<PAGE>
File No. 33-73140
811-8220
As filed with the Securities and Exchange Commission on February 28, 1997
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. 5
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 6
NORTHSTAR/VARIABLE 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)
----
60 days after filing pursuant to paragraph (a)(1)
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X on April 29, 1997 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 _______________.
<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 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 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.
A-1
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STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1997
NORTHSTAR GROWTH FUND
NORTHSTAR GROWTH + VALUE FUND
NORTHSTAR SPECIAL FUND
NORTHSTAR INCOME AND GROWTH FUND
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
NORTHSTAR HIGH TOTAL RETURN FUND
NORTHSTAR HIGH YIELD FUND
NORTHSTAR STRATEGIC INCOME FUND
NORTHSTAR GOVERNMENT SECURITIES FUND
TWO PICKWICK PLAZA
GREENWICH, CONNECTICUT 06830
(203) 863-6200
(800) 595-7827
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Funds dated March 1, 1997, as each may be revised from time to time. To
obtain a copy of the Funds' Prospectus, please contact Northstar Investment
Management Corporation at the address or phone number listed above.
Northstar Investment Management Corporation ("Northstar" or the "Adviser")
serves as the Fund's investment adviser. Northstar has engaged Navellier Fund
Management, Inc. (the "Subadviser") to serve as subadviser to the Northstar
Growth + Value Fund and Northstar Special Fund, subject to the supervision of
Northstar. Wilson/Bennett Capital Management, Inc. serves as subadviser to
Northstar Income and Growth Fund. Northstar Distributors, Inc. (the
"Underwriter") is the underwriter to the Funds. Northstar Administrators
Corporation (the "Administrator") is the Funds' administrator. The Underwriter
and the Administrator are affiliates of Northstar.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT RESTRICTIONS...................................................................................... 2
INVESTMENT TECHNIQUES........................................................................................ 5
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION.............................................................. 11
SERVICES OF NORTHSTAR, THE SUBADVISERS AND THE ADMINISTRATOR................................................. 13
NET ASSET VALUE.............................................................................................. 15
PURCHASES AND REDEMPTIONS.................................................................................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES........................................................................... 17
UNDERWRITER AND DISTRIBUTION SERVICES........................................................................ 20
TRUSTEES AND OFFICERS........................................................................................ 24
OTHER INFORMATION............................................................................................ 27
PERFORMANCE INFORMATION...................................................................................... 28
FINANCIAL STATEMENTS......................................................................................... 32
</TABLE>
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INVESTMENT RESTRICTIONS
NORTHSTAR GROWTH + VALUE FUND. The Fund has adopted investment restrictions
numbered 1 through 11 as fundamental policies. These restrictions cannot be
changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940, as amended) of such Fund's outstanding voting
shares. Investment restrictions numbered 12 through 15 are not fundamental
policies and may be changed by vote of a majority of the Trust's Board members
at any time. The Fund may not:
1. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that it may: (a) borrow from banks but only if,
immediately after such borrowing there is asset coverage of 300%, and (b) enter
into transactions in options, futures, and options on futures and other
transactions not deemed to involve the issuance of senior securities;
2. Underwrite the securities of others;
3. Purchase or sell real property, including real estate limited
partnerships (each of these Funds may purchase marketable securities of
companies that deal in real estate or interests therein, including real estate
investment trusts);
4. Deal in commodities or commodity contracts, except in the manner
described in the current Prospectus and SAI of the Fund;
5. Make loans to other persons (but the Fund may, however, lend portfolio
securities, up to 33% of net assets at the time the loan is made, to brokers or
dealers or other financial institutions not affiliated with the Fund or
Northstar, subject to conditions established by Northstar (See "Lending
Portfolio Securities" in this SAI), and may purchase or hold participations in
loans, in accordance with the investment objectives and policies of the Fund, as
described in the current Prospectus and SAI of the Fund;
6. 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);
7. Sell short, except that these Funds may enter into short sales against
the box;
8. Invest more than 25% of its assets in any one industry or related group
of industries;
9. With respect to 75% of the 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;
10. Purchase a security if, as a result, more than 10% of any class of
securities, or more than 10% of the outstanding voting securities of an issuer,
would be held by the Fund;
11. Borrow money except to the extent permitted under the 1940 Act;
12. Purchase securities of other investment companies, except in connection
with a merger, consolidation or sale of assets, and except that these Funds may
purchase shares of other investment companies, subject to such restrictions as
may be imposed by the 1940 Act and rules thereunder or by any state in which
shares of the Fund are registered;
13. Make an investment for the purpose of exercising control over
management;
14. Invest more than 15% of its net assets in illiquid securities; or
15. Borrow any amount in excess of 10% of their respective assets, other
than for temporary emergency or administrative purposes. In addition, assets,
the Fund will not make additional investments when its borrowings exceed 5% of
total assets.
NORTHSTAR INCOME AND GROWTH FUND AND NORTHSTAR HIGH TOTAL RETURN FUND. The Funds
have adopted investment restrictions numbered 1 through 11 as fundamental
policies. These restrictions cannot be changed without approval by the holders
of a majority (as defined in the Investment Company Act of 1940, as amended) of
such Fund's outstanding voting shares. Investment restrictions numbered 12
through 17 are not fundamental policies and may be changed by vote of a majority
of the Trust's Board members at any time. The Funds may not:
1. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that it may: (a) borrow from banks but only if,
immediately after such borrowing there is asset coverage of 300%, and (b) enter
into transactions in options, futures, and options on futures and other
transactions not deemed to involve the issuance of senior securities;
2. Underwrite the securities of others;
3. Purchase or sell real property, including real estate limited
partnerships (each of these Funds may purchase marketable securities of
companies that deal in real estate or interests therein, including real estate
investment trusts);
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4. Deal in commodities or commodity contracts, except in the manner
described in the current Prospectus and SAI of the Fund;
5. Make loans to other persons (but the Funds 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 Funds or
Northstar, subject to conditions established by Northstar (See "Lending
Portfolio Securities" in this SAI), and may purchase or hold participations in
loans, in accordance with the investment objectives and policies of the Fund, as
described in the current Prospectus and SAI of the Fund;
6. Participate in any joint trading accounts;
7. Purchase on margin (except that for purposes of this restriction, the
deposit or payment of initial or variation margin in connection with futures
contracts will not be deemed to be purchases of securities on margin);
8. Sell short, except that these Funds may enter into short sales against
the box;
9. Invest more than 25% of its assets in any one industry or related group
of industries;
10. 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;
11. 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;
12. Invest in a security if, as a result of such investment, more than 5%
of its total assets (taken at market value at the time of such investment) would
be invested in securities of issuers (other than issuers of federal agency
obligations) having a record, together with predecessors or unconditional
guarantors, of less than three years of continuous operation;
13. Purchase securities of other investment companies, except in connection
with a merger, consolidation or sale of assets, and except that these Funds may
purchase shares of other investment companies, subject to such restrictions as
may be imposed by the 1940 Act and rules thereunder or by any state in which
shares of the Fund are registered;
14. Purchase or retain securities of any issuer if 5% of the securities of
such issuer are owned by those officers and directors or trustees of the Fund or
of Northstar who each own beneficially more than 1/2 of 1% of its securities;
15. Make an investment for the purpose of exercising control over
management;
16. Invest more than 15% of its net assets (determined at the time of
investment) in illiquid securities, including securities subject to legal or
contractual restrictions on resale (which may include private placements and
those 144A securities for which the Trustees, pursuant to procedures adopted by
the Fund, have not determined there is a liquid secondary market), repurchase
agreements maturing in more than seven days, options traded over the counter
that a Fund has purchased, securities being used to cover options a Fund has
written, securities for which market quotations are not readily available, or
other securities that, legally or in the Adviser's or Trustees' opinion, may be
deemed illiquid; or
17. Invest in interests in oil, gas or other mineral exploration
development programs (including oil, gas or other mineral leases).
As a fundamental policy, these Funds may borrow money from banks to the
extent permitted under the 1940 Act. As an operating (non-fundamental) policy,
these 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, neither of these Funds will make additional investments when its
borrowings, including those investment techniques which are regarded as a form
of borrowing, are in excess of 5% of total assets. If either of these Funds
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.
NORTHSTAR SPECIAL, GROWTH, BALANCE SHEET OPPORTUNITIES, GOVERNMENT SECURITIES,
STRATEGIC INCOME AND HIGH YIELD FUNDS. The Funds have adopted investment
restrictions numbered 1 through 12 as fundamental policies. These restrictions
cannot be changed without approval by the holders of a majority (as defined in
the Investment Company Act of 1940, as amended) of such Fund's outstanding
voting shares. Investment restrictions numbered 13 through 21 are not
fundamental policies and may be changed by vote of a majority of the Trust's
Board members at any time. Each Fund may not:
1. Borrow money, except from a bank and as a temporary measure for
extraordinary or emergency purposes, provided the Fund maintains asset coverage
of 300% for all borrowings;
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2. Purchase securities of any one issuer (except Government securities) if,
as a result, more than 5% of the Fund's total assets would be invested in that
issuer, or the Fund would own or hold more than 10% of the outstanding voting
securities of the issuer; PROVIDED, HOWEVER, that up to 25% of the Fund's total
assets may be invested without regard to these limitations;
3. Underwrite the securities of other issuers, except to the extent that in
connection with the disposition of portfolio securities, the Fund may be deemed
to be an underwriter;
4. Concentrate its assets in the securities of issuers all of which conduct
their principal business activities in the same industry (this restriction does
not apply to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities);
5. Make any investment in real estate, commodities or commodities
contracts, except that these Funds may: (a) purchase or sell readily marketable
securities that are secured by interest in real estate or issued by companies
that deal in real estate, including real estate investment and mortgage
investment trusts; and (b) engage in financial futures contracts and related
options, as described herein and in the Fund's Prospectus;
6. Make loans, except that these Funds may: (a) invest in repurchase
agreements, and (b) loan its portfolio securities in amounts up to one-third of
the market or other fair value of its total assets;
7. Issue senior securities, except as appropriate to evidence indebtedness
that it is permitted to incur, provided that the deposit or payment by the Fund
of initial or maintenance margin in connection with futures contracts and
related options is not considered the issuance of senior securities;
8. Borrow money in excess of 5% of its total assets (taken at market
value);
9. Pledge, mortgage or hypothecate in excess of 5% of its total assets (the
deposit or payment by a Fund of initial or maintenance margin in connection with
futures contracts and related options is not considered a pledge or
hypothecation of assets);
10. Purchase more than 10% of the voting securities of any one issuer,
except U.S. Government Securities;
11. Invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than 7 days, that cannot be
disposed of within the normal course of business at approximately the amount at
which the Fund has valued the securities, excluding restricted securities that
have been determined by the Trustees of the Fund (or the persons designated by
them to make such determinations) to be readily marketable;
12. Purchase securities of any issuer with a record of less than 3 years of
continuous operations, including predecessors, except U.S. Government Securities
and obligations issued or guaranteed by any foreign government or its agencies
or instrumentalities, if such purchase would cause the investments of a Fund in
all such issuers to exceed 5% of the total assets of the Fund taken at market
value;
13. Purchase securities on margin, except these Funds may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities (the deposit or payment by a Fund of initial or maintenance margin
in connection with futures contracts or related options is not considered the
purchase of a security on margin);
14. Write put and call options, unless the options are covered and the Fund
invests through premium payments no more than 5% of its total assets in options
transactions, other than options on futures contracts;
15. Purchase and sell futures contracts and options on futures contracts,
unless the sum of margin deposits on all futures contracts held by the Fund, and
premiums paid on related options held by the Fund, does not exceed more than 5%
of the Fund's total assets, unless the transaction meets certain "bona fide
hedging" criteria (in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in computing the 5%);
16. Invest in securities of any issuer if any officer or trustee of the
Fund or any officer or director of Northstar owns more than 1/2 of 1% of the
outstanding securities of the issuer, and such officers, directors and trustees
own in the aggregate more than 5% of the securities of such issuer;
17. Invest in interests in oil, gas or other mineral exploration or
development programs (although it may invest in issuers that own or invest in
such interests);
18. Purchase securities of any investment company, except by purchase in
the open market where no commission or profit to a sponsor or dealer results
from such purchase, or except when such purchase, though not made in the open
market, is part of a plan of merger, consolidation, reorganization or
acquisition of assets;
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19. Purchase more than 3% of the outstanding voting securities of another
investment company, invest more than 5% of its total assets in another
investment company, or invest more than 10% of its total assets in other
investment companies;
20. Purchase warrants if, as a result, warrants taken at the lower of cost
or market value would represent more than 5% of the value of the Fund's net
assets or if warrants that are not listed on the New York or American Stock
Exchanges or on an exchange with comparable listing requirements, taken at the
lower of cost or market value, would represent more than 2% of the value of the
Fund's net assets (for this purpose, warrants attached to securities will be
deemed to have no value); or
21. Make short sales, unless, by virtue of its ownership of other
securities, the Fund has the right to obtain securities equivalent in kind and
amount to the securities sold and, if the right is conditional, the sale is made
upon the same conditions, except in connection with arbitrage transactions. The
Strategic Income Fund, additionally, may not invest in interests of real estate
limited partnerships.
In addition to the restrictions described above, each of these Funds may,
from time to time, agree to additional investment restrictions for purposes of
compliance with the securities laws of those state and foreign jurisdictions
where that Fund intends to offer or sell its shares.
INVESTMENT TECHNIQUES
DERIVATIVE INSTRUMENTS. The Funds may invest in Derivative Instruments (as
defined in the Fund's Prospectus) for a variety of reasons, including to hedge
certain market risks, to provide a substitute for purchasing or selling
particular securities or to increase potential income gain. Derivatives may
provide a cheaper, quicker or more specifically focused way for the Fund to
invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit a Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee usually
is supported by a daily payment system (I.E., margin requirements) operated by
the clearing agency in order to reduce overall credit risk. As a result, unless
the clearing agency defaults, there is relatively little counterparty credit
risk associated with Derivatives purchased on an exchange. By contrast, no
clearing agency guarantees over-the-counter Derivatives. Therefore, each party
to an over-the-counter Derivative bears the risk that the counterparty will
default. Accordingly, Northstar and subadviser will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Fund. Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the Derivative to be interested in bidding for
it.
FUTURES TRANSACTIONS -- IN GENERAL. The Fund may enter into futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange, or on
exchanges located outside the United States, such as the London International
Financial Futures Exchange and the Sydney Futures Exchange Limited. Foreign
markets may offer advantages such as trading opportunities or arbitrage
possibilities not available in the United States. Foreign markets, however, may
have greater risk potential than domestic markets. For example, some foreign
exchanges are principal markets so that no common clearing facility exists and
an investor may look only to the broker for performance of the contract. In
addition, any profits that the Fund might realize in trading could be eliminated
by adverse changes in the exchange rate, or the Fund could incur losses as a
result of those changes. Transactions on foreign exchanges may include both
commodities which are traded on domestic exchanges and those which are not.
Unlike trading on domestic commodity exchanges, trading on foreign commodity
exchanges is not regulated by the Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to the Fund which
could adversely affect the value of the Fund's net assets. Although the Fund
intends to purchase or sell futures contracts only if there is an active market
for such contracts, no assurance can be given that a liquid market will exist
for any particular contract at any particular time. Many futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that limit
or trading may be suspended for specified periods during the trading day.
Futures contract prices could move to the limit for several consecutive trading
days with
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little or no trading, thereby preventing prompt liquidation of futures positions
and potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant market,
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the transaction being hedged and
the price movements of the futures contract. For example, if the Fund uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Fund may be required to segregate cash or high quality
money market instruments in connection with its commodities transactions in an
amount generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting the Fund's ability otherwise to
invest those assets.
SPECIFIC FUTURES TRANSACTIONS. The Fund may purchase and sell stock index
futures contracts. A stock index future obligates the Fund to pay or receive an
amount of cash equal to a fixed dollar amount specified in the futures contract
multiplied by the difference between the settlement price of the contract on the
contract's last trading day and the value of the index based on the stock prices
of the securities that comprise it at the opening of trading in such securities
on the next business day.
The Fund may purchase and sell interest rate futures contracts. An interest
rate future obligates the Fund to purchase or sell an amount of a specific debt
security at a future date at a specific price.
The Fund may purchase and sell currency futures. A foreign currency future
obligates the Fund to purchase or sell an amount of a specific currency at a
future date at a specific price.
OPTIONS -- IN GENERAL. The Fund may purchase and write (I.E., sell) call or
put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell, the
underlying security or securities at the exercise price at any time during the
option period, or at a specific date. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy, the
underlying security or securities at the exercise price at any time during the
option period.
A covered call option written by the Fund is a call option with respect to
which the Fund owns the underlying security or otherwise covers the transaction
by segregating cash or other securities. A put option written by the Fund is
covered when, among other things, cash or liquid securities having a value equal
to or greater than the exercise price of the option are placed in a segregated
account with the Fund's custodian to fulfill the obligation undertaken. The
principal reason for writing covered call and put options is to realize, through
the receipt of premiums, a greater return than would be realized on the
underlying securities alone. The Fund receives a premium from writing covered
call or put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
SPECIFIC OPTIONS TRANSACTIONS. The Fund may purchase and sell call and put
options in respect of specific securities (or groups or "baskets" of specific
securities) or stock indices listed on national securities exchanges or traded
in the over-the-counter market. An option on a stock index is similar to an
option in respect of specific securities, except that settlement does not occur
by delivery of the securities comprising the index. Instead, the option holder
receives an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the
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exercise price of the option. Thus, the effectiveness of purchasing or writing
stock index options will depend upon price movements in the level of the index
rather than the price of a particular stock.
The Fund may purchase and sell call and put options on foreign currency.
These options convey the right to buy or sell the underlying currency at a price
which is expected to be lower or higher than the spot price of the currency at
the time the option is exercised or expires.
The Fund may purchase cash-settlement options on interest rate swaps,
interest rate swaps denominated in foreign currency and equity index swaps in
pursuit of its investment objective. Interest rate swaps involve the exchange by
the Fund with another party of their respective commitments to pay or receive
interest (for example, an exchange of floating-rate payments for fixed-rate
payments) denominated in U.S. dollars or foreign currency. Equity index swaps
involve the exchange by the Fund with another party of cash flows based upon the
performance of an index or a portion of an index of securities which usually
includes dividends. A cash-settled option on a swap gives the purchaser the
right, but not the obligation, in return for the premium paid, to receive an
amount of cash equal to the value of the underlying swap as of the exercise
date. These options typically are purchased in privately negotiated transactions
from financial institutions, including securities brokerage firms.
Successful use by the Fund of options will be subject to the ability of
Northstar and the subadviser to predict correctly movements in the prices of
individual stocks, the stock market generally, foreign currencies or interest
rates. To the extent the Manager's predictions are incorrect, the Fund may incur
losses.
SHORT SALES. A Fund may make short sales "against the box." A short-sale is
a transaction in which a party sells a security it does not own in anticipation
of decline in the market value of that security. A short sale is "against the
box" to the extent that the Fund contemporaneously owns or has the right to
obtain securities identical to those sold short. When the Fund makes a short
sale, it must borrow the security sold short and deliver it to the broker-dealer
through which it made the short sale as collateral for its obligation to deliver
the security upon conclusion of the sale. The Fund may have to pay a fee to
borrow particular securities, and is often obligated to pay over any accrued
interest on such borrowed securities.
PRIVATELY ISSUED COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS, INTEREST
OBLIGATIONS AND PRINCIPAL OBLIGATIONS. Each of High Total Return Fund and Income
and Growth Fund may invest up to 5% of its net assets in Privately Issued
Collateralized Mortgage-Backed Obligations ("CMOs"), Interest Obligations
("IOs") and Principal Obligations ("POs") when Northstar believes that such
investments are consistent with the Fund's investment objective. Collateralized
mortgage obligations or "CMOs" are debt obligations collateralized by mortgage
loans or mortgage pass-through securities. Typically, privately issued CMOs are
collateralized by Ginnie Mae, Fannie Mae or Freddie Mac Certificates, but also
may be collateralized by whole loans or private pass-throughs (such collateral
collectively hereinafter referred to as "Mortgage Assets"). Privately issued
CMOs are per se illiquid. Multi-class pass-through securities are equity
interest in a trust composed of Mortgage Assets. Unless the context indicates
otherwise, all references herein to CMOs include multi-class pass-thorough
securities. Payments of principal of and interest on the Mortgage Assets, and
any reinvestment income thereon, are the source of funds used to pay debt
service on the CMOs or make scheduled distribution on the multi-class
pass-through securities.
On a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche", is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. The principal of and interest on the Mortgage Assets may be allocated
among the several classes of a series of a CMO in innumerable ways. The Funds
may also invest in, among others, parallel pay CMOs and Planned Amortization
Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments
of principal on each payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated maturity date or final
distribution date of each class, which, as with other CMO structures, must be
retired by its stated maturity date or final distribution date but may be
retired earlier. PAC Bonds generally call for payments of a specified amount of
principal on each payment date.
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,
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and a rapid rate of principal payments may have a material adverse effect on
such security's yield to maturity. If the underlying Mortgage Assets experience
greater than anticipated prepayments of principal, a Fund may fail to recoup
fully its initial investment in these securities. The determination of whether a
particular government-issued IO or PO backed by fixed-rate mortgage is liquid is
made by Northstar under guidelines and standards established by the Board of
Trustees. Such a security may be deemed liquid if it can be disposed of promptly
in the ordinary course of business at a value reasonably close to that used in
the calculation of net asset value per share.
INDEX WARRANTS. The Strategic Income Fund may purchase put warrants and
call warrants whose values vary depending on the change in the value of one or
more specified securities indices ("index warrants"). Index warrants are
generally issued by banks or other financial institutions and give the holder
the right, at any time during the term of the warrant, to receive upon exercise
of the warrant a cash payment from the issuer, based on the value of the
underlying index at the time of exercise. In general, if the value of the
underlying index rises above the exercise price of the index warrant, the holder
of a call warrant will be entitled to receive a cash payment from the issuer
upon exercise, based on the difference between the value of the index and the
exercise price of the warrant; if the value of the underlying index falls, the
holder of a put warrant will be entitled to receive a cash payment from the
issuer upon exercise, based on the difference between the exercise price of the
warrant and the value of the index. The holder of a warrant would not be
entitled to any payments from the issuer at any time when, in the case of a call
warrant, the exercise price is greater than the value of the underlying index,
or, in the case of a put warrant, the exercise price is less than the value of
the underlying index. If the Strategic Income Fund were not to exercise an index
warrant prior to its expiration, then the Fund would lose the amount of the
purchase price paid by it for the warrant. The Strategic Income Fund will
normally use index warrants in a manner similar to its use of options on
securities indices. The risks of the Fund's use of index warrants are generally
similar to those relating to its use of index options. Unlike most index
options, however, index warrants are issued in limited amounts and are not
obligations of a regulated clearing agency, but are backed only by the credit of
the bank or other institution that issues the warrant. Also, index warrants
generally have longer terms than index options. Although the Strategic Income
Fund will normally invest only in exchange-listed warrants, index warrants are
not likely to be as liquid as certain index options backed by a recognized
clearing agency. In addition, the terms of index warrants may limit the Fund's
ability to exercise the warrants at such time, or in such quantities, as the
Fund would otherwise wish to do.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a
Fund buys a money market instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified time and at an agreed
upon yield. Northstar will use standards set by the relevant Fund's Trustees in
reviewing the creditworthiness of parties to repurchase agreements with such
Fund. In addition, no more than an aggregate of 15% of a Fund's net assets, at
the time of investment, will be invested in illiquid investments, including
repurchase agreements having maturities longer than seven days. In the event of
failure of the executing bank or broker-dealer, a Fund could experience some
delay in obtaining direct ownership of the underlying collateral and might incur
a loss if the value of the security should decline, as well as costs in
disposing of the security.
Pursuant to an Exemptive Order under Section 17(d) and Rule 17d-1 obtained
by the Funds, excluding the Strategic Income Fund and the Northstar Trust, on
March 5, 1991, such Funds may deposit uninvested cash balances into a single
joint account to be used to enter into repurchase agreements.
As an alternative to using repurchase agreements, a Fund may, from time to
time, invest up to 5% of its assets in money market investment companies
sponsored by a third party for short-term liquidity purposes. Such investments
are subject to the non-fundamental investment limitations described herein.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS. The Funds may
enter into reverse repurchase agreements and dollar roll agreements. Under a
reverse repurchase agreement or a dollar roll agreement, a Fund sells securities
and agrees to repurchase them, or substantially similar securities in the case
of a dollar roll agreement, at a mutually agreed upon date and price. At the
time the Fund enters into a reverse repurchase or dollar roll agreement, it will
establish and maintain a segregated account with its custodian, containing cash,
U.S. Government Securities, or other liquid assets from its portfolio, having a
value not less than the repurchase price (including accrued interest). The Funds
do not account for dollar rolls as a borrowing.
These agreements may involve the risk that the market value of the
securities to be repurchased by a Fund may decline below the price at which the
Fund is obligated to repurchase. Also, in the event the buyer of securities
under a reverse repurchase agreement or a dollar roll agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's
obligation to repurchase the securities, and the Fund's use of the proceeds of
the reverse repurchase agreement or the dollar roll agreement may effectively be
restricted pending such a decision.
LENDING PORTFOLIO SECURITIES. A Fund may lend portfolio securities to
broker-dealers and other financial institutions in an amount up to one-third of
the value of its total assets, provided that such loans are callable at any time
by the Fund and are at all
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times secured by collateral held by the Fund at least equal to the market value,
determined daily, of the loaned securities. A Fund will continue to receive any
income on the loaned securities, while simultaneously earning interest on cash
collateral (which will be invested in short-term debt obligations) or a
securities lending fee (in the case of collateral in the form of U.S. Government
Securities).
There may be risks of delay in recovery of the loaned securities and, in
some cases, loss of rights in the collateral should the borrower of the
securities fail financially. Loans of portfolio securities will only be made to
firms considered by Northstar to be creditworthy under guidelines adopted by the
Trustees.
FIRM COMMITMENTS AND WHEN-ISSUED SECURITIES. Each Fund, except the
Government Securities Fund, may enter into firm commitment agreements to
purchase securities at an agreed-upon price on a specified future date. An
amount of cash or short-term U.S. Government Securities equal to the Fund's
commitment will be deposited in a segregated account at the Fund's custodian
bank to secure the Fund's obligation. Although a Fund will generally enter into
firm commitments to purchase securities with the intention of actually acquiring
the securities for its portfolio (or for delivery pursuant to options
contracts it has entered into), the Fund may dispose of a security prior to
settlement if Northstar deems it advisable to do so. A Fund entering into the
forward commitment may realize short-term gains or losses in connection with
such sales.
A Fund may enter into To Be Announced ("TBA") sale commitments wherein the
unit price and the estimated principal amount are established upon entering into
the contract, with the actual principal amount being within a specified range of
the estimate. A Fund will enter into TBA sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
arrangements. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, the Fund will maintain, in a segregated account, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price. Unsettled
TBA sale commitments are valued at current market value of the underlying
securities. If the TBA sale commitment is closed through the acquisition of an
offsetting purchase commitment, the Fund realizes a gain or loss on the
commitment without regard to any unrealized gain or loss on the underlying
security. If the Fund delivers securities under the commitment, the Fund
realizes a gain or loss from the sale of the securities, based upon the unit
price established at the date the commitment was entered into.
A Fund may also purchase securities on a when-issued or delayed delivery
basis. In such transactions, the price is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place at a
later date, normally within one month. The value of the security on the
settlement date may be more or less than the price paid as a result of, among
other things, changes in the level of interest rates or other market factors.
Accordingly, there is a risk of loss, which is in addition to the risk of
decline in the value of the Fund's other assets. The Fund will establish a
segregated account with its custodian in which it will maintain cash and
marketable securities equal in value to commitments for when-issued or delayed
delivery securities. While when-issued or delayed delivery securities may be
sold prior to the settlement date, it is intended that a Fund will purchase such
securities with the purpose of actually acquiring them, unless a sale appears
desirable for investment reasons.
FLOATING OR VARIABLE RATE INSTRUMENTS. The Funds may purchase floating or
variable rate bonds, which normally provide that the holder can demand payment
of the obligation on short notice at par with accrued interest. Such bonds are
frequently secured by letters of credit or other credit support arrangements
provided by banks. Floating or variable rate instruments provide for adjustments
in the interest rate at specified intervals (weekly, monthly, semiannually,
etc.). A Fund would anticipate using these bonds as cash equivalents, pending
longer term investment of its funds. Other longer term fixed-rate bonds, with a
right of the holder to request redemption at certain times (often annually,
after the lapse of an intermediate term), may also be purchased by a Fund. These
bonds are more defensive than conventional long-term bonds (protecting to some
degree against a rise in interest rates), while providing greater opportunity
than comparable intermediate term bonds since the Fund may retain the bond if
interest rates decline. By acquiring these kinds of bonds, a Fund obtains the
contractual right to require the issuer of the security, or some other person
(other than a broker or dealer), to purchase the security at an agreed upon
price, which right is contained in the obligation itself rather than in a
separate agreement with the seller or some other person.
ZERO COUPON SECURITIES. Zero coupon securities are fixed income securities
that have been stripped of their unmatured interest coupons. Zero coupon
securities are sold at a (usually substantial) discount and redeemed at face
value at their maturity date without interim cash payments of interest or
principal. The amount of this discount is accredited over the life of the
security, and the accretion constitutes the income earned on the security for
both accounting and tax purposes. Because of these features, the market prices
of zero coupon securities are generally more volatile than the market prices of
securities that have a similar maturity but that pay interest periodically. Zero
coupon securities are likely to respond to a greater degree to interest rate
changes than are non-zero coupon securities with similar maturity and credit
qualities. Each Fund may invest a portion of its total assets in "zero coupon"
Treasury securities, which consist of Treasury bills or stripped interest or
principal components of U.S. Treasury bonds or notes.
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Zero coupon Treasury bonds or notes consist of stripped interest or
principal components held in STRIPS form issued through the U.S. Treasury's
STRIPS program, which permits the beneficial ownership of the component to be
recorded directly in the Treasury book-entry system. The Funds may also purchase
custodial receipts evidencing beneficial ownership of direct interests in
component parts of U.S. Treasury bonds or notes held by a bank in a custodian or
trust account.
ADDITIONAL INFORMATION ON GNMAS. The Funds may invest in U.S. Government
Securities, which are obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. A substantial portion of the assets of the
Government Securities Fund have, at various times, been invested in obligations
of the Government National Mortgage Association (popularly called GNMAs or
Ginnie Maes). All of the other Funds may also invest in GNMAs from time to time.
GNMAs are mortgage backed securities representing part ownership of a pool
of mortgage loans, in which the timely payment of principal and interest is
guaranteed by the full faith and credit of the U.S. Government. GNMA may borrow
U.S. Treasury funds to the extent needed to make payments under the guarantee.
The Funds purchase "modified pass-through" type GNMA Certificates for which
principal and interest are guaranteed, rather than the "straight pass through"
Certificates for which such guarantee is not available. The Funds also purchase
"variable rate" GNMA Certificates and may purchase other types that may be used
with GNMA's guarantee.
When mortgages in the pool underlying a GNMA Certificate are prepaid by
mortgagors or when foreclosure occurs, such principal payments are passed
through to the Certificate holders (such as a Fund). Accordingly, the life of
the GNMA Certificate is likely to be substantially shorter than the stated
maturity of the mortgages in the underlying pool, which will have maturities of
up to 30 years. Because of such variation in prepayment rights, it is not
possible to accurately predict the life of a particular GNMA Certificate.
Payments to holders of GNMA Certificates consist of the monthly
distributions of interest and principal, less the GNMA and issuer's fees. The
portion of the monthly payment that represents a return of principal may be
reinvested by a Fund holding the GNMA in then-available GNMA obligations, which
may bear interest at a rate higher or lower than the obligation from which the
payment was received, or in a differing security. The actual yield to be earned
by the holder of a GNMA Certificate is calculated by dividing such payments by
the purchase price paid for the GNMA Certificate (which may be at a premium or a
discount from the face value of the Certificate). Unpredictable prepayments of
principal, however, can greatly change realized yields. In a period of declining
interest rates it is more likely that mortgages contained in GNMA pools will be
prepaid, thus reducing the effective yield. Moreover, any premium paid on the
purchase of a GNMA Certificate will be lost if the obligation is prepaid. In
periods of falling interest rates, this potential for prepayment may reduce the
general upward price increase of GNMA Certificates that might otherwise occur.
As with other debt instruments, the price of GNMA Certificates is likely to
decrease in times of rising interest rates. Price changes of the GNMA
Certificates held by a Fund have a direct impact on the net asset value per
share of the Fund.
When interest rates rise, the value of a GNMA Certificate will generally
decline. Conversely, when rates fall, the GNMA Certificate value may rise,
although not as much as other debt issues, due to the prepayment feature. As a
result, the price per share the shareholder receives on redemption may be more
or less than the price paid for the shares. The dividends per share paid by the
Government Securities Fund may also vary.
ADDITIONAL INFORMATION ON FOREIGN SECURITIES. Each Fund, except Government
Securities Fund, may invest in securities of foreign issuers. Each of these
Funds other than Strategic Income, High Yield, and High Total Return may invest
up to 20% of its net assets in foreign securities, of which 10% of its net
assets may be invested in foreign securities that are not listed on a U.S.
securities exchange. Strategic Income may invest up to 60% of its assets in
securities of foreign issuers, High Total Return may invest up to 50% and High
Yield up to 35% of its total assets. Eurodollar certificates of deposit are
excluded for purposes of this limitation for Strategic Income.
ADDITIONAL INFORMATION ON HIGH YIELD SECURITIES. Balance Sheet
Opportunities Fund, Strategic Income Fund, High Yield Fund and High Total Return
Fund each may invest in lower-rated fixed income securities to the extent
described in the Prospectus. The lower ratings of certain securities held by
these Funds reflect a greater possibility that adverse changes in the financial
condition of the issuer or economic conditions in general, or both, or an
unanticipated rise in interest rates, may impair the ability of the issuer to
make payments of interest and principal. The inability (or perceived inability)
of issuers to make timely payment of interest and principal would likely make
the values of securities held by these Funds more volatile and could limit a
Fund's ability to sell its securities at prices approximating the values the
Fund had placed on such securities. In the absence of a liquid trading market
for the securities held by it, a Fund may be unable at times to establish the
fair value of such securities. The rating assigned to a security by Moody's
Investors Service, Inc. or S & P (or by any other nationally recognized
securities rating organization) does not reflect an assessment of the volatility
of the security's market value or the liquidity of an investment in the
security. See the Appendix to the Prospectus for a description of security
ratings.
10
<PAGE>
Like those of other fixed income securities, the values of lower-rated
securities fluctuate in response to changes in interest rates. Thus, a decrease
in interest rates will generally result in an increase in the value of a Fund's
assets. Conversely, during periods of rising interest rates, the value of a
Fund's assets will generally decline. In addition, the values of such securities
are also affected by changes in general economic conditions and business
conditions affecting the specific industries of their issuers. Changes by
recognized rating services in their ratings of any fixed income security and in
the ability of an issuer to make payments of interest and principal may also
affect the value of these investments. Changes in the value of portfolio
securities generally will not affect cash income derived from such securities,
but will effect a Fund's net asset value. A Fund will not necessarily dispose of
a security when its rating is reduced below its rating at the time of purchase,
although Northstar will monitor the investment to determine whether its
retention will assist in meeting a Fund's investment objective.
Certain securities held by a Fund may permit the issuer at its option to
call, or redeem, its securities. If an issuer were to redeem securities held by
a Fund during a time of declining interest rates, the Fund may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.
LOAN PARTICIPATIONS AND ASSIGNMENTS. Each Fund may invest in loan
participations and loan assignments. A Fund's investment in loan participations
typically will result in the Fund having a contractual relationship only with
the Lender and not with the borrower. The Fund will have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the Lender selling the Participations and only upon receipt by the Lender of the
payments from the borrower. In connection with purchasing Participations, the
Fund generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the Loan, nor any right of set-off
against the borrower, and the Fund may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Fund may be subject to the credit risk of both the borrower and the Lender
that is selling the Participation. In the event of the insolvency of the Lender
selling a Participation, the Fund may be treated as a general creditor of the
Lender and may not benefit from any set-off between the Lender and the borrower.
When a Fund purchases a loan assignment from Lenders, it will acquire
direct rights against the borrowers on the Loan. Because Assignments are
arranged through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender. Because there is no liquid market for such securities,
the Funds anticipate that such securities could be sold only to a limited number
of institutional investors. The lack of a liquid secondary market may have an
adverse impact on the value of such securities and a Fund's ability to dispose
of particular assignments or participations when necessary to meet redemptions
of Fund shares, to meet the Fund's liquidity needs or when necessary in response
to a specific economic event, such as deterioration in the creditworthiness of
the borrower. The lack of a liquid secondary market for assignments and
participations also may make it more difficult for a Fund to value these
securities for purposes of calculating its net asset value.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Northstar, and Subadviser in the case of Special Fund and Growth + Value
Fund, places orders for the purchase and sale of the Funds' securities,
supervises their execution and negotiates brokerage commissions on behalf of
each Fund. For purposes of the remainder of this section, "Portfolio
Transactions and Brokerage Allocation," discussion of Northstar includes the
Subadviser, but only with respect to Special Fund and Growth + Value Fund. It is
the practice of Northstar to seek the best prices and best execution of orders
and to negotiate brokerage commissions that in the Adviser's opinion, are
reasonable in relation to the value of the brokerage services provided by the
executing broker. Brokers who have executed orders for the 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 Northstar, the rate is deemed by Northstar to be reasonable.
Brokers may ask for higher rates of commission if all or a portion of the
securities involved in the transaction are positioned by the broker, if the
broker believes it has brought 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 Northstar
after the transaction has been consummated. If Northstar more than occasionally
differs with the broker's appraisal of opportunity or value, the broker would
not be selected to execute trades in the future. Northstar believes that each
Fund benefits with a securities industry comprised of many and diverse firms and
that the longterm interest of shareholders of the Funds is best served by its
brokerage policies that include paying a fair commission, rather than seeking to
exploit its leverage to force the lowest possible commission rate.
Over-the-counter purchases and sales are transacted directly with principal
market-makers, except in those circumstances where, in the opinion of Northstar,
better prices and execution are available elsewhere.
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, and forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income
11
<PAGE>
markets and equity markets, specific industry groups and individual
issues. Research services will vary from firm to firm, with broadest
coverage generally from the large full-line firms. Smaller firms, in
general, tend to provide information and interpretations on a smaller scale,
frequently with a regional emphasis. In addition, several firms monitor federal,
state, local and foreign political developments; many of the brokers also
provide access to outside consultants. The outside research assistance is
particularly useful to the Adviser's staff, since the brokers, as a group, tend
to monitor a broader universe of securities and other matters than the Adviser's
staff can follow. In addition, the outside research provides Northstar with a
diverse perspective on financial markets. Research and investment information is
provided by these and other brokers at no cost to Northstar and is available for
the benefit of other accounts advised by Northstar and its affiliates; and not
all of this information will be used in connection with the 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 Northstar, it does not reduce the Adviser's expenses by a
determinable amount. The extent to which Northstar makes use of statistical,
research and other services furnished by brokers is considered by Northstar in
the allocation of brokerage business, but there is no formula by which such
business is allocated. Northstar does so in accordance with its judgment of the
best interests of the 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 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, while taking into account the dealer's general
execution and operational facilities, the type of transaction involved and other
factors, such as the dealer's risk in positioning the securities involved. While
Northstar generally seeks reasonably competitive spreads or commissions, the
Funds will not necessarily pay the lowest spread or commission available.
Each Fund may, under circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer that has
provided statistical or other research services to the Funds. By allocating
transactions in this manner, Northstar is able to supplement its research and
analysis with the views and information of other securities firms. During the
fiscal years ended October 31, 1996 and December 31, 1996, respectively, each of
the Funds listed below paid the total brokerage commissions indicated below,
including, in the case of the Special, Growth, Balance Sheet Opportunities,
Government Securities, Strategic Income, and High Yield Funds, commissions to
Advest, Inc. ("Advest"), an affiliate of the Funds' former investment adviser.
BROKERAGE COMMISSIONS PAID DURING MOST RECENT FISCAL YEARS
<TABLE>
<CAPTION>
OCTOBER 31,
1996 1995
<S> <C> <C>
Income and Growth Fund................................................................... $507,638 $249,474
High Total Return Fund................................................................... $ 11,433 $ 0
<CAPTION>
DECEMBER 31,
1996 1995
Special Fund............................................................................. $479,135 $ 87,375
Growth Fund.............................................................................. $124,024 $241,864
Balance Sheet Opportunities Fund......................................................... $ 90,283 $ 88,151
Government Securities Fund............................................................... $ 1,049 $ 0
Strategic Income Fund.................................................................... $ 0 $ 552
High Yield Fund.......................................................................... $ 16,591 $ 12,763
</TABLE>
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 markups 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.
Each Fund cannot accurately predict its portfolio turnover rate, but Northstar
anticipates that each Fund's rate will not exceed 100% under normal market
conditions. A 100% annual turnover rate would occur, for example, if all the
securities in the portfolio were replaced once in a period of one year. A Fund's
portfolio turnover rate may be higher than that described above if 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
12
<PAGE>
turnover rate would increase commission expenses and may involve realization of
gains that would be taxable to shareholders. 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 Code, including a
requirement that less than 30% of the Fund's annual gross income be derived from
gains on the sale of securities and certain other assets held for less than
three months.
SERVICES OF NORTHSTAR, THE SUBADVISERS AND THE ADMINISTRATOR
Pursuant to an Investment Advisory Agreement with each Fund, Northstar
Investment Management Corporation acts as the investment adviser to each Fund.
In this capacity, Northstar, subject to the authority of the Trustees of the
Funds, and subject to delegation of certain responsibilities to Navellier Fund
Management, Inc. as the subadviser for the Special Fund and the Growth + Value
Fund and Wilson/Bennett Capital Management, Inc. as the subadviser for the
Income and Growth Fund, is responsible for furnishing continuous investment
supervision to the Funds and is responsible for the management of each Fund's
portfolio.
Northstar is an indirect, majority-owned subsidiary of ReliaStar Financial
Corp. ("ReliaStar"). Combined minority interests in Northstar held by members of
senior management of ReliaStar currently equal 20%. ReliaStar is a publicly
traded holding company whose subsidiaries specialize in the life insurance
business. Through ReliaStar Life Insurance Company ("ReliaStar Life") and other
subsidiaries, ReliaStar issues and distributes individual life insurance and
annuities, group life and health insurance and life and health reinsurance, and
provides related investment management services. The address of Northstar is Two
Pickwick Plaza, Greenwich, Connecticut 06830. The address of ReliaStar is 20
Washington Avenue South, Minneapolis, Minnesota 55401.
Northstar charges a fee under each advisory agreement to Government
Securities Fund, High Yield Fund, Balance Sheet Opportunities Fund, Strategic
Income Fund, Growth Fund, Special Fund and Growth + Value Fund at an annual
rate, after voluntary waivers or expense reimbursements, of 0.45%, 0.45%, 0.65%,
0.65%, 0.75%, 0.75% and 1.00% of such Fund's average daily net assets,
respectively. This fee is accrued daily and payable monthly.
Northstar charges a fee to the Income and Growth Fund and High Total Return
Fund at the annual rate of 0.75% on the first $250,000,000 of aggregate average
daily net assets of each Fund, 0.70% on the next $250,000,000 of such assets,
0.65% on the next $250,000,000 of such assets; 0.60% on the next $250,000,000 of
such assets, and 0.55% on the remaining aggregate daily net assets of each Fund
in excess of $1 billion.
Northstar has agreed that if, in any fiscal year, the aggregate expenses of
a Fund, exclusive of taxes, distribution fees, brokerage, interest and (with the
prior consent of any necessary state securities commissions) extraordinary
expenses, but including the management fee, exceed the most restrictive expense
limitations applicable to the Fund under state securities laws or published
regulations thereunder, Northstar will refund on a proportionate basis to the
Fund whose expenses exceeded such limitation the excess over such amount up to
the total fee received by Northstar. Currently, the most restrictive of such
limitations would require Northstar to reimburse such a Fund to the extent that
in any fiscal year such aggregate expenses exceed 2.5% of the first $30,000,000
of the average net assets, 2.0% of the next $70,000,000 of the average net
assets and 1.5% of any amount of the average net assets in excess of
$100,000,000.
The Investment Advisory Agreement for the Income and Growth Fund and High
Total Return Fund was originally approved by the Trustees of the Northstar Trust
on October 23, 1993, and by the sole Shareholder of the Northstar Income and
Growth Fund, and High Total Return Fund on November 8, 1993. The Investment
Advisory Agreement continued in effect for a period of two years and was renewed
by the Trustees for one year on October 31, 1995. It will continue in effect
from year to year if specifically approved annually by (a) the Trustees, acting
separately on behalf of each Fund, including a majority of the Disinterested
Trustees, or (b) a majority of the outstanding voting securities of each class
of each Fund as defined in the 1940 Act.
The Investment Advisory Agreement for the Growth + Value Fund was approved
by the Trustees on July 31, 1996. The Investment Advisory Agreement will
continue in effect for a period of two years and annually thereafter if
specifically approved annually by (a) the Trustees, acting separately on behalf
of the Fund, including a majority of the Disinterested Trustees, or (b) a
majority of the outstanding voting securities of each class of the Fund as
defined in the 1940 Act.
Each Investment Advisory Agreement for the remaining Funds was approved by
the Trustees of the affected Fund on March 1, 1995 and by the shareholders of
such Fund on June 2, 1995. Each such Investment Advisory Agreement will continue
in effect until June 2, 1997, and thereafter, will continue in effect from year
to year if specifically approved annually by (a) the Trustees, acting separately
on behalf of the particular Fund, including a majority of the Disinterested
Trustees, or (b) a majority of the outstanding voting securities of each class
of such Fund as defined in the 1940 Act.
A Fund's Investment Advisory Agreement may be terminated as to any class,
without penalty and at any time, by a similar vote upon not more than 60 days'
nor less than 30 days' written notice by Northstar, the Trustees, or a majority
of the outstanding
13
<PAGE>
voting securities of such class of such Fund as defined in the 1940 Act.
Such agreement will automatically terminate in the event of its assignment,
as defined in Section 2(a)(4) of the 1940 Act.
Pursuant to separate Subadvisory Agreements between Northstar and Navellier
Fund Management, Inc., dated February 1, 1996, and July 31, 1996, Navellier acts
as subadviser to Special Fund and Growth + Value Fund, respectively. In this
capacity, Navellier Fund Management, Inc., subject to the supervision and
control of Northstar and the Trustees of such Funds, will manage the Funds'
portfolio investments, consistently with their investment objective, and will
execute any of the Funds' investment policies that it deems appropriate to
utilize from time to time. Fees payable under the Subadvisory Agreement will
accrue daily and be paid monthly by Northstar. As compensation for its services,
Northstar will pay the Subadviser at the annual rate of 0.48% and 0.64% of the
average daily net assets of Special Fund and Growth + Value Fund, respectively.
The Subadviser is wholly-owned and controlled by its sole stockholder, Louis G.
Navellier. The Subadviser's address is: 1 East Liberty, Third Floor, Reno,
Nevada, 89501. The Subadvisory Agreement for Special Fund was approved by the
Trustees of the Fund on December 1, 1995, and by vote of the Shareholders of the
Fund on January 30, 1996. The Subadvisory Agreement for Growth + Value Fund was
approved by the Trustees of the Fund on July 31, 1996. Each Subadvisory
Agreement may be terminated without payment of any penalty by Northstar,
Navellier, the Trustees of such Fund, or the shareholders of such Fund on not
more than 60 days' and not less than 30 days' prior written notice. Otherwise,
each Subadvisory Agreement will remain in effect for two years and will,
thereafter, continue in effect from year to year, subject to the annual approval
of the Trustees of the applicable Fund, or the vote of a majority of the
outstanding voting securities of such Fund, and the vote, cast in person at a
meeting duly called and held, of a majority of the Trustees of such Fund who are
not parties to the Subadvisory Agreement or "interested persons" (as defined in
the 1940 Act) of any such Party.
Wilson/Bennett Capital Management, Inc. ("Wilson/Bennett"), serves as
subadviser with respect to the common stock portion of the Income and Growth
Fund pursuant to a Subadvisory Agreement dated July 31, 1996 between Northstar
and Wilson/Bennett. Northstar will make all determinations as to the allocation
of the Fund's assets, will direct all trades and will manage the portion of the
Fund's assets in convertible and fixed income securities. Wilson/Bennett's
principal address is Suite 250, 8260 Greensboro Drive, McLean, Virginia 22102.
Wilson/Bennett currently manages approximately $111 million of assets for
individuals, pension plans and corporations. For its services, Wilson/Bennett
will receive from Northstar, not the Funds, a monthly fee at an annual rate
equal to 0.20% of the first $125 million of average daily net assets of the Fund
managed by Wilson/Bennett, 0.25% of the next $125 million, and 0.30% for assets
in excess of $250 million. The Subadvisory Agreement for Income and Growth Fund
was approved by the Trustees of the Fund on April 25, 1996 , and by vote of the
shareholders of the Fund on July 15, 1996. The Subadvisory Agreement may be
terminated without payment of any penalty by Northstar, Wilson/Bennett, the
Trustees of the Fund, or the shareholders of the Fund on not more than 60 days'
and not less than 30 days' prior written notice. Otherwise, the Subadvisory
Agreement will remain in effect for two years and will, thereafter, continue in
effect from year to year, subject to the annual approval of the Trustees of the
Fund, or the vote of a majority of the outstanding voting securities of the
Fund, and the vote, cast in person at a meeting duly called and held, of a
majority of the Trustees of the Fund who are not parties to the Subadvisory
Agreement or "interested persons" (as defined in the 1940 Act) of any such
Party.
Northstar Administrators Corporation serves as administrator for the Funds,
pursuant to an Administrative Services Agreement with each Fund. Subject to the
supervision of the Board of Trustees, the Administrator provides the overall
business management and administrative services necessary to the proper conduct
of the Funds' business, except for those services performed by Northstar under
the Investment Advisory Agreements, the custodian for the Funds under the
Custodian Agreements, the transfer agent for the Funds under the Transfer Agency
Agreements, and such other service providers as may be retained by the Funds
from time to time. The Administrator acts as liaison among these service
providers to the Funds. The Administrator is also responsible for ensuring that
the Funds operate in compliance with applicable legal requirements and for
monitoring Northstar for compliance with requirements under applicable law and
with the investment policies and restrictions of the Funds. The Administrator is
an affiliate of Northstar. The address of the Administrator is: Two Pickwick
Plaza, Greenwich, Connecticut 06830.
The Administrative Services Agreement was approved by the Trustees of the
Trust on behalf of the Income and Growth Fund and High Total Return Fund on
October 23, 1993, and continued in effect for a period of two years. The
Agreement was renewed by the Trustees for one year on October 31, 1995 and will
continue in effect from year to year thereafter, provided such continuance is
approved annually by a majority of the Trustees of the Trust. The
Administrator'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 .10% of each Fund's
average daily net assets. In addition, the Administrator charges an annual
account fee of $5.00 for each account of beneficial owners of shares in a Fund
for providing certain shareholder services and assisting brokerdealer
shareholder accounts.
Each Administrative Services Agreement for the remaining Funds was approved
by the Trustees of the particular Fund on March 1, 1995. The Agreements provide
that until June 2, 1997, the Administrator will not receive any compensation
under such agreements and thereafter shall receive such compensation as the
Board of Trustees of the Funds may determine. The Agreements
14
<PAGE>
will continue in effect until June 2, 1997, and from year to year thereafter,
provided such continuance is approved annually by a majority of the
Disinterested Trustees of the affected Fund.
During the fiscal years ended October 31, 1996 and 1995, the Funds listed
below paid Northstar and the Administrator the following investment advisory and
administrative fees, respectively:
TOTAL ADVISORY AND ADMINISTRATIVE FEES PAID
DURING FISCAL YEAR ENDED OCTOBER 31,
<TABLE>
<CAPTION>
1996 1996 1995 1995
ADVISORY FEES ADMIN. FEE ADVISORY FEE ADMIN. FEE
<S> <C> <C> <C> <C>
Income and Growth............................................... $ 1,548,967 $206,529 $1,158,432 $154,457
High Total Return Fund.......................................... 2,639,662 359,978 941,310 125,508
</TABLE>
Prior to June 5, 1995, the Special, Growth, Balance Sheet Opportunities,
Government Securities, Strategic Income and High Yield Funds were managed by
Boston Security Counselors, Inc. ("BSC") and did not utilize the services of an
administrator. During the fiscal years ended December 31, 1996, 1995, 1994 and
1993, the Funds listed below paid Northstar or BSC the following investment
advisory fees:
TOTAL ADVISORY FEES PAID
DURING FISCAL YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Special Fund (3)....................................................... 1,146,789 287,311(2) 268,139 145,178
Growth Fund (3)........................................................ 575,383 593,282 604,576 517,203
Balance Sheet Opportunities Fund (3)................................... 464,088 477,095 519,729 447,631
Government Securities Fund (1)(3)...................................... 923,929 678,996 747,846 767,370
Strategic Income Fund (3).............................................. 532,941 252,201 57,726 0
High Yield............................................................. 941,594 683,323 622,761 432,063
</TABLE>
(1) Net of waiver of investment advisory fees of $284,286, $301,776, $332,370
and $341,054 for the years ended December 31, 1996, 1995, 1994 and 1993,
respectively.
(2) Does not reflect expense reimbursement of $733.
(3) Does not reflect expense reimbursement of $20,615 for the Special Fund,
$34,126 for the Growth Fund, $41,925 for the Balance Sheet Opportunities
Fund, $15,175 for the Government Securities Fund, and $65,578 for the
Strategic Income Fund for the year ended December 31, 1996 and $57,336 for
the Strategic Income Fund for the year ended December 31, 1995.
NET ASSET VALUE
For each Fund in the Northstar Trust, equity securities are valued at the
last sale price on the exchange or in the principal OTC market in which such
securities are being valued, or lacking any sales, at the last available bid
price. Prices of long-term debt securities are valued on the basis of last
reported sales price, or if no sales are reported, the value is determined based
upon the mean of representative quoted bid or asked prices for such securities
obtained from a quotation reporting system or from established market makers, or
at prices for securities of comparable maturity, quality and type. For the
Northstar Special, Growth, Balance Sheet Opportunities, Government Securities,
Strategic Income and High Yield Funds, portfolio securities, options and futures
contracts and options thereon that are traded on national exchanges or in the
NASDAQ System are valued at the last sale or settlement price on the exchange or
market where primarily traded or, if none that day, at the mean of the last
reported bid and asked prices, using prices as of the close of trading on the
applicable exchange or market. Securities and options that are traded in the otc
market (other than on the NASDAQ System) are valued at the mean of the last
available bid and asked prices. Such valuations are based on quotations of one
or more dealers that make markets in the securities as obtained from such
dealers or from a pricing service. Securities (including OTC options) for which
market quotations are not readily available (which may constitute a major
portion of the High Yield Fund's portfolio) and other assets are valued at their
fair value as determined by or under the direction of the Trustees. Such fair
value may be determined by various methods, including utilizing information
furnished by pricing services that determine calculations for such securities
using methods based, among other things, upon market transactions for comparable
securities and various relationships between securities that are generally
recognized as relevant.
15
<PAGE>
The net asset value of each Fund's shares fluctuates and is determined
separately for each class as of the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m. EST), on each business day that the Exchange
is open. Net asset value per share is computed by determining the value of a
Fund's assets (securities held plus cash and other assets, including dividend
and interest accrued but not received) less all liabilities of the Fund
(including accrued expenses other than class specific expenses), and dividing
the result by the total number of shares outstanding at such time. The specific
expenses borne by each class of shares will be deducted from that class and will
result in different net asset values and dividends. The net asset value per
share of the Class B, Class C and Class T shares of each Fund will generally be
lower than that of the Class A or Class I shares because of the higher
classspecific expenses borne by each of the Class B, Class C and Class T shares.
Under normal market conditions, daily prices for securities are obtained from
independent pricing services, determined by them in accordance with the
registration statement for each Fund. Securities are valued at market value or,
if a market quotation is not readily available, at their fair value, determined
in good faith under procedures established by and under the supervision of the
Trustees. Money market instruments maturing within 60 days are valued using the
amortized cost method of valuation. This involves valuing a security at cost on
the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price a Fund
would receive if it sold the instrument. See "How Net Asset Value is Determined"
in the Prospectus.
PURCHASES AND REDEMPTIONS
Shares issued pursuant to the automatic reinvestment of income dividends or
capital gains distributions are not subject to a frontend or contingent deferred
sales load. There is no sales charge for qualified persons. "Qualified Persons"
are the following (a) active or retired Trustees, Directors, Officers, Partners
or Employees (including immediate family) of (i) Northstar or any of its
affiliated companies, (ii) the Funds or any Northstar affiliated investment
company or (iii) dealers having a sales agreement with the Underwriter, (b)
trustees or custodians of any qualified retirement plan or IRA established for
the benefit of a person in (a) above; (c) dealers, brokers or registered
investment advisers that have entered into an agreement with the Underwriter
providing for the use of shares of the Funds in particular investment products
such as "wrap accounts" or other similar managed accounts for the benefit of the
clients of such brokers, dealers and registered investment advisers, and (d)
pension, profit sharing or other benefit plans created pursuant to a plan
qualified under Section 401 of the Code or plans under Section 457 of the Code,
provided that such shares are purchased by an employer sponsored plan with at
least 50 eligible employees and (e) service providers of (i) Northstar or any
of its affiliated companies or (ii) the Funds or any Northstar affiliated
investment company. Class A shares of the Funds may be purchased at
net asset value, through a dealer, where the amount invested represents
redemption proceeds from another open-end fund sold with a sales load and
the same or similar investment objective, and PROVIDED the following
conditions are met: such redemption occurred no more than 60 days prior
to the purchase of shares of a Northstar Fund, the redeemed shares were
held for at least six months prior to redemption, and the proceeds of
the redemption are sent directly to Northstar or its agent, or maintained
in cash or a money market fund. No commissions will be paid to dealers
in connection with such purchases. There is also no initial sales charge
for "Purchasers" (defined below) if the initial amount invested in the Funds is
at least $1,000,000 or the Purchaser signs a $1,000,000 Letter of Intent, as
hereinafter defined.
REDUCED SALES CHARGES ON CLASS A SHARES. Investors choosing the initial
sales alternative may under certain circumstances be entitled to pay reduced
sales charges. The sales charge varies with the size of the purchase and reduced
charges apply to the aggregate of purchases of a Fund made at one time by any
"Purchaser," which term includes (i) an individual and his/her spouse and their
children under the age of 21, (ii) a trustee or fiduciary purchasing for a
single trust, estate or single fiduciary account (including IRAs, pension,
profit-sharing or other employee benefit trusts created pursuant to a plan
qualified under Section 401 of the Code, a Simplified Employee Pension ("SEP"),
Salary Reduction and other Elective Simplified Employee Pension Accounts
("SARSEP")) and 403(b) and 457 plans, although more than one beneficiary or
participant is involved; and (iii) any other organized group of persons, whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase at a discount of
redeemable securities of a registered investment company. The circumstances
under which "Purchasers" may pay reduced sales charges are described in the
Prospectus.
REDEMPTIONS. The right to redeem shares may be suspended and payment
therefor postponed during periods when the New York Stock Exchange is closed,
other than customary weekend and holiday closings, or, if permitted by rules of
the sec, during periods when trading on the Exchange is restricted, or during
any emergency that makes it impracticable for any Fund to dispose of its
securities or to determine fairly the value of its net assets or during any
other period permitted by order of the sec for the protection of investors.
Furthermore, the Transfer Agent will not mail redemption proceeds until checks
received for shares purchased have cleared, but payment will be forwarded
immediately upon the funds becoming available. Class B, Class C and Class T
shareholders will be subject to the applicable deferred sales charge, if any,
for their shares at the time of redemption.
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The contingent deferred sales load will be waived with respect to Class T
shares in the following instances: (i) any partial or complete redemption of
shares of a shareholder who dies or becomes disabled, so long as the redemption
is requested within one year of death or the initial determination of
disability; (ii) any partial or complete redemption in connection with
distributions under Individual Retirement Accounts ("IRAS") or other qualified
retirement plans in connection with a lumpsum or other form of distribution
following retirement within the meaning of Section 72(t)(2)(A)(iv) or (v) of the
Code, disability or death, or after attaining the age of 59 1/2 in the case of
an IRA, Keogh Plan or custodial account pursuant to Section 403(b)(7) of the
Code, or on any redemption that results from a taxfree return of an excess
contribution pursuant to Section 408(d)(4) or (5) of the Code or Section 4979(f)
of the Code; (iii) redemptions effected pursuant to the Funds' right to
liquidate a shareholder's account if the aggregate net asset value of the shares
held in the account is less than $500; (iv) redemptions effected by (A)
employees of The Advest Group, Inc. ("AGI") and its subsidiaries, (B) IRAs,
Keogh plans and employee benefit plans for those employees, and (C) spouses and
minor children of those employees, so long as orders for shares are placed on
behalf of the spouses or children by the employees; (v) redemptions effected by
accounts managed by investment advisory subsidiaries of agi registered under the
Investment Advisers Act of 1940; and (vi) redemptions in connection with
exchanges of Fund Class T shares, including shares of the Class T account of the
Money Market Portfolio.
EXCHANGES. The following conditions must be met for all exchanges among the
Funds and the Money Market Portfolio: (i) the shares that will be acquired in
the exchange (the "Acquired Shares") are available for sale in the shareholder's
state of residence; (ii) the Acquired shares will be registered to the same
shareholder account as the shares to be surrendered (the "Exchanged Shares");
(iii) the Exchanged Shares must have been held in the shareholder's account for
at least 30 days prior to the exchange; (iv) except for exchanges into the Money
Market Portfolios, the account value of the Fund whose shares are to be acquired
must equal or exceed the minimum initial investment amount required by that Fund
after the exchange is implemented; and (v) a properly executed exchange request
has been received by the Transfer Agent.
Each Fund reserves the right to delay the actual purchase of the Acquired
Shares for up to five business days if it determines that it would be
disadvantaged by an immediate transfer of proceeds from the redemption of
Exchanged Shares. Normally, however, the redemption of Exchanged Shares and the
purchase of Acquired Shares will take place on the day that the exchange request
is received in proper form. Each Fund reserves the right to terminate or modify
its exchange privileges at any time upon prominent notice to shareholders. Such
notice will be given at least 60 days in advance. It is the policy of Northstar
to discourage and prevent frequent trading by shareholders among the Funds in
response to market fluctuations. Accordingly, in order to maintain a stable
asset base in each Fund and to reduce administrative expenses borne by each
Fund, Northstar generally restricts shareholders to a maximum of six exchanges
out of a Fund each calendar year. If a shareholder exceeds this limit, future
exchange requests may be denied.
CONVERSION FEATURE. Class B shares of each Fund will automatically convert
to Class A shares without a sales charge at the relative net asset values of
each of the classes after eight years from the acquisition of the Class B
shares, and as a result, will thereafter be subject to the lower distribution
fee (but same service fee) under the Class A Rule 12b-1 plan for each Fund.
Class T Shares convert to Class A shares at the end of the month that is the
later of (i) eight years after the Class T Shares were purchased or (ii) June 2,
1998.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order to so qualify, the Fund must, among
other things, (i) derive each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, gains
from the sale of securities or foreign currencies, or other income (including
but not limited to gains from options, futures or forward contracts) derived
with respect to its business of investing in stock, securities or currencies;
(ii) derive less than 30% of its gross income each taxable year from the sale or
other disposition of certain assets, including securities, held for less than
three months (the "30% Limitation"); and (iii) at the end of each quarter of the
taxable year maintain at least 50% of the value of its total assets in cash,
government securities, securities of other regulated investment companies, and
other securities of issuers that represent, with respect to each issuer, no more
than 5% the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and with no more than 25% of its assets invested in
the securities (other than those of the U.S. Government or other regulated
investment companies) of any one issuer or of two or more issuers that the Fund
controls and that are engaged in the same, similar or related trades and
businesses. As a regulated investment company, each Fund generally will not be
subject to federal income tax on its income and gains that it distributes to
shareholders, if at least 90% of its investment company taxable income (which
includes dividends, interest and the excess of any short-term capital gains over
long-term capital losses) for the taxable year is distributed.
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An excise tax at the rate of 4% will be imposed on the excess, if any, of a
Fund's "required distribution" over actual distributions in any calendar year.
Generally, the "required distribution" is 98% of a Fund's ordinary income for
the calendar year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 plus undistributed amounts from prior
years. Each Fund intends to make distributions sufficient to avoid imposition of
the excise tax. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by the Fund during October, November or
December of the year with a record date in such a month and paid by the Fund
during January of the following year. Such distributions will be taxable as if
received on December 31 in the year they are declared by the Fund, rather than
the year in which they are received.
The taxation of equity options and OTC options on debt securities is
governed by Code section 1234. Pursuant to Code section 1234, the premium
received by a Fund for selling a put or call option is not included in income at
the time of receipt. If the option expires, the premium is short-term capital
gain to the Fund. If the Fund enters into a closing transaction, the difference
between the amount paid to close out its position and the premium received is
short-term capital gain or loss. If a call option written by a Fund is
exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by a Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term,
depending upon the holding period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is added to the basis of the
purchased security and, in the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Certain options, futures contracts and forward contracts in which a Fund
may invest are "section 1256 contracts." Gains or losses on section 1256
contracts are generally considered 60% long-term and 40% short-term capital
gains or losses ("60/40 gains or losses"); however, foreign currency gains or
losses (as discussed below) arising from certain section 1256 contracts may be
treated as ordinary income or loss. Also, section 1256 contracts held by a Fund
at the end of each taxable year (and, generally, for purposes of the 4% excise
tax, on October 31 of each year) are treated as sold on such date at fair market
value, resulting in unrealized gains or losses being treated as though they were
realized.
Hedging transactions undertaken by a Fund may result in straddles for U.S.
federal income tax purposes. The straddle rules may accelerate income to a Fund,
defer losses to a Fund, and affect the character of gains (or losses) realized
by a Fund. Hedging transactions may increase the amount of short-term capital
gain realized by a Fund that is taxed as ordinary income when distributed to
shareholders. A Fund may make one or more of the various elections available
under the Code with respect to hedging transactions. If a Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected positions will be determined under rules that vary
according to the elections made. The 30% limitation may limit the extent to
which a Fund will be able to engage in transactions in options, futures
contracts and forward contracts.
Under the Code, gains or losses attributable to fluctuations in exchange
rates that occur between the time a Fund accrues interest or other receivables,
or accrues expenses or other liabilities, denominated in a foreign currency and
the time the Fund actually collects such receivables, or pays such liabilities,
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and certain
options, futures and forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition
of the security or contract and the date of disposition also are treated
as ordinary gain or loss. These gains or losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its shareholders
as ordinary income.
A Fund will not realize gain or loss on a short sale of a security until it
closes the transaction by delivering the borrowed security to the lender. All or
a portion of any gain arising from a short sale may be treated as short-term
capital gain, regardless of the period for which he Fund held the security used
to close the short sale. In addition, the Fund's holding period for any security
that is substantially identical to that which is sold short may be reduced or
eliminated as a result of the short sale.
Investments by a Fund in zero coupon securities will result in income to
the Fund equal to a portion of the excess of the face value of the securities
over their issue price (the "original issue discount") each year that the
securities are held, even though the Fund receives no cash interest payments.
This income is included in determining the amount of income that the Fund must
distribute to maintain its status as a regulated investment company and to avoid
the payment of federal income tax and the 4% excise tax. If a Fund invests in
certain high yield original issue discount obligations issued by corporations, a
portion of the original issue discount accruing on the obligations may be
eligible for the deduction for dividends received by corporations. In
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such event, a portion of the dividends of investment company taxable income
received from the Fund by its corporate shareholders may be eligible for this
deduction.
Gain derived by a Fund from the disposition of any market discount bonds
(i.e., bonds purchased other than at original issue, where the face value of the
bonds exceeds their purchase price) held by the Fund will be taxed as ordinary
income to the extent of the accrued market discount on the bonds, unless the
Fund elects to include the market discount in income as it accrues.
If 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.
Income received by the Funds from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. If more than
50% of the value of a Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, the Fund will be eligible and
may elect to "pass through" to the Fund's shareholders the amount of foreign
taxes paid by the Fund. Pursuant to this election, a shareholder will be
required to include in gross income (in addition to dividends actually received)
its pro rata share of the foreign taxes paid by the Fund, and may be entitled
either to deduct its pro rata share of the foreign taxes in computing its
taxable income or to use the amount as a foreign tax credit against its U.S.
Federal income tax liability, subject to limitations. Each shareholder will be
notified within 60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will "pass through" for that year. If a Fund is
not eligible to make the election to "pass through" to its shareholders its
foreign taxes, the foreign taxes it pays will reduce its investment company
taxable income and distributions by the Fund will be treated as U.S. source
income.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to its foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the Fund's income flows through to its shareholders. With respect to
the Funds, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation gains, including fluctuation gains
from foreign currency denominated debt securities, receivables and payables, and
options, futures and forward transactions, will be treated as ordinary income
derived from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income (as defined for purposes of the
foreign tax credit), including the foreign source passive income passed through
by the Funds.
The current position of the Internal Revenue Service (the "IRS") generally
is to treat a regulated investment company, such as the Special Fund, as owning
its proportionate share of the income and assets of any partnership in which it
is a partner, in applying the 90% qualifying income requirement, the 30%
Limitation and the asset diversification requirements that, as described above,
each Fund must satisfy to qualify as a regulated investment company under the
Code. These requirements may limit the extent to which the Special Fund may
invest in limited partnerships, especially in the case of limited partnerships
that do not primarily invest in a diversified portfolio of stocks and
securities.
Dividends paid out of a Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. If a portion of a Fund's
income consists of dividends paid by U.S. corporations, a portion of the
dividends paid by the Fund may be eligible for the corporate dividends-received
deduction. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, designated as capital
gain dividends are taxable as long-term capital gains, regardless of how long
the shareholder has held the Fund's shares, and are not eligible for the
dividends-received deduction. Shareholders receiving distributions in the form
of additional shares, rather than cash, generally will have a cost basis in each
such share equal to the net asset value of a share of the relevant Fund on the
reinvestment date. A distribution of an amount in excess of a Fund's current and
accumulated earnings and profits will be treated by a shareholder as a return of
capital that is applied against and reduces the shareholder's basis in his or
her shares. To the extent that the amount of any such distribution exceeds the
shareholder's basis in his or her shares, the excess will be treated by the
shareholder as gain from a sale or exchange of the shares. Shareholders will be
notified annually as to the U.S. federal tax status of distributions, and
shareholders receiving distributions in the form of additional shares will
receive a report as to the net asset value of those shares.
Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss that will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
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ending 30 days after disposition of the shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.
Under certain circumstances, the sales charge incurred in acquiring shares
of a Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund originally
acquired with a sales charge are disposed of within 90 days after the date on
which they were acquired and new shares of a regulated investment company are
acquired without a sales charge or at a reduced sales charge. In that case, the
gain or loss realized on the disposition will be determined by excluding from
the tax basis of the shares all or a portion of the sales charge incurred in
acquiring those shares. This exclusion applies to the extent that the otherwise
applicable sales charge with respect to the newly acquired shares is reduced as
a result of the shareholder having incurred a sales charge paid for the new
shares. This rule may be applied to successive acquisitions of shares of stock.
Distributions by a Fund reduce the net asset value of that particular
Fund's shares. Should a distribution reduce the net asset value of a share below
a shareholder's cost for the share, such a distribution nevertheless generally
would be taxable to the shareholder as ordinary income or long-term capital
gain, even though, from an investment standpoint, it may constitute a partial
return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution by a Fund. The
price of shares purchased at that time may include the amount of the forthcoming
distribution, but the distribution generally would be taxable to them.
Some shareholders may be subject to withholding of Federal income tax on
dividends and redemption payments from a Fund ("backup withholding") at the rate
of 31%. Corporate shareholders and certain other shareholders specified in the
Code generally are exempt from such backup withholding. Generally, shareholders
subject to backup withholding will be (i) those for whom a certified taxpayer
identification number is not on file with a Fund, (ii) those about whom
notification has been received (either by the shareholder or by a Fund) from the
IRS that they are subject to backup withholding or (iii) those who, to a Fund's
knowledge, have furnished an incorrect taxpayer identification number.
Generally, to avoid backup withholding, an investor must, at the time an account
is opened, certify under penalties of perjury that the taxpayer identification
number furnished is correct and that he or she is not subject to backup
withholding.
The foregoing discussion relates solely to U.S. Federal income tax law.
Dividends and distributions also may be subject to state, local and foreign
taxes. Dividends paid by a Fund from income attributable to interest on
obligations of the U.S. Government and certain of its agencies and
instrumentalities may be exempt from state and local taxes in certain states.
Shareholders should consult their tax advisers regarding the possible exclusion
of this portion of their dividends for state and local tax purposes. Non-U.S.
investors also should consult their tax advisers concerning the tax consequences
of ownership of shares of a Fund, including the possibility that distributions
may be subject to a 30% United States withholding tax (or a reduced rate of
withholding provided by treaty).
Shareholders of Class A, Class B and Class C shares may direct that income
dividends and capital gain distributions be paid to them through various options
listed in the "Dividends and Distributions Reinvestment Options" section of the
Funds' current Prospectus. If a shareholder selects either of two such options
(that: (a) income dividends be paid in cash and capital gain distributions be
paid in additional shares of the same class of a designated Fund at net asset
value; or (b) income dividends and capital gain distributions both be paid in
cash), and the dividend/distribution checks cannot be delivered, or, if such
checks remain uncashed for six months, each Fund reserves the right to
reinvest the dividend or distribution in the shareholder's account at the
then-current net asset value and to convert the shareholder's election to
automatic reinvestment in shares of the Fund from which the distributions
were made. Each Fund has received from the IRS, rulings to the effect that
(i) the implementation of the multiple class purchase arrangement will not
result in a Fund's dividends or distributions constituting "preferential
dividends" under the Code, and (ii) that any conversion feature associated
with a class of shares does not constitute a taxable event under federal
income tax law.
UNDERWRITER AND DISTRIBUTION SERVICES
Pursuant to Underwriting Agreements, Northstar Distributors, Inc. is the
Underwriter for each Fund and as such conducts a continuous offering pursuant to
a "best efforts" arrangement requiring it to take and pay for only such
securities as may be sold to the public. The Underwriter is an affiliate of the
Adviser and the Administrator.
The Underwriting Agreements may be terminated at any time on not more than
60 days' written notice, without payment of a penalty, by the Underwriter, by
vote of a majority of the outstanding class of voting securities of the affected
Fund, or by vote of a
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majority of the Trustees of such Fund, who are not "interested persons"
of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any agreements. The Underwriting Agreements
will terminate automatically in the event of their assignment.
In addition to the amount paid to dealers pursuant to the sales charge
table in the Prospectus, the Underwriter from time to time pays, from its own
resources or pursuant to the Plans, a bonus or other incentive to dealers (other
than the Underwriter) that employ a registered representative who sells a
minimum dollar amount of the shares of a Fund during a specific period of time.
Dealers may not use sales of any of the Fund's shares to qualify for or
participate in such programs to the extent such may be prohibited by a dealer's
internal procedures or by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. Such bonuses or
other incentives take the form of payment for travel expenses, including
lodging, incurred in connection with trips taken by qualifying registered
representatives and members of their families to places within or without the
United States, or other bonuses such as certificates for airline tickets, dining
establishments or the cash equivalent of such bonuses. The Underwriter, from
time to time, reallows all or a portion of the sales charge on Class A shares,
which it normally reallows to individual selling dealers. However, such
additional reallowance generally will be made only when the selling dealer
commits to substantial marketing support such as internal wholesaling through
dedicated personnel, internal communications and mass mailings.
Each Fund has adopted separate distribution plans under Rule 12b-1 of the
1940 Act for each class of shares of the Fund (collectively the "Plans"). The
Plans permit each Fund to compensate the Underwriter in connection with
activities intended to promote the sale of shares of each class of shares of
each Fund.
Pursuant to the Plan for Class A shares, each Fund may compensate the
Underwriter up to 0.30% of average daily net assets of such Fund's Class A
shares. Under the Plans for Class B and Class C shares, each Fund may compensate
the Underwriter up to 1.00% of the average daily net assets attributable to the
respective class of such Fund. Pursuant to the Plan for Class T shares, each
Fund compensates the Underwriter in an amount equal to 0.95% (in the case of
Special Fund, Growth Fund, and Strategic Income Fund), 0.75% (in the case of
Balance Sheet Opportunities Fund) and 0.65% (in the case of Government
Securities Fund and High Yield Fund) of annual average daily net assets of such
Fund's Class T shares. However, each of the Class T Plans provides for
compensation of up to 1.00% of annual average daily net assets. Expenditures by
the Underwriter under the Plans shall consist of: (i) commissions to sales
personnel for selling shares of the Funds (including underwriting fees and
financing expenses incurred in connection with the sale of Class B and Class C
shares); (ii) compensation, sales incentives and payments to sales, marketing
and service personnel; (iii) payments to broker-dealers and other financial
institutions that have entered into agreements with the Underwriter in the form
of a Dealer Agreement for Northstar Funds for services rendered in connection
with the sale and distribution of shares of the Funds; (iv) payment of expenses
incurred in sales and promotional activities, including advertising expenditures
related to the Funds; (v) the costs of preparing and distributing promotional
materials; (vi) the cost of printing the Funds' Prospectus and SAI for
distribution to potential investors; and (vii) other activities that are
reasonably calculated to result in the sale of shares of the Funds. With respect
to each Class T Plan, it is anticipated that all of the payments received by the
Underwriter under the Plan will be paid to Advest as compensation for its prior
distribution related and current shareholder servicing related activities in
connection with the Class T Shares.
A portion of the fees paid to the Underwriter pursuant to the 12b-1 plans
not exceeding 0.25% annually of the average daily net assets of each Fund's
shares may be paid as compensation for providing services to each Fund's
shareholders, including assistance in connection with inquiries related to
shareholder accounts (the "Service Fee"). In order to receive Service Fees
under the Plans, participants must meet such qualifications as are
established in the sole discretion of the Underwriter, such as services to
each Fund's shareholders; or services providing each Fund with more efficient
methods of offering shares to coherent groups of clients, members or
prospects of a participant; or services permitting purchases or sales of
shares, or transmission of such purchases or sales by computerized tape or
other electronic equipment; or other processing.
The Plans are designed to be compensation plans and therefore amounts spent
by the distributor in excess of plan limits are not carried over from year to
year for reimbursement. The Plans do, however, contemplate that amounts paid to
the distributor may compensate it for past distribution efforts without regard
to any particular time period.
If the Plans are terminated in accordance with their terms, the obligations
of a Fund to compensate the Underwriter for distribution related services
pursuant to the Plans will cease; however, subject to approval by the Trustees,
including a majority of the independent Trustees, a Fund may continue to make
payments past the date on which each Plan terminates up to the annual limits set
forth in each Plan for the purpose of compensating the Underwriter for services
that were incurred during the term of the Plan.
The Trustees have concluded that there is a reasonable likelihood that the
Plans will benefit each Fund and its shareholders and that the Plans should
result in greater sales and/or fewer redemptions of Fund shares. On a quarterly
basis, the Trustees will review a report on expenditures under the Plans and the
purposes for which expenditures were made. The Trustees will conduct an
additional, more extensive review annually in determining whether the Plans
shall be continued. By their terms, continuation of the Plans from year to year
is contingent on annual approval by a majority of the Trustees acting separately
on behalf of each Fund
21
<PAGE>
and by a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Plans or any related agreements (the
"Plan Trustees"). The Plans provide that they may not be amended to increase
materially the costs that a Fund may bear pursuant to the applicable Plan
without approval of the shareholders of the affected Fund and that other
material amendments to the Plans must be approved by a majority of the Plan
Trustees acting separately on behalf of each Fund, by vote cast in person at a
meeting called for the purpose of considering such amendments. The Plans further
provide that while each plan is in effect, the selection and nomination of
Trustees who are not "interested persons" shall be committed to the discretion
of the Trustees who are not "interested persons." A Plan may be terminated at
any time by vote of a majority of the Plan Trustees or a majority of the
outstanding Class of shares of the affected Fund to which the Plan relates.
During their fiscal year-ended October 31, 1996, each class of shares of
the Funds listed below paid the following 12b-1 distribution and service fees
pursuant to the Plan of Distribution for each class:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Income and Growth Fund................................... $ 242,908 $ 671,688 $583,906
High Total Return Fund................................... $ 382,173 $2,028,953 $296,918
</TABLE>
For the year ended October 31, 1996, expenses incurred by the Distributor
for distribution related activities with respect to each class of shares of each
Fund listed below were as follows:
<TABLE>
<CAPTION>
INCOME AND GROWTH
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Salaries/Overrides..................................... $222,594 $ 29,916 $ 15,032
Commissions Paid....................................... $ 0 $ 626,730 $ 83,415
Marketing, RMM & Convention Expense.................... $210,884 $ 39,999 $ 24,168
Total.................................................. $433,478 $ 696,645 $122,615
</TABLE>
<TABLE>
<CAPTION>
HIGH TOTAL RETURN FUND
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
EXPENSE
Salaries/Overrides..................................... $580,131 $ 605,403 $110,500
Commissions Paid....................................... $ 0 $10,186,696 $447,621
Marketing, RMM & Convention Expense.................... $335,210 $ 121,049 $ 12,601
Total.................................................. $915,341 $10,913,148 $570,722
</TABLE>
For the following Funds' fiscal year ended October 31, 1996, the
Distributor received the following amounts in sales charges, after reallowance
to Dealers:
<TABLE>
<CAPTION>
UNDERWRITING FEES
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Income and Growth Fund................................... $ 25,657 $216,133 $ 4,049
High Total Return Fund................................... $553,006 $466,013 $22,368
</TABLE>
During their fiscal year ended December 31, 1996, each class of shares of
the Funds listed below, paid the following 12b-1 distribution and service fees
pursuant to the Distribution Plan for each class:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
Special Fund.................................... $108,927 $630,676 $189,225 $328,758
Growth Fund..................................... $ 4,665 $ 33,508 $ 2,365 $679,967
Balance Sheet Fund.............................. $ 3,058 $ 30,311 $ 3,219 $502,693
Government Securities........................... $ 31,014 $ 59,149 $ 8,032 $813,064
Strategic Income Fund........................... $ 68,706 $273,868 $ 32,011 $270,759
High Yield Fund................................. $ 32,630 $575,358 $ 98,509 $851,368
</TABLE>
22
<PAGE>
During the fiscal year ended December 31, 1996, expenses incurred by the
Distributor (or Advest with respect to Class T Shares prior to June 2, 1995) for
certain distribution related activities with respect to each class of shares of
the Funds listed below were as follows:
<TABLE>
<CAPTION>
SPECIAL FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $202,492 $ 321,375 $103,940 $0
Commissions Paid................................. $ 0 $5,309,686 $425,317 $0
Marketing/Convention/rmm Expense................. $110,034 $ 41,232 $ 9,294 $0
Total............................................ $312,526 $5,672,293 $538,551 $0
</TABLE>
<TABLE>
<CAPTION>
GROWTH FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $ 5,428 $ 5,267 $ 626 $0
Commissions Paid................................. $ 0 $ 94,654 $2,353 $0
Marketing/Convention/rmm Expense................. $ 5,167 $ 2,182 $ 118 $0
Total............................................ $10,595 $102,103 $3,097 $0
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET OPPORTUNITIES FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $3,605 $ 4,924 $ 334 $0
Commissions Paid................................. $ 0 $86,309 $1,246 $0
Marketing/Convention/rmm Expense................. $2,855 $ 1,954 $ 153 $0
Total............................................ $6,460 $93,187 $1,733 $0
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $31,119 $ 16,558 $ 2,853 $0
Commissions Paid................................. $ 0 $284,212 $11,411 $0
Marketing/Convention/rmm Expense................. $30,446 $ 3,859 $ 378 $0
Total............................................ $61,565 $304,629 $14,642 $0
</TABLE>
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $ 67,162 $ 27,186 $ 6,101 $0
Commissions Paid................................. $ 0 $513,641 $27,670 $0
Marketing/Convention/rmm Expense................. $ 61,783 $ 17,684 $ 1,520 $0
Total............................................ $128,945 $ 55,854 $35,291 $0
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
HIGH YIELD FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $43,187 $ 124,358 $ 27,973 $0
Commissions Paid................................. $ 0 $2,165,191 $120,421 $0
Marketing/Convention/RMM Expense................. $30,923 $ 37,394 $ 4,709 $0
Total............................................ $74,110 $2,326,943 $ 44,724 $0
</TABLE>
For the following Funds' fiscal year ended December 31, 1996, the
Distributor (or Advest) received the following amounts in sales charges, after
reallowance to Dealers:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
Special Fund.................................... $381,499 $152,531 $39,451 $228,166
Growth Fund..................................... $ 35,903 $ 7,731 $ 29 $ 95,746
Balance Sheet Fund.............................. $ 2,436 $ 6,780 $ 406 $ 65,812
Government Securities........................... $ 13,924 $ 19,375 $ 955 $198,611
Strategic Income................................ $ 97,212 $105,239 $ 2,944 $ 77,316
High Yield Fund................................. $ 40,461 $141,189 $ 9,752 $234,689
</TABLE>
TRUSTEES AND OFFICERS
The Trustees and principal Officers of each Fund and their business
affiliations for the past five years are set forth below. Unless otherwise
noted, the mailing address of the Trustees and Officers is Two Pickwick Plaza,
Greenwich, Connecticut 06830.
ROBERT B. GOODE, JR., Trustee. Age: 66. Currently retired. From 1990 to
1991, Chairman of The First Reinsurance Company of Hartford. From 1987 to
1989, President and Director of American Skandia Life Assurance Company.
Since October 1993, Trustee of the Northstar affiliated investment
companies.
PAUL S. DOHERTY, Trustee. Age: 62. President, Doherty, Wallace, Pillsbury
and Murphy, P.C., Attorneys. Director, Tambrands, Inc. Since October 1993,
Trustee of the Northstar affiliated investment companies.
DAVID W. WALLACE, Trustee. Age: 72. Chairman of Putnam Trust Company, Lone
Star Industries and FECO Engineered Systems, Inc. He is also President and
Trustee of Robert R. Young Foundation and Governor of the New York
Hospital. Director of UMC Electronics and Zurn Industries, Inc. Former
Chairman and Chief Executive Officer, Todd Shipyards and Bangor Punta
Corporation, and former Chairman and Chief Executive Officer of National
Securities & Research Corporation. Since October 1993, Trustee of the
Northstar affiliated investment companies.
*MARK L. LIPSON, Trustee and President. Age: 47. Director, Chairman and
Chief Executive Officer of Northstar and Northstar, Inc. Director and
President of Northstar Administrators Corporation and Director and Chairman
of Northstar Distributors, Inc., President and Trustee of the Northstar
affiliated investment companies since October 1993. Prior to August, 1993,
Director, President and Chief Executive Officer of National Securities &
Research Corporation and President and Director/Trustee of the National
Affiliated Investment Companies and certain of National's subsidiaries.
*JOHN G. TURNER, Trustee. Age: 57. Since May 1993, Chairman and CEO of
ReliaStar Financial Corporation and Northwestern NationalLife Insurance Co.
and Chairman of other ReliaStar Affiliated Insurance Companies since 1995.
Since October 1993, Director of Northstar and affiliates. Prior to May
1993, President and CEO of ReliaStar and Northwestern National.
ALAN L. GOSULE, Trustee. Age: 55. Partner, Rogers & Wells. Director, F.L.
Putnam Investment Management Co., Inc.
DAVID W.C. PUTNAM, Trustee. Age: 67. President, Clerk and Director of F.L.
Putnam Securities Company, Incorporated, F.L. Putnam Investment Management
Company, Incorporated, Interstate Power Company, Inc., Trust Realty Corp.
and Bow Ridge Mining Co.; Director of Anchor Investment Management
Corporation; President and Trustee of Anchor Capital Accumulation Trust,
Anchor International Bond Trust, Anchor Gold and Currency Trust, Anchor
Resources and Commodities Trust and Anchor Strategic Assets Trust.
*Deemed to be an "interested person" of the Trust, as defined by the 1940 Act.
24
<PAGE>
JOHN R. SMITH, Trustee. Age: 73. From 1970-1991, Financial Vice President
of Boston College; President of New England Fiduciary Company (financial
planning) since 1991; Chairman of Massachusetts Educational Financing
Authority since 1987; Vice Chairman of Massachusetts Health and Education
Authority.
WALTER H. MAY, Trustee. Age: 60. Retired. Former Senior Executive for Piper
Jaffrey, Inc.
THOMAS OLE DIAL, Vice President. Age: 40. Executive Vice President and
Chief Investment Officer-Fixed Income of Northstar and Principal, T.D. &
Associates, Inc. From 1989 to August 1993, Executive Vice President and
Chief Investment Officer-Fixed Income of National Securities and Research
Corporation, Vice President of National Affiliated Investment Companies,
and Vice President of NSR Asset Management Corporation. From 1988 to 1989,
President of Dial Captial Management.
GEOFFREY WADSWORTH, Vice President. Age: 53. Vice President of
Northstar.Former Vice President and Portfolio Manager with National
Securities & Research Corporation.
AGNES MULLADY, Vice President and Treasurer. Age: 38. Senior Vice President
and Chief Financial Officer of Northstar, Senior Vice President and
Treasurer of Northstar Administrators corporation, and Vice President and
Treasurer ofNorthstar Distributors, Inc. From 1987 to 1993, Vice President
and Treasurer of National Securities & Research Corporation.
Northstar and Northstar Administrators Corporation make their personnel
available to serve as Officers and "Interested Trustees" of the Funds. All
Officers and Interested Trustees of the Funds are compensated by Northstar or
Northstar Administrators Corporation. Trustees who are not "interested persons"
of the Adviser are paid an annual retainer fee of $6,000 for their combined
services as Trustees to the Funds and to retail funds sponsored or advised by
the Adviser, and a per meeting fee of $1,500 for attendance at each joint
meeting of the Funds and the other Northstar retail funds. The Funds also
reimburse Trustees for expenses incurred by them in connection with such
meetings.
Mone Anathan, III, Dr. Loring E. Hart, Reverend Bartley MacPhaidin and
Edward T. Sullivan, each of whom were previously Trustees of the Funds, serve on
an Advisory Board. The Advisory Board is expected to provide advice to the Board
of Trustees in order to facilitate a smooth management transition regarding the
advisory services to be provided by Northstar and to provide such other advise
as the Board of Trustees may request from time to time. The Advisory Board will
have no authority or control over the Funds. Northstar has agreed to assume all
expenses associated with the Advisory Board for three years.
As of December 31, 1996, all Trustees and executive officers of each Fund
as a group owned beneficially or of record less than 1% of the outstanding
securities of such Fund. To the knowledge of the Funds, as of December 31, 1996,
no shareholder owned beneficially (b) or of record (r) more than 5% of a Fund's
outstanding shares, except as set forth below:
(1) Income and Growth Fund
A
Norwest Bank 28% (r)
Minneapolis, Minnesota
B
Merrill Lynch Pierce Fenner & Smith 28.4% (r)
Jacksonville, Florida
(2) High Total Return Fund
A
Merrill Lynch Pierce Fenner & Smith 9.6% (r)
Jacksonville, Florida
B
Merrill Lynch Pierce Fenner & Smith 35.7% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 47% (r)
Jacksonville, Florida
(3) Growth + Value Fund
A
Merrill Lynch Pierce Fenner & Smith 33.5% (r)
Jacksonville, Florida
Norwest Bank 47.4% (r)
Minneapolis, MN
C
Merrill Lynch 11.8% (r)
Jacksonville, Florida
Bear Stearns Securities 6.5% (r)
Brooklyn, New York
Mrs. Ruth A. Samuels Trustee 5.9% (b)
Laguna Hills, California
Merrill Lynch 23.2% (r)
Jacksonville, Florida
(4) Special Fund
A
Merrill Lynch Pierce Fenner & Smith 29.5% (r)
Jacksonville, Florida
B
Merrill Lynch Pierce Fenner & Smith 38.5% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 64.9% (r)
Jacksonville, Florida
(5) Growth Fund
A
NWNL Ins Co Retirement Plan Div 26.2% (r)
Lifestyle II Separate Acct 3
Greenwich, Connecticut
NWNL Ins Co Retirement Plan Div 28.7% (r)
Lifestyle I
Greenwich, Connecticut
B
Merrill Lynch Pierce Fenner & Smith 15.8% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 15.3% (r)
Jacksonville, Florida
Gerald A. Mitchell 35.7% (b)
Ypsilanti, Michigan
Advest Inc. 6.4% (r)
Hartford, Connecticut
(6) Balance Sheet Opportunities Fund
A
Advest Inc 6.2% (r)
Hartford, Connecticut
Margaret M. Standring Trust 5.6% (b)
Weymouth, Massachusetts
Donaldson Lufkin Jenrette 6.4% (r)
Jersey City, New Jersey
Mildred J. Clark 10% (b)
Palatine, Illinois
Donaldson Lufkin Jenrette 6.5% (r)
Jersey City, New Jersey
Advest Inc 7.3% (r)
Hartford, Connecticut
B
Merrill Lynch Pierce Fenner & Smith 9.3% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 5.1% (r)
Jacksonville, Florida
Louise H. Fitzgerald 53.5% (b)
So. Attleboro, Massachusetts
(7) Government Securities Fund
A
Merrill Lynch Pierce Fenner & Smith 8% (r)
Jacksonville, Florida
Donaldson Lufkin Jenrette 16.4% (r)
Jersey City, New Jersey
Donaldson Lufkin Jenrette 17% (r)
Jersey City, New Jersey
Donaldson Lufkin Jenrette 16.9% (r)
Jersey City, New Jersey
Donaldson Lufkin Jenrette 17.6% (r)
Jersey City, New Jersey
Order of St. Benedict of New Jersey 5.2% (b)
Morristown, New Jersey
Order of St. Benedict of New Jersey 9.8% (b)
Morristown, New Jersey
B
Merrill Lynch Pierce Fenner & Smith 7.4% (r)
Jacksonville, Florida
Advest Inc. 5.1% (r)
Hartford, Connecticut
C
Merrill Lynch Pierce Fenner & Smith 96% (r)
Jacksonville, Florida
(8) Strategic Income Fund
A
Norwest Bank 29.8% (r)
Minneapolis, Minnesota
NWNL Ins Co Retirement Plan Div. 5.5% (r)
Lifestyle III Separate Acct 3
Greenwich, Connecticut
NWNL Ins Co Retirement Plan Div 6.9% (r)
Lifestyle II Separate Acct 3
Greenwich, Connecticut
B
Merrill Lynch Pierce Fenner & Smith 31.6% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 33.2% (r)
Jacksonville, Florida
(9) High Yield Fund
A
Merrill Lynch Pierce Fenner & Smith 15% (r)
Jacksonville, Florida
B
Merrill Lynch Pierce Fenner & Smith 40.3% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 58.5% (r)
Jacksonville, Florida
COMPENSATION TABLE
PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PENSION BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON FROM ALL FUNDS IN
FUND FUND EXPENSES RETIREMENT NORTHSTAR COMPLEX(B)
<S> <C> <C> <C> <C>
Robert B. Goode, Jr...................... (a)13,000 0 0 13,500
Paul S. Doherty.......................... (a)14,000 0 0 14,500
David W. Wallace......................... (a)14,000 0 0 14,500
Mark L. Lipson........................... (a) 0 0 0 --
John G. Turner........................... (a) 0 0 0 --
Alan L. Gosule........................... (a)14,000 0 0 14,500
David W.C. Putnam........................ (a)10,000 0 0 10,000
John R. Smith............................ (a)14,000 0 0 14,500
Walter H. May............................ (a)13,000 0 0 13,500
</TABLE>
(a) See table below for Fund specific compensation.
(b) Compensation paid by the Northstar Trust funds, the Northstar Variable Trust
funds and the remaining six funds, Northstar Special, Growth, Balance Sheet
Opportunities, Government Securities, Strategic Income and High Yield Funds,
formerly advised by BSC.
26
<PAGE>
INDIVIDUAL FUND
FISCAL YEAR COMPENSATION TABLES
<TABLE>
<CAPTION>
INCOME AND GROWTH HIGH TOTAL RETURN GROWTH + VALUE SPECIAL(C) GROWTH(C)
<S> <C> <C> <C> <C> <C>
Robert B. Goode, Jr.................. 2,063 1,563 0 1,563 1,563
Paul S. Doherty...................... 2,313 1,813 0 1,646 1,646
David W. Wallace..................... 2,313 1,813 0 1,646 1,646
Mark L. Lipson....................... 0 0 0 0 0
John G. Turner....................... 0 0 0 0 0
Alan L. Gosule....................... 2,313 1,813 0 1,646 1,646
David W.C. Putnam.................... 2,063 1,563 0 1,188 1,188
John R. Smith........................ 2,312 2,312 0 1,646 1,646
Walter H. May....................... 2,000 1,500 0 1,583 1,583
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET GOVERNMENT
OPPORTUNITIES(C) SECURITIES(C) STRATEGIC INCOME(C) HIGH YIELD(C)
<S> <C> <C> <C> <C>
Robert B. Goode, Jr.................................. 1,563 1,563 1,563 1,563
Paul S. Doherty...................................... 1,646 1,646 1,646 1,646
David W. Wallace..................................... 1,646 1,646 1,646 1,646
Mark L. Lipson....................................... -- -- -- --
John G. Turner....................................... -- -- -- --
Alan L. Gosule....................................... 1,646 1,646 1,646 1,646
David W.C. Putnam.................................... 1,188 1,188 1,188 1,188
John R. Smith........................................ 1,646 1,646 1,646 1,646
Walter H. May........................................ 1,583 1,583 1,583 1,583
</TABLE>
(c) Prior to June 2, 1995 the Trustees who were not interested persons, other
than David Putnam, were paid a per fund fee of $500 for each full calendar
year during which services were rendered to the Funds. In addition, they
were paid a per fund fee of $250 for attending each of the Trustees'
meetings, $100 per fund for attending each audit committee meeting, $100
audit committee retainer per fund and were reimbursed for outofpocket
expenses. Mr. Putnam, former Chairman of these Funds, received a fee of
$30,000 per annum.
OTHER INFORMATION
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P. has been selected as the
independent accountants of the Northstar Trust and each of the remaining
Northstar Funds. Coopers & Lybrand L.L.P. audits the Funds' annual financial
statements and expresses an opinion thereon.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian, and fund accounting
agent for the Funds and the NorthStar Trust.
TRANSFER AGENT. Pursuant to a Transfer Agency Agreement with each Fund, First
Data (the "Transfer Agent") acts as the Transfer Agent for each Fund. Pursuant
to a Sub-Transfer Agency Agreement between Advest Transfer Services, Inc.
("ATS") and First Data, ats serves as the subtransfer agent for the Funds
offering Class T shares, and, prior to June 5, 1995, ats acted as transfer agent
to these Funds.
REPORTS TO SHAREHOLDERS. The fiscal year of the Northstar Trust ends on October
31. The fiscal year of each other Fund ends on December 31. Each Fund will send
financial statements to its shareholders at least semiannually. An annual report
containing financial statements audited by the independent accountants will be
sent to shareholders each year.
ORGANIZATIONAL AND RELATED INFORMATION. Special Fund (formerly The Advantage
Special Fund) was organized in 1986; Growth Fund (formerly The Advantage Growth
Fund) was organized in 1986; Balance Sheet Opportunities Fund (formerly The
Advantage Income Fund) was organized in 1986; Government Securities Fund
(formerly The Advantage Government Securities Fund) was organized in 1986;
Strategic Income Fund (formerly The Advantage Strategic Income Fund) was
organized in 1994; and
27
<PAGE>
High Yield Fund (formerly The Advantage High Yield Bond
Fund) was organized 1989. Northstar Trust (formerly Northstar Advantage Trust),
and two of its series Income and Growth Fund (formerly Northstar Advantage
Income and Growth Fund) and High Total Return Fund (formerly Northstar Advantage
High Total Return Fund), was organized in 1993. Northstar Growth + Value Fund
was organized in 1996.
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 of the affected Fund or class having voting rights. Except as
set forth above and subject to the 1940 Act, the Trustees will continue to hold
office and appoint successor Trustees.
Under Massachusetts law, there is a remote possibility that shareholders of
a business trust could, under certain circumstances, be held personally liable
as partners for the obligations of such trust. The Amended and Restated
Declaration of Trust for each Fund contains provisions intended to limit such
liability and to provide indemnification out of Fund property of any shareholder
charged or held personally liable for obligations or liabilities of a Fund
solely by reason of being or having been a shareholder of a Fund and not because
of such shareholder's acts or omissions or for some other reason. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a Fund itself would be unable to meet its
obligations.
PERFORMANCE INFORMATION
Performance information for the Funds may be compared in reports and
promotional literature to (1) the S&P 500, Dow Jones Industrial Average
("DJIA"), or other unmanaged indices, so that investors may compare each Fund's
results to those of a group of unmanaged securities that are widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm that ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications or persons who rank mutual funds on overall performance or other
criteria; (iii) the Consumer Price Index (measure for inflation) to assess the
real rate of return from an investment in a Fund; and (iv) well known monitoring
sources of cd performance rates, such as Solomon Brothers, Federal Reserve
Bulletin, American Bankers and Tower Data/The Wall Street Journal. Unmanaged
indices may assume the reinvestment of dividends, but generally do not reflect
deductions for administrative and management costs and expenses. Performance
rankings are based on historical information and are not intended to indicate
future performance.
In addition, the Funds may, from time to time, include various measures of
a Fund's performance, including the current yield, the taxequivalent yield and
the average annual total return of shares of the Funds in advertisements,
promotional literature or reports to shareholders or prospective investors. Such
materials may occasionally cite statistics to reflect a Fund's volatility risk.
AVERAGE ANNUAL TOTAL RETURN. Standardized quotations of average annual
total return ("Standardized Return") for each class of shares will be expressed
in terms of the average annual compounded rate of return for a hypothetical
investment in such class of shares over periods of 1, 5 and 10 years or up to
the life of the class of shares, calculated for each class separately pursuant
to the following formula:
P(1+T) to the power of n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = the average annual total return
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the period).
All total return figures reflect the deduction of a proportional share of
each Class's expenses (on an annual basis), the deduction of the maximum initial
sales load (in the case of Class A shares) and the maximum contingent deferred
sales charge
28
<PAGE>
applicable to a complete redemption of the investment (in the case of Class
B, Class C and Class T shares), and assume that all dividends and
distributions are reinvested when paid.
YIELD. Quotations of yield for a specific class of shares of a Fund will be
based on all investment income attributable to that class earned during a
particular 30-day (or one month) period (including dividends and interest), less
expenses accrued during the period ("net investment income"), and will be
computed by dividing the net investment income per share of that class earned
during the period by the maximum offering price per share on the last day of the
month, according to the following formula:
Yield = 2[(a-b + 1) to the power of 6 -1]
cd
Where:
a = dividends and interest earned during the period attributable to a
specific class of shares
b = expenses accrued for the period attributable to that class (net of
reimbursements)
c = the average daily number of shares of that class outstanding during the
period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the period
The maximum offering price includes a maximum contingent deferred
sales load of 4%, in the case of Class T shares, 5% for Class B shares, and
1%, for Class C shares.
All accrued expenses are taken into account as follows. Accrued
expenses include all recurring expenses that are charged to all shareholder
accounts in proportion to the length of the base period, including but not
limited to expenses under the Funds' distribution plans. Except as noted,
the performance results take the contingent deferred sales load into
account.
The yield for Class A, B, C and T shares of the Special Fund, Growth
Fund, Balance Sheet Opportunities Fund, Government Securities Fund,
Strategic Income Fund, and High Yield Fund for the month ended December 31,
1996, and the yield for Class A, B and C of the Income and Growth Fund and
High Total Return Fund for the month ended October 31, 1996 was as follows:
YIELD
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
Special Fund............................................................... 0.04% -0.70% -0.76% -0.51%
Growth Fund................................................................ -0.14% -0.69% -0.49% -0.31%
Balance Sheet Opportunities Fund........................................... 5.61% 5.01% 5.07% 5.57%
Government Securities Fund................................................. 6.55% 6.24% 6.43% 6.80%
Strategic Income Fund...................................................... 6.28% 5.88% 5.71% 6.08%
High Yield Fund............................................................ 7.98% 7.66% 7.64% 8.20%
Income and Growth.......................................................... 2.63% 2.04% 2.10% N/A
High Total Return Fund..................................................... 9.56% 9.28% 9.32% N/A
</TABLE>
NON-STANDARDIZED RETURN. In addition to the performance information
described above, the Funds may provide total return information that is not
calculated according to the formula set forth above ("Non-Standardized
Return"). Neither initial nor contingent deferred sales charges are taken
into account in calculating Non-Standardized Return. Excluding a Fund's
sales charge from a total return calculation produces a higher total return
figure.
The following tables summarize the calculation of Standardized and
Non-Standardized Return for Class A, Class B and Class C shares of each
Fund in the Northstar Trust and for Class A, Class B, Class C and Class T
shares of the other Funds for the periods indicated.
29
<PAGE>
NORTHSTAR TRUST. The following table summarizes the calculation of
Total Return for the periods indicated through October 31, 1996, assuming
the contingent deferred sales load HAS been assessed:
<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
<S> <C> <C>
INCOME AND GROWTH FUND
Class A......................................................... 9.08% 8.04%
Class B......................................................... 8.60% 6.52%
Class C......................................................... 12.68% 8.90%
HIGH TOTAL RETURN FUND
Class A......................................................... 12.62% 7.25%
Class B......................................................... 12.32% 5.75%
Class C......................................................... 16.28% 7.82%
</TABLE>
The following table summarizes the calculation of Total Return for the
periods indicated through October 31, 1996, assuming the contingent
deferred sales load HAS NOT been assessed:
<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
<S> <C> <C>
INCOME AND GROWTH FUND
Class A......................................................... 14.48% 9.82%
Class B......................................................... 13.60% 7.49%
Class C......................................................... 13.68% 8.90%
HIGH TOTAL RETURN FUND
Class A......................................................... 18.14% 9.02%
Class B......................................................... 17.32% 6.65%
Class C......................................................... 17.28% 7.82%
</TABLE>
*The inception date for Class A, Class B and Class C shares of Income and
Growth Fund and High Total Return Fund is November 8, 1993, February 9,
1994 and March 21, 1994, respectively.
THE REMAINING FUNDS. The following table summarizes the calculation of
Total Return for Class T shares of the remaining Funds for the periods
indicated through December 31, 1996, assuming the maximum sales charge HAS
been assessed:
<TABLE>
<CAPTION>
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION*
<S> <C> <C> <C> <C>
Special Fund......................................... 13.47% 11.36% 12.38% 10.13%
Growth Fund.......................................... 15.90% 10.43% 12.05% 11.86%
Balance Sheet Fund................................... 6.42% 9.98% 9.52% 9.71%
Government Securities Fund........................... -3.44% 7.66% 7.04% 7.23%
Strategic Income Fund................................ 6.39% N/A N/A 10.04%
High Yield Fund...................................... 10.49% 14.07% N/A 10.97%
</TABLE>
The following table summarizes the calculation of Total Return for
Class T shares of the remaining Funds for the periods indicated through
December 31, 1996, assuming the maximum sales charge HAS NOT been assessed:
<TABLE>
<CAPTION>
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION*
<S> <C> <C> <C> <C>
Special Fund......................................... 17.47% 11.36% 12.38% 10.13%
Growth Fund.......................................... 19.90% 10.43% 12.05% 11.86%
Balance Sheet Fund................................... 10.18% 9.98% 9.52% 9.71%
Government Securities Fund........................... 0.32% 7.66% 7.04% 7.23%
Strategic Income Fund................................ 10.39% N/A N/A 10.73%
High Yield Fund...................................... 14.49% 14.07% N/A 10.97%
</TABLE>
30
<PAGE>
*The inception date for Class T shares of Special, Growth, Balance Sheet
Opportunities and Government Securities Funds was February 1, 1986. The
inception date for Class T shares of the High Yield Fund was July 5, 1989.
The inception date for Class T shares of the Strategic Income Fund was
July 1, 1994.
The following table summarizes the calculation of Total
Return for Class A, Class B and Class C shares of the remaining Funds for
the period from commencement of operations of such classes (June 5, 1995)
through December 31, 1996, assuming the maximum sales charge HAS been
assessed:
<TABLE>
<CAPTION>
Since
1 Year Inception
<S> <C> <C>
Fund
Special
Class A 12.57% 15.90%
Class B 12.37% 16.46%
Class C 16.37% 18.76%
Growth
Class A 14.85% 16.94%
Class B 14.74% 17.62%
Class C 18.74% 19.85%
Balance Sheet
Class A 5.25% 11.00%
Class B 5.07% 11.56%
Class C 8.78% 13.66%
Government
Class A -4.19% 3.55%
Class B -4.86% 3.55%
Class C -1.15% 5.98%
Strategic Income
Class A 5.60% 7.45%
Class B 5.18% 7.61%
Class C 9.11% 9.93%
High Yield
Class A 9.25% 8.55%
Class B 8.93% 8.81%
Class C 12.93% 11.21%
</TABLE>
The following table summarizes the calculation of Total Return for
Class A, Class B and Class C shares of the remaining Funds for the period
from commencement of operations of such classes (June 5, 1995) through
December 31, 1996, assuming the maximum sales charge HAS NOT been assessed:
<TABLE>
<CAPTION>
Since
1 Year Inception
<S> <C> <C>
Fund
Special
Class A 18.16% 19.54%
Class B 17.37% 18.76%
Class C 17.37% 18.76%
Growth
Class A 20.54% 20.61%
Class B 19.74% 19.91%
Class C 19.74% 19.85%
Balance Sheet
Class A 10.54% 14.50%
Class B 9.76% 13.73%
Class C 9.72% 13.66%
Government
Class A 0.57% 6.77%
Class B -0.15% 6.01%
Class C -0.21% 5.98%
Strategic Income
Class A 10.88% 10.80%
Class B 10.18% 10.02%
Class C 10.11% 9.93%
High Yield
Class A 14.74% 11.91%
Class B 13.93% 11.21%
Class C 13.93% 11.21%
</TABLE>
A Fund may quote its performance in various ways, using various types
of comparisons to market indices, other funds or investment alternatives,
or to general increases in the cost of living. All performance information
supplied by the Funds in advertising is historical and is not intended to
indicate future returns. Each Fund's share prices and total returns
fluctuate in response to market conditions and other factors, and the value
of the Fund's shares when redeemed may be more or less than their original
cost.
Evaluations of Fund performance made by independent sources may also
be used in advertisements concerning the Funds, including reprints of, or
selections from, editorials or articles about a Fund. These editorials or
articles may include quotations of performance from other sources, such as
Lipper or Morningstar. Sources for Fund performance information and
articles about the Fund may include the following: BANXQUOTE, BARRON'S,
BUSINESS WEEK, CDA INVESTMENT TECHNOLOGIES, INC., CHANGING TIMES, CONSUMER
DIGEST, FINANCIAL WORLD, FORBES, FORTUNE, IBC/DONOGHUES'S MONEY FUND
REPORT, IBBOTSON ASSOCIATES, INC., INVESTMENT COMPANY DATA, INC.,
INVESTOR'S DAILY, LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND
PERFORMANCE ANALYSIS, MONEY, MUTUAL FUND VALUES, THE NEW YORK TIMES,
PERSONAL INVESTING NEWS, PERSONAL INVESTOR, SUCCESS, USA TODAY, U.S. NEWS
AND WORLD REPORT, WALL STREET JOURNAL, WIESENBERGER INVESTMENT COMPANIES
SERVICES, AND WORKING WOMAN.
When comparing yield, total return and investment risk of shares of a
Fund with other investments, investors should understand that certain other
investments have different risk characteristics than an investment in
shares of the Fund. For example, certificates of deposit may have fixed
rates of return and may be insured as to principal and interest by the
FDIC, while a Fund's returns will fluctuate and its share values and
returns are not guaranteed. Money market accounts offered by banks also
may be insured by the FDIC and may offer stability of principal. U.S.
Treasury securities are guaranteed as to principal and interest by the
full faith and credit of the U.S. government. Money market mutual funds
may seek to offer a fixed price per share.
The performance of a Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representative of performance of
the Fund for any period in the future. The performance of a Fund is a
function of many factors including its earnings, expenses and number of
outstanding shares. Fluctuating market conditions; purchases, sales and
maturities of portfolio securities; sales and redemptions of shares of
beneficial interest, and changes in operating expenses are all examples of
items that can increase or decrease the Fund's performance.
31
<PAGE>
FINANCIAL STATEMENTS
The Northstar Trust's audited financial statements dated October 31,
1996 and the report of the independent accountants, Coopers & Lybrand
L.L.P. with respect to such financial statements, are hereby incorporated
by reference to the Annual Report to Shareholders of the Northstar Trust
for the fiscal year ended October 31, 1996.
The audited financial statements of Special Fund, Growth Fund, Balance
Sheet Opportunities Fund, Government Securities Fund, Strategic Income Fund
and High Yield Fund as of and for the fiscal period ended December 31, 1996
and the report of the independent accountants, Coopers & Lybrand L.L.P.,
with respect to such financial statements are hereby incorporated by
reference to the Annual Report to Shareholders of The NorthStar
Funds for the fiscal year ended December 31, 1996.
32
<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>
NORTHSTAR/NWNL TRUST
CERTIFICATE OF AMENDMENT OF DECLARATION OF TRUST
AND REDESIGNATION OF SERIES
The undersigned being all of the trustees of Northstar/NWNL Trust, a
Massachusetts business trust (the "Trust"), acting pursuant to Section 8.3 of
the Trust's Declaration of Trust dated December 17, 1993, as amended (the
"Declaration of Trust"), hereby amend the Declaration of Trust to change the
name of the Trust set forth in Section 1.1 thereof as follows;
1. Section 1.1. of the Declaration of Trust, executed on December 17,
1993, as amended, is hereby amended to read in its entirety as follows:
"Section 1.1 Name. The name of the Trust created hereby is "NORTHSTAR VARIABLE
TRUST".
IN WITNESS WHEREOF, the undersigned have this day signed this Certificate of
Amendment of Declaration of Trust.
Dated: August 1, 1996
-------------------- --------------------
John G. Turner Mark L. Lipson
-------------------- --------------------
Paul S. Doherty Robert B. Goode, Jr.
-------------------- --------------------
David W. Wallace Walter May
-------------------- --------------------
David W.C. Putnam Alan L. Gosule, Esq.
--------------------
John R. Smith
<PAGE>
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.
<PAGE>
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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<PAGE>
(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
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NORTHSTAR/NWNL TRUST
NORTHSTAR INCOME AND GROWTH FUND
SUBADVISORY AGREEMENT
AGREEMENT made this day of August, 1996 by and between Northstar Investment
Management Corporation, a Delaware Corporation (hereinafter the "Adviser"),
investment adviser for the Northstar Income and Growth Fund, a series of the
Northstar NWNL Trust (the "Trust") (hereinafter the "Fund") and Wilson/Bennett
Capital Management, Inc., a Virginia 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 those assets of
the Fund which are designated by the Adviser for investment in common stocks
(the "Assets"), 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 the Assets,
subject to the duty to render to the Trustees of the Trust, the Adviser and the
Custodian such written reports regarding the Assets as often as the Trustees or
the Adviser of the Fund shall reasonably require; provided however that all
investment decisions and orders shall be communicated to the Adviser, who shall
select brokers and dealers to execute such purchase and sell orders.
(b) to make all decisions relating to the timing of investment
transactions relating to the Assets, and to engage such consultants, analysts
and experts in connection therewith as may be considered necessary or
appropriate;
(c) to take all such other actions as may be considered necessary or
appropriate to discharge its duties thereunder;
PROVIDED THAT any specific or general directions which the Trustees of the Fund
or the Adviser may give to the Subadviser with regard to any of the foregoing
powers shall, unless the contrary is expressly stated herein, override the
general authority given by this provision.
<PAGE>
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) coordinate with the Adviser to (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 Assets in accordance with the
investment requirements for regulated investment companies under Subchapter M of
the Code and regulations issued thereunder; and (iii) review on a daily basis
and confirm as accurate the valuations of the securities comprising the Assets.
(b) furnish to the Trust whatever non-proprietary reports it may
reasonably request with respect to the Assets or contemplated investments. In
addition, the Subadviser will keep the Trust and the Trustees informed of
developments materially affecting the Assets 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 Assets 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).
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.
4. Compensation. The Subadvisor agrees to waive all compensation until the
Fund's net assets exceed $50 million. After the Fund's net assets exceed $50
million, the Adviser will pay the Subadviser at the end of each calendar month
an advisory fee computed daily at an annual rate equal to 0.20 of 1% of the
first $125 million of the average daily net asset value of the Assets; 0.25 of
1% of the net asset value of the Assets exceeding $125 million up to $250
million; and 0.30 of 1% of the average daily net asset value of the Assets
exceeding $250 million as compensation for the advisory services provided by the
Subadviser under this Agreement. 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
<PAGE>
the value of its net 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 and reasonable care in rendering the services provided by it
under this Subadvisory Agreement. The Subadviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the 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 clients or from engaging in other
investment advisory activities; provided however, that the Subadviser agrees
that it shall not provide investment advisory services to any other investment
company clients (whether or not the investment objective and policies are
similar to those of the Fund). 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.
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
<PAGE>
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 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
<PAGE>
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, "Wilson/Bennett Capital 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 or any of its
principals, 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.. 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 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 Massachusetts, 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 Massachusetts located in Boston, Massachusetts.
(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 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
<PAGE>
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.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the date and year set forth
above.
NORTHSTAR INVESTMENT MANAGEMENT WILSON/BENNETT CAPITAL MANAGEMENT, INC.
By:_______________________________ By:_______________________________
Mark L. Lipson John W. Fisher
Chairman and CEO President
<PAGE>
NORTHSTAR/NWNL TRUST
NORTHSTAR INCOME AND GROWTH FUND
-----------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
JULY 15, 1996
-------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE TRUSTEES
The undersigned shareholder of NORTHSTAR INCOME AND GROWTH FUND (the "Fund"), a
series of the NORTHSTAR/NWNL TRUST, a Massachusetts business trust, hereby
appoints Mark L. Lipson and Agnes Mullady, and each of them, with full power of
substitution and revocation, as proxies to represent the undersigned at the
Special Meeting of Shareholders of the Fund, which shall be held on July 15,
1996, at 10:00 a.m., New York City time, at the offices of the Fund, Two
Pickwick Plaza, Greenwich, Connecticut, and at any and all adjournments thereof,
and thereat to vote all shares of the Fund which the undersigned would be
entitled to vote, with all powers the undersigned would possess if personally
present, in accordance with the following instructions:
1. FOR______ AGAINST______ ABSTAIN______ as to the proposal to
approve a Subadvisory Agreement for the Fund between Northstar
Investment Management Corporation, investment adviser to the
Fund, and Wilson/Bennett Capital Management, Inc.
and, in their discretion, upon such other business as may properly come before
the meeting or any adjournments thereof.
If more than one of the proxies, or their substitutes, are present at the
meeting or at any adjournment thereof, they jointly (or, if only one is present
and voting, then that one) shall have authority and may exercise all the powers
granted hereby. This proxy, when properly executed, will be voted in accordance
with the instructions marked hereon by the undersigned. In the absence of
contrary instructions, this proxy will be voted FOR the proposal.
The undersigned hereby acknowledges receipt of the accompanying Notice of
Meeting and Proxy Statement, dated June 3, 1996.
IMPORTANT: PLEASE INSERT DATE OF SIGNING.
Dated:_____________________________ , 1996
---------------------------------------------
Signature of Shareholder(s) (if held jointly)
THIS PROXY SHALL BE SIGNED EXACTLY AS YOUR NAME(S) APPEAR HEREON. IF AS
ATTORNEY, EXECUTOR, GUARDIAN OR IN SOME OTHER CAPACITY OR AS AN OFFICER OF A
CORPORATION, PLEASE STATE CAPACITY OR TITLE AS SUCH.
<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 instrumentalities, except that
in connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings
by the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a
6
<PAGE>
broker-dealer registered under the Securities Exchange Act
of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating
to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described 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
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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
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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;
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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
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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;
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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
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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,
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<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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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
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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
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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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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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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
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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.
34
<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.
35
<PAGE>
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
37
<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>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
----------------------------------------------------------
NORTHSTAR INC & GROWTH A
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------ ---------- --------- --------- ---------- ---------- ------------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/ 1/95 1,000.00 10.9100 91.659 91.659 1,000.00
12/29/95 11.3000 92.307 0.080 7.32 0.000 0.00 0.648 1,043.00
12/31/95 11.3000 92.307 1,043.07
3/26/96 11.4400 92.855 0.068 6.27 0.000 0.00 0.548 1,062.26
6/25/96 11.6400 92.473 0.077 7.19 0.000 0.00 0.618 1,088.03
9/25/96 11.7500 94.143 0.084 7.87 0.000 0.00 0.670 1,106.18
10/31/96 12.1600 94.143 1,144.78
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 14.48%
ERV = Ending Redeemable Value $1,144.78 Overall Total Return 14.48%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
-------------------------------------------------------------
NORTHSTAR INC & GROWTH A
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------ --------- ----------- -------- ---------- ------------ ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/ 8/93 1,000.00 10.0000 100.000 100.000 1,000.00
12/31/93 10.2700 100.243 0.025 2.50 0.000 0.00 0.243 1,029.50
12/31/93 10.2700 100.243 1,029.50
3/31/94 10.1900 100.833 0.060 6.01 0.000 0.00 0.590 1.027.49
6/24/94 9.7200 101.683 0.082 8.26 0.000 0.00 0.850 988.36
9/26/94 9.9800 102.483 0.079 7.98 0.000 0.00 0.800 1,022.78
12/23/94 9.5700 103.526 0.097 9.98 0.000 0.00 1.043 990.74
12/31/94 9.5900 103.526 992.81
3/23/95 9.8000 104.234 0.067 6.94 0.000 0.00 0.708 1,021.49
6/22/95 10.6100 105.074 0.085 8.91 0.000 0.00 0.840 1,114.84
9/26/95 10.8700 105.851 0.080 8.45 0.000 0.00 0.777 1,150.60
12/29/95 11.3000 106.600 0.080 8.46 0.000 0.00 0.749 1,240.58
12/31/95 11.3000 106.600 1,204.58
3/26/96 11.4400 107.233 0.068 7.24 0.000 0.00 0.633 1,226.75
6/25/95 11.6400 107.946 0.077 8.30 0.000 0.00 0.713 1,256.49
9/25/96 11.7500 108.719 0.084 9.08 0.000 0.00 0.773 1,277.45
10/31/96 12.1600 108.719 1,322.02
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 9.82%
ERV = Ending Redeemable Value $1,322.02 Overall Total Return 32.20%
n = Number of Time Periods 2.98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
----------------------------------------------------------
NORTHSTAR INC & GROWTH B
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------ ---------- --------- --------- ---------- ---------- ------------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/ 1/95 1,000.00 10.8900 91.827 91.827 1,000.00
12/29/95 11.2800 92.313 0.060 5.48 0.000 0.00 0.486 1,041.29
12/31/95 11.2800 92.313 1,041.29
3/26/96 11.4300 92.713 0.050 4.57 0.000 0.00 0.400 1,059.71
6/25/96 11.6300 93.162 0.056 5.22 0.000 0.00 0.449 1,083.47
9/25/96 11.7300 93.654 0.062 5.77 0.000 0.00 0.492 1,098.56
10/31/96 12.1300 93.654 1,136.02
FORMULA -- Average Annual Total Return: ERV = P(1+T) ^n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 13.60%
ERV = Ending Redeemable Value $1,136.02 Overall Total Return 13.60%
n = Number of Time Periods 1.00
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
----------------------------------------------------------
NORTHSTAR INC & GROWTH B
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ------- ------- --------- --------- --------- --------- ---------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/ 9/94 1,000.00 10.6400 93.985 93.985 1,000.00
3/31/94 10.1900 94.538 0.060 5.64 0.000 0.00 0.553 963.34
6/24/94 9.7200 95.256 0.074 6.98 0.000 0.00 0.718 925.89
9/26/94 9.9800 95.893 0.067 6.36 0.000 0.00 0.637 957.01
12/23/94 9.5700 96.711 0.082 7.83 0.000 0.00 0.818 925.52
12/31/94 9.5900 96.711 927.46
3/23/95 9.7900 97.239 0.053 5.17 0.000 0.00 0.528 951.97
6/22/95 10.6000 97.899 0.072 7.00 0.000 0.00 0.660 1,037.73
9/26/95 10.8600 98.458 0.062 6.07 0.000 0.00 0.559 1,069.25
12/29/95 11.2800 98.978 0.060 5.87 0.000 0.00 0.520 1,116.47
12/31/95 11.2800 98.978 1,116.47
3/26/96 11.4300 99.407 0.050 4.90 0.000 0.00 0.429 1,136.22
6/25/96 11.6300 99.889 0.056 5.60 0.000 0.00 0.482 1,161.71
9/25/96 11.7300 100.416 0.062 6.18 0.000 0.00 0.527 1,177.88
10/31/96 12.1300 100.416 1,218.05
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 7.49%
ERV = Ending Redeemable Value $1,218.05 Overall Total Return 21.80%
n = Number of Time Periods 2.73
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
---------------------------------------------------------------
NORTHSTAR INC & GROWTH C
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------ -------- --------- ---------- ---------- ----------- ------------ ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/ 1/95 1,000.00 10.8800 91.912 91.912 1,000.00
12/29/95 11.2700 92.417 0.062 5.69 0.000 0.00 0.505 1,041.54
12/31/95 11.2700 92.417 1,041.54
3/26/96 11.4100 92.828 0.051 4.69 0.000 0.00 0.411 1,059.17
6/25/96 11.6100 93.291 0.058 5.37 0.000 0.00 0.463 1,083.11
9/25/96 11.7200 93.797 0.064 5.93 0.000 0.00 0.506 1,099.30
10/31/96 12.1200 93.797 1,136.82
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 13.68%
ERV = Ending Redeemable Value $1,136.82 Overall Total Return 13.68%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
---------------------------------------------------------------
NORTHSTAR INC & GROWTH C
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------- ---------- --------- ---------- --------- ---------- ------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/21/94 1,000.00 10.3700 96.432 96.432 1,000.00
3/31/94 10.1900 97.000 0.060 5.79 0.000 0.00 0.568 988.43
6/24/94 9.7200 97.714 0.071 6.94 0.000 0.00 0.714 949.78
9/26/94 9.9800 98.346 0.065 6.31 0.000 0.00 0.632 981.49
12/23/94 9.5700 99.168 0.080 7.87 0.000 0.00 0.822 949.04
12/31/94 9.5900 99.168 951.02
3/23/95 9.7800 99.875 0.070 6.91 0.000 0.00 0.707 976.78
6/22/95 10.5900 100.511 0.067 6.73 0.000 0.00 0.636 1,064.41
9/26/95 10.8400 101.091 0.063 6.29 0.000 0.00 0.580 1,095.83
12/29/95 11.2700 101.646 0.062 6.26 0.000 0.00 0.555 1,145.55
12/31/95 11.2700 101.646 1,145.55
3/26/96 11.4100 102.098 0.051 5.16 0.000 0.00 0.452 1,164.94
6/25/96 11.6100 102.607 0.058 5.91 0.000 0.00 0.509 1,191.27
9/25/96 11.7200 103.163 0.064 6.52 0.000 0.00 0.556 1,209.07
10/31/96 12.1200 103.163 1,250.34
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 8.90%
ERV = Ending Redeemable Value $1,250.34 Overall Total Return 25.03%
n = Number of Time Periods 2.62
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
---------------------------------------------------------------
NORTHSTAR HIGH T/R A
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------- ---------- --------- ---------- --------- ---------- ------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/ 1/95 1,000.00 4.4800 223.214 223.214 1,000.00
11/22/95 4.4800 225.207 0.040 8.93 0.000 0.00 1.993 1,008.93
12/29/95 4.5800 227.174 0.040 9.01 0.000 0.00 1.967 1,040.46
12/31/95 4.5800 227.174 1,040.46
1/26/96 4.6500 229.129 0.040 9.09 0.000 0.00 1.955 1,065.45
2/23/96 4.6800 231.088 0.040 9.17 0.000 0.00 1.959 1,081.49
3/26/96 4.7100 233.050 0.040 9.24 0.000 0.00 1.962 1,097.67
4/25/96 4.7300 235.020 0.040 9.32 0.000 0.00 1.970 1,111.64
5/24/96 4.8000 236.978 0.040 9.40 0.000 0.00 1.958 1,137.49
6/25/96 4.7500 238.974 0.040 9.48 0.000 0.00 1.996 1,135.13
7/26/96 4.7000 241.008 0.040 9.56 0.000 0.00 2.034 1,132.74
8/27/96 4.6800 243.068 0.040 9.64 0.000 0.00 2.060 1,137.56
9/25/96 4.7700 245.106 0.040 9.72 0.000 0.00 2.038 1,169.16
10/25/96 4.7600 247.165 0.040 9.80 0.000 0.00 2.059 1,176.51
10/31/96 4.7800 247.165 1,181.45
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 18.14%
ERV = Ending Redeemable Value $1,181.45 Overall Total Return 18.14%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
---------------------------------------------------------------
NORTHSTAR HIGH T/R A
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------- ---------- --------- ---------- --------- ---------- ------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/ 8/93 1,000.00 5.0000 200.000 200.000 1,000.00
11/23/93 5.0200 200.510 0.013 2.56 0.000 0.00 0.510 1,006.56
12/27/93 5.0900 201.995 0.038 7.56 0.000 0.00 1.485 1,028.15
12/31/93 5.0900 201.995 1,028.15
1/25/94 5.1800 203.478 0.038 7.68 0.000 0.00 1.483 1,054.02
2/22/94 4.1600 204.976 0.038 7.73 0.000 0.00 1.498 1,057.68
3/25/94 5.0300 206.525 0.038 7.79 0.000 0.00 1.549 1,038.82
4/25/94 4.7900 208.197 0.039 8.01 0.000 0.00 1.672 997.26
5/24/94 4.7600 209.894 0.039 8.08 0.000 0.00 1.697 999.10
6/24/94 4.7600 211.570 0.038 7.98 0.000 0.00 1.676 1,007.07
7/25/94 4.6200 213.401 0.040 8.46 0.000 0.00 1.831 985.91
8/25/94 4.5400 215.282 0.040 8.54 0.000 0.00 1.881 977.38
9/26/94 4.4800 217.204 0.040 8.61 0.000 0.00 1.922 973.07
10/25/94 4.4200 219.170 0.040 8.69 0.000 0.00 1.966 968.73
11/23/94 4.3200 221.200 0.040 8.77 0.000 0.00 2.030 955.58
12/23/94 4.2200 223.297 0.040 8.85 0.000 0.00 2.097 942.08
12/31/94 4.2100 223.297 940.08
1/25/95 4.2300 225.408 0.040 8.93 0.000 0.00 2.111 953.48
2/22/95 4.3100 227.501 0.040 9.02 0.000 0.00 2.093 980.53
3/23/95 4.3400 229.598 0.040 9.10 0.000 0.00 2.097 996.46
4/25/95 4.4300 231.670 0.040 9.18 0.000 0.00 2.072 1,026.30
5/24/95 4.5000 233.730 0.040 9.27 0.000 0.00 2.060 1,051.79
6/22/95 4.3800 235.865 0.040 9.35 0.000 0.00 2.135 1,033.09
7/25/95 4.4800 237.970 0.040 9.43 0.000 0.00 2.105 1,066.11
8/24/95 4.4900 240.090 0.040 9.52 0.000 0.00 2.120 1,078.00
9/26/95 4.4900 242.228 0.040 9.60 0.000 0.00 2.138 1,087.60
10/25/95 4.5000 244.381 0.040 9.69 0.000 0.00 2.153 1,099.71
11/22/95 4.4800 246.564 0.040 9.78 0.000 0.00 2.183 1,104.61
12/29/95 4.5800 248.717 0.040 9.86 0.000 0.00 2.153 1,139.12
12/31/95 4.5800 248.717 1,139.12
1/26/96 4.6500 250.857 0.040 9.95 0.000 0.00 2.140 1,166.49
2/23/96 4.6800 253.000 0.040 10.03 0.000 0.00 2.143 1,184.04
3/26/96 4.7100 255.149 0.040 10.12 0.000 0.00 2.149 1,201.75
</TABLE>
Continued on Page 2
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
---------------------------------------------------------------
NORTHSTAR HIGH T/R A
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------- ---------- --------- ---------- --------- ---------- ------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/25/96 4.7300 257.308 0.040 10.21 0.000 0.00 2.159 1,217.07
5/24/96 4.8000 259.452 0.040 10.29 0.000 0.00 2.144 1,245.37
6/25/96 4.7500 261.637 0.040 10.38 0.000 0.00 2.185 1,242.78
7/26/96 4.7000 263.865 0.040 10.47 0.000 0.00 2.228 1,240.17
8/27/96 4.6800 266.119 0.040 10.55 0.000 0.00 2.254 1,245.44
9/25/96 4.7700 268.350 0.040 10.64 0.000 0.00 2.231 1,280.03
10/25/96 4.7600 270.604 0.040 10.73 0.000 0.00 2.254 1,288.08
10/31/96 4.7800 270.604 1,293.49
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 9.02%
ERV = Ending Redeemable Value $1,293.49 Overall Total Return 29.35%
n = Number of Time Periods 2.98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/ 1/95 1,000.00 4.4700 223.714 223.714 1,000.00
11/22/95 4.4700 225.584 0.037 8.36 0.000 0.00 1.870 1,008.36
12/29/95 4.5700 227.429 0.037 8.43 0.000 0.00 1.845 1,039.35
12/31/95 4.5700 1,039.35
1/26/96 4.6400 229.254 0.037 8.47 0.000 0.00 1.825 1,063.74
2/23/96 4.6800 231.077 0.037 8.53 0.000 0.00 1.823 1,081.44
3/26/96 4.7100 232.901 0.037 8.59 0.000 0.00 1.824 1,096.96
4/25/96 4.7200 234.736 0.037 8.66 0.000 0.00 1.835 1,107.95
5/24/96 4.8000 236.551 0.037 8.71 0.000 0.00 1.815 1,135.44
6/25/96 4.7500 238.397 0.077 8.77 0.000 0.00 1.846 1,132.39
7/26/96 4.6900 240.284 0.037 8.85 0.000 0.00 1.887 1,126.93
8/27/96 4.6800 242.188 0.037 8.91 0.000 0.00 1.904 1,133.44
9/25/96 4.7700 244.062 0.037 8.94 0.000 0.00 1.874 1,164.18
10/25/96 4.7600 245.957 0.037 9.02 0.000 0.00 1.895 1,170.76
10/31/96 4.7700 245.957 1,173.21
</TABLE>
FORMULA - Average Annual Total Return: ERV= P(1+T) ^n
Overall Total Return: ERV/P -1
Where: P= Initial Investment $1,000.00
ERV= Ending Redeemable Value $1,173.21
n= Number of Time Periods 1.00
T= Average Annual Total Return 17.32%
Overall Total Return 17.32%
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR HIGH T/R B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/ 9/94 1,000.00 5.2000 192.308 192.308 1,000.00
2/22/94 5.1600 192.957 0.017 3.35 0.000 0.00 0.649 995.66
3/25/94 5.0300 194.301 0.035 6.76 0.000 0.00 1.344 977.33
4/25/94 4.7900 195.754 0.036 6.96 0.000 0.00 1.453 937.66
5/24/94 4.7600 197.227 0.036 7.01 0.000 0.00 1.473 938.80
6/24/94 4.7600 198.710 0.036 7.06 0.000 0.00 1.483 945.86
7/25/94 4.6200 200.310 0.037 7.39 0.000 0.00 1.600 925.43
8/25/94 4.5400 201.951 0.037 7.45 0.000 0.00 1.641 916.86
9/26/94 4.4800 203.627 0.037 7.51 0.000 0.00 1.676 912.25
10/25/94 4.4200 205.340 0.037 7.57 0.000 0.00 1.713 907.60
11/23/94 4.3200 207.109 0.037 7.64 0.000 0.00 1.769 894.71
12/23/94 4.2200 208.934 0.037 7.70 0.000 0.00 1.825 881.70
12/31/94 4.2100 208.934 879.61
1/25/95 4.2300 210.771 0.037 7.77 0.000 0.00 1.837 891.56
2/22/95 4.3100 212.604 0.038 7.90 0.000 0.00 1.833 916.32
3/23/95 4.3400 214.438 0.037 7.96 0.000 0.00 1.834 930.66
4/25/95 4.4300 216.248 0.037 8.02 0.000 0.00 1.810 957.98
5/24/95 4.4900 218.079 0.038 8.22 0.000 0.00 1.831 979.17
6/22/95 4.3700 219.942 0.037 8.14 0.000 0.00 1.863 961.15
7/25/95 4.4800 221.772 0.037 8.20 0.000 0.00 1.830 993.54
8/24/95 4.4800 223.618 0.037 8.27 0.000 0.00 1.846 1,001.81
9/26/95 4.4900 225.478 0.037 8.35 0.000 0.00 1.860 1,012.40
10/25/95 4.4900 227.349 0.037 8.40 0.000 0.00 1.871 1,020.80
11/22/95 4.4700 229.251 0.037 8.50 0.000 0.00 1.902 1,024.75
12/29/95 4.5700 231.124 0.037 8.56 0.000 0.00 1.873 1,056.24
12/31/95 4.5700 231.124
1/26/96 4.6400 232.977 0.037 8.60 0.000 0.00 1.853 1,081.01
2/23/96 4.6800 234.830 0.037 8.67 0.000 0.00 1.853 1,099.00
3/26/96 4.7100 236.684 0.037 8.73 0.000 0.00 1.854 1,114.78
4/25/96 4.7200 238.548 0.037 8.80 0.000 0.00 1.864 1,125.95
5/24/96 4.8000 240.392 0.037 8.85 0.000 0.00 1.844 1,153.88
6/25/96 4.7500 242.270 0.077 8.92 0.000 0.00 1.878 1,150.78
7/26/96 4.6900 244.187 0.037 8.99 0.000 0.00 1.917 1,145.24
8/27/96 4.6800 246.123 0.037 9.06 0.000 0.00 1.936 1,151.86
</TABLE>
Continued on Page 2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/25/96 4.7700 248.029 0.037 9.09 0.000 0.00 1.906 1,183.10
10/25/96 4.7600 249.953 0.037 9.16 0.000 0.00 1.924 1,189.78
10/31/96 4.7700 249.953 1,192.28
</TABLE>
FORMULA - Average Annual Total Return: ERV= P(1+T) ^n
Overall Total Return: ERV/P -1
Where: P= Initial Investment $1,000.00
ERV= Ending Redeemable Value $1,192.28
n= Number of Time Periods 2.73
T= Average Annual Total Return 6.65%
Overall Total Return 19.23%
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR HIGH T/R C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/ 1/95 1,000.00 4.4900 222.717 222.717 1,000.00
11/22/95 4.4900 224.570 0.037 8.32 0.000 0.00 1.853 1,008.32
12/29/95 4.5900 226.411 0.038 8.45 0.000 0.00 1.841 1,039.23
12/31/95 4.5900 226.411 1,039.23
1/26/96 4.6600 228.233 0.038 8.49 0.000 0.00 1.822 1,063.57
2/23/96 4.7600 230.027 0.037 8.54 0.000 0.00 1.794 1,094.93
3/26/96 4.7300 231.845 0.037 8.60 0.000 0.00 1.818 1,096.63
4/25/96 4.7400 233.674 0.037 8.67 0.000 0.00 1.829 1,107.61
5/24/96 4.8200 235.481 0.037 8.71 0.000 0.00 1.807 1,135.02
6/25/96 4.7700 237.320 0.037 8.77 0.000 0.00 1.839 1,132.02
7/26/96 4.7100 239.199 0.037 8.85 0.000 0.00 1.879 1,126.63
8/27/96 4.7000 241.097 0.037 8.92 0.000 0.00 1.898 1,133.16
9/25/96 4.7900 242.968 0.037 8.96 0.000 0.00 1.871 1,163.82
10/25/96 4.7800 244.849 0.037 8.99 0.000 0.00 1.881 1,170.38
10/31/96 4.7900 244.849 1,172.83
</TABLE>
FORMULA - Average Annual Total Return: ERV= P(1+T) ^n
Overall Total Return: ERV/P -1
Where: P= Initial Investment $1,000.00
ERV= Ending Redeemable Value $1,172.83
n= Number of Time Periods 1.00
T= Average Annual Total Return 17.28%
Overall Total Return 17.28%
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR HIGH T/R C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/21/94 1,000.00 5.0600 197.628 197.628 1,000.00
3/25/94 5.0300 197.745 0.003 0.59 0.000 0.00 0.117 994.66
4/25/94 4.7900 199.223 0.036 7.08 0.000 0.00 1.478 954.28
5/24/94 4.7600 200.721 0.036 7.13 0.000 0.00 1.498 955.43
6/24/94 4.7600 202.232 0.036 7.19 0.000 0.00 1.511 962.62
7/25/94 4.6200 203.860 0.037 7.52 0.000 0.00 1.628 941.83
8/25/94 4.5400 205.530 0.037 7.58 0.000 0.00 1.670 933.11
9/26/94 4.4800 207.238 0.037 7.65 0.000 0.00 1.708 928.43
10/25/94 4.4200 208.982 0.037 7.71 0.000 0.00 1.744 923.70
11/23/94 4.3200 210.781 0.037 7.77 0.000 0.00 1.799 910.57
12/23/94 4.2200 212.639 0.037 7.84 0.000 0.00 1.858 897.34
12/31/94 4.2100 212.639 895.21
1/25/95 4.2400 214.505 0.037 7.91 0.000 0.00 1.866 909.50
2/22/95 4.3200 216.366 0.038 8.04 0.000 0.00 1.861 934.70
3/23/95 4.3500 218.228 0.037 8.10 0.000 0.00 1.862 949.29
4/25/95 4.4500 220.062 0.037 8.16 0.000 0.00 1.834 979.28
5/24/95 4.5100 221.916 0.038 8.36 0.000 0.00 1.854 1,000.84
6/22/95 4.3900 223.804 0.037 8.29 0.000 0.00 1.888 982.50
7/25/95 4.5000 225.660 0.037 8.35 0.000 0.00 1.856 1,015.47
8/24/95 4.5000 227.529 0.037 8.41 0.000 0.00 1.869 1,023.88
9/26/95 4.5000 229.418 0.037 8.50 0.000 0.00 1.889 1,032.38
10/25/95 4.5100 231.314 0.037 8.55 0.000 0.00 1.896 1,043.23
11/22/95 4.4900 233.238 0.037 8.64 0.000 0.00 1.924 1,047.24
12/29/95 4.5900 235.151 0.038 8.78 0.000 0.00 1.913 1,079.34
12/31/95 4.5900 235.151 1,079.34
1/26/96 4.6600 237.044 0.038 8.82 0.000 0.00 1.893 1,104.63
2/23/96 4.7600 238.907 0.037 8.87 0.000 0.00 1.863 1,137.20
3/26/96 4.7300 240.795 0.037 8.93 0.000 0.00 1.888 1,138.96
4/25/96 4.7400 242.696 0.037 9.01 0.000 0.00 1.901 1,150.38
5/24/96 4.8200 244.574 0.037 9.05 0.000 0.00 1.878 1,178.85
6/25/96 4.7700 246.484 0.037 9.11 0.000 0.00 1.910 1,175.73
7/26/96 4.7100 248.435 0.037 9.19 0.000 0.00 1.951 1,170.13
8/27/96 4.7000 250.405 0.037 9.26 0.000 0.00 1.970 1,176.90
9/25/96 4.7900 252.347 0.037 9.30 0.000 0.00 1.942 1,208.74
</TABLE>
Continued on Page 2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
- ----- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/25/96 4.7800 254.299 0.037 9.33 0.000 0.00 1.952 1,215.55
10/31/96 4.7900 254.299 1,218.09
</TABLE>
FORMULA - Average Annual Total Return: ERV= P(1+T) ^n
Overall Total Return: ERV/P -1
Where: P= Initial Investment $1,000.00
ERV= Ending Redeemable Value $1,218.09
n= Number of Time Periods 2.62
T= Average Annual Total Return 7.82%
Overall Total Return 21.81%
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
----------------------------------------------------------
NORTHSTAR GROWTH V/A
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>
1/ 1/96 1,000.00 11.5600 86.505 86.505 1,000.00
3/26/96 12.1500 86.777 0.038 3.30 0.000 0.00 0.272 1,054.34
6/25/96 13.9100 86.950 0.028 2.40 0.000 0.00 0.173 1,209.47
9/25/96 14.1400 86.988 0.006 0.54 0.000 0.00 0.038 1,230.01
12/27/96 14.0800 87.353 0.020 1.70 0.040 3.44 0.365 1,229.93
12/31/96 14.0800 87.353 1,229.93
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 22.99%
ERV = Ending Redeemable Value $1,229.93 Overall Total Return 22.99%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
-------------------------------------------------------------
NORTHSTAR GROWTH V/A
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
3/26/96 12.1500 112.036 0.038 4.27 0.000 0.00 0.351 1,361.24
6/25/96 13.9100 112.259 0.028 3.10 0.000 0.00 0.223 1,561.52
9/25/96 14.1400 112.308 0.006 0.69 0.000 0.00 0.049 1,588.04
12/27/96 14.0800 112.780 0.020 2.20 0.040 4.44 0.472 1,587.94
12/31/96 14.0800 112.780 1,587.94
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 18.99%
ERV = Ending Redeemable Value $1,587.94 Overall Total Return 58.79%
n = Number of Time Periods 2.66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
-------------------------------------------------------------
NORTHSTAR INCOME & GROWTH V/A
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>
1/ 1/96 1,000.00 11.3900 87.796 87.796 1,000.00
3/26/96 11.4600 88.436 0.084 7.33 0.000 0.00 0.640 1,013.48
6/25/96 11.6400 89.119 0.090 7.95 0.000 0.00 0.683 1,037.35
9/25/96 11.7500 89.865 0.098 8.77 0.000 0.00 0.746 1,055.91
12/27/96 11.8100 97.099 0.137 12.29 0.814 73.14 7.234 1,146.74
12/31/96 11.7000 97.099 1,136.06
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 13.61%
ERV = Ending Redeemable Value $1,136.06 Overall Total Return 13.61%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
---------------------------------------------------------------
NORTHSTAR INCOME & GROWTH V/A
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
3/26/96 11.4600 109.412 0.084 9.07 0.000 0.00 0.791 1,253.86
6/25/96 11.6400 110.257 0.090 9.83 0.000 0.00 0.845 1,283.39
9/25/96 11.7500 111.180 0.098 10.85 0.000 0.00 0.923 1,306.37
12/27/96 11.8100 120.130 0.137 15.21 0.814 90.49 8.950 1,418.74
12/31/96 11.7000 120.130 1,405.52
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 13.65%
ERV = Ending Redeemable Value $1,405.52 Overall Total Return 40.55%
n = Number of Time Periods 2.66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
---------------------------------------------------------------
NORTHSTAR MULTI-SECTOR BOND V/A
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>
1/ 1/96 1,000.00 5.1400 194.553 194.553 1,000.00
3/26/96 5.1500 198.388 0.012 19.75 0.000 0.00 3.835 1,021.70
6/25/96 5.1600 202.778 0.114 22.65 0.000 0.00 4.390 1,046.33
9/25/96 5.2200 206.483 0.095 19.34 0.000 0.00 3.705 1,077.84
12/27/96 5.2500 214.340 0.102 21.09 0.098 20.16 7.857 1,125.29
12/31/96 5.2500 214.340 1,125.29
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 12.53%
ERV = Ending Redeemable Value $1,125.29 Overall Total Return 12.53%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
---------------------------------------------------------------
NORTHSTAR MULTI-SECTOR BOND V/A
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
3/23/95 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
3/26/96 5.1500 231.309 0.102 23.02 0.000 0.00 4.470 1,191.24
6/25/96 5.1600 236.427 0.114 26.41 0.000 0.00 5.118 1,219.96
9/25/96 5.2200 240.747 0.095 22.55 0.000 0.00 4.320 1,256.70
12/27/96 5.2500 249.905 0.102 24.58 0.098 23.50 9.158 1,312.00
12/31/96 5.2500 249.905 1,312.00
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 10.75%
ERV = Ending Redeemable Value $1,312.00 Overall Total Return 31.20%
n = Number of Time Periods 2.66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
---------------------------------------------------------------
NORTHSTAR HIGH YIELD BOND V/A
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>
1/ 1/96 1,000.00 5.0400 198.413 198.413 1,000.00
3/26/96 5.1400 203.288 0.126 25.06 0.000 0.00 4.875 1,044.90
6/25/96 5.2100 208.100 0.123 25.07 0.000 0.00 4.812 1,084.20
9/25/96 5.2300 212.184 0.103 21.36 0.000 0.00 4.084 1,109.72
12/27/96 5.2700 219.639 0.100 21.26 0.085 18.03 7.455 1,157.50
12/31/96 5.2700 219.639 1,157.50
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 15.75%
ERV = Ending Redeemable Value $1,157.50 Overall Total Return 15.75%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
---------------------------------------------------------------
NORTHSTAR HIGH YIELD BOND V/A
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
3/26/96 5.1400 238.712 0.126 29.43 0.000 0.00 5.726 1,226.98
6/25/96 5.2100 244.361 0.123 29.43 0.000 0.00 5.649 1,273.12
9/25/96 5.2300 249.156 0.103 25.08 0.000 0.00 4.795 1,303.09
12/27/96 5.2700 257.911 0.100 24.97 0.085 21.17 8.755 1,359.19
12/31/96 5.2700 257.911 1,359.19
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P (1+T) ^n
Overall Total Return: ERV/P -1
<TABLE>
<CAPTION>
<S> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 12.23%
ERV = Ending Redeemable Value $1,359.19 Overall Total Return 35.92%
n = Number of Time Periods 2.66
</TABLE>
<PAGE>
<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
<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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<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>
(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>
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. 5
to the registration Statement of Northstar Variable Trust on Form N-1A of our
report dated _________ on our audit of the financial statements and financial
highlights of Northstar Variable 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 ________________ and
in the Statement of Additional Information under the captions "Independent
Accountants" and Financial Statements."
COOPERS & LYBRAND L.L.P.
New York, New York
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