purchase of options on foreign
currency futures contracts gives each Fund the right to enter into a futures
contract to purchase (in the case of a call option) or to sell (in the case of a
put option) a particular currency at a specified price at any time during the
period before the option expires. Options on foreign currency futures currently
are available with respect to British pounds, German deutsche marks and Swiss
francs. The Funds may purchase options on foreign currency futures as a hedge
against fluctuating currency values.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Funds may engage in foreign currency
exchange transactions to hedge against uncertainty in the level of future
exchange rates. The Funds may conduct its currency exchange transactions on a
"spot" (I.E., cash) basis at the rate then prevailing in the currency exchange
market, or on a forward basis, by entering into futures or forward contracts to
purchase or sell currency. The Fund's dealings in foreign currency exchange
contracts is limited to hedging.
FORWARD FOREIGN CURRENCY CONTRACTS. A forward foreign currency contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract as agreed
upon by the parties, at a price set at the date of the contract. Forward
currency contracts are entered into in the interbank market on a principal basis
directly between currency dealers, which usually are large commercial banks and
brokerage houses, and their customers, and therefore generally involve no
margin, commissions or other fees. Forward currency contracts will establish a
rate of exchange that can be achieved in the future and thus limit the risk of
loss due to a decline in the value of the hedged currency but also limit any
potential gain that might result in the event the value of the currency
increases.
OPTIONS ON FOREIGN CURRENCY. The Funds may also purchase and sell put and call
options for the purpose of hedging against changes in future currency exchange
rates. An option on a foreign currency gives the purchaser, in return for a
premium paid plus related transaction costs, the right to sell (in the case of a
put option) or to buy (in the case of a call option) the underlying currency at
a specified price until the option expires. The value of an option on foreign
currency depends upon the value of the foreign currency when compared to the
value of the United States dollar. Currency options traded on United States or
other exchanges may be subject to position limits, which may affect the ability
of the Fund to hedge its positions. The Funds will purchase and sell options on
foreign exchanges to the extent permitted by the Commodity Futures Trading
Commission ("CFTC").
The Funds may purchase or sell options on currency only when the Adviser
believes that a liquid secondary markets exists for these options; however, no
assurance can be given that a liquid secondary market will exist for a
particular option at any specific time.
RISK FACTORS AND SPECIAL CONSIDERATIONS. FUTURES CONTRACTS AND RELATED OPTIONS.
A Fund will not use leverage when it enters into long futures contracts or
related options. For each long position that a Fund enters into, it will
segregate cash or cash equivalents having a value equal to the market value of
the contract as collateral with the custodian of the Fund. A Fund will not
enter into futures contracts and related options if as a result the aggregate of
the initial margin
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deposits on a Fund's existing futures and premiums paid for unexpired options
exceeds 5% of the fair market value of that Fund's assets.
Using futures contracts and related options involves certain risks, including
(1) the risk of imperfect correlation between fluctuations in the value of a
futures contract and the portfolio security that is being hedged; (2) the risk
that a Fund may underperform a fund that does not make use of these
instruments; (3) the risk that no active market will be available to offset a
position; and (4) the risk that the Adviser will not be able to predict
correctly movements in the direction of the interest rate and foreign currency
markets. Loss from futures transactions is potentially unlimited.
Certain exchanges on which futures are traded may establish daily limits in the
amount that the price of a futures or related option contract may fluctuate from
the previous day's settlement price. When a daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that
limit. If a daily limit were reached, a Fund might be prevented from
liquidating unfavorable positions and thus incur losses. In certain situations,
a Fund might be unable to close a position and might also have to make daily
cash payments of variation margin.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Foreign currency futures contracts and
related options, forward foreign currency contracts and options on foreign
currency may be traded on foreign exchanges. The regulation of transactions on
these exchanges may be less extensive than the regulation of transactions on
United States exchanges. The Funds will trade only those options approved by
the CFTC.
Transactions on foreign exchanges also may not involve a clearing mechanism and
related guarantees and may be subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities. The value of such
positions also could be affected adversely by (1) other, foreign political,
legal and economic factors; (2) a lack of information on which to make trading
decisions compared to that which is available in the United States; (3) a delay
in the ability to act on significant events occurring in the foreign markets
during non-business hours in the United States; (4) different exercise and
settlement terms from those imposed in the United States; and (5) less trading
volume than occurs on United States exchanges.
In addition, foreign exchanges offer less protection against defaults in the
forward trading of currencies than is available on United States exchanges.
Because a forward foreign currency contract is not guaranteed by an exchange or
clearing house, a default on the contract would deprive the Fund of unrealized
profits or would force the Fund to cover its commitments for purchase of resale,
if any, at the current market price.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION. The Adviser, and the Subadviser
in the case of the Growth Fund, places orders for the purchase and sale of
securities, supervises their execution and negotiates brokerage commissions on
behalf of each Fund. For purposes of this section, discussion of the Adviser
includes the Subadviser, but only with respect to the Growth Fund. It is the
practice of the Adviser to seek the best prices and best execution of orders and
to negotiate brokerage commissions which in the Adviser's opinion are reasonable
in relation
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to the value of the brokerage services provided by the executing broker.
Brokers who have executed orders for the Funds are asked to quote a fair
commission for their services. If the execution is satisfactory and if the
requested rate approximates rates currently being quoted by the other brokers
selected by the Adviser, the rate is deemed by the Adviser 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 a Fund an unusually favorable trading
opportunity, or if the broker regards its research services as being of
exceptional value, and payment of such commissions is authorized by the Adviser
after the transaction has been consummated. If the Adviser 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. The Adviser
believes that each Fund benefits with a securities industry comprised of many
and diverse firms and that the long-term interest of shareholders of the Funds
is best served by its brokerage policies which include paying a fair commission
rather than seeking to exploit its leverage to force the lowest possible
commission rate. The primary factors considered in determining the firms to
which brokerage orders are given are the Adviser's appraisal of the firm's
ability to execute the order in the desired manner, the value of research
services provided by the firm, and the firm's attitude toward and interest in
mutual funds in general, including the sale of mutual funds managed and
sponsored by the Adviser. The Adviser does not offer or promise to any broker
an amount or percentage of brokerage commissions as an inducement or reward for
the sale of shares of the Funds. Over-the-counter purchases and sales are
transacted directly with principal market-makers except in those circumstances
where in the opinion of the Adviser 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 the Adviser's staff since the brokers as a group tend to
monitor a broader universe of securities and other matters than the Adviser's
staff can follow. In addition, it provides the Adviser with a diverse
perspective on financial markets. Research and investment information is
provided by these and other brokers at no cost to the Adviser and is available
for the benefit of other accounts advised by the Adviser and its affiliates and
not all of this information will be used in connection with the Funds. While
this information may be useful in varying degrees and may tend to reduce the
Adviser's expenses, it is not possible to estimate its value and in the opinion
of the Adviser it does not reduce the Adviser's expenses in a determinable
amount. The extent to which the Adviser makes use of statistical, research and
other services furnished by brokers is considered by the Adviser in the
allocation of brokerage business but there is no formula by which such business
is allocated. The Adviser does so in accordance with its judgment of the best
interest of the Funds and their 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
15
<PAGE>
securities at a net price. Each Fund will also purchase such securities in
underwritten offerings and will, on occasion, purchase securities directly from
the issuer. Generally, fixed-income securities are traded on a net basis and do
not involve brokerage commissions. The cost of executing fixed-income
securities transactions consists primarily of dealer spreads and underwriting
commissions.
In purchasing and selling fixed-income securities, it is the policy of each Fund
to obtain the best results 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 the
Adviser generally seeks reasonably competitive spreads or commissions, the Funds
will not necessarily pay the lowest spread or commission available.
Each Fund may, in circumstances in which two or more dealers are in a position
to offer comparable results, give preference to a dealer which has provided
statistical or other research services to the Funds. By allocating transactions
in this manner, the Adviser is able to supplement its research and analysis with
the views and information of other securities firms.
During the fiscal year ended December 31, 1995, each of the Funds listed below
paid total brokerage commission indicated below.
Brokerage Commissions Paid During 1995 Fiscal Year
Northstar Growth Fund $8326.73
Northstar Income and Growth Fund $8468.78
Northstar Multi-Sector Bond Fund $ 375
Northstar High Yield Bond Fund $ -0-
PORTFOLIO TURNOVER. A change in securities held in the portfolio of a Fund is
known as "Portfolio Turnover" and may involve the payment by a Fund of dealer
mark-ups or brokerage or underwriting commissions and other transaction costs on
the sale of securities, as well as on the reinvestment of the proceeds in other
securities. Portfolio turnover rate for a fiscal year is the percentage
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. A Fund cannot accurately predict its
turnover rate, however the rate will be higher when a 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. The ability of a Fund
to make purchases and sales of securities and to engage in options and futures
transactions will be limited by certain requirements of the Internal Revenue
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.
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<PAGE>
SERVICES OF THE ADVISER AND ADMINISTRATOR. Pursuant to an Investment Advisory
Agreement with the Funds, Northstar Investment Management Corporation acts as
the investment adviser to each Fund. In this capacity, the Adviser, subject to
the authority of the Trustees, and subject to certain responsibilities being
delegated to the Subadviser for the Growth Fund, is responsible for furnishing
continuous investment supervision to the Funds and is responsible for the
management of the Funds' portfolios.
The Adviser is an indirect, majority owned subsidiary of ReliaStar Financial
Corporation ("ReliaStar"). Combined minority interests held by members of
senior management currently equal 20%. ReliaStar is a publicly traded holding
company whose subsidiaries specialize in the insurance business. Through the
Affiliated Insurance Companies and other subsidiaries, ReliaStar issues and
distributes individual life insurance and annuities, employee benefit contracts,
retirement contracts and life and health reinsurance, and mutual funds and
provides related investment management services. The address of the Adviser is
Two Pickwick Plaza, Greenwich, CT 06830. The address of ReliaStar is 20
Washington Avenue South, Minneapolis, MN 55401.
The Adviser charges a fee at the annual rate of .75% on the first $250,000,000
of aggregate average daily net assets of each Fund, .70% on the next
$250,000,000 of such assets, .65% on the next $250,000,000 of such assets; .60%
on the next $250,000,000 of such assets, and .55% on the remaining aggregate
daily net assets of each Fund in excess of $1 billion.
Northstar Administrators Corporation ("Administrator") serves as administrator
for the Funds pursuant to an Administrative Services Agreement with the Funds.
The Administrator is an affiliate of the Adviser. The address of the
Administrator is Two Pickwick Plaza, Greenwich, Connecticut 06830. 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 Funds' business, except for those services performed by the Funds'
Adviser under the Investment Advisory Agreement, and the custodian and
accounting agent for the Funds under the Custodian Agreement.
The Administrator acts as liaison among these service providers to the Funds.
The Administrator is also responsible for ensuring that the Funds operate in
compliance with applicable legal requirements and for monitoring the Adviser for
compliance with requirements under applicable law and with the investment
policies and restrictions of the Funds.
The Administrator's fee is accrued daily against the value of each Fund's net
assets and is payable by each Fund monthly. The fee is computed daily and
payable monthly, at an annual rate of .10% of each Fund's average daily net
assets.
The Investment Advisory Agreement was approved by the Trustees of the Trust on
January 26, 1994, and by the sole Shareholder of each Fund on April 15, 1994.
The Investment Advisory Agreement became effective on May 2, 1994 and will
continue in effect until May 1, 1996.
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Thereafter, the Investment Advisory Agreement will continue in effect from year
to year if specifically approved annually (a) by the Trustees, acting separately
on behalf of each Fund, including a majority of the Disinterested Trustees, or
by (b) a majority of the outstanding voting securities of each Fund as defined
in the 1940 Act.
The Investment Advisory Agreement may be terminated without penalty at any time
by a similar vote upon 60 days' notice or by the Adviser upon 60 days' written
notice and will automatically terminate in the event of its assignment as
defined in Section 2(a)(4) of the 1940 Act.
The Administrative Services Agreement was approved by the Trustees of the Trust
on January 26, 1994. The Agreement became effective on May 2, 1994 and will
continue in effect until May 1, 1996, and from year to year thereafter, provided
such continuance is approved annually by a majority of the Trustees of the
Trust.
During the fiscal years ended December 31, 1994 and 1995, the Funds paid the
Adviser and Administrator the following investment advisory and administrative
fees, respectively:
<TABLE>
<CAPTION>
Advisory Fees Administrative Fees
------------------ -------------------
1995 1994 1995 1994
------- -------- -------- --------
<S> <C> <C> <C> <C>
Growth Fund (1) $23,854 18,145 $3,180 1,753
Income and Growth Fund (2) $40,195 13,661 $5,359 1,822
Multi-Sector Fund (3) $23,984 12,911 $3,198 1,724
High Yield Fund (4) $27,922 12,580 $3,723 1,677
</TABLE>
(1) Does not reflect expense reimbursements, respectively,
of $39,351 and 25,423.
(2) Does not reflect expense reimbursements, respectively,
of $50,661 and 25,973.
(3) Does not reflect expense reimbursements, respectively,
of $40,437 and 24,275.
(4) Does not reflect expense reimbursements, respectively,
of $48,482 and 25,975.
SERVICES OF THE SUBADVISER. Pursuant to a Subadvisory Agreement between the
Adviser and the Subadviser, effective February 1, 1996, Navellier Fund
Management, Inc. serves as subadviser to the Growth Fund. In this capacity,
Navellier, subject to the supervision and control of the Adviser and the
Trustees of the Growth Fund, will manage the Growth Fund's portfolio
investments, consistently with such Fund's investment objective, and will
execute any of the Growth 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 the Adviser. As compensation for its
services, the Adviser will pay the Subadviser at the annual rate of 0.48 of 1%
of the average daily net assets of the Growth Fund.
The Subadviser is wholly owned and controlled by its sole stockholder, Louis G.
Navellier. The Subadviser's address is 920 Incline Way, Incline Village, Nevada
89450. The Subadvisory Agreement was approved by the Trustees of the Fund
on December 1, 1995, and by vote of shareholders of the Fund on January 31,
1996. The Subadvisory Agreement may be terminated without payment of any
penalty by the Adviser, the Subadviser, the Trustees of the Fund or the
shareholders on not more than 60 nor less than 30 days' prior written notice.
Otherwise, the Subadvisory Agreement will remain in effect for two years and
will, thereafter, continue in effect
18
<PAGE>
from year to year, subject to the annual approval of the Trustees of the Growth
Fund, or the vote of a majority of the outstanding voting securities of the
Growth Fund, and the vote, cast in person at a meeting duly called and held, of
a majority of the Trustees of Growth Fund who are not parties to the Subadvisory
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party.
NET ASSET VALUE. The net asset value per share of each Fund will be determined
at the close of the general trading session of the New York Stock Exchange (the
"Exchange"), on each business day the Exchange is open. The Exchange is
scheduled to be closed on New Year's Day, President's Day (observed), Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
The net asset value per share of each Fund is computed by dividing the value of
such Fund's securities, plus any cash and other assets (including dividends and
interest accrued but not collected) less all liabilities (including accrued
expenses) by the number of shares of the Fund outstanding. See the Trust's
current Prospectus for more information.
PURCHASES, REDEMPTIONS, AND EXCHANGE TRANSACTIONS. For information on purchases
and redemptions of shares, see "Purchase of Shares" and "Redemption of Shares"
in the Trust's Prospectus. The Trust may suspend the right of redemption of
shares of any Fund and may postpone payment for more than seven days for any
period: (i) during which the New York Stock Exchange is closed other than
customary weekend and holiday closings or during which trading on the New York
Stock Exchange is restricted; (ii) when the Securities and Exchange Commission
determines that a state of emergency exists which may make payment or transfer
not reasonably practicable; (iii) as the Securities and Exchange Commission may
by order permit for the protection of the security holders of the Funds; or (iv)
at any other time when the Funds may, under applicable laws and regulations,
suspend payment on the redemption of their shares.
Shares of any Fund may be exchanged for shares of any other Funds. Exchanges
are treated as a redemption of shares of one Fund and a purchase of shares of
one or more of the other Funds and are effected at the respective net asset
value per share of each Fund on the date of the exchange. The Trust reserves
the right to modify or discontinue its exchange privilege at any time without
notice.
Variable Contract Owners do not deal directly with the Trust with respect to the
purchase, redemption, or exchange of shares of a Fund, and should refer to the
prospectus for the Variable Contract for information on allocation of premiums
and on transfers of account value among divisions of the insurance company
separate account that invest in the Funds.
The Trust reserves the right to discontinue offering shares of one or more Funds
at any time. In the event that a Fund ceases offering its shares, any
investments allocated by the insurance company to such Fund will be invested in
the fixed account portfolio or any successor to such portfolio.
19
<PAGE>
DIVIDENDS AND DISTRIBUTIONS. Net investment income of the Northstar High Yield
and Multi-Sector Bond Funds is declared as dividends daily and paid quarterly.
For the Northstar Growth, and Income and Growth Funds, net investment income
will be declared and paid quarterly. Any net realized long-term capital gains
(the excess of net long-term capital gains over net short-term capital losses)
for any Fund will be declared and paid at least once annually. Net realized
short-term capital gains may be declared and paid more frequently.
FEDERAL INCOME TAX STATUS. Each Fund intends to qualify each year as a
regulated investment company under Subchapter M of the Code. Accordingly, a
Fund generally expects not to be subject to federal income tax if it meets
certain source of income, diversification of assets, income distribution, and
other requirements, to the extent it distributes its investment company taxable
income and its net capital gains.
Distributions of investment company taxable income (which includes among other
items, interest, dividends, and net realized short-term capital gains in excess
of net realized long-term capital losses) and of net realized capital gains,
whether received in cash or additional shares, are included in the gross income
of the shareholder (Variable Account). Distributions of investment company
taxable income are treated as ordinary income for tax purposes in the hands of a
separate account. Net capital gains designated as capital gain distributions by
a Fund will, to the extent distributed, be treated as long-term capital gains in
the hands of the Variable Account regardless of the length of time the Variable
Account may have held the shares. A distribution will be treated as paid on
December 31 of the calendar year if it is declared by a Fund in October,
November, or December of that year to the shareholder of record on a date in
such a month and paid by the Fund during January of the following calendar year.
Such distributions will be taxable to the Variable Account in the calendar year
in which they are declared, rather than the calendar year in which they are
received. Tax consequences to the Variable Contract Owners are described in the
prospectus for the Variable Account.
If a 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.
Certain requirements relating to the qualification of a Fund as a regulated
investment company under the Code may limit the extent to which a Fund will be
able to engage in transactions in
20
<PAGE>
options, futures contracts, or forward contracts. In addition, certain Fund
investments may generate income for tax purposes which must be distributed even
though cash representing such income is not received until a later period. To
timely meet its distribution requirements, the Fund may in those circumstances
be forced to raise cash by other means, including borrowing or disposing of
assets at a time when it may not otherwise be advantageous to do so.
To comply with regulations under Section 817(h) of the Code, each Fund generally
will be required to diversify its investments, so that on the last day of each
quarter of a calendar year, no more than 55% of the value of its assets is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. For this purpose,
securities of a single issuer are treated as one investment and each U.S.
Government agency or instrumentality is treated as a separate issuer. Any
security issued, guaranteed, or insured (to the extent so guaranteed or insured)
by the U.S. or an agency or instrumentality of the U.S. is treated as a security
issued by the U.S. Government or its agency or instrumentality, whichever is
applicable. These regulations will limit the ability of a Fund to invest more
than 55% of its assets in direct obligations of the U.S. Treasury or in
obligations which are deemed to be issued by a particular agency or
instrumentality of the U.S. Government. If a Fund fails to meet the
diversification requirements under Code Section 817(h), income with respect to
Variable Contracts invested in the Fund at any time during the calendar quarter
in which the failure occurred could become currently taxable to the owners of
such Variable Contracts and income for prior periods with respect to such
Contracts also would be taxable, most likely in the year of the failure to
achieve the required diversification. Other adverse tax consequences also could
ensue.
In connection with the issuance of the regulations governing diversification
under Section 817(h) of the Code, the Treasury Department announced that it
would issue future regulations or rulings addressing the circumstances in which
a Variable Contract owner's control of the investments of a separate account may
cause the contract owner, rather than the insurance company, to be treated as
the owner of the assets held by a separate account. If the Variable Contract
Owner is considered the owner of the securities underlying a separate account,
income and gains produced by those securities would be included currently in the
Variable Contract owner's gross income. Although it is not known what standards
will be incorporated in future regulations or other pronouncements, the Treasury
staff has indicated informally that it is concerned that there may be too much
contract owner control where the Fund underlying a separate account invests
solely in securities issued by companies in a specific industry. Similarly, the
ability of a contract owner to select a Fund representing a specific economic
risk may also be prescribed. These future rules and regulations proscribing
investment control may adversely affect the ability of the Funds to operate as
described in this Prospectus. There is, however, no certainty as to what
standard, if any, Treasury will ultimately adopt, and there can be no certainty
that the future rules and regulations will not be given retroactive application.
In the event that unfavorable rules or regulations are adopted, there can be no
assurance that these or other Funds will be able to operate as currently
described in the Prospectus, or that a Fund will not have to change its
investment objectives, investment policies, or investment restrictions. While a
Fund's investment objective is fundamental and may be changed only by a vote of
a majority of its outstanding shares, the Trustees have reserved the right to
modify the investment policies of a Fund as
21
<PAGE>
necessary to prevent any such prospective rules and regulations from causing the
Variable Contract Owners to be considered the owners of the Funds underlying the
Variable Account.
Reference is made to the prospectus of the Variable Account for information
regarding the federal income tax treatment of distributions to the Variable
Account.
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 of the Fund is
c/o Northstar Investment Management Corporation, Two Pickwick Plaza, Greenwich,
CT 06830. "A" signifies a member of the Audit Committee, and "V" signifies a
member of the Valuation Committee, of the Board.
JOHN TURNER * -- TRUSTEE AND CHAIRMAN. Chairman and Chief Executive Officer of
ReliaStar Financial Corp. and Northwestern National Life Insurance Co. (NWNL)
since May 1993, and Chairman of other ReliaStar affiliated insurance companies
since 1995. Prior to May 1993, President and Chief Executive Officer of
ReliaStar and NWNL. Director of Northstar and affiliates and Trustee and
Chairman of other Northstar affiliated investment companies.
MARK L. LIPSON * -- TRUSTEE AND PRESIDENT. Director, Chairman and Chief
Executive Officer of Northstar Investment Management Corporation and NWNL
Northstar, Inc. Director and President of Northstar Administrators Corporation
and Director, Chairman, Chief Executive Officer of Distributors, Inc. Trustee
and President of other Northstar affiliated investment companies. 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.
PAUL S. DOHERTY -- TRUSTEE. (A). President, Doherty, Wallace, Pillsbury and
Murphy, P.C., Director, Tambrands, Inc. Trustee of other Northstar affiliated
investment companies.
ROBERT B. GOODE, JR. -- TRUSTEE. (V). 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. Trustee of other Northstar
affiliated investment companies.
ALAN R. GOSULE. -- TRUSTEE. (A). Partner, Rogers & Wells. Director, F.L.
Putnam Investment Management Company.
WALTER H. MAY, JR. -- TRUSTEE. (A). Retired. Former Marketing Director for
Piper Jaffray, Inc.
DAVID W.C. PUTNAM. -- TRUSTEE (v). President and Director of F.L. Putnam
Securities Company F.L. Putnam Investment Management Co., Interstate Power Co.,
Trust Realty Corp. and Bow Ridge Mining Co; Director of Anchor Investment
Management Corp; President and Trustee of Anchor Capital Accumulation Trust,
Anchor International Bond Trust, Anchor Gold and Currency Trust, Anchor
Resources and Commodities Trust and Anchor Strategic Assets Trust.
JOHN R. SMITH -- TRUSTEE. (A). President (since 1991) of New England
Fiduciary Company; Chairman (since 1987) Massachusetts Educational Financing
Authority; Vice Chairman of Massachusetts Health and Education Authority, and
former Financial Vice President of Boston College (1970-1991).
22
<PAGE>
DAVID W. WALLACE -- TRUSTEE. (A)(V). Chairman of FECO Engineered Systems, Inc.,
Lone Star Industries and Putnam Trust Company. 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, and Chairman and Director/Trustee of the National Affiliated
Investment Companies. Trustee of other Northstar affiliated investment
companies.
ERNEST N. MYSOGLAND -- VICE PRESIDENT. Executive Vice President and Chief
Investment Officer-Equities of Northstar Investment Management Corporation.
From 1992 to August 1993, Senior Vice President and Chief Investment Officer-
Equities of National Securities & Research Corporation and Vice President of
National Affiliated Investment Companies. Prior to joining National in 1992,
Mr. Mysogland was the President & Chief Investment Officer of Reinoso Asset
Management. From 1988 to 1991, Mr. Mysogland was Executive Vice President and
Chief Investment Officer of Gintel Equity Management. Vice President of other
Northstar affiliated investment companies.
THOMAS OLE DIAL -- VICE PRESIDENT. Executive Vice President and Chief
Investment Officer- Fixed Income of Northstar Investment Management Corporation.
From 1989 to August 1993, Executive Vice President and Chief Investment Officer-
Fixed Income of National Securities & Research Corporation. From 1988 to 1989,
President, Dial Capital Management. Vice President of other Northstar affiliated
investment companies.
GEOFFREY WADSWORTH -- VICE PRESIDENT. Vice President of Northstar Investment
Management Corporation and Portfolio Manager. Former Vice President and
Portfolio Manager of National Securities & Research Corp. Vice President of
other Northstar affiliated investment companies.
AGNES MULLADY -- VICE PRESIDENT AND TREASURER. Senior Vice President and Chief
Financial Officer of NIMC, Senior Vice President and Treasurer of Northstar
Administrators Corporation, and Vice President and Treasurer of Northstar
Distributors, Inc. From 1987 to 1993 Treasurer and Vice President of National
Securities & Research Corporation. Vice President and Treasurer of other
Northstar affiliated investment companies.
LISA M. HURLEY - VICE PRESIDENT AND SECRETARY. Senior Vice President, General
Counsel and Secretary of NIMC. Executive Vice President and Secretary of
Northstar Administrators Corporation, and Vice President and Secretary of NWNL
Northstar Distributors, Inc. Vice President and Secretary of other Northstar
affiliated investment companies.
* Messrs. Turner and Lipson are each deemed to be an "interested person" within
the meaning of the 1940 Act.
NIMC and Northstar Administrators Corporation makes their personnel available to
serve as Officers and "Interested Trustees" of the Fund. All Officers and
Interested Trustees of the Fund
23
<PAGE>
are compensated by NIMC or Northstar Administrators Corporation. Trustees who
are not "interested persons" of the adviser are paid an annual retainer fee of
$500, which fee is allocated evenly among the Funds. No meeting or committee
fees will be paid until combined assets in the Funds reach $50 million; however
the Funds reimburse Trustees for all expenses incurred by them in connection
with such meetings. The Funds currently have an Audit Committee (members noted
by (a), a Valuation Committee (members noted by (v), and a Nominating Committee
consisting of all of the Independent Trustees. On March 31, 1995, no Officer or
Trustee of the Funds, owned beneficially or of record or had an interest in
shares of any Fund.
OTHER INFORMATION
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P. has been selected as the
independent accountants for the Trust. Coopers & Lybrand L.L.P. will audit the
Trust's annual financial statements and express an opinion thereon.
CUSTODIAN/ACCOUNTING SERVICES AGENT. State Street Bank and Trust Company acts
as custodian of the Fund's assets and performs fund accounting services.
REPORTS TO SHAREHOLDERS. The fiscal year of the Trust ends on December 31. Each
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.
SHAREHOLDER AND TRUSTEE RESPONSIBILITY. Shareholders of a Massachusetts
business trust may, under certain circumstances, be held personally liable as
partners for the obligations of the Trust. The risk of a shareholder incurring
any financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations.
The Declaration of Trust contains an express disclaimer of shareholder liability
for acts or obligations of the Trust and provides that notice of the disclaimer
must be given in each agreement, obligation or instrument entered into or
executed by the Trust or Trustees. The Declaration of Trust provides for
indemnification of any shareholder held personally liable for the obligations of
the Trust and also provides for the Trust to reimburse the shareholder for all
legal and other expenses reasonably incurred in connection with any such claim
or liability.
Under the Declaration of Trust, the trustees or officers are not liable for
actions or failure to act; however, they are not protected from liability by
reason of their willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office. The Trust
provides indemnification to its trustees and officers as authorized by the 1940
Act and the rules and regulations thereunder.
FINANCIAL STATEMENTS. The Northstar/NWNL Trust's audited financial statements
dated December 31, 1995 and the report of the independent accountants,
Coopers & Lybrand, L.L.P. with respect to such financial statements, are hereby
incorporated by reference to the Annual Report to Shareholders of the
Northstar/NWNL Trust for the fiscal year ended December 31, 1995.
REGISTRATION STATEMENT. A registration statement has been filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act. The
Prospectus and this Statement of Additional Information do not contain all
information set forth in the registration statement, its amendments and exhibits
thereto that the Trust has filed with the Securities and Exchange Commission,
Washington, D.C., to all of which reference is hereby made.
24
<PAGE>
PERFORMANCE INFORMATION. Each Fund may, from time to time, include its total
return and the Northstar Multi-Sector Bond and Northstar High Yield Bond Funds
may include their yields in advertisements or reports to shareholders or
prospective investors. Performance information for the Funds will not be
advertised or included in sales literature unless accompanied by comparable
performance information for a Separate Account to which the Funds offer their
shares.
A. TOTAL RETURN. Standardized quotations of average annual total return for
a Fund will be expressed in terms of the average annual compounded rate of
return for a hypothetical investment in the Fund over periods of 1,5 and 10
years (or up to the life of the Fund), calculated pursuant to the following
formula: P(1 + T) to the power of n = ERV (where P = a hypothetical initial
payment of $1,000, T = the average annual total return, n = the number of years,
and ERV = the ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the period). All total return figures reflect the deduction of
Fund expenses (on an annual basis), and assume that all dividends and
distributions on shares are reinvested when paid.
The total return for each Fund, so calculated, for the period since inception of
each Fund (May 6, 1994) and for the one year period ended December 31, 1995 is
set forth below:
Growth Fund Income and Growth Multi-Sector High Yield
Since Inception 16.75% 13.77% 9.75% 10.22%
One Year 24.78% 21.39% 14.97% 18.55%
Performance information for the Funds may be compared in reports and promotional
literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P 500"), Dow Jones
Industrial Average ("DJIA"), or other unmanaged indices so that investors may
compare each Fund's results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities markets in general;
(ii) other groups of mutual funds tracked by Lipper Analytical Services, Inc., a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives, and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall performance
or other criteria; and (iii) the Consumer Price Index (measure for inflation) to
assess the real rate of return from an investment in the Fund; (iv) well known
monitoring sources of CD performance rates such as Salomon Brothers, Federal
Reserve Bulletin, American Bankers, 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.
The Fund also may quote annual, average annual and annualized total return and
aggregate total return performance data, both as a percentage and as a dollar
amount based on a hypothetical $10,000 investment for various periods other than
those noted below. Such data will be
25
<PAGE>
computed as described above, except that the rates of return calculated will not
be average annual rates, but rather, actual annual, annualized or aggregate
rates of return.
B. YIELD. Yield is the net annualized yield based on a specified 30-day (or
one month) period assuming a semiannual compounding of income. Yield is computed
by dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:
Yield = 2[(a-b + 1)6 -1]
cd
Where:
a = dividends and interest earned during the period, including the
amortization of market premium or accretion of market discount
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
To calculate interest earned (for the purpose of "a" above) on debt obligations,
each Fund computes the yield to maturity of each obligation held by the Fund
based on the market value of the obligation (including actual accrued interest)
at the close of the last business day of the month, or, with respect to
obligations purchased during the month, the purchase price (plus actual accrued
interest). The yield to maturity is then divided by 360 and the quotient is
multiplied by the market value of the obligation (including actual accrued
interest) to determine the interest income on the obligation for each day of the
subsequent month that the obligation is in the Fund's portfolio.
Solely for the purpose of computing yield, the Funds recognize dividend income
by accruing 1/360 of the stated dividend rate of a security in the portfolio.
Undeclared earned income, computed in accordance with generally accepted
accounting principles, may be subtracted from the maximum offering price.
Undeclared earned income is the net investment income which, at the end of the
base period, has not been declared as a dividend, but is reasonably expected to
be declared as a dividend shortly thereafter.
The yield for each of the Northstar Multi-Sector Bond Fund and Northstar High
Yield Bond Fund, so calculated, for the one month period ended December 31, 1995
was 7.25% and 8.78%, respectively.
Quotations of yield or total return for the Funds will not take into account
charges and deductions against the Variable Account to which the Funds' shares
are sold or charges and deductions against the Variable Contracts issued by
Northwestern National or its affiliates. The Funds' yield and total return
should not be compared with mutual funds that sell their shares
26
<PAGE>
directly to the public since the figures provided do not reflect charges against
the Variable Account or the Variable Contracts. Performance information for any
Fund reflects only the performance of a hypothetical investment in the Fund
during the particular time period in which the calculations are based.
Performance information should be considered in light of the Funds' investment
objectives and policies, characteristics and quality of the portfolios and the
market conditions during the given time period, and should not be considered as
a representation of what may be achieved in the future.
27
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A: Financial Highlights for a share outstanding throughout
the period May 6, 1994 (commencement of operations) through December 31,
1995.
Included in Part B: The Audited Financial Statements as of December 31,
1995 for the fiscal year ended December 31, 1995, and the report of the
Independent Accountants, including the following:
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Portfolio of Investments
Notes to Financial Statements
are incorporated in the Statement of Additional Information for the
Trust by reference to the Annual Report to Shareholders for the Trust
for the fiscal year ended December 31, 1995.
(b) EXHIBITS - NORTHSTAR/NWNL TRUST
(1) Declaration of Trust*
(2) By-Laws*
(3)(4) N/A
(5)(a) Investment Advisory Agreement*
(5)(b) Form of Subadvisory Agreement
(6) N/A
(8) Custody Agreement*
(9) Administrative Services Agreement*
(10) Opinion of Counsel*
(11) Consent of Independent Public Accountants*
(12) Annual Report to Shareholders*
(13) N/A
(14) N/A
(15) N/A
(16) Performance Information*
(17) Powers of Attorney
(18) N/A
- ----------------------------
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Northwestern National Life Insurance Company and Northern Life Insurance
Company, and ReliaStar Bankers Security Life Insurance Co., which are
affiliated through a common parent company, ReliaStar Financial Corp., on
behalf of their respective separate accounts, together own a majority of the
outstanding shares of the Trust. These insurance companies will vote shares
of the Trust in accordance with instructions of contract owners having interests
in these separate accounts.
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of December 31, 1995, the Trust had three 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
(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.
<PAGE>
(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:
(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 Funds" in the Prospectus and Services of the Adviser and
Administrator" Services of the Subadviser, and "Trustees and Officers" in the
Statement of Additional Information, each of which is included in the
Registration Statement.
<PAGE>
Set forth below 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 December 31, 1993.
POSITION WITH OTHER SUBSTANTIAL
INVESTMENT BUSINESS, PROFESSION
NAME ADVISER VOCATION OR EMPLOYMENT
- ---- ------- ----------------------
- ---- ------- ----------------------
JOHN TURNER DIRECTOR CHAIRMAN AND CEO,
RELIASTAR FINANCIAL CORP. AND
NORTHWESTERN NATIONAL LIFE INS. CO.
JOHN FLITTIE DIRECTOR PRESIDENT AND COO, RELIASTAR FINANCIAL
CORP. AND NORTHWESTERN NATIONAL LIFE
INS. CO.
MARK L. LIPSON CHAIRMAN/CEO DIRECTOR AND OFFICER OF NORTHSTAR
DIRECTOR DISTRIBUTORS, INC., NORTHSTAR
ADMINISTRATORS CORP. AND NWNL NORTHSTAR,
INC.
THOMAS OLE DIAL EXECUTIVE VICE VICE PRESIDENT, NORTHSTAR AFFILIATED
PRESIDENT - CHIEF INVESTMENT COMPANIES, AND PRINCIPAL, TD
INVESTMENT OFFICER ASSOCIATES INC.
FIXED INCOME
PRESCOTT CROCKER VICE PRESIDENT/ VICE PRESIDENT, NORTHSTAR AFFILIATED
MANAGING DIRECTOR INVESTMENT COS. FORMER VICE PRESIDENT
AND PORTFOLIO MANAGER FOR BOSTON
SECURITY COUNSELLORS, INC.
MARGARET PATEL VICE PRESIDENT/ VICE PRESIDENT, NORTHSTAR AFFILIATE
MANAGING DIRECTOR INVESTMENT COS. FORMER VICE PRESIDENT
AND PORTFOLIO MANAGER FOR BOSTON
SECURITY COUNSELLORS, INC.
ROBERT J. ADLER EXECUTIVE VICE PRESIDENT, NORTHSTAR DISTRIBUTORS, INC.
PRESIDENT, SALES &
MARKETING
AGNES MULLADY SR. VICE PRESIDENT VICE PRESIDENT & TREASURER OF NORTHSTAR
AND CFO AFFILIATES AND THE NORTHSTAR AFFILIATED
INVESTMENT COS..
ERNEST MYSOGLAND EXEC.VICE PRESIDENT VICE PRESIDENT - NORTHSTAR AFFILIATED
CHIEF INVESTMENT INVESTMENT COMPANIES.
OFFICER - EQUITIES
GEOFFREY WADSWORTH VICE PRESIDENT/
INVESTMENTS AND
Set forth below is a list of each officer and director of the subadviser
indicating each business, profession, vocation or employment of a substantial
nature in which each such person has been engaged since December 31, 1993.
<TABLE>
<CAPTION>
Name and
Principal
Business Address Principal Occupations During Past Two Years
- ---------------- --------------------------------------------
<S> <C>
Louis Navellier Principal, Director and President of Navellier Fund
920 Incline Way Management, Inc. Mr. Navellier is and has been the CEO
Incline Village and President of Navellier & Associates Incorporated, an
NV 89450 investment management company since 1988, and has been publisher
and editor of MPT Review from August 1987 to the present, and
was publisher and editor of the predecessor investment advisory
newsletter OTC Insight, which he began in 1980 and wrote through
July 1987. Mr. Navellier is also Trustee, President, and Treasurer
of the Navellier Series Fund and CEO, President, Treasurer, and
Secretary of Navellier Management Inc., the Investment Adviser to
the Navellier Series Fund. Mr. Navellier is also CEO, President,
Secretary, and Treasurer of Navellier & Associates, Inc.,
Navellier Publications, Inc., MPT Review Inc., and Navellier
International Management Inc.
</TABLE>
<PAGE>
PORTFOLIO MANAGER
JEFFREY AURIGEMMA VICE PRESIDENT -
INVESTMENTS
MICHAEL GRAVES VICE PRESIDENT
INVESTMENTS
LISA M. HURLEY SR. VICE PRESIDENT VICE PRESIDENT AND SECRETARY OF
GENERAL COUNSEL & NORTHSTAR AFFILIATES AND NORTHSTAR
SECRETARY AFFILIATED INVESTMENT COS.
GERTRUDE PURUS VICE PRESIDENT VICE PRESIDENT OF NORTHSTAR AFFILIATES
OPERATIONS
STEPHEN VONDRAK VICE PRESIDENT FORMER REGIONAL MARKETING
SALES & MARKETING MANAGER, ROGER ENGEMANN
AND ASSOCIATES, 1991-1994.
MARK SFARRA VICE PRESIDENT -
MARKETING
ITEM 29 . PRINCIPAL UNDERWRITER
There is no principal underwriter for Registrant.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
State Street Bank and Trust Co., located at 225 Franklin Street, Boston, MA
02110-2804 maintains such records as Custodian, Transfer Agent and Fund
Accounting Agent, for the Trust and each Series:
(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.
(4) Shareholder Records
All other records required by item 30(a) are maintained at the office of the
Administrator, Two Pickwick Plaza, Greenwich, CT 06830.
ITEM 31. Management Services
Not Applicable
<PAGE>
ITEM 32. Undertakings
(a) Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Trustees when
requested in writing to do so by the holders of at least 10% of the Trusts'
outstanding shares of beneficial interest and in connection with such meeting to
comply with the provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.
(b) Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Greenwich and the State of Connecticut on the 27th
day of February, 1996.
REGISTRANT
By: MARK L. LIPSON
--------------------------------------
Mark L. Lipson, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
SIGNATURES TITLE DATE
JOHN G. TURNER Chairman and February 27, 1996
John G. Turner* Trustee
MARK L. LIPSON President and February 27, 1996
Mark L. Lipson* Trustee
JOHN R. SMITH Trustee February 27, 1996
John R. Smith*
PAUL S. DOHERTY Trustee February 27, 1996
Paul S. Doherty*
DAVID W. WALLACE Trustee February 27, 1996
David W. Wallace*
ROBERT B. GOODE, JR. Trustee February 27, 1996
Robert B. Goode, Jr.*
WALTER MAY Trustee February 27, 1996
Walter May*
<PAGE>
SIGNATURES TITLE DATE
ALAN L. GOSULE Trustee February 27, 1996
Alan L. Gosule*
DAVID W.C. PUTNAM Trustee February 27, 1996
David W.C. Putnam*
AGNES MULLADY Principal Financial February 27, 1996
Agnes Mullady and Accounting
Officer
By: LISA HURLEY*
Lisa Hurley
Attorney-in-fact
*Executed pursuant to powers of attorney filed herewith.
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Under
Part C of Form N-1A Name of Exhibit Page Number Herein
------------------- --------------- ------------------
1 Form of Declaration of Trust
2 Form of By-Laws
5(a) Form of Advisory Agreement
5(b) Form of Subadvisory Agreement
8 Form of Custody Agreement
9 Form of Administrative Services
Agreement
10 Opinion of Counsel
11 Consent of Independent Accountants
12 Annual Report to Shareholders
16 Schedule for Computation of Performance
Information
17 Powers of Attorney
27 Financial Data Schedule (EX-27)
<PAGE>
DECLARATION OF TRUST
NORTHSTAR/NWNL TRUST
DATED: DECEMBER 8, 1993
<PAGE>
TABLE OF CONTENTS
PAGE
----
----
ARTICLE I -- NAME AND DEFINITIONS 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II -- TRUSTEES 3
Section 2.1 General Powers 3
Section 2.2 Investments 3
Section 2.3 Legal Title 4
Section 2.4 Issuance and Repurchase of Shares 6
Section 2.5 Delegation; Committees 6
Section 2.6 Collection and Payment 6
Section 2.7 Expenses 7
Section 2.8 Manner of Acting; By-Laws 7
Section 2.9 Miscellaneous Powers 7
Section 2.10 Principal Transactions 8
Section 2.11 Number of Trustees 8
Section 2.12 Election and Term 8
Section 2.13 Resignation and Removal 9
Section 2.14 Vacancies 9
Section 2.15 Delegation of Power to Other Trustees 10
ARTICLE III -- CONTRACTS 10
Section 3.1 Distribution Contract 10
Section 3.2 Advisory or Management Contract 10
Section 3.3 Administrator 11
Section 3.4 Transfer Agent and Shareholder
Servicing Agents 11
Section 3.5 Affiliations of Trustees or Officers, Etc. 11
Section 3.6 Compliance with 1940 Act 12
ARTICLE IV -- LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES
AND OTHERS
Section 4.1 No Personal Liability of Shareholders,
Trustees, Etc. 12
Section 4.2 Non-Liability of Trustees, Etc. 13
Section 4.3 Mandatory Indemnification 13
Section 4.4 No Bond Required of Trustees 15
Section 4.5 No Duty of Investigation;
Notice in Trust Instruments, Etc. 15
<PAGE>
Section 4.6 Reliance on Experts, Etc. 16
ARTICLE V -- SHARES OF BENEFICIAL INTEREST 16
Section 5.1 Beneficial Interest 16
Section 5.2 Rights of Shareholders 16
Section 5.3 Trust Only 17
Section 5.4 Issuance of Shares 17
Section 5.5 Register of Shares 17
Section 5.6 Transfer of Shares 17
Section 5.7 Notices, Reports 18
Section 5.8 Treasury Shares 18
Section 5.9 Voting Powers 19
Section 5.10 Meetings of Shareholders 19
Section 5.11 Series Designation 20
Section 5.12 Assent to Declaration of Trust 22
Section 5.13 Class Designation 22
ARTICLE VI -- REDEMPTION AND REPURCHASE OF SHARES 23
Section 6.1 Redemption of Shares 23
Section 6.2 Price 24
Section 6.3 Payment 24
Section 6.4 Effect of Suspension of Determination
of Net Asset Value 24
Section 6.5 Repurchase by Agreement 25
Section 6.6 Redemption of Sub-Minimum Accounts 25
Section 6.7 Redemption of Shares in Order to
Qualify as Regulated Investment
Company; Disclosure of Holding 25
Section 6.8 Reductions in Number of Outstanding
Shares Pursuant to Net Asset Value
Formula 26
Section 6.9 Suspension of Right of Redemption 26
ARTICLE VII -- DETERMINATION OF NET ASSET VALUE, NET INCOME
AND DISTRIBUTIONS
Section 7.1 Net Asset Value 26
Section 7.2 Distributions to Shareholders 27
Section 7.3 Determination of Net Income; Constant
Net Asset Value; Reduction of
Outstanding Shares 28
Section 7.4 Allocation Between Principal and Income 29
Section 7.5 Power to Modify Foregoing Procedures 29
-ii-
<PAGE>
ARTICLE VIII -- DURATION; TERMINATION OF TRUST; AMENDMENT;
MERGERS, ETC. 29
Section 8.1 Duration 29
Section 8.2 Termination of Trust 29
Section 8.3 Amendment Procedures 30
Section 8.4 Merger, Consolidation and Sale of Assets 31
Section 8.5 Incorporation 31
ARTICLE IX -- REPORTS TO SHAREHOLDERS 32
ARTICLE X -- MISCELLANEOUS 32
Section 10.1 Filing 32
Section 10.2 Governing Law 33
Section 10.3 Counterparts 33
Section 10.4 Reliance by Third Parties 33
Section 10.5 Provisions in Conflict with Law or
Regulations 33
Section 10.6 Principal Place of Business 34
Section 10.7 Resident Agent 34
-iii-
<PAGE>
DECLARATION OF TRUST
NORTHSTAR/NWNL TRUST
DATED: DECEMBER 8, 1993
DECLARATION OF TRUST, made this 8th day of December, 1993 by the
undersigned Trustees (together with all other persons from time to tome duly
elected, qualified and serving as Trustees in accordance with the provisions of
Article II hereof, (the "Trustees");
WHEREAS, the Trustees desire to establish a trust for the investment and
reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided; and
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of the holders, from time to time, of the shares of
beneficial interest issued hereunder, and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1. NAME. The name of the Trust created hereby is
"Northstar/NWNL Trust".
SECTION 1.2. DEFINITIONS. Wherever they are used herein the following
terms have the following respective meanings:
(a) "ADMINISTRATOR" means a party furnishing services to the Trust
pursuant to any contract described in Section 3.3 hereof.
(b) "BY-LAWS" means the By-laws referred to in Section 2.8 hereof, as
from time to time amended.
(c) "CLASS" means the two or more classes as may be established and
designated from time to time by the Trustees pursuant to Section 5.13 hereof.
(d) "COMMISSION" has the meaning given it in the 1940 Act. The term
"Interested Person" has the meaning given it in the 1940 Act, as modified by any
applicable order or orders of the Commission. Except as otherwise defined by
the Trustees in conjuction with the establishment of any series of Shares, the
term "VOTE OF A MAJORITY OF THE SHARES OUTSTANDING AND ENTITLED TO VOTE" shall
have the same meaning as the term "VOTE OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES" given it in the 1940 Act.
<PAGE>
(e) "CUSTODIAN" means any Person other than the Trust who has custody of
any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(f) "DECLARATION" means this Declaration of Trust as further amended from
time to time. Reference in this Declaration of Trust to "DECLARATION,"
"HEREOF," "HEREIN," AND "HEREUNDER" shall be deemed to refer to this Declaration
rather than exclusively to the article or section in which such words appear.
(g) "DISTRIBUTOR" means the party, other than the Trust, to the contract
described in Section 3.1 hereof.
(h) "HIS" shall include the feminine and neuter, as well as the masculine
genders.
(i) "INVESTMENT ADVISER" means the party, other than the Trust, to the
contract described in Section 3.2 hereof.
(j) "MUNICIPAL BONDS" means obligations issued by or on behalf of states,
territories of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest from which
is exempt from regular Federal income tax.
(k) The "1940 ACT" means the Investment Company Act of 1940, as amended
from time to time.
(l) "PERSON" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(m) "SERIES" individually or collectively means the two or more Series as
may be established and designated from time to time by the Trustees pursuant to
Section 5.11 hereof. Unless the context otherwise requires, the term "Series"
shall include Classes into which shares of the Trust, or of a Series, may be
divided from time to time.
(n) "SHAREHOLDER" means a record owner of Outstanding Shares.
-2-
<PAGE>
(o) "SHAREHOLDER SERVICING AGENT" means a party furnishing services to the
Trust pursuant to any shareholder servicing contract described in Section 3.4
hereof.
(p) "SHARES" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all Series and Classes which may be established
by the Trustees, and includes fractions of Shares as well as whole Shares.
"OUTSTANDING SHARES" means those Shares shown from time to time on the books of
the Trust or its Transfer Agent as then issued and outstanding, but shall not
include Shares which have been redeemed or repurchased by the Trust and which
are at the time held in the treasury of the Trust.
(q) "Transfer Agent" means any one or more Persons other than the Trust
who maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(r) "TRUST" means the Trust referred to in Section 1.1.
(s) "TRUSTEES" means the person or person who has or have signed this
Declaration, so long as he or they shall continue in office in accordance with
the terms hereof, and all other persons who may from time to time be duly
qualified and serving as Trustees in accordance with the provisions of Article
II hereof, and reference herein to a Trustee or the Trustees shall refer to such
person or person in this capacity or their capacities as trustees hereunder.
(t) The "TRUSTEES" means the person or persons who has or have signed this
Declaration, so long as he or they shall continue in office in accordance with
the terms hereof, and all other persons who may from time to time be duly
qualified and serving as Trustees in accordance with the provisions of Article
II hereof, and reference herein to a Trustee or the Trustees shall refer to such
person or persons in this capacity or their capacities as trustees hereunder.
ARTICLE II
TRUSTEES
SECTION 2.1. GENERAL POWERS. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain
-3-
<PAGE>
offices both within and without the Commonwealth of Massachusetts, in any and
all states of the United States of American, in the District of Columbia, and in
any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such instruments as
they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
SECTION 2.2. INVESTMENTS. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, securities,
including common and preferred stocks; warrants; bonds, debentures, bills, time
notes and all other evidences of indebtedness; negotiable or non-negotiable
instruments; any form of gold or other precious metal; commodity contracts;
shares of, or any other interest in, any investment company as defined in the
1940 Act; government securities, including securities of any state, municipality
or other political subdivision thereof, or any governmental or quasi-
governmental agency or instrumentality; and money market instruments including
bank certificates of deposit, finance paper, commercial paper, bankers
acceptances and all kinds of repurchase agreements, of any corporation, company,
trust, association, firm or other business organization however established, and
of any country, state, municipality or other political subdivision, or any
governmental or quasi-governmental agency or instrumentality; "when issued"
contracts for any such securities, contracts or interests; to retain Trust
assets in cash and from time to time to change the securities contracts or
interest in which the assets of the Trust are invested.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire any rights or options to purchase or sell, to sell or
otherwise dispose of, to lend, and to pledge any such securities, contracts or
interests, and to enter into repurchase agreements and forward foreign currency
exchange contracts, to purchase and sell futures contracts on securities,
securities indices and foreign currencies, to purchase or sell options on such
contracts, foreign currency contracts, and foreign currencies and to engage in
all types of hedging and risk management transactions.
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(d) To exercise all rights, powers and privileges of ownership or interest
in all securities, repurchase agreements, futures contracts and options and
other assets included in the Trust Property, including the right to vote thereon
and otherwise act with respect thereto and to do all acts for the preservation,
protection, improvement and enhancement in value of all such assets.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash, and any interest therein.
(f) To borrow money and in this connection issue notes or other evidence
of indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or undertake
the performance of any obligation or engagement of any other Person and to lend
Trust property.
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest, and to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To enter into a plan of distribution and any related agreements
whereby the Trust may finance directly or indirectly any activity which is
primarily intended to result in the sale of Shares.
(i) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or Proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either along or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connection with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investment which may be made by fiduciaries.
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SECTION 2.3. LEGAL TITLE. Legal title to all the Trust Property,
including the property of any Series of the Trust, shall be vested in the
Trustees as joint tenants except that the Trustees shall have power to cause
legal title to any Trust Property to be held by or in the name of one or more of
the Trustees, or in the name of the Trust, or in the name of any other person as
nominee, on such terms as the Trustees may determine, provided that the interest
of the Trust therein is deemed appropriately protected. The right, title and
interest of the Trustees in the Trust Property and the property of each Series
of the Trust shall vest automatically in each Person who may hereafter become a
Trustee. Upon the termination of the term of office, resignation, removal or
death of a Trustee he shall automatically cease to have any right, title or
interest in any of the Trust Property or the property of any Series of the
Trust, and the right, title and interest of such Trustee in the Trust Property
shall vest automatically in the remaining Trustees. Such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
SECTION 2.4. ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VI and VII and Section 5.11 hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the particular series of the
Trust with respect to which such Shares are issued, whether capital or surplus
or otherwise, to the full extent now or hereafter permitted by the laws of the
Commonwealth of Massachusetts governing business corporation.
SECTION 2.5. DELEGATION; COMMITTEES. the Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient, to the same extent as such
delegations permitted by the 1940 Act.
SECTION 2.6. COLLECTION AND PAYMENT. The Trustees shall have the power
to collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
SECTION 2.7 EXPENSES. The Trustees shall have the power to incur and
pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the funds of the Trust to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees.
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Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
SECTION 2.9. MISCELLANEOUS POWERS. Subject to Section 5.11 hereof, the
Trustees shall have the power to: (a) employ or contract with such Persons as
the Trustees may deem desirable for the transaction of the business of the
Trust; (b) enter into joint ventures, partnerships and any other combinations or
associations; (c) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine; (d) purchase,
and pay for out of Trust Property, insurance policies insuring the Shareholders,
the Administrator, Trustees, officers, employees, agents, investment advisers,
distributors, selected dealers or independent contractors of the Trust against
all claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such liability; (e) establish pension, profit-
sharing, share purchase, and other retirement, incentive and benefit plans for
any Trustees, officers, employees and agents of the Trust; (f) to the extent
permitted by law, indemnify any person with whom the Trust has dealings,
including the Investment Adviser, Distributor, Transfer Agent and selected
dealers, to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and change the
fiscal year of the Trust and the method by which its accounts shall be kept; and
(i) adopt a seal for the Trust, but the absence of such seal shall not impair
the validity of any instrument executed on behalf of the Trust.
SECTION 2.10. PRINCIPAL TRANSACTIONS. Except in transactions not
permitted by the 1940 Act or rules and regulations adopted by the Commission,
the Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with the Investment Adviser, Distributor or
transfer agent or with any interested Person of such Person; and the Trust may
employ any such person, or firm or company in which such Person is an Interested
Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or Custodian upon customary terms.
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SECTION 2.11. NUMBER OF TRUSTEES. The number of Trustees shall initially
be two (2), and thereafter shall be such number as shall be fixed from time to
time by a written instrument signed by a majority of the Trustees, provided,
however, that the number of Trustees shall in no event be more than fifteen
(15).
SECTION 2.12. ELECTION AND TERM. Except for the Trustees named herein or
appointed to fill vacancies pursuant to Section 2.14 hereof, the Trustees shall
be elected by the Shareholders owning of record a plurality of the Shares voting
at a meeting of Shareholders. Such a meeting shall be held on a date fixed by
the Trustees. Except in the event of resignation or removals pursuant to
Section 2.13 hereof, each Trustee shall hold office until such time as less than
a majority of the Trustees holding office have been elected by Shareholders. In
such event the Trustees then in office will call a Shareholders' meeting for the
election of Trustees. Except for the foregoing circumstances, the Trustees
shall continue to hold office and may appoint successor Trustees.
SECTION 2.13. RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without the need for any prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than one) with cause, by
the action of two-thirds of the remaining Trustees. Any Trustee may be removed
at any meeting of Shareholders by vote of two-thirds of the Outstanding Shares
and, in that connection, the Trustees will assist shareholder communications to
the extent provided for in Section 16(c) under the 1940 Act. Upon the
resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee,
he shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
Trust Property or property of any series of the Trust held in the name of the
resigning or removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
SECTION 2.14. VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall fill
such vacancy by the appointment of such other person as they in their discretion
shall see fit, made by a written instrument signed by a majority of the Trustees
then in office. Any such appointment shall not become effective, however, until
the person
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named in the written instrument of appointment shall have accepted in writing
such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filed as provided in this Section 2.14, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees in office shall be conclusive evidence of the existence
of such vacancy.
SECTION 2.15. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not to exceed six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under this Declaration except as herein otherwise expressly provided.
ARTICLE III
CONTRACTS
SECTION 3.1. DISTRIBUTION CONTRACT. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing for the sale of the Shares at a price based on the net
asset value of a Share, whereby the Trustees may either agree to sell the Shares
to the other party to the contract or appoint such other party their sales agent
for the Shares, and in either case on such terms and conditions, if any, as may
be prescribed in the By-Laws, and such further terms and conditions as the
Trustees may in their discretion determine not inconsistent with the provisions
of this Article III or of the By-Laws; and such contract may also provide for
the repurchase of the Shares by such other party as agent of the Trustees. Such
contract may also further provide that such other party may enter into selected
dealer agreements with registered securities dealers to further the purpose of
the distribution or repurchase of the Shares. The foregoing services may be
provided by one or more persons.
SECTION 3.2. ADVISORY OR MANAGEMENT CONTRACT. The Trustees may in their
discretion from time to time enter into an investment advisory or management
contract or separate advisory contracts with respect to one or more Series
whereby the other party to such contract shall undertake to furnish to the Trust
such management, investment advisory, statistical and research facilities and
services and such other facilities and services, if any, and all upon such terms
and conditions as the Trustees may in their discretion determine, including the
grant of authority to such other party to determine what securities shall be
purchased or sold by the Trust and what portion of its assets shall be
uninvested, which authority shall include the power to make changes in the
investments of the Trust or any Series.
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The Trustees may also employ, or authorize the Investment Adviser to
employ, one or more sub-advisers from time to time to perform such of the acts
and services of the Investment Adviser and upon such terms and conditions as may
be agreed upon between the Investment Adviser and such sub-advisers and approved
by the Trustees. Any reference in this Declaration to the Investment Adviser
shall be deemed to include such sub-advisers unless the context otherwise
requires.
SECTION 3.3. ADMINISTRATOR. The Trustees may in their discretion from
time to time enter into one or more administrative services contracts whereby
the other party to each such contract shall undertake to furnish such
administrative services to the Trust as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the Trustees may in
their discretion determine, provided that such terms and conditions are not
inconsistent with the provisions of this Declaration or the By-Laws. Such
services may be provided by one or more persons.
SECTION 3.4. TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS. The
Trustees may in their discretion from time to time enter into one or more
transfer agency contracts and one or more shareholder servicing contracts
whereby the other party to each such contract shall undertake to furnish such
transfer agency and/or shareholder services to the Trust as the Trustees shall
from time to time consider desirable and all upon such terms and conditions as
the Trustees may in their discretion determine, provided that such terms and
conditions are not inconsistent with the provisions of this Declaration or the
By-Laws. Such services may be provided by one or more Persons.
SECTION 3.5. AFFILIATIONS OF TRUSTEES OR OFFICERS, ETC.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholders, director, officer, partner, trustee, employee, manager, adviser or
distributor of or for any partnership, corporation, trust, association or other
organization or of or for any parent or affiliate of any organization, with
which a contract of the character described in Sections 3.1, 3.2, 3.3 or 3.4
above or any Custodian contract as described in Article X of the By-Laws, or for
related services may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Shareholder of or has an
interest in the Trust, or that
(ii) any partnership, corporation, trust, association or other organization
with which a contract of the character described in Sections 3.1, 3.2, 3.3 or
3.4 above or for services as Custodian or for related services may have been or
may hereafter be made also has any one or more of such contracts with one or
more other partnerships, corporations, trusts, associations, or other
organizations, or has other business or interests,
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shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
SECTION 3.6. COMPLIANCE WITH 1940 ACT. Any contract entered into
pursuant to Sections 3.1 or 3.2, shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act (including any amendment thereof or
other applicable act of Congress hereafter enacted), as modified by any
applicable order or orders of the Commission, with respect to its continuance in
effect, its termination and the method of authorization and approval of such
contract or renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OFFICERS
SECTION 4.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability of the
Trust, he shall not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability. The indemnification and reimbursement required by
the preceding sentence shall be made only out of the assets of the one or more
Series of which the Shareholder who is entitled to indemnification or
reimbursement was a Shareholder at the time the act or event occurred which gave
rise to the claim against or liability of said Shareholder. The rights accruing
to a Shareholder under this Section 4.1 shall not impair any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically provided
herein.
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SECTION 4.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
SECTION 4.3. MANDATORY INDEMNIFICATION. (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
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, 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 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 the reasonable belief
that his action was in the best interest of the Trust; or
(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:
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(A) by the court or other body approving the settlement or other
disposition; or
(B) based upon a review of readily available facts (as opposed to a
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:
(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.
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SECTION 4.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be obligated
to give any bond or other security for the Performance of any of his duties
hereunder.
SECTION 4.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC.
No purchaser, lender, transfer agent or other Person dealing with the Trustees
or any officer, employee or agent of the Trust shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent or be liable for the application
of money or property paid, loaned, or delivered to or on the order of the
Trustees or of said officer, employee or agent. Every obligation, contract,
instrument, certificate, share, other security of the Trust or undertaking, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done by the executors thereof
only in their capacity as officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate, share, other security of
the Trust or undertaking made or issued by the Trustees may recite that the same
is executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust under any such instrument are
not binding upon any of the Trustees or Shareholders individually, but bind only
the trust estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees individually. The Trustees shall at all times maintain insurance for
the protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
SECTION 4.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust by any of its officers or employees or by the Investment Adviser,
the Distributor, Transfer Agent, selected dealers, accountants, appraisers or
other experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or expert
may also be a Trustee.
ARTICLE V
SHARE OF BENEFICIAL INTEREST
SECTION 5.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest, all
of one class, except as provided in Section 5.11 and Section 5.13 hereof, par
value $0.1 per share. The number of shares of beneficial interest authorized
hereunder is unlimited. All shares issued hereunder including, without
limitation, shares issued in connection with a dividend in shares or a split of
shares, shall be fully paid and non-assessable.
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SECTION 5.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property
and the property of each Series of the Trust of every description and the right
to conduct any business hereinbefore described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares, and they shall have no right to
call for any partition or division of any property, profits, rights or interests
of the Trust nor can they be called upon to share or assume any losses of the
Trust nor can they suffer an assessment of any kind by virtue of their ownership
of Shares. The shares shall be personal property giving only the rights
specifically set forth in this Declaration. The shares shall not entitle the
holder to preference, preemptive, appraisal, conversion or exchange rights,
except as the Trustees may determine with respect to any Series of Shares.
SECTION 5.3. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or member of a
joint stock association.
SECTION 5.4. ISSUANCE OF SHARES. The Trustees in their discretion may,
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares and Shares held in the treasury. The Trustees may from time
to time divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and/or 1/1,000ths of a Share or integral multiples thereof.
SECTION 5.5. REGISTER OF SHARES. A register shall be kept at the
principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or in
the By-Laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the issuance
of share certificates and promulgate appropriate rules and regulations as to
their use.
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SECTION 5.6. TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Transfer Agent of a duly executed instrument of
transfer, together with such evidence of the genuineness of each such execution
and authorization and of other matter as may reasonably be required. Upon such
delivery the transfer shall be recorded on the register of the Trust. Until such
record is made, the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereunder and neither the Trustees nor any transfer
agent or registrar nor any officer, employee or agent of the Trust shall be
affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
SECTION 5.7. NOTICES, REPORTS. Any and all notices to which any
Shareholder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage prepaid, addressed to any Shareholder of
record at his last known address as recorded on the register of the Trust. A
notice of a meeting, an annual report and any other communication to
Shareholders need not be sent to a Shareholder (i) if an annual report and a
proxy statement for two consecutive shareholder meetings have been mailed to
such Shareholders address and have been returned as undeliverable, (ii) if all,
and at least two, checks (if sent by first class mail) in payment of dividends
on Shares during a twelve-month period have been mailed to such Shareholder's
address and have been returned as undeliverable or (iii) in any other case in
which a proxy statement concerning a meeting of security holders is not required
to be given pursuant to the Commissions proxy rules as from time to time in
effect under the Securities Exchange Act of 1934. However, delivery of such
proxy statements, annual reports and other communications shall resume if and
when such Shareholder delivers or cause to be delivered to the Trust written
notice setting forth such Shareholder's then current address.
SECTION 5.8. TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
SECTION 5.9. VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.12; (ii) for the
removal of Trustees as provided in
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Section 2.13; (iii) with respect to any investment advisory or management
contract entered into pursuant to Section 3.2; (iv) with respect to termination
of the Trust as provided in Section 8.2; (v) with respect to any amendment of
this Declaration to the extent and as provided in Section 8.3; (vi) with respect
to any merger, consolidation or sale of assets as provided in Section 8.4; (vii)
with respect to incorporation of the Trust or any Series to the extent and as
provided in Section 8.5; (viii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be bought or maintained derivitavely or
as a class action on behalf of the Trust or any Series or Class thereof or the
Shareholders (provided, however, that a Shareholder of a particular Series or
Class shall not be entitled to a derivative or class action on behalf of any
other Series or Class (or Shareholder of any other Series or Class) of the
Trust); (ix) with respect to any plan adopted pursuant to Rule12b-1 (or any
successor rule) under the 1940 Act; and (x) with respect to such additional
matters relating to the Trust as may be required by this Declaration, the By-
Laws or any registration of the Trust as an investment company under the 1940
Act with the Commission (or any successor agency) or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote, except that the Trustees may, in
conjunction with the establishment of any Series or Class of Shares, establish
or reserve the right to establish conditions under which the several Series or
Classes shall have separate voting rights or, if a Series or Class would not, in
the sole judgment of the Trustees, be materially affected by a proposal, no
voting rights. There shall be no cumulative voting in the election of Trustees.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, this Declaration or the By-laws to be
taken by Shareholders. The By-laws may include further provisions for
Shareholders votes and meetings and related matters.
SECTION 5.10. MEETINGS OF SHAREHOLDERS. Meetings of Shareholders may be
called at any time by the President, and shall be called by the President and
Secretary at the request in writing or by resolution, of a majority of Trustees,
or at the written request of the holder or holders of ten percent (10%) or more
of the total number of Shares then issued and outstanding of the Trust entitled
to vote at such meeting. Any such request shall state the purpose of the
proposed meeting. At any meeting of Shareholders of the Trust or of any series
of the Trust, a Shareholder Servicing Agent may vote any shares as to which such
Shareholder Servicing Agent is the Agent of record and which are not otherwise
represented in person or by proxy at the meeting, proportionately in accordance
with the votes cast by holders of all shares otherwise represented at the
meeting in person or by proxy as to which such Shareholder Servicing Agent is
the agent of record. Any shares so voted by a Shareholder Servicing Agent will
be deemed represented at the meeting for quorum purposes.
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SECTION 5.11. SERIES DESIGNATION. The Trustees, in their discretion, may
authorize the division of Shares into two or more Series, and the different
Series shall be established and designated, and the variations in the relative
rights and preferences as between the different Series shall be fixed and
determined, by the Trustees; provided, that all Shares shall be identical except
that there may be variations so fixed and determined between different Series as
to investment objective, purchase price, allocation of expenses, right of
redemption, special and relative rights, and conditions under which the several
Series shall have separate voting rights. All references to Shares in this
Declaration shall be deemed to be Shares of any or all series as the context may
require.
If the Trustees shall divide the Shares of the Trust into two or more
Series, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust shall apply equally to
each Series of the Trust except as the context requires otherwise.
(b) The number of authorized Shares and the number of Shares of each
Series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any Series into one or more Series that may be established and designated from
time to time. The Trustees may hold as treasury Shares (of the same or some
other Series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any Series reacquired by the Trust at their
discretion from time to time.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors of such Series and except as may otherwise be required by
applicable laws, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series, the Trustees shall allocate them among any
one or more of the Series established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the shareholders of all Series for all purposes.
(d) The assets belonging to each particular Series shall be charged with
the liabilities of the Trust in respect of that Series and all expenses, costs,
charges and reserves attributable to
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that Series, and any general liabilities, expenses, costs charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees to and among any one or
more of the Series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the Shareholders
of all Series for all purposes. The Trustees shall have full discretion, to the
extent not inconsistent with the 1940 Act, to determine which items are capital;
and each such determination and allocation shall be conclusive and binding upon
the Shareholders. The assets of a particular Series of the Trust shall, under
no circumstances, be charged with liabilities attributable to any other Series
of the Trust. All persons extending credit to, or contracting with or having
any claim against a particular Series of the Trust shall look only to the assets
of that particular Series for payment of such credit, contract or claim. No
Shareholder or former Shareholder of any Series shall have any claim on or right
to any assets allocated or belonging to any other series.
(e) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of distributions of income and
capital gains made with respect to such Series. Upon redemption of his Shares
or indemnification for liabilities incurred by reason of his being or having
been a Shareholder of a Series, such shareholder shall be paid solely out of the
funds and property of such Series of the Trust. Upon liquidation or termination
of a Series of the Trust, Shareholders of such Series shall be entitled to
receive a pro rata share of the net assets of such Series. A Shareholder of a
particular Series of the Trust shall not be entitled to participate in a
derivative or class action on behalf of any other Series or the Shareholders of
any other Series of the Trust.
(f) The establishment and designation of any Series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such Series, or as otherwise provided in such instrument. The
Trustees may by an instrument executed by a majority of their number abolish any
Series and the establishment and designation thereof. Except as otherwise
provided in this Article V, the Trustees shall have the power to determine the
designations, preferences, privileges, limitations and rights, of each class and
Series of Shares. Each instrument referred to in this paragraph shall have the
status of an amendment to his Declaration.
SECTION 5.12. ASSENT TO DECLARATION OF TRUST. Every Shareholder, by
virtue of having become a shareholder, shall be held to have expressly assented
and agreed to the terms hereof and to have become a party hereto.
SECTION 5.13. CLASS DESIGNATION. The Trustees, in their discretion, may
authorize the division of the Shares of the Trust, or, if any Series be
established, the Shares of any Series, into
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two or more Classes, and the different Classes shall be established and
designated, and the variations in the relative rights and preferences as between
the different Classes shall be fixed and determined, by the Trustees; provided,
that all Shares of the Trust or of any Series shall be identical to all other
Shares of the Trust or the same Series, as the case may be, except that there
may be variations between different classes as to allocation of expenses, right
of redemption, special and relative rights as to dividends and on liquidation,
conversion rights, and conditions under which the several Classes shall have
separate voting rights. All references to Shares in this Declaration shall be
deemed to be Shares of any or all Classes as the context may require.
If the Trustees shall divide the Shares of the Trust or any Series into two
or more Classes, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust, or any Series of the
Trust, shall apply equally to each class of Shares of the Trust or of any Series
of the Trust, except as the context requires otherwise.
(b) The number of Shares of each Class that may be issued shall be
unlimited. The Trustees may classify or reclassify any unissued Shares of the
Trust or any Series or any Shares previously issued and reacquired of any Class
of the Trust or of any Series into one or more Classes that may be established
and designated from time to time. The Trustees may hold as treasury Shares (of
the same or some other class), reissue for such consideration and on such terms
as they may determine, or cancel any Shares of any Class reacquired by the Trust
at their discretion from time to time.
(c) Liabilities, expenses, costs, charges and reserves related to the
distribution of, and other identified expenses that should properly be allocated
to, the Shares of a particular Class may be charged to and borne solely by such
Class and the bearing of expenses solely by a Class of Shares may be
appropriately reflected (in a manner determined by the Trustees) and cause
differences in the net asset value attributable to, and the dividend, redemption
and liquidation rights of, the Shares of different Classes. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Classes for all purposes.
(d) The establishment and designation of any Class of Shares shall be
effective upon the execution of a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such Class, or as otherwise provided in such instrument. The
Trustees may, by an instrument executed by a majority of their number, abolish
any Class and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment to this
Declaration.
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ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
SECTION 6.1. REDEMPTION OF SHARES. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust.
The Trust shall redeem the Shares upon the appropriately verified written
application of the record holder thereof (or upon such other form of request as
the Trustees may determine) at the office of the Transfer Agent, the Shareholder
Servicing Agent, which is the agent of record for such Shareholder, or at the
office of any bank or trust company, either in or outside the office of any bank
or trust company, either in or outside the Commonwealth of Massachusetts, which
is a member of the Federal Reserve System and which the said Transfer Agent or
the said Shareholder Servicing Agent has designated for that purpose, or at such
office or agency as may be designated from time to time in the Trust's then
effective registration statement under the Securities Act of 1933. The Trustees
may from time to time specify additional conditions, not inconsistent with the
1940 Act, regarding the redemption of Shares in the Trust's then effective
registration statement under the Securities Act of 1933.
SECTION 6.2. PRICE. Shares shall be redeemed at their net asset value
determined as set forth in Section 7.1 hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Section 7.1 hereof after
receipt of such application.
SECTION 6.3. PAYMENT. Payment for such Shares shall be made in cash or
in property out of the assets of the relevant series of the Trust to the
Shareholder of record at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws, as may be specified from time to time in the
Trust's then effective registration statement under the Securities Act of 1933,
subject to the provisions of Section 6.4 hereof.
SECTION 6.4. EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE.
If, pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of
the determination of net asset value, the rights of Shareholders (including
those who shall have applied for redemption pursuant to Section 6.1 hereof but
who shall not yet have received payment) to have Shares redeemed and paid for by
the Trust shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any
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certificates on deposit. The redemption price of Shares for which redemption
applications have not been revoked shall be the net asset value of such Shares
next determined as set forth in Section 7.1 after the termination of such
suspension, and payment shall be made within seven (7) days after the date upon
which the application was made plus the period after such application during
which the determination of net asset value was suspended.
SECTION 6.5. REPURCHASE BY AGREEMENT. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the purpose
by agreement with the owner thereof at a price not exceeding the net asset value
per share determined as of the time when the purchase or contract of purchase is
made or the net asset value as of any time which may be later determined
pursuant to Section 7.1 hereof, provided payment is not made for the Shares
prior to the time as of which such net asset value is determined.
SECTION 6.6 REDEMPTION OF SUB-MINIMUM ACCOUNTS. The Trust shall have
the right at any time without prior notice to the shareholder to redeem shares
of any shareholder for their then current net asset value per share if at such
time the shareholder owns shares having an aggregate net asset value of less
than an amount set forth from time to time by the Trustees, subject to such
terms and conditions as the Trustees may approve, and subject to the Trust's
giving general notice to all shareholders of its intention to avail itself of
such right, either by publication in the Trust's registration statement, if any,
or by such other means as the Trustees may determine.
SECTION 6.7. REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATION
INVESTMENT COMPANY; DISCLOSURE OF HOLDING. If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become concentrated in any Person to
an extent which would disqualify any Series of the Trust as a regulated
investment company under the Internal Revenue Code, then the Trustees shall have
the power by lot or other means deemed equitable by them (i) to call for
redemption by any such Person a number, or principal amount, of Shares or other
securities of the Trust sufficient to maintain or bring the direct or indirect
ownership of Shares or other securities of the Trust into conformity with the
requirements for such qualification, and (ii) to refuse to transfer or issue
Shares or other securities of the Trust to any Person whose acquisition of the
Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 6.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
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SECTION 6.8. REDUCTIONS IN NUMBER OF OUTSTANDING SHARES PURSUANT TO NET
ASSET VALUE FORMULA. The Trust may also reduce the number of Outstanding Shares
pursuant to the provisions of Section 7.3.
SECTION 6.9. SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary week-end and holiday closings,
(ii) during which trading on the New York Stock Exchange is restricted, (iii)
during which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the Commission may for the protection of
Shareholders of the Trust by order permit suspension of the right of redemption
or postponement of the date of payment or redemption; provided that applicable
rules and regulations of the Commission shall govern as to whether the
conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall take
effect at such time as the Trust shall specify but not later than the close of
business on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment on redemption until
the Trust shall declare the suspension at an end, except that the suspension
shall terminate in any event on the first day on which said stock exchange shall
have reopened or the Period specified in (ii) or (iii) shall have expired (as to
which in the absence of an official ruling by the Commission, the determination
of the Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
SECTION 7.1. NET ASSET VALUE. The value of the assets of the Trust or
any Series of the Trust shall be determined by appraisal of the securities of
the Trust or allocated to such Series, such appraisal to be on the basis of the
amortized cost of such securities in the case of money market securities, market
value in the case of other securities, or by such other method as shall be
deemed to reflect the fair value thereof, determined in good faith by or under
the direction of the Trustees. From the total value of said assets, there shall
be deducted all indebtedness, interest, taxes, payable or accrued, including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, net income determined and declared as a
distribution and all other items in the nature of liabilities attributable to
the Trust or such Series or Class thereof which shall be
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determined by dividing the net asset value of the Class, or, if no Class has
been established, of the Series, or if no Series has been established, of the
Trust, as applicable, outstanding. The net asset value of Shares of the Trust
or any Class or Series of the Trust shall be determined pursuant to the
procedure and methods prescribed or approved by the Trustees in their discretion
and as set forth in the most recent Registration Statement of the Trust as filed
with the Securities and Exchange Commission pursuant to the requirements of the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and the Rules thereunder. The net asset value of the Shares shall be
determined at least once on each business day, as of the close of trading on the
New York Stock Exchange or as of such other time or times as the Trustees shall
determine. The power and duty to make the daily calculations may be delegated
by the Trustees to the Investment Adviser, the custodian, the Transfer Agent or
such other person as the Trustees may determine by resolution or by approving a
contract which delegates such duty to another Person. The Trustees may suspend
the daily determination of net asset value to the extent permitted by the 1940
Act.
SECTION 7.2. DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from
time to time distribute ratably among the Shareholders of the Trust or a Series
such proportion of the net profits, surplus (including paid-in surplus),
capital, or assets of the Trust or such Series held by the Trustees as they may
deem proper. Such distributions may be made in cash or property (including
without limitation any type of obligations of the Trust or such Series or any
assets thereof), and the Trustees may distribute ratably among the Shareholders
additional Shares of the Trust or such Series issuable hereunder in such manner,
at such times, and on such terms as the Trustees may deem proper. Such
distributions may be among the Shareholders of record at the time of declaring a
distribution or among the Shareholders of record at such other date or time or
dates or times as the Trustees shall determine. To the extent the Trustees deem
it appropriate as a matter of administrative convenience, distributions to
Shareholders may be effected on different dates to different Shareholders,
provided that such distributions shall be made at regularly occurring intervals
of approximately the same length with respect to each Shareholder of the Trust.
The Trustees may in their discretion determine that, solely for the purposes of
such distributions, outstanding shares shall exclude shares for which orders
have been placed subsequent to a specified time on the date the distribution is
declared or on the preceding day if the distribution is declared as of a day on
which Boston banks are not open for business, all as described in the
registration statement under the Securities Act of 1933. The Trustees may
always retain from the net profits such amount as they may deem necessary to pay
the debts or expenses of the Trust or the Series or to meet obligations of the
Trust or the Series, or as they may deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the business. The
Trustees may adopt and offer to Shareholders such dividend reinvestment Plans,
cash dividend payout plans or related plans as the Trustees shall deem
appropriate.
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Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or the Series to avoid or reduce liability for taxes.
SECTION 7.3. DETERMINATION OF NET INCOME; CONSTANT NET ASSET VALUE;
REDUCTION OF OUTSTANDING SHARES. Subject to Section 5.11 hereof, the net income
of the Trust or any Series shall be determined in such manner as the Trustees
shall provide by resolution. Expenses of the Trust or a Series, including the
advisory or management fee and service fees, shall be accrued each day. Such
net income may be determined by or under the direction of the Trustees as of the
close of trading on the New York Stock Exchange on each day on which such
Exchange is open or as of such other time or times as the Trustees shall
determine, and, except as provided therein, all the net income of the Trust or
any Series, as so determined, may be declared as a dividend on the Outstanding
Shares of the Trust or such Series. If for any reason, the net income of the
Trust or any Series, determined at any time is a negative amount, the Trustees
shall have the power with respect to the Trust or such Series (i) to offset each
Shareholder's pro rata shares of such negative amount from the accrued dividend
account of such Shareholder, or (ii) to reduce the number of Outstanding Shares
of the Trust or such Series by reducing the number of Shares in the account of
such Shareholder by that number of full and fractional Shares which represents
the amount of such excess negative net income, or (iii) to cause to be recorded
on the books of the Trust or such Series an asset account in the amount of such
negative net income, which account may be reduced by the amount, provided that
the same shall thereupon become the property of the Trust or such Series with
respect to the Trust or such Series and shall not be paid to any Shareholder, of
dividends declared thereafter upon the Outstanding Shares of the Trust or such
Series on the day such negative net income is experienced, until such asset
account is reduced to zero, or (iv) to combine the methods described in clauses
(i) and (ii) and (iii) of this sentence, in order to cause the net asset value
per shares of the Trust or such Series to remain at a constant amount per
Outstanding Share immediately after each such determination and declaration.
The Trustees shall also have the power to fail to declare a dividend out of net
income for the purpose of causing the net asset value per share to be increased
to a constant amount. The Trustees shall not be required to adopt, but may at
any time adopt, discontinue or amend the practice of maintaining the net asset
value per Shares of the Trust or a Series at a constant amount.
SECTION 7.4. ALLOCATION BETWEEN PRINCIPAL AND INCOME. The Trustees shall
have full discretion to determine whether any cash or property received shall be
treated as income or as principal and whether any item of expense shall be
charged to the income or the principal account, and their determination made in
good faith shall be conclusive upon the Shareholders. In the case of stock
dividends received, the Trustees shall have full discretion to determine, in the
light of the particular circumstances, how much if any of the value thereof
shall be treated as income, the balance, if any, to be treated as principal.
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SECTION 7.5. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any
of the foregoing provisions of this Article VII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value or net income, or the declaration and payment of dividends
and distributions as they may deem necessary or desirable.
ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
SECTION 8.1. DURATION. The Trust shall continue without limitation of
time but subject to the provisions of this Article VIII.
SECTION 8.2. TERMINATION OF TRUST. (a) The Trust or any Series of the
Trust may be terminated by an instrument writing signed by a majority of the
Trustees, or by the affirmative vote of the holders a majority of the Shares of
the Trust or Series outstanding and entitled to vote, at any meeting of
Shareholders. Upon the termination of the Trust or any Series,
(i) The Trust or any Series shall carry on no business except for the
purpose of winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the Trust or
Series and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust or Series shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust or
Series, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property or property
of the Series to one or more persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or other property of
any kind, discharge or pay its liabilities, and do all other acts appropriate to
liquidate its business; and
(iii) after paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or property of the Series, in cash or in
kind or partly each, among the Shareholders of the Trust or Series according to
their respective rights.
(b) After termination of the Trust or any Series and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth the
fact of such termination, and the Trustees shall thereupon be discharged from
all further liabilities and duties hereunder, and the rights and interests of
all Shareholders of the Trust or Series shall thereupon cease.
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SECTION 8.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended by
a vote of the holders of a majority of the Shares outstanding and entitled to
vote. Amendments shall be effective upon the taking of action as provided in
this section or at such later time as shall be specified in the applicable vote
or instrument. The Trustees may also amend this Declaration without the vote or
consent of Shareholders if they deem it necessary to conform this Declaration to
the requirements of applicable federal or state laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code (including those provisions of such Code relating to the retention
of the exemption from federal income tax with respect to dividends paid by the
Trust out of interest income received on Municipal Bonds), but the Trustees
shall not be liable for failing so to do. The Trustees may also amend this
Declaration without the vote or consent of Shareholders if they deem it
necessary or desirable to change the name of the Trust or to make any other
changes in the Declaration which do not materially adversely affect the rights
of Shareholders hereunder.
(b) No amendment may be made under this Section 8.3 which would change any
rights with respect to any Shares of the Trust or Series by reducing the amount
payable thereon upon liquidation of the Trust or Series or by diminishing or
eliminating any voting rights pertaining thereto, except with the vote or
consent of the holders of two-thirds of the Shares of the Trust or Series
outstanding and entitled to vote. Noting contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
SECTION 8.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust or any
Series thereof may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property or the property of any Series, including its good
will, upon such terms and conditions and for such consideration when and as
authorized at any meeting of Shareholders of the Trust or Series called for the
purpose by the affirmative vote of the holders of a majority of the Shares of
the Trust or Series.
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SECTION 8.5. INCORPORATION. With the approval of the holders of a
majority of the Shares of the Trust or any Series outstanding and entitled to
vote, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or the property of any Series or to carry on any business sin
which the Trust or the Series shall directly or indirectly have any interest,
and to sell, convey and transfer the Trust Property or the property of any
Series to any such corporation, trust, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
or the Series holds or is about to acquire shares or any other interest. The
Trustees may also cause a merger or consolidation between the Trust or any
Series or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report, which may be included in the Trust's prospectus or
statement of additional information, of the transactions of the Trust, including
financial statements which shall at least annually be certified by independent
public accountants.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. FILING. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Unless the amendment is embodied in an instrument signed by a majority of the
Trustees, each amendment filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and operative,
may be executed from time to time by a majority of the Trustees and shall, upon
filing with the Secretary of the Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may hereafter be referred to in
lieu of the original Declaration and the various amendments thereto. The
restated Declaration may include any amendment which the Trustees are empowered
to adopt, whether or not such amendment has been adopted prior to the execution
of the restated Declaration.
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SECTION 10.2. GOVERNING LAW. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
internal laws thereof, and the rights of all parties and the validity and
construction of very provision hereof shall be subject to and construed
according to the internal laws of said State without regard to the choice of law
rules thereof.
SECTION 10.3. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
SECTION 10.4. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any By-laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any person dealing with the
Trustees and their successors.
SECTION 10.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration or jurisdiction.
SECTION 10.6. PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Trust is Two Pickwick Plaza, Greenwich, CT 06830. The principal
place of business may be changed by resolution of a majority of the Trustees.
SECTION 10.7. RESIDENT AGENT. The Trust shall maintain a resident agent
in the Commonwealth of Massachusetts, which agent shall initially be CT
Corporation System, 2 Oliver Street, Boston, MA 02109. The Trustees may
designate a successor resident agent, provided, however, that such appointment
shall not become effective until written notice thereof is delivered to the
office of the Secretary of the Commonwealth.
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BY-LAWS OF
NORTHSTAR/ NWNL TRUST
ARTICLE I
DEFINITIONS
The terms "Administrator", "Class", "Commission", "Custodian", "Declaration",
"Distributor", "His", "Interested Person", "Investment Adviser", "Municipal
Bonds", "1940 Act", "Person", "Series", "Shareholder", "Shareholder Servicing
Agent", "Shares", "Transfer Agent", "Trust", "Trust Property", "Trustees", and
"vote of a majority of the shares outstanding and entitled to vote", have the
respective meanings given them in the Declaration of Trust - Northstar/NWNL
Trust dated December 8, 1993, as amended from time to time.
ARTICLE II
SECTION 1. RESIDENT AGENT. The Trust shall maintain a resident agent in
the Commonwealth of Massachusetts, which agent shall initially be CT Corporation
System, 2 Oliver Street, Boston, Massachusetts 02109. The Trustees may
designate a successor resident agent, provided, however, that such appointment
shall not become effective until written notice thereof is delivered to the
office of the Secretary of the Commonwealth.
SECTION 2. OFFICES. The Trust may have its principal office and other
offices in such places without as well as within the Commonwealth of
Massachusetts as the Trustees may from time to time determine.
ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. A meeting of Shareholder may be called at any time
by a majority of the Trustees and shall be called by any Trustee upon written
request, which shall specify the purpose or purposes for which such meeting is
to be called, of Shareholders holding in the aggregate not less than 10% of the
outstanding shares entitled to vote on the matters specified in such written
request. Any such meeting shall be held as provided in the Declaration at such
place within or without the Commonwealth of Massachusetts as the Trustees shall
designate. The holders of a majority of outstanding shares present in person or
by proxy shall constitute a quorum at any meeting of the Shareholders. In the
absence of a quorum, a majority of outstanding shares entitled to vote present
in person or by proxy may adjourn the meeting from time to time until a quorum
shall be present.
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SECTION 2. NOTICE OF MEETINGS. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder at his address as recorded on
the register of the Trust mailed at least (10) days and not more than sixty (60)
days before the meeting. Only the business sated in the notice of the meeting
shall be considered at such meeting. Any adjourned meeting may be held as
adjourned without further notice. No notice need be given any Shareholder who
shall have failed to inform the Trust of his current address or if a written
waiver of notice, executed before or after the meeting by the Shareholder or his
attorney thereunto authorized, is filed with the records of the meeting.
SECTION 3. RECORD DATE FOR MEETINGS AND OTHER PURPOSES. For the purpose
of determining the Shareholders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer books for such
period, not exceeding thirty (30) days, as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date not more than
sixty (60) days prior to the date of any meeting of Shareholders or distribution
or other action as a record date for the determinations of the persons to be
treated as Shareholders of record for such purposes, except for dividend
payments which shall be governed by the Declaration.
SECTION 4. PROXIES. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent for the Trust as the Secretary
may direct, for verification prior to the time at which such vote shall be
taken. Proxies may be solicited in the name of one or more Trustees or one or
more of the officers of the Trust. Only Shareholders of record shall be
entitled to vote. Each whole share shall be entitled to one vote as to any
matter on which it is entitled by the Declaration to vote, and each fractional
share shall be entitled to a proportionate fractional vote. When any Share is
held jointly by several persons, any one of them may vote at any meeting in
person or by proxy in respect of such Share, but if more than one of them shall
be present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Share. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise, and the burden of proving invalidity shall rest on the challenger.
If the holder of any such Share is a minor or a person of unsound mind, and
subject to guardianship or the legal control of any other person as regards the
charge or management of such Share, he may vote by his guardian or such other
person appointed or having such control, and such vote may be given in person or
by proxy.
SECTION 5. INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted shareholders of
a Massachusetts business corporation.
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SECTION 6. ACTION WITHOUT MEETING. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consents shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the President, or by any one
of the Trustees, at the time being in office. Notice of meetings shall be given
by the Secretary or an Assistant Secretary or by the officer or Trustee calling
the meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be telegraphed, cabled, or wirelessed to each Trustee at his
business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a
meeting need not be given to any Trustee if a written waiver of notice, executed
by him before or after the meeting, is filed with the records of the meeting, or
to any Trustee who attends the meeting without protesting prior thereto or at
its commencement the lack of notice to him. A notice or waiver of notice need
not specify the purpose of any meeting. The Trustees may meet by means of a
telephone conference circuit or similar communications equipment by means of
which all persons participating in the meeting shall be deemed to have been held
at a place designated by the Trustees at the meeting. Participation in a
telephone conference meeting shall constitute presence in person at such
meeting. Any action required or permitted to be taken by the Trustees without a
meeting may be taken if all the Trustees consent to the action in writing and
the written consents are filed with the records of the Trustees meetings. Such
consents shall be treated as a vote for all purposes.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees shall
be present in person at any regular or special meeting of the Trustees in order
to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these By-Laws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
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ARTICLE V
COMMITTEES
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) to hold office at the pleasure
of the Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session, including the
purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to them, except those
powers which by law, the Declaration or these By-Laws they are prohibited from
delegating. The Trustees may also elect from their own number other Committees
from time to time, the number composing such Committees, the powers conferred
upon the same (subject to the same limitations as with respect to the Executive
Committee) and the term of membership on such Committees to be determined by the
Trustees. The Trustees may designate a chairman of any such Committee. In the
absence of such designation the Committee may elect its own Chairman.
SECTION 2. MEETINGS, QUORUM AND MANNER OF ACTING. The Trustees may (1)
provide for stated meetings of any Committee, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the office of the Trust.
SECTION 3. CHAIRMAN. The Trustees may, by a majority vote of all the
Trustees, elect from their own number a Chairman, to hold office until his
successors shall have been duly elected and qualified. The Chairman shall not
hold any other office. The Chairman may be, but need not be, a Shareholder.
The Chairman shall preside at all meetings of the Trustees and shall have such
other duties as from time to time may be assigned to him by the Trustees.
ARTICLE VI
OFFICERS
SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall be a
President, a Treasurer and a Secretary, each of whom shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as
the business of the Trust may require, including one or
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more Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers. The Trustees may delegate to any officer or committee the
power to appoint any subordinate officers or agents.
SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise
provided by law, the Declaration or these By-Laws, the President, the Treasurer
and the Secretary shall each hold office until his successor shall have been
duly elected and qualified, and all other officers shall hold office at the
pleasure of the Trustees. The offices of the Secretary and the Treasurer shall
not be held by the same person. The President shall hold no other office.
Except as above provided, any two offices may be held by the same person. Any
officer may be but none need be a Trustee or Shareholder.
SECTION 3. REMOVAL. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer without cause, by a vote of a majority of
the Trustees then in office. Any officer or agent appointed by an officer or
committee may be removed with or without cause by such appointing officer or
committee.
SECTION 4. POWERS AND DUTIES OF THE PRESIDENT. The President may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and shall preside at all meetings of the Shareholders. Subject to the control
of the Trustees and to the control of any Committees of the Trustees, within
their respective spheres, as provided by the Trustees, he shall at all times
exercise a general supervision and direction over the affairs of the Trust. He
shall have the power to employ attorneys and counsel for the Trust and to employ
such subordinate officers, agents, clerks and employees as he may find necessary
to transact the business of the Trust. He shall also have the power to grant,
issue, execute or sign such powers of attorney, proxies or other documents as
may be deemed advisable or necessary in furtherance of the interest of the
Trust. The President shall have such other powers and duties, as from time to
time may be conferred upon or assigned to him by the Trustees.
SECTION 5. POWERS AND DUTIES OF VICE PRESIDENTS. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any other powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees and the President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be the
principal financial and accounting officer of the Trust. He shall deliver all
funds of the Trust which may come into his hands to such Custodian as the
Trustees may employ pursuant to Article X of these By-Laws. He shall render a
statement of condition of the finances of the Trust to the Trustees as often as
they shall require the same and he shall in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the
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Trustees. The Treasurer shall give a bond for the faithful discharge of his
duties, if required so to do by the Trustees, in such sum and with such surety
or sureties as the Trustees shall require.
SECTION 7. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall keep
the minutes of all meetings of the Trustees and of the Shareholders in proper
books provided for that purpose; he shall have custody of the seal of the Trust,
he shall have charge of the Share transfer books, lists and records unless the
same are in the charge of the Transfer Agent. He shall attend to the giving and
serving of all notices by the Trust in accordance with the provisions of these
By-Laws and as required by law; and subject to these By-Laws, he shall in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Trustees.
SECTION 8. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such other duties as from
time to time may be assigned to him by the Trustees. Each Assistant Treasurer
shall give a bond for the faithful discharge of his duties, if required so to do
by the Trustees, in such sum and with such surety or sureties as the Trustees
shall require.
SECTION 9. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the absence or
disability of the Secretary, an Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him by the Trustees
SECTION 10. COMPENSATION OF OFFICERS AND TRUSTEES. Subject to any
applicable provisions of the Declaration, the compensation of the officers and
Trustees shall be fixed from time to time by the Trustees or, in the case of
officers, by any Committee or officer upon whom such power may be conferred by
the Trustees. No officer shall be prevented from receiving such compensation as
such officer by reason of the fact that he is also a Trustee.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of January in
each year and shall end on the thirty-first day of December in each year,
provided, however, that the Trustees may from time to time change the fiscal
year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time be prescribed.
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ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice whatsoever is required to be given by law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or wirelessed for the purposes of these By-Laws when it
has been delivered to a representative of any telegraph, cable or wireless
company with instructions that it be telegraphed, cabled or wirelessed.
ARTICLE X
CUSTODY OF SECURITIES
SECTION 1. EMPLOYMENT OF A CUSTODIAN,. The Trust shall place and at all
times maintain in the custody of a Custodian (including any sub-custodian for
the Custodian) all funds, securities and similar investments included in the
Trust Property. The Custodian (and any sub-custodian) shall be a bank having
not less that $2,000,000 aggregate capital, surplus and undivided profits and
shall be appointed from time to time by the Trustees, who shall fix its
remuneration.
SECTION 2. ACTIONS UPON TERMINATION OF CUSTODIAN AGREEMENT. Upon
termination of a Custodian Agreement or inability of the Custodian to continue
to serve, the Trustees shall promptly appoint a successor custodian, but in the
event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call as promptly as
possible a special meeting of the Shareholders to determine whether the Trust
shall function without a custodian or shall be liquidated. If so directed by
vote of the holders of a majority of the outstanding voting securities, the
Custodian shall deliver and pay over all Trust Property held by it as specified
in such vote.
SECTION 3. CENTRAL CERTIFICATE SYSTEM. Subject to such results,
regulations and orders as the Commission may adopt, the Trustees may direct the
Custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodian.
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SECTION 4. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the Custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or new
By-Laws may be adopted by (a) vote of a majority of the shares outstanding and
entitled to vote or (b) by the Trustees, provided, however, that no By-Law may
be amended, adopted or repealed by the Trustees if such amendment, adoption or
repeal requires, pursuant to law, the Declaration or these By-Laws, a vote of
the Shareholders.
ARTICLE XII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or Trustees of the Trust
and no partner, officer, director or shareholder of the Investment Adviser of
the Trust (as that term is defined in the Investment Company Act of 1940) or of
the underwriter of the Trust, and no Investment Adviser or underwriter of the
Trust, shall take long or short positions in the securities issued by the Trust.
(1) The foregoing provisions shall not prevent the underwriter from
purchasing Shares from the Trust if such purchases are limited (except for
reasonable allowances for clerical errors, delays and errors of
transmission and cancellation of orders) to purchase for the purpose of
filling orders for such Shares received by the underwriter, and provided
that orders to purchase from the Trust are entered with the Trust or the
Custodian promptly upon receipt by the underwriter of purchase orders for
such Shares, unless the underwriter is otherwise instructed by its
customers.
(2) The foregoing provision shall not prevent the underwriter from
purchasing Shares of the Trust as agent for the account of the Trust.
(3) The foregoing provisions shall not prevent the purchase from the Trust
or from the underwriter of Shares issued by the Trust, by any officer or
Trustee of the Trust or by any partner, officer, director or shareholder of
the Investment Adviser of the Trust or of the underwriter of the Trust at
the price available to the public generally at the moment of such purchase,
or as described in the then currently effective Prospectus of the Trust.
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(4) The foregoing shall not prevent the Investment Adviser, or any
affiliate thereof, of the Trust from purchasing Shares prior to the
effectiveness of the first registration statement relating to the Shares
under the Securities Act of 1933.
(B) The Trust shall not lend assets of the Trust to any officer or Trustee
of the Trust, or to any partner, officer, director or shareholder of, or
person financially interested in, the Investment Adviser of the Trust or
the underwriter of the Trust, or to the Investment Adviser of the Trust or
to the underwriter of the Trust.
(C) The Trust shall not impose any restrictions upon the transfer of the
Shares of the Trust except as provided in the Declaration, but this
requirement shall not prevent the charging of customary transfer agent
fees.
(D) The Trust shall not permit any officer or Trustee of the Trust, or any
partner, officer or director of the Investment Adviser or underwriter of
the Trust to deal from or on behalf of the Trust with himself as principal
or agent, or with any partnership, association or corporation in which he
has a financial interest; provided that the foregoing provisions shall not
prevent (a) officers and Trustees of the Trust or partners, officers or
directors of the Investment Adviser or underwriter of the Trust from
buying, holding or selling shares in the Trust, or from being partners,
officers or directors or otherwise financially interested in the Investment
Adviser or underwriter of the Trust; (b) purchases or sales of securities
or other property by the Trust from or to an affiliated person or to the
Investment Adviser or underwriter of the Trust if such transaction is
exempt from the applicable provisions of the 1940 Act; (c) purchases of
investments for the portfolio of the Trust or sales of investments owned by
the Trust through a security dealer who is, or one or more of whose
partners, shareholders, officers or directors is, an officer or Trustee of
the Trust, or a partner, officer or director of the Investment Adviser or
underwriter of the Trust, if such transactions are handled in the capacity
of broker only and commissions charged do not exceed customary brokerage
charges for such services; (d) employment of legal counsel, registrar,
Transfer Agent, dividend disbursing agent or Custodian who is, or has a
partner, shareholder, officer, or director who is, an officer or Trustee of
the Trust, or a partner, officer or director of the Investment Adviser or
underwriter of the Trust, if only customary fees are charged for services
to the Trust; (e) sharing statistical research, legal and management
expenses and office hire and expenses with any other investment company in
which an officer or Trustee of the Trust, or a partner, officer or director
of the Investment Adviser or underwriter of the Trust, is an officer or
director or otherwise financially interested.
END OF BY-LAWS
-9-
<PAGE>
NORTHSTAR/NWNL TRUST
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 2nd day of May, 1994 by and between NORTHSTAR/NWNL
TRUST, a Massachusetts business trust, (the "Trust") and NORTHSTAR INVESTMENT
MANAGEMENT CORP., a Delaware business corporation (the "Adviser").
The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
consisting of four separate diversified series, Northstar/NWNL Growth Fund,
Northstar/NWNL High Yield Bond Fund, Northstar/NWNL Multi-Sector Bond Fund and
Northstar/NWNL Income and Growth Fund (each "Fund" and collectively the
"Funds").
The Trust desires to retain the Adviser to render investment advisory
services to the Funds, and the Adviser is willing to render such investment
advisory on the terms set forth below.
The parties agree as follows:
1. The Trust hereby appoints the Adviser to act as investment adviser to
the Trust and the Funds for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to render the
services described, for the compensation provided, in this Agreement.
2. Subject to the supervision of the Trustees, the Adviser shall manage
the investment operations of the Funds and the composition of each Fund's
portfolio, including the purchase and retention and disposition of portfolio
securities, in accordance with each Fund's investment objectives, policies and
restrictions as stated in the Trust's Prospectus and Statement of Additional
Information (as defined below) subject to the following understandings:
(a) The Adviser shall provide supervision of each Fund's investments and
determine from time to time what investments will be made, held or disposed of
or what securities will be purchased and retained, sold or loaned by each Fund,
and what portion of the assets will be invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations under
this Agreement, shall (i) act in conformity with the Declaration of Trust, By-
Laws, Prospectus and Statement of Additional Information of the Trust, with the
instructions and directions of the Trustees and (ii) conform to and comply with
the requirements of the Investment Company Act and all other applicable federal
and state laws and regulations.
(d) (i) The Adviser shall determine the securities to be purchased or sold
by each Fund and will place orders pursuant to its determinations with or
through such persons, brokers or dealers to carry out the policy with respect to
brokerage as set forth in the Trust's Prospectus and Statement of Additional
Information or as the Trustees may direct from time to time. In providing each
Fund with investment supervision, the Adviser will give primary consideration to
securing
<PAGE>
the most favorable price and efficient execution. The Adviser may also consider
the financial responsibility, research and investment information and other
services and research related products provided by brokers or dealers who may
effect or be a party to any such transactions or other transactions to which
other clients of the Adviser may be a party. The Funds recognize that the
services and research related products provided by such brokers may be useful to
the Adviser in connection with its services to other clients.
(ii) When the Adviser deems the purchase or sale of a security to be
in the best interest of a Fund as well as other clients, the Adviser, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased in order to obtain the most favorable price
or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transactions, will be made by the Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to each Fund and to such other clients.
(e) The Adviser shall maintain, or cause to be maintained, all books and
records required under the Investment Company Act to the extent not maintained
by the custodian of the Trust. The Adviser shall render to the Trustees such
periodic and special reports as the Trustees may reasonably request.
(f) The Adviser shall provide the Trust's custodian on each business day
information relating to all transactions concerning each Fund's assets.
(g) The investment management services of the Adviser to the Trust and to
each Fund under this Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services to others.
3. The Trust has delivered to the Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Declaration of Trust, as amended, as filed with the Secretary of the
Commonwealth of Massachusetts (such Declaration of Trust, as in effect on the
date hereof and as further amended from time to time, are herein called the
"Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date hereof
and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Trustees authorizing the appointment of
the Adviser and approving this Agreement on behalf of the Trust and each Fund;
(d) Registration Statement on Form N-lA under the Investment Company Act
and the Securities Act of 1933, as amended from time to time (the "Registration
Statement"), as filed with the Securities and Exchange Commission (the
"Commission"), relating to the Trust and shares of beneficial interest of each
Fund and all amendments thereto.
(e) Notification of Registration of the Trust under the Investment Company
Act on Form N-8A as filed with the Commission and all amendments thereto;
(f) Prospectus and Statement of Additional Information included in the
Registration Statement, as amended from time to time. All references to this
2
<PAGE>
Agreement, the Prospectus and the Statement of Additional Information shall be
to such documents as most recently amended or supplemented and in effect.
4. The Adviser shall authorize and permit any of its directors, officers
and employees who may be elected as trustees or officers of the Trust and/ or
the Funds to serve in the capacities in which they are elected. All services to
be furnished by the Adviser under this Agreement may be furnished through such
directors, officers or employees of the Adviser.
5. The Adviser agrees that all records which it maintains for the Trust
and/or the Funds are property of the Trust and/or the Funds. The Adviser will
surrender promptly to the Trust and/or the Funds any such records upon either
the Trust's or the Fund's request. The Adviser further agrees to preserve such
records for the periods prescribed in Rule 3la-2 of the Commission under the
Investment Company Act.
6. (i) In connection with the services rendered by the Adviser under this
Agreement, the Adviser will pay all of the following expenses:
(a) the salaries and expenses of all personnel of the Trust, the Funds and the
Adviser required to perform the services to be provided pursuant to this
Agreement, except the fees of the trustees who are not affiliated persons of the
Adviser, and
(b) all expenses incurred by the Adviser, the Trust or by the Funds in
connection the performance of the Adviser's responsibilities hereunder, other
than brokers' commissions and any issue or transfer taxes chargeable to each
respective Fund in connection with its securities transactions.
7. For the services provided and the expenses assumed pursuant to this
Agreement, each Fund will pay to the Adviser as compensation a fee accrued daily
and paid monthly at the annual rate of .75% of the first $250,000,000 of
aggregate average daily net assets of each Fund; .70% of the next $250,000,000
of such assets; .65% of the next $250,000,000 of such assets; .60% on the next
$250,000,000 of such asset and .55% on the remaining aggregate daily net assets
of the Fund in excess of $l,000,000,000.
8. The Adviser may rely on information reasonably believed by it to be
accurate and reliable. Neither the Adviser nor its officers, directors,
employees or agents or controlling persons shall be liable for any error or
judgment or mistake of law, or for any loss suffered by the Trust and/or a Fund
in connection with or arising out of the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
9. This Agreement shall continue in effect for a period of two years from
the date hereof and shall continue in effect thereafter for so long as such
continuance is specifically approved at least annually by the affirmative vote
of (i) a majority of the Trustees of the Trust acting separately on behalf of
each Fund, who are not interested persons of the Trust, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) a majority
of the Trustees of the Trust or the holders of a majority of the outstanding
voting securities of each respective Fund; provided however, that this Agreement
may be terminated by the Trust, on behalf of a Fund at any time, without the
payment of any penalty, by the Trustees acting on behalf of a Fund or by vote
of a majority
3
<PAGE>
of the outstanding voting securities (as defined in the Investment Company Act)
of a Fund, or by the Adviser at any time, without the payment of any penalty, on
not more than 60 days' nor less than 30 days' written notice to the other party.
This Agreement shall terminate automatically in the event of its assignment
provided that a transaction which does not, under the Investment Company Act,
result in a change of actual control or management of the Adviser's business
shall not be deemed to be an assignment for the purposes of this Agreement.
10. This agreement shall terminate automatically in the event of its
assignment; the term "assignment" for this purpose shall have the meaning
defined in Section 2(a)(4) of the Investment Company Act of 1940.
11. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Adviser who may also be a trustee, officer
or employee of the Trust and/or the Funds to engage in any other business or to
devote his time and attention in part to the management or other aspect of any
business, whether of a similar or dissimilar nature, nor limit or restrict the
right of the Adviser to engage in any other business or to render services of
any kind to any other person or entity.
12. During the term of this Agreement, the Trust and each Fund agrees to
furnish the Adviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to shareholders of each Fund or the public, which refer in any way
to the Adviser, prior to use thereof and not to use such material if the Adviser
reasonably objects in writing within five business days (or such other time as
may be mutually agreed) after receipt. In the event of termination of the
Agreement, the Trust and/or each Fund will continue to furnish to the Adviser
such other information relating to the business affairs of the Trust and/or each
Fund as the Adviser at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
13. This Agreement may be amended by mutual agreement, but only after
authorization of such amendments by the affirmative vote of (i) the holders of
the majority of the outstanding voting securities of each Fund and ( ii) a
majority of the members of the Trustees who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
14. The Adviser, the Trust and the Funds each agree that the name
"Northstar" is proprietary to, and a property right of, the Adviser. The Trusts
and the Funds agree and consent that (i) each will only use the name "Northstar"
as part of its name and for no other purpose, (ii) each will not purport to
grant any third party the right to use the name "Northstar" and (iii) upon the
termination of this Agreement, the Trust and the Funds shall, upon the request
of the Adviser, cease to use the name "Northstar", and shall use its best
efforts to cause its officers, trustees and shareholders to take any and all
actions which the Adviser may request to effect the foregoing.
15. Any notice or other communications required to be given pursuant to
this Agreement shall be deemed to be given if delivered or mailed by registered
mail, postage paid, (1) to the Adviser at Two Pickwick Plaza, Greenwich, CT
06830, Attention: Secretary; or (2) to the Trust and/or the Funds, Two Pickwick
Plaza, Greenwich, CT 06830, Attention: Secretary.
4
<PAGE>
16. This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut. The terms "interested person",
"assignment", and "vote of the majority of the outstanding securities" shall
have the meaning set forth in the Investment Company Act.
17. The Declaration of Trust, establishing the Trust, dated December 17,
1993, a copy of which, together with all amendments thereto (the "Declaration"),
is on file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name "Northstar/NWNL Trust" refers to the Trustees under the
Declaration collectively as trustees, but not individually or personally; and no
Trustee, shareholder, officer, employee or agent of the Trust and/or the Funds
may be held to any personal liability, nor may resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the Trust property only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first written
above.
NORTHSTAR/NWNL TRUST
Attest: By:
--------------------------------
President
NORTHSTAR INVESTMENT MANAGEMENT CORP.
Attest: By:
--------------------------------
Sr. Vice President
5
<PAGE>
EXHIBIT 5(B)
FORM OF SUBADVISORY AGREEMENT
<PAGE>
NORTHSTAR/NWNL TRUST
NORTHSTAR GROWTH FUND
SUBADVISORY AGREEMENT
AGREEMENT made this 1st day of February, 1996 by and between Northstar
Investment Management Corporation, a Delaware Corporation (hereinafter the
"Adviser"), investment adviser for the Northstar Growth Fund, a series
of the Northstar NWNL Trust (the "Trust") (hereinafter the "Fund") and
Navellier Fund Management, Inc., a Delaware corporation (hereinafter the
"Subadviser").
WHEREAS, the Adviser has been retained by the Trust, an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), to provide investment advisory services to
the Fund pursuant to an Investment Advisory Agreement dated May 2, 1994 (the
"Investment Advisory Agreement"); and
WHEREAS, the Trustees of the Trust, including a majority of the Trustees who are
not "interested persons," as defined in 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 or will be registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act") prior to
performing its services for the Fund under this Agreement;
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
the assets of the Fund with power on behalf of and in the name of the Fund
at Subadviser's discretion; subject at all time to the supervision of the
Adviser and the Trustees of the Trust:
(a) to direct the purchase, subscription or other acquisition of
investments and to direct the sale, redemption, and exchange of investments,
subject to the duty to render to the Trustees of the Trust, the Adviser and the
Custodian written reports of the composition of the portfolio of the Fund as
often as the Trustees 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 that
the Subadviser shall have no authority to direct the transfer of the Fund's
funds or assets to itself or other 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
<PAGE>
(d) to take all such 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
Trust, or the Adviser may give to the Subadviser with regard to any of the
foregoing powers shall, unless the contrary is expressly stated therein,
override the general authority given by this provision to the extent that
the Trustees 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
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 that 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 Subadviser's performance of the
duties delineated in subparagraphs (a)-(d) of this provision.
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 (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; (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 Trust whatever non-proprietary reports it may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Subadviser will keep the Trust and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Subadviser's own initiative, furnish to the Trust from time to time whatever
information the Subadviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Northstar
Administrators Corp. (the "Administrator"), the Adviser, and the Trust,
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 Trust 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 Trust 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 Trust and the Adviser
immediately of any material fact known to the Subadviser respecting or relating
to the Subadviser that is not contained in the Trust's Registration Statement,
or any amendment or supplement thereto, but that is required to be disclosed
therein, and of any statement contained therein that becomes untrue in any
material respect. The Trust, the Fund, Adviser, Administrator and their
affiliates shall likewise immediately notify the Subadviser if any of them
become aware of any regulatory action of the type described in this
subparagraph 2(d).
<PAGE>
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 directors, officers and employees,
and other internal operating costs; provided, however, that the Subadviser
shall be entitled to reimbursement on a monthly basis by the Adviser of all
reasonable out-of-pocket expenses properly incurred by it in connection with
serving as subadviser to the Fund. For the avoidance of doubt, 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 the
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. As compensation for the advisory services provided by the
Subadviser under this Agreement, the Adviser will pay the Subadviser at the
end of each calendar month an advisory fee computed daily at an annual rate
equal to 0.48 of 1% of the Fund's average daily net assets. The "average daily
net assets" of the Fund shall mean the average of the values placed on the
Fund's net assets as of 4:00 p.m. (New York time) on each day on which the
net asset value of the Fund is determined consistent with the provisions of
Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines the value
of its net assets as of some other time on each business day, as of such other
time. The value of net assets of the Fund shall always be determined pursuant
to the applicable provisions of the Fund's Declaration of Trust and the
Registration Statement. If, pursuant to such provisions, the determination of
net asset value is suspended for any particular business day, then for the
purposes of this Section 4, the value of the net assets of the Fund as last
determined shall be deemed to be the value of its net
<PAGE>
assets as of the close of regular trading on the New York Stock Exchange, or as
of such other time as the value of the net assets of the Fund's portfolio may
lawfully be determined, on that day. If the determination of the net asset value
of the shares of the Fund has been so suspended for a period including any month
end when the Subadviser's compensation is payable pursuant to this Section, the
Subadviser's compensation payable at the end of such month shall be computed on
the basis of the value of the net assets of the Fund as last determined (whether
during or prior to such month). If the Fund determines the value of the net
assets of its portfolio more than once on any day, then the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this Section 4.
5. BOOKS AND RECORDS. The Subadviser agrees to maintain such books and
records with respect to its services to the Trust and 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 Trust and will be surrendered promptly to the Trust 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 judgment 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 Trust or the Fund
or the holders of 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 Trust or 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 gross 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 this 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 the services of the
Subadviser are not exclusive, and that nothing in this Subadvisory Agreement
shall prevent the Subadviser, its affiliates or its or their officers,
directors and employees from providing similar services to other investment
companies (whether or not their investment objectives and policies are similar
to those of the Fund) or from engaging in other investment advisory
activities. When the Subadviser recommends the purchase or sale of a
security for other investment companies and other clients, and at the same time
the Subadviser recommends the purchase or sale of the same security for the
Fund, it is understood that in light of its fiduciary duty to the Fund, such
transactions will be executed on a basis that is fair and equitable to
the Fund, provided, however, that 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 directors, officers or employees
shall act as a 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.
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, upon sixty (60) days' written notice to the Subadviser,
or (b) by the Subadviser without cause at any time without penalty, upon (60)
days' written notice to the Trust 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.
<PAGE>
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 Trust, 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 (other than attorneys' fees and costs in relation to
the preparation of this Agreement; each party bearing responsibility for its
own such costs and fees) 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 the Adviser's (its affiliates and 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 any
claims for non-payment of advisory fees; claims asserted or threatened by
any shareholder of the Trust, governmental or regulatory agency, or any
other person; claims arising from any wrongful act by the Trust or the Fund
or any of their trustees, officers, employees, or representatives, or by
the Adviser, its officers, employees or representatives, or from any actions by
any representative of the Trust or the Fund; 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 covering shares filed or made public by the Trust on
behalf of 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, provided 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 and costs (including any reasonable attorneys' fees and
costs) of the Subadviser 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 determination 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, the
Trust and the Fund from and against all liabilities, losses, expenses,
reasonable attorneys' fees and costs (other than attorneys' fees and costs in
relation to the preparation of this Agreement; each party bearing responsibility
for its own such costs and fees) 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
(its affiliates, and their respective agents and employees) failure to perform
its duties and assume its obligations hereunder, or from any wrongful act
of Subadviser or its failure to act in performing 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 and
with the consent of Subadviser contained in any registration statement,
prospectus, shareholder report or other information or materials relating to
the Trust or the Fund and shares issued by the Trust or the failure or alleged
failure to state a material fact therein required to be stated in order that the
statement therein is 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 determination 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 shall promptly notify the other
party thereof. After becoming notified of the same, the party from whom
indemnification is sought shall
<PAGE>
be entitled to participate in any such action or proceeding and shall assume
any payment for the full defense thereof with counsel reasonably
satisfactory to the party seeking indemnification. After properly assuming
the defense thereof, the party from whom indemnification is sought shall not be
liable hereunder to the other party for any legal or other expenses
subsequently incurred by such party in connection with the defense thereof,
other than damages, if any, by way of judgment, settlement, or
otherwise pursuant to this provision. The party from whom indemnification is
sought 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.
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 Trust or the Fund in any way or otherwise be deemed to be an agent of the
Trust or the Fund. Likewise, the Trust, the Fund, the Adviser, and their
respective affiliates, agents and employees shall not be deemed agents of the
Subadviser and shall have not
authority to bind Subadviser.
12. USE OF NAME. (a) The Trust, on behalf of the Fund, and the Fund may,
subject to sub-clause (b) below, use the name, "Navellier Fund Management, Inc."
or any component, abbreviation or other name derived therefrom for promotional
purposes only for so long as this Agreement (or any extension, renewal or
amendment thereof) continues in force, unless the Subadviser shall specifically
consent in writing to such continued use thereafter. Any permitted use by the
Trust or Fund during the term hereof of the name of the Subadviser, Navellier or
any derivative thereof, shall in no way prevent the Subadviser or any of it
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 Trust or the Fund. The
name and right to the name Navellier Fund Management, Inc. or any derivation of
the name Navellier shall at all times be owned and be the sole and exclusive
property of Louis Navellier and his affiliated entities. Navellier Fund
Management Inc., by entering into this Agreement, is allowing the Trust and the
Fund to use the name Navellier and/or derivatives thereof solely by or on behalf
of this Fund. At the conclusion of this Agreement or in the event of any
termination of this Agreement or if the Subadviser's services are terminated for
any reason, each of the authorized parties and their respective employees,
representatives, affiliates, and associates agree that they shall immediately
cease using the name Navellier and/or any derivatives of said name for any
purpose whatsoever.
(b) The Adviser and its affiliates shall not publish or distribute, and 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 document referring by name to the Subadviser, unless the
Subadviser shall have consented in writing to such references in the form and
context in which they appear; provided however, that where the Fund timely seeks
to obtain approval of disclosure contained in any documents required to be filed
by the Fund, 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. MISCELLANEOUS. (a) This Subadvisory Agreement shall be governed by the
laws of the State of Nevada, 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. In the event of any litigation in which the Adviser and the
Subadviser are adverse parties and there are no other parties to such
litigation, such action shall be brought in the United States District Court for
the State of Nevada, located in Reno, Nevada.
(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.
14. 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
<PAGE>
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. 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.
15. 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.
16. NON-SOLICITATION. The Adviser, its affiliates and their respective agents
(including brokers engaged in marketing and selling shares of the Fund), and
each of their employees and affiliates agree not to knowingly solicit to invest,
or accept or retain as investors, in the Fund directly or indirectly any persons
or entities who are clients of or investors in any fund or investment vehicle
managed by any entity owned by Louis Navellier.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the 1st day of February,
1996.
NORTHSTAR INVESTMENT MANAGEMENT NAVELLIER FUND MANAGEMENT, INC.
By: By:
--------------------------------- --------------------------------
Chairman and CEO President
<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
1
<PAGE>
which the Fund, on behalf of the applicable Portfolio desires to be held in
places within the United States ("domestic 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
2
<PAGE>
in Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities System" and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
3
<PAGE>
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into
by the Portfolio;
3) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.10 hereof;
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
4
<PAGE>
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
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 instrumental- ities, 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
from time to time in the currently effective prospectus and
statement of additional
7
<PAGE>
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 be used in common with other
registered investment companies having the same investment adviser as
the
8
<PAGE>
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 of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable;
9
<PAGE>
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 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
10
<PAGE>
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 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
11
<PAGE>
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
(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
12
<PAGE>
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;
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;
13
<PAGE>
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 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
14
<PAGE>
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 Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
15
<PAGE>
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 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
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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 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
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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 ("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
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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
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.
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2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on behalf
of the Portfolio, the Custodian and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio, (ii) for purposes of
segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii)
for the purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered
20
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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.
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.
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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 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
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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
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
23
<PAGE>
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 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
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<PAGE>
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
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
25
<PAGE>
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
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,
26
<PAGE>
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,
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,
27
<PAGE>
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
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
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<PAGE>
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 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
29
<PAGE>
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
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
30
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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 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
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<PAGE>
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.
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
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<PAGE>
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 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
33
<PAGE>
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, 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.
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<PAGE>
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-1A, 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 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.
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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 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
36
<PAGE>
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.
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
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<PAGE>
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 an Assistant Secretary that the Board of Trustees of the Fund has
approved the initial use of a particular Securities System by such Portfolio and
the receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has reviewed the use by such Portfolio of such
Securities System, as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not with respect to
a Portfolio act under Section 2.10A hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System by such
Portfolio and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has reviewed the use by such
Portfolio of the Direct Paper System; PROVIDED FURTHER, however, that the Fund
shall
38
<PAGE>
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.
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
39
<PAGE>
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 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
40
<PAGE>
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 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.
41
<PAGE>
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 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
42
<PAGE>
corporate communications. Please indicate below whether the Fund consents or
objects by checking one of the alternatives below.
YES [ ] 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.
43
<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 day of ,
1994.
ATTEST NORTHSTAR/NWNL TRUST
By
- ------------------------- --------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
By
- ------------------------- --------------------------------
Executive Vice President
44
<PAGE>
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:
45
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made this 2nd day of May, 1994, between Northstar/NWNL Series
(the "Trust"), on behalf of Northstar/NWNL Growth Fund, Northstar/NWNL Income
and Growth Fund, Northstar/NWNL Multi-Sector Bond Fund, and Northstar/NWNL High
Yield Bond Fund (the "Funds"), and Northstar Administrators Corporation (the
"Administrator").
WHEREAS, the Trust is a Massachusetts business trust authorized to issue
shares in series and is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act") and the
Funds are the initial series of the Trust; and
WHEREAS, Northstar Investment Management Corporation (the "Adviser") serves
as investment adviser to the Funds, and the Trust wishes to retain the
Administrator to render administrative and other services to the Funds, and the
Administrator is willing to render such services to the Funds;
NOW THEREFORE, in consideration of the premises, the promises and mutual
covenants herein contained, it is agreed between the parties as follows:
1. APPOINTMENT
The Trust hereby appoints the Administrator to serve as administrator to
the Funds for the periods and on the terms set forth herein. The Administrator
accepts this appointment and agrees to furnish the services set forth herein for
the compensation provided herein.
2. SERVICES AS ADMINISTRATOR
A. GENERAL SERVICES
Subject to the supervision and direction of the Board of Trustees of
the Trust, the Administrator will (a) assist in supervising all aspects of the
Funds' operations except those performed by the Funds' Adviser under its
investment advisory agreement; (b) furnish such statistical or other factual
information, advice regarding economic factors and trends and advice and
guidelines as to transactions in specific securities (but without generally
furnishing advice or making recommendations regarding the purchase or sale of
securities); (c) maintain or supervise, as the case may be, the maintenance by
the Adviser or third parties approved by the Trust of such books and records of
the Funds as may be required by applicable federal or state law; (d) perform all
corporate secretarial functions on behalf of the Funds; (e) provide the Funds
with office facilities, assemble and provide statistical and research data,
provide data processing, clerical, internal legal, internal executive,
administrative and bookkeeping services, and provide stationary and office
supplies; (f) supervise the performance by third parties of Fund accounting and
portfolio pricing services, internal audits and audits by independent
accountants for the Funds; (g) prepare and arrange for the printing, filing and
distribution of prospectuses, proxy materials, and periodic reports to the
shareholders of the Funds as required by applicable law; (h) prepare or
supervise the preparation by third parties approved by the Trust of all federal,
state, and local tax returns and reports of the Funds required by applicable
law; (i) prepare, update, and arrange for the filing of the Funds' registration
statement and amendments thereto and other documents as the Securities and
Exchange Commission ("Commission") and other federal regulatory authorities may
require by applicable law, and oversee compliance under all state regulatory
requirements to which the Funds are subject; (j) render to the Board of Trustees
of the Trust such periodic and special reports respecting the Funds as the Board
may
<PAGE>
reasonably request; (k) arrange, assemble information and reports for, and
attend meetings of the Trustees and the shareholders of the Funds; (l) maintain
a fidelity bond as required under the 1940 Act for the Trust and liability
insurance for the Trustees and officers of the Trust; and (m) make available its
officers and employees to the Board of Trustees and officers of the Trust for
consultation and discussions regarding the administration of the Funds.
B. PERFORMANCE OF DUTIES
The Administrator, at its discretion, may enter into contracts with third
parties for the performance of the services to be provided by the Administrator
under this Agreement.
The Administrator, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Registration Statement, as
amended, of the Funds and with the instructions and directions of the Board of
Trustees of the Trust and will conform to, and comply with, the requirements of
the 1940 Act and all other applicable federal and state laws and regulations.
3. DOCUMENTS
The Trust has delivered to the Administrator copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) Declaration of Trust, as amended, as filed with the Secretary of
the Commonwealth of Massachusetts;
(b) By-Laws of the Trust;
(c) Certified resolutions of the Trustees authorizing the appointment
of the Administrator and approving this Agreement on behalf of the Trust and
each Fund;
(d) Registration Statement on Form N-1A under the 1940 Act and the
Securities Act of 1933, as amended from time to time (the "Registration
Statement"), as filed with the Commission, relating to the Trust and shares of
beneficial interest of each Fund and all amendments thereto;
(e) Notification of Registration of the Trust under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto;
(f) Prospectus and Statement of Additional Information included in
the Registration Statement, as amended from time to time. All references to
this Agreement, the Prospectus and the Statement of Additional Information shall
be to such documents as most recently amended or supplemented and in effect.
4. DIRECTORS, OFFICERS AND EMPLOYEES
The Administrator shall authorize and permit any of its directors, officers
and employees who may be elected as trustees or officers of the Trust and/or the
Funds to serve in the capacities in which they are elected. All services to be
furnished by the Administrator under this Agreement may be furnished through
such directors, officers or employees of the Administrator.
-2-
<PAGE>
5. RECORDS
The Administrator agrees that all records which it maintains for the Trust
and/or the Funds are property of the Trust and/or the Funds. The Administrator
will surrender promptly to the Trust and/or the Funds any such records upon
either the Trust's or the Fund's request. The Administrator further agrees to
preserve such records for the periods prescribed in Rule 31a-2 of the Commission
under the 1940 Act.
6. COMPENSATION
In consideration of the services rendered pursuant to this Agreement, the
Funds will pay the Administrator a fee, computed and accrued daily and payable
monthly, at an annual rate of 0.10% of each Fund's average daily net assets.
For the purpose of determining fees payable to the Administrator, the value of a
Fund's average daily net assets shall be computed at the times and in the manner
specified in the Prospectus and Statement of Additional Information of the Fund
as from time to time in effect.
7. EXPENSES
The Administrator will bear all expenses in connection with the performance
of its services under this Agreement, except that the Administrator will be
reimbursed by the Funds for the out-of-pocket costs incurred in connection with
this Agreement or by third parties who are performing services as permitted by
paragraph 2. The Funds will bear certain other expenses to be incurred in their
operation, including: taxes, interest, brokerage fees and commissions, if any;
fees of Trustees of the Trust who are not officers, directors, or employees of
the Adviser or Administrator; Securities and Exchange Commission fees; charges
of custodians and transfer and dividend disbursing agents; certain insurance
premiums; outside auditing and legal expenses; cost of maintenance of the Funds'
existence; charges of accounting, internal auditing, and pricing of portfolio
securities for the Funds, including the charges of an independent pricing
service; costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of the shareholders of
the Funds and of the officers or Board of Trustees of the Trust; and any
extraordinary expenses.
8. STANDARD OF CARE
The Administrator shall exercise its best judgment in rendering the
services under this Agreement. The Administrator shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Funds or the
Funds' shareholders in connection with the matters to which this Agreement
relates, provided that nothing herein shall be deemed to protect or purport to
protect the Administrator against liability to the Funds or to their
shareholders to which the Administrator would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of its Administrator's reckless disregard
of its obligations and duties under this Agreement. As used in this Section 9,
the term "Administrator" shall include any officers, directors, employees, or
other affiliates of the Administrator performing services with respect to the
Funds.
-3-
<PAGE>
9. DURATION AND TERMINATION
This Agreement shall continue in effect unless sooner terminated as
provided herein, for two years from the date hereof and shall continue from year
to year thereafter, provided each continuance is specifically approved at least
annually by a majority of the Board of Trustees of the Trust, including a
majority of the Board of Trustees who are not "interested persons" (as defined
in the 1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting such approval. This Agreement is
terminable, without penalty, on 60 days' written notice by the Board of Trustees
of the Trust or by vote of holders of a majority of the Funds' shares, or upon
90 days' written notice by the Administrator.
10. SERVICE TO OTHER COMPANIES OR ACCOUNTS
The administrative services of the Administrator to the Funds under this
Agreement are not to be deemed exclusive, and the Administrator, or any
affiliate thereof, shall be free to render similar services to other investment
companies and other clients (whether or not their investment objectives and
policies are similar to those of the Funds) and to engage in other activities,
so long as it services hereunder are not impaired thereby.
11. ASSIGNMENT
This Agreement may be assigned by either party only upon the prior written
consent of the other party.
12. MISCELLANEOUS
(a) This Agreement constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof.
(b) Titles or captions of Sections contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provisions thereof.
(c) This Agreement may be executed in several counterparts, all of
which together shall for all purposes constitute one Agreement, binding on all
the parties.
(d) This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and interpreted, construed and enforced in
accordance with the laws of the State of Connecticut.
(e) If any provisions of this Agreement or the application thereof to
any party or circumstances shall be determined by any court of competent
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Agreement or the application of such provision to such person or circumstance,
other than those as to which it is so determined to be invalid or unenforceable,
shall not be affected thereby, and each provision hereof shall be valid and
shall be enforced to the fullest extent permitted by law.
-4-
<PAGE>
(f) Notices of any kind to be given to the Administrator by the Trust
shall be in writing and shall be duly given if mailed or delivered to the
Administrator at Two Pickwick Plaza, Greenwich, Connecticut 06830, or at such
other address or to such individual as shall be specified by the Administrator
to the Trust. Notices of any kind to be given to the Trust by the Administrator
shall be in writing and shall be duly given if mailed or delivered to Two
Pickwick Plaza, Greenwich, Connecticut 06830, or at such other address or to
such individual as shall be specified by the Trust to the Administrator.
(g) The Administrator, the Trust and the Funds each agree that the
name "Northstar" is proprietary to, and a property right of, the Administrator.
The Trust and the Funds agree and consent that (i) each will only use the name
"Northstar" as part of its name and for no other purpose, (ii) each will not
purport to grant any third party the right to use the name "Northstar" and (iii)
upon the termination of this Agreement, the Trust and the Funds shall, upon the
request of the Administrator, cease to use the name "Northstar," and shall use
its best efforts to cause its officers, trustees and shareholders to take any
and all actions which the Administrator may request to effect the foregoing.
(h) The Declaration of Trust, establishing the Trust, dated December
8, 1993, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "Northstar/NWNL Trust" refers to the
Trustees under the Declaration collectively as trustees, but not individually or
personally; and no Trustee, shareholder, officer, employee or agent of the Trust
and/or the Funds may be held to any personal liability, nor may resort be had to
their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of the Trust, but the Trust property
only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
NORTHSTAR/NWNL TRUST
By:
------------------------------------
President
NORTHSTAR ADMINISTRATORS CORPORATION
By:
------------------------------------
Executive Vice President
-5-
<PAGE>
EXHIBIT 10
OPINION OF COUNSEL
<PAGE>
NORTHSTAR INVESTMENT MANAGEMENT CORP.
TWO PICKWICK PLAZA
GREENWICH, CT 06830
February 15, 1996
Northstar/NWNL Trust
Two Pickwick Plaza
Greenwich, CT 06830
Gentleman:
I am furnishing the following opinion in connection with the filing of a
notice (the "Notice") under Rule 24f-2 for the Northstar/NWNL Trust (the
"Trust"). This opinion is being furnished in my capacity as counsel for
Northstar Investment Management Corporation and Northstar Administrators,
investment adviser and administrator, respectively, for the Trust and each
Series thereof.
I have reviewed the Declaration of Trust of the Trust, a Massachusetts business
trust, and such other documents and such questions of law as I have deemed
necessary or advisable.
On the basis of such review, it is my opinion that when the shares of
beneficial interest of the Trust referred to in the Notice were sold during
the period commencing January 1, 1995 and ending December 31, 1995, in
reliance upon registration pursuant to Rule 24f-2 and in accordance with the
currently effective prospectus of the Trust, such shares were legally issued,
fully paid and nonassessable.
Very truly yours,
/s/ LISA HURLEY
Lisa Hurley
General Counsel
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
--------------------------
We consent to the incorporation by reference in Post-Effective Amendment No. 4
to the registration Statement of Northstar\NWNL Trust on Form N-1A of our report
dated January 31, 1996 on our audit of the financial statements and financial
highlights of Northstar/NWNL Trust which report is included in its Annual Report
to Shareholders which is also incorporated by reference in this Post-Effective
Amendment to the Registration Statement. We also consent to the references to
our Firm in the Prospectus under the caption "Financial Highlights" and in the
Statement of Additional Information under the captions "Independent Accountants"
and Financial Statements."
COOPERS & LYBRAND L.L.P.
New York, New York
February 26, 1996
<PAGE>
EXHIBIT 12
ANNUAL REPORT TO SHAREHOLDERS - NORTHSTAR/NWNL TRUST
<PAGE>
Northstar/NWNL Trust
NORTHSTAR GROWTH FUND
NORTHSTAR INCOME AND GROWTH FUND
NORTHSTAR MULTI-SECTOR BOND FUND
NORTHSTAR HIGH YIELD BOND FUND
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
<PAGE>
NORTHSTAR GROWTH FUND
GROWTH OF $10,000 INVESTED IN NORTHSTAR GROWTH FUND
FROM INCEPTION THROUGH THE FUND'S FISCAL YEAR END.
The graph below illustrates the hypothetical investment of $10,000 in the
Northstar Growth Fund from May 6, 1994 (inception of the Fund) through December
31, 1995, assuming the reinvestment of dividends and capital gains at net asset
value, compared to the S&P 500 Index for the same period. All performance data
shown represents past performance, and should not be considered indicative of
future performance.
GROWTH
[GRAPH]
<TABLE>
<CAPTION>
S&P 500 GROWTH
<S> <C> <C>
10,000 10,000
05/31/94 10,124 10,200
06/30/94 9,928 9,989
07/31/94 10,241 10,301
08/31/94 10,626 10,662
09/30/94 10,413 10,590
10/31/94 10,631 10,671
11/30/94 10,211 10,398
12/31/94 10,412 10,347
01/31/95 10,665 10,223
02/28/95 11,049 10,429
03/31/95 11,422 10,689
04/30/95 11,742 11,062
05/31/95 12,168 11,581
06/30/95 12,509 12,117
07/31/95 12,907 12,408
08/31/95 12,903 12,606
09/30/95 13,500 12,875
10/31/95 13,433 12,582
11/30/95 13,984 12,937
12/31/95 14,310 12,900
</TABLE>
Average Annual Total Return 16.75%
Total Return Since Inception 29.11%
The acompanying notes are an integral part of the financial statements.
1
<PAGE>
NORTHSTAR GROWTH FUND
INVESTMENT ENVIRONMENT
THE MARKETS
- The year 1995 was extraordinarily good for the stock market. The S&P
500 index gained 34.1%.
- Stock prices responded to strong corporate earnings increases, lower
interest rates, and the outlook for an extended economic expansion.
- In late 1995 a slowing in global economic activity led to inventory
corrections and reduced expectations for an increasing number of
companies. This, along with federal budget uncertainties, has caused
some increased price volatility.
THE FUND
- The Fund gained 24.7% compared to 31.0% for the Lipper Growth Fund
Index. Most of the shortfall relative to the broad averages occurred
in the first quarter when Latin American stocks declined sharply and
unfounded fears of recession weighed heavily on the cyclically
sensitive holdings.
- Very strong gains were achieved in a variety of well capitalized, high
quality stocks such as Citicorp, Merck, Xerox, Boeing, Lilly,
Halliburton, and British Sky Broadcasting.
- Underperforming areas such as consumer durables were sold early in the
year. Technology, which was very strong at mid-year, was cut back and
finished 1995 with disappointing returns. Basic materials were sold
and technology cut back after mid-year while additions were made to
more consistent growers in consumer staples, energy, and financial
services.
CURRENT STRATEGY
- We continue to expect stocks will provide positive results in 1996.
Slow economic growth should continue in the first half but strengthen
later in the year because of low interest rates and a more stimulative
monetary policy. Stock prices look attractive relative to interest
rates. The major stock indices should appreciate along with 5-10%
earnings growth. Selective individual stocks should benefit from
superior growth in earnings, restructurings, stock buy backs, and
acquisition activity.
- Stocks with long term consistent growth prospects have received more
emphasis with the largest holdings in consumer staples/health,
financial and energy. Technology was cut back further early in January
and cash reserves raised to be deployed opportunistically.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 12/31/95) TOTAL NET ASSETS: $3,813,294
- --------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS
NAME % FUND
1. Fannie Mae 3.6%
2. Philip Morris 3.6
3. Intel 3.4
4. Mellon Bank 3.2
5. Citicorp 3.0
6. Worldcom 3.0
7. National Semi 2.9
8. GME 2.7
9. BankAmerica 2.7
10. AMP 2.4
30.5%
5 TOP SECTORS
SECTORS
1. Technology 22.3%
2. Consumer Goods 18.8
3. Financial 17.8
4. Energy 10.6
5. Healthcare 10.2
79.7%
ASSET ALLOCATION
% FUND
Common Stock 88.3%
Convertible Bonds 1.8
Convertible Stock 0.5
Cash/other assets 9.4
100.0%
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 88.28%
AEROSPACE - 1.44%
Boeing Co. 700 $54,863
AUTOMOTIVE - 1.59%
Magna International, Inc. 1,400 60,549
BANKING - 10.00%
Ahmanson, (H.F.) & Co. 1,500 39,750
BankAmerica Corp. 1,600 103,600
Citicorp 1,700 114,325
Mellon Bank Corp. 2,300 123,625
381,300
COMPUTER SERVICES - 2.73%
General Motors Corp. Class E 2,000 104,000
CONSUMER STAPLES - 1.96%
Procter & Gamble Co. 900 74,700
COSMETICS - 0.46%
Estee Lauder Companies, Inc. (1) 500 17,437
ELECTRICAL EQUIPMENT - 3.91%
AMP, Inc. 2,400 92,100
Emerson Electric Co. 700 57,225
149,325
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ENERGY - 7.02%
Amoco Corp. 800 57,500
El Paso Natural Gas Co. 1,000 28,375
Enron Oil and Gas Co. 3,000 72,000
Mobil Corp. 600 67,200
Sonat, Inc. 1,200 42,750
267,825
ENTERTAINMENT/BROADCASTING - 1.28%
British Sky Broadcasting Group PLC (2) 1,300 48,913
FINANCIAL SERVICES - 8.66%
Federal National Mortgage Association 1,100 136,538
H&R Block, Inc. 1,900 76,950
MGIC Investment Corp. 900 48,825
PMI Group, Inc. 1,500 67,875
330,188
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/PHARMACEUTICAL - 9.58%
Bristol-Myers, Squibb Co. 1,000 $85,875
Lilly, (Eli) & Co. 532 29,925
Merck & Co., Inc. 1,000 65,750
Mylan Laboratories, Inc. 3,000 70,500
Pharmacia & Upjohn, Inc. 2,100 81,375
Sierra Health Services, Inc. (1) 1,000 31,750
365,175
LODGING & RESTAURANTS - 0.70%
Marriott International, Inc. 700 26,775
MACHINERY - 1.67%
Deere & Co. 1,000 35,250
Kennametal, Inc. 900 28,575
63,825
OFFICE EQUIPMENT - 1.44%
Xerox Corp. 400 54,800
OIL SERVICES - 2.88%
Halliburton Co. 800 40,500
Schlumberger LTD 1,000 69,250
109,750
PAPER & FOREST PRODUCTS - 0.51%
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Kimberly-Clark Corp. 234 19,363
RETAIL - 5.11%
Home Depot, Inc. 1,900 90,963
Office Depot, Inc. (1) 2,400 47,400
Pep Boys - Manny, Moe & Jack 2,200 56,375
194,738
SEMICONDUCTORS - 8.59%
Cirrus Logic, Inc. (1) 700 13,825
Intel Corp. 2,300 130,525
LSI Logic Corp. (1) 2,200 72,050
National Semiconductor Corp. 5,000 111,250
327,650
TECHNOLOGY - 8.11%
Applied Materials, Inc. (1) 2,000 78,750
Compaq Computer Corp. (1) 1,500 72,000
DSC Communications Corp. (1) 2,400 88,500
Nokia Corp. (2) 1,800 69,975
309,225
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS - 5.77%
Alltel Corp. 1,700 $50,150
GTE Corp. 1,300 57,200
WorldCom, Inc. (1) 3,200 112,800
220,150
TOBACCO - 3.56%
Philip Morris Companies, Inc. 1,500 135,750
TRANSPORTATION - 1.31%
Canadian National Railway Co. (1) 1,000 15,000
Conrail, Inc. 500 35,000
50,000
TOTAL COMMON STOCK
(cost $3,006,266) 3,366,301
CONVERTIBLE STOCK - 0.46%
CONSUMER STAPLES - 0.46%
AJL PEPS Trust
$1.44, Exchangeable Shares, 2/15/99 (3) 900 17,550
TOTAL CONVERTIBLE STOCK
(cost $17,245) 17,550
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
CONVERTIBLE BONDS - 1.78%
GAMING - 1.78%
Argosy Gaming Co.
12.00%, Subordinated Notes, 6/01/01 $75,000 68,063
TOTAL CONVERTIBLE BONDS
(cost $79,000) 68,063
TOTAL INVESTMENTS SECURITIES - 90.52%
(cost $3,102,511) 3,451,914
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
SECURITY PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 9.73%
Agreement with State Street Bank and Trust bearing interest at 5.25% dated
12/29/95, to be repurchased 1/02/96 in the amount of $371,216 and collateralized
by $380,000 U.S. Treasury Notes, 4.25% due 5/15/96, value $380,408
<TABLE>
<S> <C> <C>
(Cost $371,162) $371,000 $371,162
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.25%) (9,782)
NET ASSETS - 100.00% $3,813,294
</TABLE>
(1) Non-income producing securities.
(2) American Depository Receipts.
(3) Exchangeable into shares of common stock of Amway Japan Ltd. ADR's.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
GROWTH OF $10,000 INVESTED IN NORTHSTAR INCOME AND GROWTH FUND
FROM INCEPTION THROUGH THE FUND'S FISCAL YEAR END.
The graph below illustrates the hypothetical investment of $10,000 in the
Northstar Income and Growth Fund from May 6, 1994 (inception of the Fund)
through December 31, 1995, assuming the reinvestment of dividends and capital
gains at net asset value, compared to the S&P 500 Index and the Lehman Brothers'
Government/ Corporate Bond Index for the same period. All performance data
shown represents past performance, and should not be considered indicative of
future performance.
NORTHSTAR INCOME AND GROWTH FUND
[GRAPH]
INCOME AND GROWTH
<TABLE>
<CAPTION>
LEHMAN INCOME
S&P 500 GOV'T/CORP GROWTH
<S> <C> <C> <C>
05/06/94 $10,000 $10,000 $10,000
05/31/94 $10,124 $ 9,982 $10,170
06/30/94 $ 9,928 $ 9,959 $10,033
07/31/94 $10,241 $10,158 $10,314
08/31/94 $10,626 $10,162 $10,545
09/30/94 $10,413 $10,009 $10,436
10/31/94 $10,631 $ 9,998 $10,456
11/30/94 $10,211 $ 9,980 $10,233
12/31/94 $10,412 $10,046 $10,202
01/31/95 $10,665 $10,239 $10,140
02/28/95 $11,049 $10,476 $10,336
03/31/95 $11,422 $10,546 $10,500
04/30/95 $11,742 $10,693 $10,728
05/31/95 $12,168 $11,141 $11,152
06/30/95 $12,509 $11,230 $11,595
07/31/95 $12,907 $11,186 $11,615
08/31/95 $12,903 $11,329 $11,751
09/30/95 $13,500 $11,445 $11,989
10/31/95 $13,433 $11,613 $11,894
11/30/95 $13,984 $11,805 $12,220
12/31/95 $14,310 $11,978 $12,371
</TABLE>
Average Annual Total Return 13.77%
Total Return Since Inception 23.72%
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
INVESTMENT ENVIRONMENT
THE MARKETS
- The year 1995 was extraordinary for U.S. stocks and bonds. The S&P
500 stock index gained 34.1%. The Intermediate Corporate Bond Index
rose 16.7%.
- Stocks responded to strong corporate earnings increases, lower
interest rates, and the outlook for an extended economic expansion.
The yield on long term treasury bonds dropped from 7.9% in January to
5.9% at year end as inflation remained low, the global economy slowed,
and monetary policy was eased.
- In late 1995 the economic slowdown led to inventory corrections and
reduced expectations for an increasing number of companies. This
along with the federal budget uncertainties has caused some increased
price volatility.
THE FUND
- For the year, the Fund rose 21.3%, compared to the Lipper Balanced
Fund Index which was up 24.6%. It lagged the major averages because
of a particularly slow start in the first quarter. For the remainder
of the year, after March, the strategy worked better and the Fund was
up 17.7% compared to the Balanced Fund Index at 17.4%.
- Very strong gains were achieved in a variety of well capitalized, high
quality stocks such as Citicorp, Merck, Xerox, Boeing, Lilly, and
British Sky Broadcasting.
- Underperforming areas such as consumer durables and some Latin
American holdings were sold early in the year. Technology which was
very strong at mid-year was cut back and then finished the year with
disappointing returns. Holdings in basic materials were sold after
mid-year while additions were made to consumer staples and drug
stocks.
CURRENT STRATEGY
- We continue to have a positive view for equities and bonds in 1996.
Lower interest rates and an accommodative monetary policy should
result in slow economic growth, picking up more strength later in the
year. Stocks are attractive relative to interest rates. Without a
recession, stock prices should advance in line with 5-10% earnings
growth, possibly better. Individual stocks will also benefit from
restructurings, stock buy backs, and acquisition activity.
- The Fund is invested in high quality stocks, convertibles, and bonds
with an 8% cash reserve.
- Stocks with consistent growth have received more emphasis with the
largest holdings in consumer staples/health, financial services,
energy, and technology.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 12/31/95) TOTAL NET ASSETS: $7,410,493
- --------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS
NAME % FUND
1. Philip Morris 3.1%
2. Intel 2.2
3. Fannie Mae 2.2
4. Mellon Bank 1.8
5. Citicorp 1.6
6. Bristol Myers 1.6
7. AMP 1.5
8. Home Depot 1.5
9. GME 1.4
10. OMEGA 1.4
18.3%
5 TOP SECTORS
SECTORS
1. Consumer Goods 19.6%
2. Technology 15.8
3. Financial 15.0
4. Energy 13.0
5. Healthcare 9.2
72.6%
ASSET ALLOCATION
% FUND
Common Stock 51.4%
Bonds 30.8
Convertible Bonds 6.2
Convertible Preferred 1.8
Convertible Stock 1.3
Exchangeable Notes 0.5
Cash/other assets 8.0
100.0%
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 51.36%
AEROSPACE - 0.74%
Boeing Co. 700 $54,862
AUTOMOTIVE - 1.28%
Magna International, Inc. 2,200 95,150
BANKING - 5.56%
Ahmanson, (H.F.) & Co. 2,500 66,250
BankAmerica Corp. 1,400 90,650
Citicorp 1,800 121,050
Mellon Bank Corp. 2,500 134,375
412,325
COMPUTER SERVICES - 1.40%
General Motors Corp, Class E 2,000 104,000
CONSUMER STAPLES - 1.01%
Procter & Gamble Co. 900 74,700
ELECTRICAL EQUIPMENT - 2.16%
AMP, Inc. 2,900 111,288
Emerson Electric Co. 600 49,050
160,338
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
ENERGY - 6.12%
Amoco Corp. 1,000 71,875
El Paso Natural Gas Co. 3,000 85,125
ENI SpA (1) (2) 3,000 102,750
Mobil Corp. 600 67,200
Sonat, Inc. 2,000 71,250
Texaco, Inc. 700 54,950
453,150
ENTERTAINMENT\BROADCASTING - 0.61%
British Sky Broadcasting Group PLC (1) 1,200 45,150
FINANCIAL SERVICES - 3.88%
Federal National Mortgage Association 1,300 161,362
H&R Block, Inc. 1,900 76,950
MGIC Investment Corp. 900 48,825
287,137
HEALTHCARE/PHARMACEUTICAL - 5.82%
Bristol-Myers, Squibb Co. 1,400 120,225
Lilly, (Eli) & Co. 796 44,775
Merck & Co., Inc. 1,400 92,050
Mylan Laboratories, Inc. 3,450 81,075
Pharmacia & Upjohn, Inc. 2,400 93,000
431,125
</TABLE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
LODGING & RESTAURANTS - 0.41%
Marriott International, Inc. 800 $30,600
MACHINERY - 1.67%
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Deere & Co. 1,000 35,250
Kennametal, Inc. 1,400 44,450
McDermott International, Inc. 2,000 44,000
123,700
OFFICE EQUIPMENT - 0.93%
Xerox Corp. 500 68,500
OIL SERVICES - 0.93%
Schlumberger LTD 1,000 69,250
PAPER & FOREST PRODUCTS - 0.44%
Kimberly-Clark Corp. 390 32,273
REAL ESTATE INVESTMENT TRUSTS - 1.96%
General Growth Properties, Inc. 2,000 41,500
OMEGA Healthcare Investors, Inc. 3,900 103,838
145,338
RETAIL - 2.11%
Home Depot, Inc. 2,300 110,112
Pep Boys - Manny, Moe & Jack 1,800 46,125
156,237
SEMICONDUCTORS - 4.41%
Cirrus Logic, Inc. (2) 1,300 25,675
Intel Corp. 2,900 164,575
LSI Logic Corp. (2) 1,100 36,025
National Semiconductor Corp. 4,500 100,125
326,400
TECHNOLOGY - 2.50%
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Applied Materials, Inc. (2) 1,000 39,375
Compaq Computer Corp. (2) 900 43,200
DSC Communications Corp. (2) 2,800 103,250
185,825
TELECOMMUNICATIONS - 3.51%
Alltel Corp. 2,000 59,000
GTE Corp. 1,500 66,000
Nokia Corp. (1) 1,200 46,650
WorldCom, Inc. (2) 2,500 88,125
259,775
TOBACCO - 3.05%
Philip Morris Companies, Inc. 2,500 226,250
</TABLE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 0.86%
Canadian National Railway Co. (2) 1,000 $15,000
Conrail, Inc. 700 49,000
64,000
TOTAL COMMON STOCK
(cost $3,385,231) 3,806,085
CONVERTIBLE PREFERRED STOCK - 1.75%
BROADCASTING/CABLE TV - 1.10%
Cablevision Systems Corp.
8.50%, Exchangeable Shares, 12/31/49 3,000 81,750
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
OIL & GAS - 0.65%
Enron Corp.
6.25%, Exchangeable Shares, 12/13/98 2,000 48,000
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $120,560) 129,750
CONVERTIBLE STOCK - 1.29%
CONSUMER STAPLES - 1.29%
AJL PEPS Trust
$1.44, Exchangeable Shares, 2/15/99 (3) 4,900 95,550
TOTAL CONVERTIBLE STOCK
(cost $93,884) 95,550
EXCHANGEABLE NOTES - 0.55%
INSURANCE - 0.55%
Allstate Corp.
6.76%, Exchangeable Notes, 4/15/98 (4) 1,000 41,000
TOTAL EXCHANGEABLE NOTES
(cost $34,000) 41,000
CONVERTIBLE BONDS - 6.27%
ENTERTAINMENT - 1.44%
Time Warner, Inc.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
8.75%, Sr. Notes, 1/10/15 $102,400 106,240
GAMING - 0.74%
Argosy Gaming Co.
12.00%, Subordinated Notes, 6/01/01 60,000 54,450
</TABLE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE - 0.55%
American Travellers Corp.
6.50%, Subordinated Debentures, 10/01/05 $30,000 $40,898
REAL ESTATE INVESTMENT TRUSTS - 1.39%
Meditrust
7.50%, Debentures, 3/01/01 100,000 103,000
TRANSPORTATION - 0.67%
Alaska Air Group, Inc.
6.50%, Debentures, 6/15/05 50,000 49,875
UTILITY - 1.48%
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Boston Edison Co.
9.375%, Debentures, 8/15/21 100,000 109,857
TOTAL CONVERTIBLE BONDS
(cost $458,607) 464,320
CORPORATE BONDS - 1.80%
INSURANCE - 1.80%
Leucadia National Corp.
8.25%, Sr. Subordinated Notes, 6/15/05 125,000 133,551
TOTAL CORPORATE BONDS
(cost $125,000) 133,551
U.S. GOVERNMENT SECURITIES - 28.95%
U.S. Treasury Notes and Bonds
6.50%, 4/30/99 - 8/15/05 375,000 394,727
7.25%, 5/15/04 250,000 277,750
7.625%, 2/15/25 800,000 977,840
7.75%, 1/31/00 250,000 271,680
7.875%, 8/15/01 200,000 223,486
TOTAL U.S. GOVERNMENT SECURITIES
(cost $1,988,217) 2,145,483
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
TOTAL INVESTMENTS SECURITIES - 91.97%
(cost $6,205,499) 6,815,739
REPURCHASE AGREEMENTS - 7.52%
Agreement with State Street Bank and
Trust bearing interest at 5.25% dated
12/29/95, to be repurchased 1/02/96
in the amount of $557,325 and
collateralized by $570,000 U.S.
Treasury Notes, 4.25% due 5/15/96,
value $570,613
(cost $557,244) 557,000 557,244
</TABLE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS LESS LIABILITIES - 0.51% $37,510
NET ASSETS - 100.00% $7,410,493
</TABLE>
(1) American Depository Receipts.
(2) Non-income producing security.
(3) Exchangeable into shares of common stock of Amway Japan Ltd. ADR's
(4) Exchangeable into shares of common stock of PMI Group, Inc.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
GROWTH OF $10,000 INVESTED IN NORTHSTAR MULTI-SECTOR BOND FUND
FROM INCEPTION THROUGH THE FUND'S FISCAL YEAR END.
The graph below illustrates the hypothetical investment of $10,000 in the
Northstar Multi-Sector Bond Fund from May 6, 1994 (inception of the Fund)
through December 31, 1995, assuming the reinvestment of dividends and capital
gains at net asset value, compared to the Lehman Brothers' Government/Corporate
Bond Index for the same period. All performance data shown represents past
performance, and should not be considered indicative of future performance.
[GRAPH]
MULTI-SECTOR
LEHMAN MULTI-
GOVT/CORP SECTOR
10,000 10,000
05/31/94 $ 9,982 10,020
06/30/94 $ 9,959 10,009
07/31/94 $10,158 10,009
08/31/94 $10,162 10,050
09/30/94 $10,009 10,116
10/31/94 $ 9,998 10,075
11/30/94 $ 9,980 9,952
12/31/94 $10,046 10,141
01/31/95 $10,239 10,183
02/28/95 $10,476 10,350
03/31/95 $10,546 10,572
04/30/95 $10,693 10,721
05/31/95 $11,141 10,934
06/30/95 $11,230 11,157
07/31/95 $11,186 11,048
08/31/95 $11,329 11,026
09/30/95 $11,445 11,331
10/31/95 $11,613 11,265
11/30/95 $11,805 11,309
12/31/95 $11,978 11,659
Average Annual Total Return 9.75%
Total Return Since Inception 16.60%
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
INVESTMENT ENVIRONMENT
THE MARKETS
-- The Federal Reserve's interest rate policies helped the U.S. economy
achieve a soft landing in 1995. Lower inflation rates helped push the
yield on the 30-year Treasury bond down from 7.87% to 5.94%. Solid
growth in the U.S. economy and in corporate profits sent stock prices
to record levels throughout 1995. High yield bond prices marched up
along with treasury bond prices and common stock valuations. However,
spreads over Treasury yields rose 0.75 percentage points as slower
growth in 1995 increased fears of a recession in 1996.
-- Emerging markets were volatile. Prices for emerging market bonds
dropped steeply after Mexico devalued, but ended on a firm note due to
successful economic policy actions in Latin America. Foreign
corporates were unattractive due to spreads below one point and to a
U.S. dollar that rose between 10% and 25% after it hit lows in April
1995.
-- We and many others believe that the U.S. economy can now sustain
annual GDP growth and CPI inflation rates of 2.5% to 3%. Therefore,
the outlook for domestic debt and equity markets remains positive for
1996.
THE FUND
-- January through December 1995, the total return of the Fund's shares
was 14.97%; the Lipper average was 18.02%. Continued improvement in
the Fund's performance promoted sales that led to a 39% increase in
its net assets, which rose from $2.72MM to $3.77MM in 1995.
-- There were major changes in the Fund's allocations in 1995. We reduced
investments in the computer, entertainment, grocery, steel and textile
industries, and we cut cash from 18% to 5% of the portfolio. On the
other hand, we increased investments in the cable, banking,
manufacturing, telecommunications and insurance industries and in
emerging markets, while investments in Treasuries rose by 10
percentage points.
-- Straight equities and high yield bonds that were issued with equity
securities or rights attached ("equity kickers") benefited from high
stock prices and boosted the Fund's returns (e.g.,BCP/Essex and
Thermoscan).
CURRENT STRATEGY
-- Continue above-average exposure in non-cyclical industries and in
bonds that have equity kickers.
-- Invest in companies that will benefit from deregulation; and very
cautiously invest in emerging markets and cyclicals with due regard
for the volatility in those market segments; and increase exposure to
long term Treasuries.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 12/31/95) TOTAL NET ASSETS: $3,765,732
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS SECTOR ALLOCATIONS CREDIT QUALITY
NAME % FUND SECTOR % FUND RATING % FUND
<S> <C> <C> <C> <C> <C> <C>
1 U.S. Treasury Notes 27.7 U.S. Government Total 34 AAA-A 34.3
2 GNMA II 5.2 Investment Grade BBB 13.6
3 Boston Edison 2.9 - Domestic 12 BB 23.9
4 Leucadia National 2.9 - Foreign 0 B 20.8
5 LaRoche Industries 2.8 Total 12 CCC 0.0
6 Williamhouse-Regency 2.8 High Yield (HY) Not Rated 2.2
7 Nacolah Holdings 2.8 - Domestic 30 - Internal BB 0.0
8 Grand Casinos 2.8 - Foreign 13 - Internal B 2.2
9 Paramount Communications 2.7 Total 43 - Internal CCC 0.0
10 CE Casecnan Water&Energy 2.7 Equity 5 Cash/Other Assets 5.2
55.3% (Average Rating = BBB) 100.0%
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY PRINCIPAL AMOUNT VALUE
<S> <C> <C>
________________________________________________________________________________
INVESTMENT GRADE SECURITIES - 12.13%
CONTAINER - 1.51%
Owens-Illinois, Inc.
11.00%, Sr. Debentures, 12/01/03 $50,000 $56,750
ENTERTAINMENT - 2.73%
Paramount Communications, Inc.
8.25%, Debentures, 8/01/22 100,000 102,647
HEALTHCARE - 2.08%
Columbia/HCA Healthcare Corp.
6.91%, Notes, 6/15/05 75,000 78,299
INSURANCE - 2.89%
Leucadia National Corp.
10.375%, Sr. Subordinated Notes, 6/15/02 100,000 109,000
UTILITY - 2.92%
Boston Edison Co.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
9.375%, Debentures, 8/15/21 100,000 109,857
TOTAL INVESTMENT GRADE SECURITIES
(cost $432,128) 456,553
DOMESTIC HIGH YIELD SECURITIES - 30.16%
CONGLOMERATE - 2.83%
LaRoche Industries, Inc.
13.00%, Sr. Subordinated Notes, 8/15/04 100,000 106,750
CONSUMER PRODUCTS - 2.80%
Williamhouse - Regency, Inc.
13.00%, Sr. Subordinated Notes, 11/15/05 (1) 100,000 105,500
ENERGY - 2.51%
California Energy, Inc.
0/10.25%, Discount Notes, 1/15/04 (2) 100,000 94,500
FINANCE - 2.54%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 100,000 95,500
FOOD SERVICE - 2.07%
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
American Restaurant Group, Inc.
12.00%, Sr. Notes, 9/15/98 100,000 78,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY PRINCIPAL AMOUNT VALUE
________________________________________________________________________________
<S> <C> <C>
GROCERY - 4.49%
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 $100,000 $86,500
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 100,000 82,500
169,000
HOTELS & GAMING - 5.47%
Grand Casinos, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 100,000 104,750
HMC Acquisition Properties Inc.
9.00%, Sr. Notes, 12/15/07 (1) 100,000 101,250
206,000
INSURANCE - 2.80%
Nacolah Holding Corp.
9.50%, Sr. Notes, 12/01/03 100,000 105,500
STEEL - 2.43%
Sheffield Steel Corp.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
12.00%, 1st Mortgage Notes, 11/01/01 100,000 91,500
TELECOMMUNICATIONS - 2.22%
Mobile Telecommunication Technologies Corp.
13.50%, Sr. Notes, 12/15/02 75,000 83,625
TOTAL DOMESTIC HIGH YIELD SECURITIES
(cost $1,145,083) 1,135,875
FOREIGN HIGH YIELD SECURITIES - 13.10%
BANKING - 2.08%
Banco Nacional de Comercio Exterior
7.25%, Debentures, 2/02/04 100,000 78,375
BROADCASTING/CABLE - 1.55%
Comcast UK Cable Partners Ltd.
0/11.20%, Sr. Discount Debentures, 11/15/07 (2)100,000 58,250
FOREIGN GOVERNMENT - 2.41%
Federal Republic of Brazil Capitalization Bonds
8.00%, Government Guaranty, 4/15/14 (3) 159,181 90,733
PAPER - 4.37%
APP International Finance Co.
11.75%, Guaranteed Secured Notes, 10/01/05 100,000 98,000
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
Grupo Industrial Durango S.A.
12.00%, Notes, 7/15/01 75,000 66,750
164,750
</TABLE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY SHARES VALUE
________________________________________________________________________________
<S> <C> <C>
UTILITY - 2.69%
CE Casecnan Water and Energy Co.
11.45%, Sr. Notes, 11/15/05 (1) $100,000 $101,250
TOTAL FOREIGN HIGH YIELD SECURITIES
(cost $473,422) 493,358
PREFERRED STOCK - 5.11%
BANKING - 1.49%
First Nationwide Bank 11.50% 500 56,125
CONGLOMERATE - 2.19%
BCP/Essex Holdings, Inc.15.00% 3,112 82,468
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
OIL & GAS - 1.43%
Enron Capital Resources L.P. 9.00% 2,000 54,000
TOTAL PREFERRED STOCK
(cost $179,919) 192,593
WARRANTS - 0.07% (4)
CONSUMER PRODUCTS - 0.00%
Chattem, Inc. (expires 6/17/99) (1) 50 138
STEEL - 0.07%
Sheffield Steel Corp. (expires 11/01/01) 500 2,500
TOTAL WARRANTS
(cost $2,000) 2,638
U.S. GOVERNMENT & AGENCIES - 34.27%
GNMA II Arm 6.50% $194,212 197,379
Resolution Trust Corp., 8.00%, 6/25/26 47,607 48,467
U.S. Treasury Notes, 6.75%, 5/31/99 1,000,000 1,044,580
TOTAL U.S. GOVERNMENT & AGENCIES
(cost $1,232,275) 1,290,426
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
TOTAL INVESTMENTS SECURITIES - 94.84%
(cost $3,464,827) 3,571,443
</TABLE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY PRINCIPAL AMOUNT VALUE
________________________________________________________________________________
<S> <C> <C>
REPURCHASE AGREEMENTS - 4.38%
Agreement with State Street Bank and Trust bearing interest at 5.25% dated
12/29/95, to be repurchased 1/02/96 in the amount of $165,096 and collateralized
by $165,000 U.S. Treasury Notes, 6.875% due 10/31/96, value $168,901
(Cost $165,072) $165,000 $165,072
OTHER ASSETS LESS LIABILITIES - 0.78% 29,217
NET ASSETS - 100.00% $3,765,732
</TABLE>
(1) Sale restricted to qualified institutional investors.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
(2) Step Bond.
(3) Interest paid partial cash/partial capitalization.
(4) Non - income producing securities.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
GROWTH OF $10,000 INVESTED IN NORTHSTAR HIGH YIELD BOND FUND
FROM INCEPTION THROUGH THE FUND'S FISCAL YEAR END.
The graph below illustrates the hypothetical investment of $10,000 in the
Northstar High Yield Bond Fund from May 6, 1994 (inception of the Fund) through
December 31, 1995, assuming the reinvestment of dividends and capital gains at
net asset value, compared to the Lehman Brothers' Government/Corporate Bond
Index for the same period. All performance data shown represents past
performance, and should not be considered indicative of future performance.
[GRAPH]
HIGH YIELD
LEHMAN HIGH
GOVT/CORP YIELD
10,000 10,000
05/31/94 $ 9,982 10,040
06/30/94 $ 9,959 10,026
07/31/94 $10,158 9,905
08/31/94 $10,162 9,905
09/30/94 $10,009 9,991
10/31/94 $ 9,998 9,909
11/30/94 $ 9,980 9,683
12/31/94 $10,046 9,905
01/31/95 $10,239 9,905
02/28/95 $10,476 10,074
03/31/95 $10,546 10,426
04/30/95 $10,693 10,621
05/31/95 $11,141 10,750
06/30/95 $11,230 10,870
07/31/95 $11,186 11,025
08/31/95 $11,329 10,981
09/30/95 $11,445 11,279
10/31/95 $11,613 11,143
11/30/95 $11,805 11,256
12/31/95 $11,978 11,743
Average Annual Total Return 10.22%
Total Return Since Inception 17.43%
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
INVESTMENT ENVIRONMENT
THE MARKETS
-- The Federal Reserve's interest rate policies helped the U.S. economy
achieve a soft landing in 1995. Lower actual inflation rates and
expectations of continued declines in the CPI helped push Treasury bond
prices up to the levels reached in early 1994. The yield on the 30-year
Treasury bond fell from 7.87% to 5.94%. Solid growth in the U.S. economy
and in corporate profits sent stock prices to record levels throughout
1995.
-- High yield bond prices marched up along with those of Treasury bonds,
and were further boosted by higher stock valuations. However, spreads of
high yield bonds over Treasury yields and spreads of B-rated bond yields
over BB-rated bonds widened about 0.75 percentage points as slower
economic growth in 1995 increased fear of a recession in 1996.
-- We and many others believe that the U.S. economy can now sustain annual
GDP growth and CPI inflation rates of 2.5% to 3%. Therefore, the outlook
for domestic debt and equity markets remains positive for 1996.
THE FUND
-- From January through December 1995, the total return of the Fund's
shares was 18.55%; the Lipper average was 17.11%. Improvement in the
Fund's performance promoted sales that led to a 84% increase in its net
assets, which rose from $2.59MM to $4.77MM in 1995.
-- The Fund's performance was enhanced by changes in portfolio allocations
that anticipated changes in the markets. We cut investments in cash
equivalents from 18% to 4% of the portfolio and underweighted
investments in the retail, gaming and capital goods industries. We
increased investments in the telecommunications, cable and broadcasting
industries and in emerging markets.
-- High yield bonds that were issued with equity securities or rights
attached ("equity kickers") benefited from high stock prices and
contributed to the Fund's high total return (e.g., Echostar and
Thermoscan).
CURRENT STRATEGY
- Continue above-average exposure in non-cyclical industries and in bonds
that have equity kickers.
- Invest in companies that will benefit from deregulation, and very
cautiously invest in emerging markets and cyclicals with due regard for
the volatility in those market segments.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 12/31/95) TOTAL NET ASSETS: $4,773,469
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS TOP 5 INDUSTRIES CREDIT QUALITY
NAME % FUND INDUSTRY % FUND RATING % FUND
<S> <C> <C> <C> <C> <C>
1 BCP/Essex Holdings 4.1 1 Broadcasting/Cable 13.6 AAA-A 1.6
2 Intracel 3.2 2 Telecommunications 9.8 BBB 2.2
3 Rep. of Brazil 3.2 3 Steel 7.3 BB 21.0
4 IXC Communications 2.3 4 Paper 6.9 B 50.7
5 LaRoche Industries 2.2 5 Conglomerate 6.4 CCC 2.5
6 Williamhouse-Regency 2.2 44.0% Not Rated 13.6
7 Grand Casinos 2.2 - Internal BB 3.2
8 Paxson Communications 2.2 - Internal B 10.4
9 Paramount Communications 2.1 - Internal CCC/D 0.0
10 Norcal Waste Systems 2.1 Cash/Other Assets 8.4
25.8% 100.0%
(Average Rating = BB-)
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY UNITS VALUE
________________________________________________________________________________
<S> <C> <C>
DOMESTIC CORPORATE BONDS & NOTES - 62.76%
BANKING - 1.63%
Berkeley Federal Bank and Trust
12.00%, Subordinated Debentures, 6/15/05 $75,000 $77,625
BROADCASTING/CABLE - 11.26%
Chancellor Broadcasting Co.
12.50%, Sr. Subordinated Notes, 10/01/04 75,000 80,625
Echostar Communications Corp.
0/12.875%, Units, 6/01/04 (1) (2) 100 73,500
Panamsat Corp.
0/11.375%,Sr. Subordinated Notes, 100,000 82,000
8/01/03 (1) Paxson Communications Corp.
11.625%, Sr. Subordinated Notes, 100,000 103,000
10/01/02 (3) Pegasus Media & Communications
, Inc.
12.50%, Notes, 7/01/05 100,000 100,000
Spanish Broadcasting Systems, Inc.
7.50/12.50%, Sr. Notes, 6/15/02 (1) 100,000 98,500
537,625
CONGLOMERATE - 2.24%
LaRoche Industries, Inc.
13.00%, Sr. Subordinated Notes, 8/15/04 100,000 106,750
CONSUMER PRODUCTS - 3.72%
Marvel Holding, Inc.
0%, Sr. Secured Discount Notes, 4/15/98 100,000 72,000
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
Williamhouse - Regency, Inc.
13.00%, Sr. Subordinated Notes, 100,000 105,500
11/15/05 (3)
177,500
ENERGY - 1.98%
California Energy
0/10.25%, Discount Notes, 1/15/04 (1) 100,000 94,500
ENTERTAINMENT - 2.15%
Paramount Communications, Inc.
8.25%, Sr. Notes, 8/01/22 100,000 102,647
FINANCE - 5.60%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 100,000 95,500
GPA Delaware, Inc.
8.75%, Sr. Notes, 12/15/98 75,000 70,687
HMC Acquisition Properties, Inc.
9.00%, Sr. Notes, 12/15/07 (3) 100,000 101,250
267,437
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY UNITS VALUE
________________________________________________________________________________
<S> <C> <C>
FOOD SERVICE - 1.63%
American Restaurant Group, Inc.
12.00%, Sr. Notes, 9/15/98 $100,000 $78,000
FOOD WHOLESALER - 1.30%
Di Giorgio Corp.
12.00%, Sr. Notes, 2/15/03 75,000 62,250
GROCERY - 5.62%
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 100,000 86,500
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 100,000 82,500
Ralphs Grocery Co.
11.00%, Sr. Subordinated Notes, 6/15/05 100,000 99,250
268,250
HEALTHCARE - 1.64%
Columbia/HCA Healthcare Corp.
6.91%, Notes, 6/15/05 75,000 78,299
HOTELS & GAMING - 2.19%
Grand Casinos, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 100,000 104,750
RETAIL - 1.52%
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
Duane Reade Corp.
12.00%, Sr. Notes, 9/15/02 75,000 72,750
STEEL - 7.20%
Acme Metals, Inc.
0/13.50%, Sr. Secured Discount Notes, 100,000 80,625
8/01/04 (1) NS Group, Inc.
13.50%, Units, 7/15/03 (4) 100 90,000
Renco Metals, Inc.
12.00%, Sr. Notes, 7/15/00 75,000 81,375
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes, 11/01/01 100,000 91,500
343,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY UNITS VALUE
________________________________________________________________________________
<S> <C> <C>
TELECOMMUNICATIONS - 9.61%
Geotek Communication, Inc.
0/15.00%, Sr. Discount Notes, 7/15/05 (1) $100,000 $ 47,500
Heartland Wireless Communications, Inc.
13.00%, Units, 4/15/03 (3) (5) 75 85,500
IXC Communications, Inc.
12.50%, Sr. Notes, 10/01/05 (3) 100,000 107,250
Mobile Telecommunication Technologies Corp.
13.50%, Sr. Notes, 12/15/02 75,000 83,625
Nextel Communications, Inc.
0/9.75%, Sr. Discount Notes, 8/15/04 (1) 100,000 55,000
WinStar Communications, Inc.
0/14.00%, Units, 10/15/05 (1) (3) (6) 50 79,750
458,625
TRANSPORTATION - 1.35%
Burlington Motor Holdings, Inc.
11.50%, Sr. Subordinated Notes, 100,000 18,500
11/01/03 (8) (11) Great Dane Holdings, Inc.
12.75%, Sr. Subordinated Debentures, 50,000 45,875
8/01/01
64,375
WASTE MANAGEMENT - 2.12%
Norcal Waste Systems Inc.
12.50%, Sr. Subordinated Notes, 100,000 101,250
11/15/05 (3)
TOTAL DOMESTIC CORPORATE BONDS & NOTES
(cost $3,003,543) 2,996,133
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
FOREIGN BONDS & NOTES - 19.04%
BANKING - 1.64%
Banco Nacional de Comercio Exterior
7.25%, Unsecured Debentures, 2/02/04 100,000 78,375
BROADCASTING/CABLE - 1.83%
Comcast UK Cable Partners Ltd.
0/11.20%, Sr. Discount Debentures, 150,000 87,375
11/15/07 (1)
CONSUMER PRODUCTS - 1.15%
International Semi-Tech Corp.
0/11.50%, Sr. Secured Notes, 8/15/03 (1) 100,000 54,750
FOOD/BEVERAGE - 1.54%
Gruma SA de CV
9.75%, Sr. Notes, 3/09/98 75,000 73,312
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY SHARES VALUE
________________________________________________________________________________
<S> <C> <C>
FOREIGN GOVERNMENT - 3.17%
Federal Republic of Brazil Capitalization
Bonds 8.00%, Government Guaranty, $265,302 $151,222
4/15/14 (7)
PAPER - 6.03%
APP International Finance Co.
11.75%, Guaranteed Sr. Secured Notes, 100,000 98,000
10/01/05 Empaques Ponderosa SA
8.75%, Sr. Notes, 12/06/96 75,000 73,125
Grupo Industrial Durango
12.00%, Notes, 7/15/01 75,000 66,750
Indah Kiat International Finance
12.50%, Guaranteed Sr. Secured Notes, 50,000 49,750
6/15/06
287,625
UTILITIES - 3.68%
CE Casecnan Water and Energy Co.
11.45%, Sr. Notes, 11/15/05 (3) 100,000 101,250
Invergas SA
12.50%, Sr. Notes, 12/16/99 75,000 74,625
175,875
TOTAL FOREIGN BONDS & NOTES
(Cost $865,795) 908,534
DOMESTIC COMMON STOCK - 1.34% (8)
BROADCASTING/CABLE - 0.06%
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
Pegasus Media & Communications, Inc. (3) 10 3,000
ELECTRICAL EQUIPMENT - 1.28%
Berg Electronics Holding Corp. 8,160 61,200
HOTELS & GAMING - 0.00%
Capital Gaming International, Inc. 1,135 142
TOTAL DOMESTIC COMMON STOCK
(cost $61,706) 64,342
DOMESTIC PREFERRED STOCK - 9.73%
BANKING - 1.18%
First Nationwide Bank 11.50% 500 56,125
CONGLOMERATE - 4.10%
BCP/Essex Holdings 15.00% 7,378 195,517
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
________________________________________________________________________________
<S> <C> <C>
HEALTHCARE - 4.45%
Foxmeyer Health Corp $4.20 (9) 1,620 $ 60,548
Intracel Corp. 8.00%, Series A (10) 12,526 151,878
212,426
TOTAL DOMESTIC PREFERRED STOCK
(cost $392,159) 464,068
DOMESTIC WARRANTS - 1.65% (8)
BROADCASTING/CABLE - 0.44%
Spanish Broadcasting Systems, Inc. (expire 6/30/99) 100 21,000
CONSUMER PRODUCTS - 0.00%
Chattem, Inc. (expires 8/17/99) (3) 50 138
HOTELS & GAMING - 0.00%
Capital Gaming International, Inc. (expires 2/01/99) 1,012 35
PAPER - 0.87%
SDW Holdings Corp. (expiration 2006) (3) 6,400 41,600
RETAIL - 0.13%
Central Rents, Inc. (expiration 2003) 100 6,000
STEEL - 0.05%
Sheffield Steel Corp. (expires 11/01/01) 500 2,500
TELECOMMUNICATIONS - 0.16%
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
Geotek Communications Inc. (expiration 2000) 3,000 7,500
TOTAL DOMESTIC WARRANTS
(cost $67,063) 78,773
TOTAL INVESTMENTS SECURITIES - 94.52%
(cost $4,390,266) 4,511,850
REPURCHASE AGREEMENTS - 4.21%
Agreement with State Street Bank and
Trust bearing interest at 5.25% dated
12/29/95, to be repurchased 1/02/96
in the amount of $201,117 and
collateralized by $205,000 U.S. Treasury
Notes, 6.875% due 10/31/96, value $209,847
(cost $201,088) $201,000 201,088
OTHER ASSETS LESS LIABILITIES - 1.27% 60,531
NET ASSETS - 100.00% $4,773,469
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
________________________________________________________________________________
(1) Step bond.
(2) A unit consists of $1,000 par value 12.875%, Sr. Discount Notes, 6/01/04
and 6 warrants.
(3) Sale restricted to qualified institutional investors.
(4) A unit consists of $1,000 par value 13.50%, Sr. Secured Notes, 7/15/03
and 1 warrant.
(5) A unit consists of $1,000 par value 13.00%, Sr. Notes, 4/15/03 and 6
warrants.
(6) A unit consists of $2,000 par value 14.00%, Sr. Discount Notes, 10/15/05
and 1,000 par value Convertible Sr. Subordinated Notes.
(7) Interest paid partial cash/partial capitalization.
(8) Non-income producing securities.
(9) Payment-in-kind security.
(10) Private Placement.
(11) Defaulted security.
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
NORTHSTAR/NWNL TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $3,102,511, $6,205,499, $3,464,827
and $4,390,266, respectively). . . . . . . . . . . $3,451,914 $6,815,739 $3,571,443 $4,511,850
Repurchase agreements. . . . . . . . . . . . . . . 371,162 557,244 165,072 201,088
Cash . . . . . . . . . . . . . . . . . . . . . . . 95 668 603 288
Dividends and interest receivable. . . . . . . . . 5,978 66,630 49,481 85,531
Receivable due from adviser. . . . . . . . . . . . 1,621 - 1,095 914
Receivable for shares of beneficial interest sold - 1,062 - -
Prepaid expenses . . . . . . . . . . . . . . . . . 1,990 2,038 1,992 2,008
---------- ---------- ---------- ----------
Total Assets. . . . . . . . . . . . . . . . . 3,832,760 7,443,381 3,789,686 4,801,679
---------- ---------- ---------- ----------
LIABILITIES:
Management fees payable. . . . . . . . . . . . . . 6,850 13,049 6,706 8,719
Audit fee payable. . . . . . . . . . . . . . . . . 6,817 10,443 10,414 10,399
Custodians & fund accounting fees payable. . . . . 3,072 4,701 2,993 4,362
Administrative services fees payable . . . . . . . 913 1,740 894 1,163
Printing fees payable. . . . . . . . . . . . . . . 777 776 777 776
Other liabilities. . . . . . . . . . . . . . . . . 1,037 2,179 2,170 2,791
---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
Total Liabilities . . . . . . . . . . . . 19,466 32,888 23,954 28,210
---------- ---------- ---------- ----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . $3,813,294 $7,410,493 $3,765,732 $4,773,469
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest,
$.01 par value outstanding
(unlimited shares authorized)
Paid in capital . . . . . . . . . . . . . . . . . $3,415,671 $6,800,520 $3,669,418 $4,696,141
Undistributed (overdistributed)
net investment income . . . . . . . . . . . . . . 3,583 (275) 2,782 3,725
Accumulated net realized gain (loss) on investments 44,637 8 (13,084) (47,981)
Net unrealized appreciation of investments . . . . 349,403 610,240 106,616 121,584
---------- ---------- ---------- ----------
NET ASSETS. . . . . . . . . . . . . . . . . . $3,813,294 $7,410,493 $3,765,732 $4,773,469
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Asset Value Per Share ($3,813,294/329,728 shares,
$7,410,493/650,852 shares, $3,765,732/732,659 shares
and $4,773,469/946,532 shares, respectively).. . . $11.56 $11.39 $5.14 $5.04
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
NORTHSTAR/NWNL TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (net of withholding tax of $305, $288, $0,
and $0, respectively) . . . . . . . . . . . . . $61,233 $93,452 $13,106 $15,515
Interest (net of withholding tax of $0, $0, $657,
and $1,055, respectively) . . . . . . . . . . . 20,676 143,976 285,000 408,146
----------- ----------- ------------ ----------
Total investment income . . . . . . . . . . . . . 81,909 237,428 298,106 423,661
----------- ----------- ------------ ----------
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
EXPENSES
Investment advisory and management fees . . . . . 23,854 40,195 23,984 27,922
Custodian and fund accounting fees. . . . . . . . 19,845 24,505 17,266 24,330
Audit fees. . . . . . . . . . . . . . . . . . . . 10,142 13,768 13,739 13,724
Trustee fees and expenses . . . . . . . . . . . . 4,681 4,887 4,663 4,780
Administrative service fees . . . . . . . . . . . 3,180 5,359 3,198 3,723
Registration fees . . . . . . . . . . . . . . . . 1,080 1,894 1,183 1,622
Legal fees. . . . . . . . . . . . . . . . . . . . 901 1,184 893 982
Insurance expense . . . . . . . . . . . . . . . . 399 447 401 418
Miscellaneous expenses. . . . . . . . . . . . . . 825 1,094 824 824
----------- ----------- ------------ ----------
64,907 93,333 66,151 78,325
Less expenses reimbursed by investment adviser. . 39,351 50,661 40,437 48,482
----------- ----------- ------------ ----------
Total expenses. . . . . . . . . . . . . . . 25,556 42,672 25,714 29,843
----------- ----------- ------------ ----------
Net investment income . . . . . . . . . . . . . . 56,353 194,756 272,392 393,818
----------- ----------- ------------ ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
. . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gain(loss) on investments. . . . . . 283,906 170,332 (10,020) (46,687)
Net change in unrealized appreciation of investments 338,855 642,622 185,291 281,787
----------- ----------- ------------ ----------
Net realized and unrealized gain on investments 622,761 812,954 175,271 235,100
----------- ----------- ------------ ----------
Increase in net assets resulting from operations. $679,114 $1,007,710 $447,663 $628,918
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
NORTHSTAR/NWNL TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income . . . . . . . . . . . . . . $56,353 $194,756 $272,392 $393,818
Net realized gain (loss) on investments . . . . . 283,906 170,332 (10,020) (46,687)
Net change in unrealized appreciation
of investments . . . . . . . . . . . . . . . . 338,855 642,622 185,291 281,787
----------- ----------- ------------ ----------
Increase in net assets resulting
from operations. . . . . . . . . . . . . . . . 679,114 1,007,710 447,663 628,918
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . (52,710) (195,505) (269,960) (387,799)
Net realized gain on investments. . . . . . . . . (235,625) (163,759) - -
----------- ----------- ------------ ----------
(288,335) (359,264) (269,960) (387,799)
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares. . . . . . . . . 468,249 3,826,113 951,319 1,731,908
Net asset value of shares issued to
shareholders in reinvestment of dividends. . . 288,334 364,564 271,848 395,812
----------- ----------- ------------ ----------
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
756,583 4,190,677 1,223,167 2,127,720
Cost of shares redeemed . . . . . . . . . . . . . (35,007) (1,023,212) (351,281) (183,528)
----------- ----------- ------------ ----------
Net increase in net assets derived from capital
share transactions. . . . . . . . . . . . . 721,576 3,167,465 871,886 1,944,192
----------- ----------- ------------ ----------
Net increase in net assets. . . . . . . . . . . . 1,112,355 3,815,911 1,049,589 2,185,311
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . 2,700,939 3,594,582 2,716,143 2,588,158
----------- ----------- ------------ ----------
End of year (including (overdistributed)
undistributed net investment income of $3,583,
($275), $2,782 and $3,725 respectively) . . . . . $3,813,294 $7,410,493 $3,765,732 $4,773,469
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
NORTHSTAR/NWNL TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MAY 6, 1994 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income.. . . . . . . . . . . . . . $ 40,463 $ 56,590 $ 121,217 $ 144,652
Net realized gain (loss) on investments . . . . . 35,404 19,899 (3,064) (1,294)
Net change in unrealized appreciation
(depreciation) of investments. . . . . . . . . 10,548 (32,382) (78,675) (160,203)
----------- ----------- ------------ ----------
Increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . 86,415 44,107 39,478 (16,845)
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . (40,523) (56,116) (120,867) (146,946)
Net realized gain on investments. . . . . . . . . (39,048) (26,464) - -
----------- ----------- ------------ ----------
(79,571) (82,580) (120,867) (146,946)
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares. . . . . . . . . 2,603,764 3,550,327 2,658,072 2,610,124
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
Net asset value of shares issued to
shareholders in reinvestment of dividends. . . 79,571 82,580 118,629 138,933
----------- ----------- ------------ ----------
2,683,335 3,632,907 2,776,701 2,749,057
Cost of shares redeemed . . . . . . . . . . . . . (14,240) (24,852) (4,169) (22,108)
----------- ----------- ------------ ----------
Net increase in net assets derived from capital
share transactions . . . . . . . . . . . . . . 2,669,095 3,608,055 2,772,532 2,726,949
----------- ----------- ------------ ----------
Net increase in net assets. . . . . . . . . . . . 2,675,939 3,569,582 2,691,143 2,563,158
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . 25,000 25,000 25,000 25,000
----------- ----------- ------------ ----------
End of period (including (overdistributed)
undistributed net investment income of ($60),
$474, $350, and ($2,294), respectively) . . . . . $2,700,939 $3,594,582 $2,716,143 $2,588,158
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
NORTHSTAR/NWNL TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
NET ASSET NET REALIZED & TOTAL DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED FROM DECLARED FROM NET DECLARED
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT FROM NET
PERIOD ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME REALIZED GAINS
__________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
NORTHSTAR GROWTH FUND
5/06/94-
12/31/94 $10.00 $0.16 $0.19 $0.35 ($0.16) ($0.15)
12/31//95 10.04 0.20 2.27 2.47 (0.19) (0.76)
NORTHSTAR INCOME AND GROWTH FUND
5/06/94-
12/31/94 10.00 0.20 (0.01) 0.19 (0.20) (0.07)
12/31/95 9.92 0.37 1.73 2.10 (0.37) (0.26)
NORTHSTAR MULTI-SECTOR BOND FUND
5/06/94-
12/31/94 5.00 0.23 (0.15) 0.08 (0.23) -
12/31/95 4.85 0.42 0.29 0.71 (0.42) -
NORTHSTAR HIGH YIELD BOND FUND
5/06/94-
12/31/94 5.00 0.28 (0.31) (0.03) (0.28) -
12/31/95 4.69 0.50 0.34 0.84 (0.49) -
</TABLE>
(1) Annualized for the period May 6, 1994 (commencement of operations) through
December 31, 1994.
<PAGE>
<TABLE>
<CAPTION>
RATIO OF RATIO OF NET
RATIO OF EXPENSE INVESTMENT
NET ASSET NET ASSETS, EXPENSES REIMBURSEMENT INCOME
TOTAL VALUE, END END OF PERIOD TO AVERAGE TO AVERAGE TO AVERAGE PORTFOLIO
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S) NET ASSETS(1) NET ASSETS(1) NET ASSETS(1) TURNOVER
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
($0.31) $10.04 3.47% $2,701 1.00% 1.45% 2.31% 61%
(0.95) 11.56 24.78 3,813 0.80 1.24 1.77 123
NORTHSTAR INCOME AND GROWTH FUND
(0.27) 9.92 2.02 3,595 1.00 1.43 3.11 45
(0.63) 11.39 21.39 7,410 0.80 0.94 3.63 74
NORTHSTAR MULTI-SECTOR BOND FUND
(0.23) 4.85 1.41 2,716 1.00 1.41 7.03 29
(0.42) 5.14 14.97 3,766 0.80 1.26 8.52 83
NORTHSTAR HIGH YIELD BOND FUND
(0.28) 4.69 (0.95) 2,588 1.00 1.55 8.62 62
(0.49) 5.04 18.55 4,773 0.80 1.31 10.61 157
</TABLE>
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
NORTHSTAR/NWNL TRUST
Notes to Financial Statements - December 31, 1995
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. The Northstar/NWNL Trust is a business trust organized under the
laws of the Commonwealth of Massachusetts on December 17, 1993. The names of the
four investment series which comprise the Trust (the "Funds") and their
respective investment objectives are set forth below. Each Fund commenced
offering shares on May 6, 1994.
NORTHSTAR GROWTH FUND ("GROWTH FUND") is a diversified portfolio with
an investment objective of long-term growth of capital through investments
in common stocks and convertible securities that the Adviser believes
provide above average potential for capital appreciation.
NORTHSTAR INCOME AND GROWTH FUND ("INCOME AND GROWTH FUND") is a
diversified portfolio with the investment objective of current income
balanced with the objective of achieving capital appreciation. The Fund
will seek to achieve its objective through investments in a diversified
group of securities selected for their prospects of current yield and
capital appreciation.
NORTHSTAR MULTI-SECTOR BOND FUND ("MULTI-SECTOR FUND") is a
diversified portfolio whose investment objective is to maximize current
income. The Fund seeks to achieve its objective by investing in U.S.
Government Bonds, Foreign Government Bonds, Investment Grade Bonds and High
Yield Bonds, each as defined in the Prospectus for the Trust.
NORTHSTAR HIGH YIELD BOND FUND ("HIGH YIELD FUND") is a diversified
portfolio whose investment objective is to seek high income. The Fund
invests primarily in a diversified group of high yield, high risk fixed
income securities, convertible securities, securities issued by U.S.
companies in foreign currencies, and securities issued by foreign
governments and companies.
MANAGEMENT'S USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the dates of the financial statements and the reported amounts of
income and expenses during the reporting periods. Actual results could differ
from those estimates.
SECURITY VALUATION. Equity securities are valued at closing sales prices
reported on recognized securities exchanges or lacking any sales, at the last
available bid price. Prices of long-term debt securities are valued on the
basis of last reported sales price, or if no sales are reported, the value is
determined based upon the mean of representative quoted bid or asked prices for
such securities, or if such prices are not available, at prices provided by
market makers, or at prices for securities of comparable maturity, quality and
type. Short-term debt instruments with remaining maturities of less than 60
days are valued at amortized cost, unless the Trustees determine that amortized
cost does not reflect the fair value of such obligations. Securities for which
market quotations are not readily available are valued at fair value determined
in good faith by or under direction of the Trustees of the Trust. The books
and records of the Funds are maintained in U.S. dollars. Securities quoted in
foreign currencies are translated into U.S. dollars based on the prevailing
exchange rates on that day. The Adviser uses independent pricing services to
price the Funds' securities.
SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTION TO
SHAREHOLDERS. Security transactions are recorded on the trade date. Realized
gains or losses on sales of investments are calculated on the identified cost
basis. Interest income is recorded on the accrual basis except when collection
is not expected; discounts are accrued, and premiums amortized to par at
maturity; dividend income is recorded on the ex-dividend dates. Dividends from
net investment income were declared and paid quarterly by the Funds.
Distributions of net realized capital gains, if any, are declared annually;
however, to the extent that a net realized capital gain can be reduced by a
capital loss carryover, such gain will not be distributed. Distributions to
shareholders from net investment income and net realized gain from security
transactions are reinvested at net asset value by each Fund on the ex-dividend
date.
REPURCHASE AGREEMENTS. The Funds' custodian takes possession of collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a marked-to-market basis to assure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default on the obligation to repurchase, the Funds have the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Funds may be delayed or limited.
53
<PAGE>
FEDERAL INCOME TAXES. The Trust intends to comply with the special provisions
of the Internal Revenue Code available to investment companies and to distribute
all of the taxable net income to respective shareholders. Therefore, no
Federal income tax provision is required.
ORGANIZATION COSTS. Costs incurred by the Trust in connection with its
organization of each Fund have been deferred and are being amortized over a
period of five years from the date the Funds commenced operations.
NOTE 2. INVESTMENT ADVISER AND ADMINISTRATOR. Northstar Investment Management
Corporation (the "Adviser") serves as each Fund's investment adviser. Each Fund
pays the Adviser an investment advisory fee calculated at an annual rate of .75%
of average daily net assets. For the twelve months ended December 31, 1995,
the Adviser earned $115,955 in investment advisory fees. Northstar
Administrators Corporation (the "Administrator"), an affiliate of the Adviser,
serves as each Fund's administrator. Each Fund pays the Administrator a fee
calculated at an annual rate of .10% of average daily net assets. For the
fiscal year ended December 31, 1995 the Administrator earned $15,460 in
administrative fees. The Adviser has agreed that if a Fund's total operating
expenses exceed .80% annually, the Adviser will reimburse the Fund for amounts
in excess of such limit. For the twelve months ended December 31, 1995, the
Adviser has reimbursed the Growth Fund $39,351, Income and Growth Fund $50,661,
Multi-Sector Fund $40,437 and High Yield Fund $48,482. At December 31, 1995, the
Adviser owed the Growth Fund $1,621, Multi-Sector Fund $1,095, and High Yield
Fund $914.
NOTE 3. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases, and proceeds from sales of investments
(excluding short-term investments) for the year ended December 31, 1995 were as
follows:
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
___________ ___________ ___________ ___________
Aggregate Purchases $3,916,137 $6,824,816 $3,637,469 $7,356,218
Aggregate Sales 3,606,845 3,575,520 2,466,343 5,347,046
U.S. government securities included above were as follows:
Aggregate Purchases 104,366 1,865,952 1,010,703 514,531
Aggregate Sales - 272,266 517,719 517,500
NOTE 4. PORTFOLIO SECURITIES (TAX BASIS)
The cost of securities for federal income tax purposes and the aggregate
appreciation and depreciation of securities at December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
Cost (tax basis) $3,107,040 $6,214,558 $3,464,827 $4,390,266
Appreciated Securities 490,064 763,301 151,139 289,742
Depreciated Securities (145,190) (162,120) (44,523) (168,158)
___________ ___________ ___________ ___________
Net Unrealized Appreciation/
Depreciation $ 344,874 $ 601,181 $ 106,616 $ 121,584
___________ ___________ ___________ ___________
</TABLE>
54
<PAGE>
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the year ended December 31, 1995
were as follows:
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
___________ ___________ ___________ ___________
Shares Sold 38,726 354,306 189,321 351,466
Reinvested Dividends 25,089 32,124 53,452 79,938
Shares Repurchased ( 2,987) (97,818) (70,223) (37,102)
___________ ___________ ___________ ___________
Net Increase 60,828 288,612 172,550 394,302
___________ ___________ ___________ ___________
Transactions in capital shares of each Fund for the period ended December 31,
1994 were as follows:
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
___________ ___________ ___________ ___________
Shares Sold 260,131 353,916 531,796 522,837
Reinvested Dividends 7,904 8,260 24,153 28,983
Shares Repurchased (1,385) (2,436) (840) (4,590)
___________ ___________ ___________ ___________
Net Increase 266,650 359,740 555,109 547,230
___________ ___________ ___________ ___________
NOTE 6. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Yield Fund had 62.76%
of its portfolio invested in lower rated and comparable quality unrated high
yield securities. Investments in higher yield securities are accompanied by a
greater degree of credit risk and such lower rated securities tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities, because such securities are generally unsecured and
are often subordinated to other creditors of the issuer. At December 31, 1995,
the High Yield Fund held Burlington Motor Holdings, Inc., a security in
default. The value of this security represented $18,500 or 0.39% of the High
Yield Fund's net assets. For financial reporting purposes, it is each Fund's
accounting practice to discontinue accrual of income and provide an estimate for
probable losses due to unpaid interest income on defaulted bonds for the current
reporting period.
NOTE 7. FEDERAL INCOME TAX - CAPITAL LOSS CARRYFORWARD
At December 31, 1995, High Yield Fund had capital loss carryforwards expiring
December 31, 2002 and 2003 of $1,294 and $20,337, respectively. Multi-Sector
Fund and High Yield Fund had post October capital loss deferrals of $13,084 and
$26,650, respectively.
55
<PAGE>
NORTHSTAR/NWNL TRUST
Report of Independent Accountants
To Shareholders and Trustees
of Northstar/NWNL Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of the Northstar/NWNL Trust, (comprising,
respectively, the Northstar Growth Fund, the Northstar Income and Growth Fund,
the Northstar Multi-Sector Bond Fund, and the Northstar High Yield Bond Fund
(the "Funds")), as of December 31, 1995 and the related statements of operations
for the year then ended, the statements of changes in net assets, and the
financial highlights for the year then ended and for the period May 6, 1994
(commencement of operations) to December 31, 1994. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting the Northstar/NWNL Trust as of December 31,
1995, the results of their operations, the changes in their net assets, and the
financial highlights for each of the periods referred to above in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
January 31, 1996
56
<PAGE>
EXHIBIT 16
PERFORMANCE CALCULATIONS
<PAGE>
**HYPO**
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NWNL NORTHSTAR GROWTH V/A
<TABLE>
<CAPTION>
Unit Units Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Value Purchased Units per Unit Dividends per Unit Capital Gains Units Market Value
---- ------ ----- --------- ---------- -------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/ 6/94 1,000.00 10.0000 100.000 100.000 1,000.00
6/24/94 9.9100 100.396 0.039 3.92 0.000 0.00 0.396 994.92
9/26/94 10.3300 101.246 0.087 8.78 0.000 0.00 0.850 1,045.87
12/23/94 9.9800 103.056 0.031 3.11 0.148 14.95 1.810 1,028.50
12/31/94 10.0400 103.056 1,034.68
3/23/95 10.2300 103.675 0.061 6.33 0.000 0.00 0.619 1,060.60
6/26/95 11.6400 104.096 0.047 4.90 0.000 0.00 0.421 1,211.68
9/26/95 12.2300 104.417 0.038 3.92 0.000 0.00 0.321 1,277.02
12/29/95 11.5500 111.685 0.040 4.20 0.764 79.75 7.268 1,289.96
12/31/95 11.5600 111.685 1,291.08
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1+T) to the nth power
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,291.08
n = Number of Time Periods 1.65
T = Average Annual Total Return 16.75%
Overall Total Return 29.11%
<PAGE>
**HYPO**
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NWNL NORTHSTAR HIGH YIELD BOND V/A
<TABLE>
<CAPTION>
Unit Units Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Value Purchased Units per Unit Dividends per Unit Capital Gains Units Market Value
---- ------ ----- --------- ---------- -------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/ 6/94 1,000.00 5.0000 200.000 200.000 1,000.00
6/24/94 5.0000 201.318 0.033 6.59 0.000 0.00 1.318 1,006.59
9/26/94 4.8900 205.148 0.093 18.73 0.000 0.00 3.830 1,003.17
12/23/94 4.6900 211.189 0.138 28.33 0.000 0.00 6.041 990.48
12/31/94 4.6900 211.189 990.48
3/23/95 4.7900 216.304 0.116 24.50 0.000 0.00 5.115 1,036.10
6/26/95 4.9200 220.944 0.106 22.83 0.000 0.00 4.640 1,087.04
9/26/95 4.9700 226.940 0.135 29.80 0.000 0.00 5.996 1,127.89
12/29/95 5.0400 232.986 0.134 30.47 0.000 0.00 6.046 1,174.25
12/31/95 5.0400 232.986 1,174.25
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1+T) to the nth power
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,174.25
n = Number of Time Periods 1.65
T = Average Annual Total Return 10.22%
Overall Total Return 17.43%
<PAGE>
**HYPO**
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NWNL NORTHSTAR INCOME & GROWTH V/A
<TABLE>
<CAPTION>
Unit Units Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Value Purchased Units per Unit Dividends per Unit Capital Gains Units Market Value
---- ------ ----- --------- ---------- -------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/ 6/94 1,000.00 10.0000 100.000 100.000 1,000.00
6/24/94 9.9600 100.428 0.043 4.26 0.000 0.00 0.428 1,000.26
9/26/94 10.1900 101.513 0.110 11.06 0.000 0.00 1.085 1,034.42
12/23/94 9.8800 102.740 0.045 4.61 0.074 7.51 1.227 1,015.07
12/31/94 9.9200 102.740 1,019.18
3/23/95 10.0900 103.547 0.079 8.14 0.000 0.00 0.807 1,044.79
6/26/95 11.0000 104.463 0.097 10.08 0.000 0.00 0.916 1,149.09
9/26/95 11.3000 105.264 0.087 9.05 0.000 0.00 0.801 1,189.48
12/29/95 11.3900 108.621 0.104 10.91 0.260 27.33 3.357 1,237.19
12/31/95 11.3900 108.621 1,237.19
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1+T) to the nth power
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,237.19
n = Number of Time Periods 1.65
T = Average Annual Total Return 13.77%
Overall Total Return 23.72%
<PAGE>
**HYPO**
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NWNL NORTHSTAR MULTI-SECTOR BOND V/A
<TABLE>
<CAPTION>
Unit Units Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Value Purchased Units per Unit Dividends per Unit Capital Gains Units Market Value
---- ------ ----- --------- ---------- -------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/ 6/94 1,000.00 5.0000 200.000 200.000 1,000.00
6/24/94 4.9900 201.395 0.035 6.96 0.000 0.00 1.395 1,004.96
9/26/94 4.9600 204.772 0.083 16.75 0.000 0.00 3.377 1,015.67
12/23/94 4.8500 209.098 0.102 20.98 0.000 0.00 4.326 1,014.13
12/31/94 4.8500 209.098 1,014.13
3/25/95 4.9500 213.146 0.096 20.04 0.000 0.00 4.048 1,055.07
6/26/95 5.1400 217.057 0.094 20.10 0.000 0.00 3.911 1,115.67
9/26/95 5.0900 222.185 0.120 26.10 0.000 0.00 5.128 1,130.92
12/29/95 5.1400 226.839 0.108 23.92 0.000 0.00 4.654 1,165.95
12/31/95 5.1400 226.839 1,165.95
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1+T) to the nth power
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,165.95
n = Number of Time Periods 1.65
T = Average Annual Total Return 9.75%
Overall Total Return 16.60%
<PAGE>
<TABLE>
<CAPTION>
Actual
Total
REINV Initial Div Reinv NUMBER OF Ending Return
Fund DATE Investment Rate Price # of shares Value Per C&L
---- ---------- ---- ----- ----------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Fund JAN 1 1,000 10.04 99.6016
MAR 23 0.061396 87-2 10.23 100.199 1025.03
JUN 22 0.047308 87-2 11.64 100.607 1171.06
SEP 26 0.037630 87-2 12.23 100.916 1234.21
DEC 29 0.804009 87-2 11.55 107.941 1246.72
DEC 31 11.56 107.941 1247.80 24.78% 19-4
- ------------------------------------------------------------------------------------------------------------------------------------
Income & Growth JAN 1 1,000 9.92 100.8065
MAR 23 0.0792266 87-2 10.09 101.596
JUN 22 0.0973422 87-2 11.00 102.497
SEP 26 0.0866448 87-2 11.30 103.283
DEC 29 0.3632800 87-2 11.39 106.577
DEC 31 11.39 106.577 1213.91 21.39% 19-4
- ----------------------------------------------------------------------------------------------------------------------------------
Multi Sector JAN 1 1,000 4.85 206.1856
MAR 23 0.095618 87-2 4.95 210.177
JUN 22 0.094312 87-2 5.14 214.033
SEP 26 0.120256 87-2 5.09 219.090
DEC 29 0.107653 87-2 5.14 223.679
DEC 31 5.14 223.679 1149.71 14.97% 19-4
- ----------------------------------------------------------------------------------------------------------------------------------
High Yield JAN 1 1,000 4.69 213.2196
MAR 23 0.116038 87-3 4.79 218.385
JUN 22 0.105530 87-3 4.92 223.069
SEP 26 0.134871 87-3 4.97 229.122
DEC 29 0.134260 87-3 5.04 235.226
DEC 31 5.04 235.226 1165.54 18.55% 19-4
</TABLE>
<PAGE>
EXHIBIT 17
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Mark L. Lipson, Agnes Mullady and Lisa Hurley, and each of them his true and
lawful attorney-in-fact as agent with full power of substitution and
resubstitution of him in his name, place, and stead, to sign any and all
registration statements on Form N-1A applicable to the Northstar/NWNL Trust and
any amendment or supplement thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: January , 1996.
DAVID W.C. PUTNAM
-------------------------
David W.C. Putnam
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Mark L. Lipson, Agnes Mullady and Lisa Hurley, and each of them his true and
lawful attorney-in-fact as agent with full power of substitution and
resubstitution of him in his name, place, and stead, to sign any and all
registration statements on Form N-1A applicable to the Northstar/NWNL Trust and
any amendment or supplement thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: January , 1996
JOHN G. TURNER
-------------------------
John G. Turner
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Mark L. Lipson, Agnes Mullady and Lisa Hurley, and each of them his true and
lawful attorney-in-fact as agent with full power of substitution and
resubstitution of him in his name, place, and stead, to sign any and all
registration statements on Form N-1A applicable to the Northstar/NWNL Trust and
any amendment or supplement thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: January 29, 1996
ALAN L. GOSULE
-------------------------
Alan L. Gosule
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Mark L. Lipson, Agnes Mullady and Lisa Hurley, and each of them his true and
lawful attorney-in-fact as agent with full power of substitution and
resubstitution of him in his name, place, and stead, to sign any and all
registration statements on Form N-1A applicable to the Northstar/NWNL Trust and
any amendment or supplement thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: January 24 , 1996
MARK L. LIPSON
-------------------------
Mark L. Lipson
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Mark L. Lipson, Agnes Mullady and Lisa Hurley, and each of them his true and
lawful attorney-in-fact as agent with full power of substitution and
resubstitution of him in his name, place, and stead, to sign any and all
registration statements on Form N-1A applicable to the Northstar/NWNL Trust and
any amendment or supplement thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: January , 1996
JOHN R. SMITH
-------------------------
John R. Smith
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Mark L. Lipson, Agnes Mullady and Lisa Hurley, and each of them his true and
lawful attorney-in-fact as agent with full power of substitution and
resubstitution of him in his name, place, and stead, to sign any and all
registration statements on Form N-1A applicable to the Northstar/NWNL Trust and
any amendment or supplement thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: January 29 , 1996
DAVID W. WALLACE
----------------
David W. Wallace
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Mark L. Lipson, Agnes Mullady and Lisa Hurley, and each of them his true and
lawful attorney-in-fact as agent with full power of substitution and
resubstitution of him in his name, place, and stead, to sign any and all
registration statements on Form N-1A applicable to the Northstar/NWNL Trust and
any amendment or supplement thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: January , 1996
ROBERT B. GOODE, JR.
-------------------------
Robert B. Goode, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Mark L. Lipson, Agnes Mullady and Lisa Hurley, and each of them his true and
lawful attorney-in-fact as agent with full power of substitution and
resubstitution of him in his name, place, and stead, to sign any and all
registration statements on Form N-1A applicable to the Northstar/NWNL Trust and
any amendment or supplement thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: January , 1996
PAUL S. DOHERTY
-------------------------
Paul S. Doherty
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Mark L. Lipson, Agnes Mullady and Lisa Hurley, and each of them his true and
lawful attorney-in-fact as agent with full power of substitution and
resubstitution of him in his name, place, and stead, to sign any and all
registration statements on Form N-1A applicable to the Northstar/NWNL Trust and
any amendment or supplement thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: January 29, 1996
WALTER H. MAY
-------------------------
Walter H. May
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000916403
<NAME> NORTHSTAR/NWNL TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3102511
<INVESTMENTS-AT-VALUE> 3451914
<RECEIVABLES> 7599
<ASSETS-OTHER> 373247
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3832760
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19466
<TOTAL-LIABILITIES> 19466
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3415671
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3583
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 44637
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 349403
<NET-ASSETS> 3813294
<DIVIDEND-INCOME> 61233
<INTEREST-INCOME> 20676
<OTHER-INCOME> 0
<EXPENSES-NET> 25556
<NET-INVESTMENT-INCOME> 56353
<REALIZED-GAINS-CURRENT> 283906
<APPREC-INCREASE-CURRENT> 338855
<NET-CHANGE-FROM-OPS> 679114
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (52710)
<DISTRIBUTIONS-OF-GAINS> (235625)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 468249
<NUMBER-OF-SHARES-REDEEMED> (35007)
<SHARES-REINVESTED> 288334
<NET-CHANGE-IN-ASSETS> 1112355
<ACCUMULATED-NII-PRIOR> 40463
<ACCUMULATED-GAINS-PRIOR> (3644)
<OVERDISTRIB-NII-PRIOR> (60)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23,854
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 64907
<AVERAGE-NET-ASSETS> 3178777
<PER-SHARE-NAV-BEGIN> 10.04
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> 2.27
<PER-SHARE-DIVIDEND> (.19)
<PER-SHARE-DISTRIBUTIONS> (.76)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.56
<EXPENSE-RATIO> .008
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000916403
<NAME> NORTHSTAR/NWNL TRUST
<SERIES>
<NUMBER> 2
<NAME> INCOME & GROWTH
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 6205499
<INVESTMENTS-AT-VALUE> 6815739
<RECEIVABLES> 67692
<ASSETS-OTHER> 559950
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7443381
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32888
<TOTAL-LIABILITIES> 32888
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6800520
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (275)
<ACCUMULATED-NET-GAINS> 8
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 610240
<NET-ASSETS> 7410493
<DIVIDEND-INCOME> 93452
<INTEREST-INCOME> 143976
<OTHER-INCOME> 0
<EXPENSES-NET> 42672
<NET-INVESTMENT-INCOME> 194756
<REALIZED-GAINS-CURRENT> 170332
<APPREC-INCREASE-CURRENT> 642622
<NET-CHANGE-FROM-OPS> 1007710
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (195505)
<DISTRIBUTIONS-OF-GAINS> (163759)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3826113
<NUMBER-OF-SHARES-REDEEMED> (1023212)
<SHARES-REINVESTED> 364564
<NET-CHANGE-IN-ASSETS> 3815911
<ACCUMULATED-NII-PRIOR> 474
<ACCUMULATED-GAINS-PRIOR> (6565)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 40195
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 93333
<AVERAGE-NET-ASSETS> 5366557
<PER-SHARE-NAV-BEGIN> 9.92
<PER-SHARE-NII> 0.37
<PER-SHARE-GAIN-APPREC> 1.73
<PER-SHARE-DIVIDEND> (0.37)
<PER-SHARE-DISTRIBUTIONS> (0.26)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.39
<EXPENSE-RATIO> 0.008
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000916403
<NAME> NORTHSTAR/NWNL TRUST
<SERIES>
<NUMBER> 3
<NAME> MULTI SECTOR BOND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3464827
<INVESTMENTS-AT-VALUE> 3571443
<RECEIVABLES> 50576
<ASSETS-OTHER> 167667
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3789686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23954
<TOTAL-LIABILITIES> 23954
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3669418
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2782
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (13084)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 106616
<NET-ASSETS> 3765732
<DIVIDEND-INCOME> 13106
<INTEREST-INCOME> 285000
<OTHER-INCOME> 0
<EXPENSES-NET> 25714
<NET-INVESTMENT-INCOME> 272392
<REALIZED-GAINS-CURRENT> (10020)
<APPREC-INCREASE-CURRENT> 185291
<NET-CHANGE-FROM-OPS> 447663
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (269960)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 951319
<NUMBER-OF-SHARES-REDEEMED> (351281)
<SHARES-REINVESTED> 271848
<NET-CHANGE-IN-ASSETS> 1049589
<ACCUMULATED-NII-PRIOR> 350
<ACCUMULATED-GAINS-PRIOR> (3064)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23984
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 66151
<AVERAGE-NET-ASSETS> 3198239
<PER-SHARE-NAV-BEGIN> 4.85
<PER-SHARE-NII> .42
<PER-SHARE-GAIN-APPREC> .29
<PER-SHARE-DIVIDEND> (.42)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.14
<EXPENSE-RATIO> .008
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000916403
<NAME> NORTHSTAR/NWNL TRUST
<SERIES>
<NUMBER> 4
<NAME> HIGH YIELD BOND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 4390266
<INVESTMENTS-AT-VALUE> 4511850
<RECEIVABLES> 86445
<ASSETS-OTHER> 203384
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4801679
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28210
<TOTAL-LIABILITIES> 28210
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4696141
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3725
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (47981)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 121584
<NET-ASSETS> 4773469
<DIVIDEND-INCOME> 15515
<INTEREST-INCOME> 408146
<OTHER-INCOME> 0
<EXPENSES-NET> 29843
<NET-INVESTMENT-INCOME> 393818
<REALIZED-GAINS-CURRENT> (46687)
<APPREC-INCREASE-CURRENT> 281787
<NET-CHANGE-FROM-OPS> 628918
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (387799)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1731908
<NUMBER-OF-SHARES-REDEEMED> (183528)
<SHARES-REINVESTED> 395812
<NET-CHANGE-IN-ASSETS> 2185311
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1294)
<OVERDISTRIB-NII-PRIOR> (2296)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27922
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 78325
<AVERAGE-NET-ASSETS> 3711953
<PER-SHARE-NAV-BEGIN> 4.69
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> .34
<PER-SHARE-DIVIDEND> (.49)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.04
<EXPENSE-RATIO> .008
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
