-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ww3W9/RAedZ1fjeDcSEQPMWRq/D3tOFiqDKBPbQGdEUqj8DeWwg1z5R6aBS+ti75 o3CqId7138f0psX4gAIFnA== 0000950135-96-001803.txt : 19960426 0000950135-96-001803.hdr.sgml : 19960426 ACCESSION NUMBER: 0000950135-96-001803 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 27 FILED AS OF DATE: 19960425 EFFECTIVENESS DATE: 19960430 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASL SERIES TRUST CENTRAL INDEX KEY: 0000756913 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-94157 FILM NUMBER: 96550537 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04146 FILM NUMBER: 96550538 BUSINESS ADDRESS: STREET 1: 116 HUNTINGTON AVE CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6172666004 MAIL ADDRESS: STREET 1: 116 HUNTINGTON AVE CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: NASL SERIES FUND INC DATE OF NAME CHANGE: 19881030 485BPOS 1 NASL SERIES TRUST 1 Registration No. 2-94157/811-4146 As filed with the Securities and Exchange Commission on April 25, 1996 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________ FORM N-1A REGISTRATION STATEMENT under THE SECURITIES ACT OF 1933 POST-EFFECTIVE AMENDMENT NO.31 and THE INVESTMENT COMPANY ACT OF 1940 AMENDMENT NO. 32 _________________________ NASL SERIES TRUST (Exact Name of Registrant as Specified in Charter) 116 Huntington Avenue Boston, Massachusetts 02116 (Address of Principal Executive Offices) _________________________ James D. Gallagher, Esq. General Counsel North American Security Life Insurance Company 116 Huntington Avenue Boston, Massachusetts 02116 (Name and Address of Agent for Service) Copies to: J. Sumner Jones, Esq. Jones & Blouch L.L.P. 1025 Thomas Jefferson Street, N.W. Washington, DC 20007 The Registrant has registered an indefinite amount of its shares under the Securities Act of 1933 pursuant to a declaration made in accordance with paragraph (a)(1) of Rule 24f-2 under the Investment Company Act of 1940. The notice required by such rule for the Registrant's most recent fiscal year was filed on FEBRUARY 28, 1996. It is proposed that this filing will become effective: _____ immediately upon filing pursuant to paragraph (b) __X__ on APRIL 30, 1996 pursuant to paragraph (b) _____ 60 days after filing pursuant to paragraph (a) _____ 75 days after filing pursuant to paragraph (a) _____ on (date) pursuant to paragraph (a) of Rule 485 2 NASL SERIES TRUST CROSS REFERENCE TO ITEMS REQUIRED BY RULE 404(A) N-1A Item of Part A Caption in Prospectus 1. Cover Page 2. Synopsis 3. Financial Highlights; Management of the Trust (Performance Data) 4. Synopsis; Investment Objectives, Policies and Risks International Small Cap Trust, Global Equity Trust; Pasadena Growth Trust; Equity Trust; Value Equity Trust; Growth and Income Trust; International Growth and Income Trust, Strategic Bond Trust; Global Government Bond Trust; Investment Quality Bond Trust; U.S. Government Securities Trust; Money Market Trust; Automatic Asset Allocation Trusts); Risk Factors (Investment Restrictions Generally; Foreign Securities; Lending Securities; When-Issued Securities; Hedging Techniques); Appendix I - Debt Security Ratings; Appendix II -Options, Futures and Currency Transactions 5. Management of the Trust (Advisory Agreement; Subadvisory Agreements; Expenses); General Information (Custodian and Transfer and Dividend Disbursing Agent) 6. General Information (Shares of the Trust; Taxes; Dividends) 7. General Information (Purchase and Redemption of Shares) 8. General Information (Purchase and Redemption of Shares) 9. Not Applicable N-1A Item of Part B Caption in Part B 10. Cover Page 11. Table of Contents 12. Not Applicable 13. Investment Policies (Money Market Instruments); Investment Restrictions; Portfolio Turnover 14. Management of the Trust (Compensation of Trustees) 15. Organization of the Trust (Principal Holders of Securities) 16. Investment Management Arrangements (The Advisory Agreement; The Subadvisory Agreements 17. Investment Management Arrangements (Portfolio Brokerage) 18. Organization of the Trust (Shares of the Trust) 3 19. Purchase and Redemption of Shares (Determination of Net Asset Value) 20. Not Applicable 21. Not Applicable 22. Purchase and Redemption of Shares (Performance Data) 23. Financial Statements 4 PART A INFORMATION REQUIRED IN A PROSPECTUS 5 NASL SERIES TRUST 116 Huntington Avenue Boston, Massachusetts 02116 NASL Series Trust (the "Trust") is a no-load, open-end management investment company, commonly known as a mutual fund. Shares of the Trust are not offered directly to the public but are sold only to insurance companies and their separate accounts as the underlying investment medium for variable contracts ("contracts"). The Trust provides a range of investment objectives through sixteen separate investment portfolios, each of which issues its own series of shares of beneficial interest. The SMALL/MID CAP TRUST seeks long-term capital appreciation by investing at least 65% of its assets in companies that at the time of purchase have total market capitalization between $500 million and $5 billion The INTERNATIONAL SMALL CAP TRUST seeks long term capital appreciation by investing primarily in securities issued by foreign companies which have total market capitalization or annual revenue of $1 billion or less. THE GLOBAL EQUITY TRUST seeks long-term capital appreciation, by investing primarily in a globally diversified portfolio of common stocks and securities convertible into or exercisable for common stocks. THE PASADENA GROWTH TRUST seeks to achieve long-term growth of capital by emphasizing investments in companies with rapidly growing earnings per share, some of which may be smaller emerging growth companies. THE EQUITY TRUST seeks growth of capital, by investing primarily in common stocks of United States issuers and securities convertible into or carrying the right to buy common stocks. THE VALUE EQUITY TRUST seeks long-term growth of capital by investing primarily in common stocks and securities convertible into or carrying the right to buy common stocks. THE GROWTH AND INCOME TRUST seeks long-term growth of capital and income, consistent with prudent investment risk, by investing primarily in a diversified portfolio of common stocks of United States issuers which the Subadviser believes are of high quality. THE INTERNATIONAL GROWTH AND INCOME TRUST seeks long-term growth of capital and income by investing primarily in a portfolio of securities of foreign issuers. THE STRATEGIC BOND TRUST seeks a high level of total return consistent with preservation of capital by giving its Subadviser broad discretion to deploy the portfolio's assets among certain segments of the fixed-income market as the Subadviser believes will best contribute to achievement of the portfolio's investment objective. THE GLOBAL GOVERNMENT BOND TRUST seeks a high level of total return by placing primary emphasis on high current income and the preservation of capital, by investing primarily in a global portfolio of high-quality, fixed-income securities of foreign and United States governmental entities and supranational issuers. THE INVESTMENT QUALITY BOND TRUST seeks a high level of current income consistent with the maintenance of principal and liquidity, by investing primarily in a diversified portfolio of investment grade corporate bonds and U.S. Government bonds with intermediate to longer term maturities. Up to 20% of the portfolio's assets may be invested in below investment grade debt securities. THE U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current income consistent with preservation of capital and maintenance of liquidity, by investing in debt obligations and mortgage-backed securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities and derivative securities such as collateralized mortgage obligations backed by such securities. THE MONEY MARKET TRUST seeks maximum current income consistent with preservation of principal and liquidity, by investing in high quality money market instruments with maturities of 397 days or less issued primarily by United States entities. THE AUTOMATIC ASSET ALLOCATION TRUSTS seek the highest potential total return consistent with a specified level of risk tolerance -- conservative, moderate or aggressive -- by investing primarily in the kinds of securities in which the Equity, Investment Quality Bond, U.S. Government Securities and Money Market Trusts may invest. * THE AGGRESSIVE ASSET ALLOCATION TRUST seeks the highest total return consistent with an aggressive level of risk tolerance. This Trust attempts to limit the decline in portfolio value in very adverse market conditions to 15% over any twelve month period. * THE MODERATE ASSET ALLOCATION TRUST seeks the highest total return consistent with a moderate level of risk tolerance. This Trust attempts to limit the decline in portfolio value in very adverse market conditions to 10% over any twelve month period. * THE CONSERVATIVE ASSET ALLOCATION TRUST seeks the highest total return consistent with a conservative level of risk tolerance. This Trust attempts to limit the decline in portfolio value in very adverse market conditions to 5% over any twelve month period. THERE CAN BE NO ASSURANCE THAT THE LIMITS IN PORTFOLIO DECLINE SET FORTH ABOVE FOR THE AUTOMATIC ASSET ALLOCATION TRUSTS WILL NOT BE EXCEEDED. In pursuing their investment objectives, the Strategic Bond Trust reserves the right to invest without limitation, and the Investment Quality Bond Trust may invest up to 20% of its assets, in high yield (high risk) securities, commonly known as "junk bonds" which also present a high degree of risk. High-yielding, lower-quality securities involve comparatively greater risks, including price volatility and risk of default in the timely payment of interest and principal, than higher-quality securities. Although the Strategic Bond Trust's Subadviser has the ability to invest up to 100% of the portfolio's assets in lower-rated securities, the portfolio's Subadviser does not anticipate investing in excess of 75% of the portfolio's assets in such securities. Purchasers should carefully assess the risks associated with an investment in the Strategic Bond Trust. See "RISK FACTORS -- High Yield (High Risk) Securities." AN INVESTMENT IN THE MONEY MARKET TRUST IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET TRUST WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $10.00 PER SHARE. This Prospectus sets forth concisely the information about the Trust that a prospective purchaser of a contract should know before purchasing such a contract. PLEASE READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE. Additional information about the Trust has been filed with the Securities and Exchange Commission and is available upon request and without charge by writing the Trust at the above address or calling (617) 266-6008 and requesting the "Statement of Additional Information for NASL Series Trust" dated the date of this Prospectus (hereinafter "Statement of Additional Information"). The Statement of Additional Information is incorporated by reference into this Prospectus. SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is May 1, 1996. 6 NASL SERIES TRUST TABLE OF CONTENTS SYNOPSIS .................................................. 3 FINANCIAL HIGHLIGHTS ...................................... 4 INVESTMENT OBJECTIVES AND POLICIES......................... 18 Small/Mid Cap Trust .................................... 19 International Small Cap Trust .......................... 20 Global Equity Trust .................................... 21 Pasadena Growth Trust .................................. 21 Equity Trust............................................ 22 Value Equity Trust ..................................... 22 Growth and Income Trust ................................ 22 International Growth and Income Trust .................. 23 Strategic Bond Trust ................................... 24 Global Government Bond Trust ........................... 26 Investment Quality Bond Trust .......................... 27 U.S. Government Securities Trust ....................... 28 Money Market Trust ..................................... 29 Automatic Asset Allocation Trusts ...................... 30 RISK FACTORS .............................................. 32 Investment Restrictions Generally ...................... 32 Additional Investment Restrictions on Borrowing and Foreign Investing...................................... 33 High Yield Securities................................... 33 Corporate Debt Securities............................... 34 Foreign Sovereign Debt Securities ...................... 34 Foreign Securities...................................... 35 Warrants ............................................... 36 Lending Securities...................................... 36 When-Issued Securities ................................. 36 Repurchase Agreements and Reverse Repurchase Agreements. 37 Mortgage Dollar Rolls .................................. 37 Hedging and Other Strategic Transactions................ 37 Illiquid Securities .................................... 38 MANAGEMENT OF THE TRUST ................................... 38 Advisory Arrangements................................... 39 Subadvisory Arrangements................................ 40 Expenses ............................................... 45 Performance Data ....................................... 45 GENERAL INFORMATION ....................................... 46 Shares of the Trust .................................... 46 Taxes .................................................. 46 Dividends .............................................. 47 Purchase and Redemption of Shares ...................... 47 Custodian .............................................. 48 Appendix I - Debt Security Ratings ........................ 48 Appendix II - Strategic Bond Trust Debt Ratings............ 50
______________________ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST, THE ADVISER, THE SUBADVISERS OR THE PRINCIPAL UNDERWRITER OF THE CONTRACTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. 2 7 SYNOPSIS NASL Series Trust (the "Trust") is a series trust, which means that it has several portfolios, each with a stated investment objective which it pursues through separate investment policies. Currently, there are sixteen such portfolios: the Small/Mid Cap Trust, the International Small Cap Trust, the Global Equity Trust, the Pasadena Growth Trust, the Equity Trust, the Value Equity Trust, the Growth and Income Trust, the International Growth and Income Trust, the Strategic Bond Trust, the Global Government Bond Trust, the Investment Quality Bond Trust, the U.S. Government Securities Trust, the Money Market Trust, the Aggressive Asset Allocation Trust, the Moderate Asset Allocation Trust and the Conservative Asset Allocation Trust. (The Aggressive, Moderate and Conservative Asset Allocation Trusts are referred to collectively as the "Automatic Asset Allocation Trusts.") The investment objective of each of the sixteen portfolios is as described on the cover page of this Prospectus. In addition to the risks inherent in any investment in securities, certain portfolios of the Trust are subject to particular risks associated with investing in foreign securities, lending portfolio securities, investing in when-issued securities and hedging techniques employed through the use of futures contracts, options on futures contracts, forward currency contracts and various options. See "Investment Restrictions." The investment adviser of the Trust is NASL Financial Services, Inc. ("NASL Financial" or the "Adviser"). The Trust currently has nine Subadvisers. Fred Alger Management, Inc. ("Alger") serves as Subadviser to the Small/Mid Cap Trust. Founders Asset Management, Inc. ("Founders") serves as Subadviser to the International Small Cap Trust. Oechsle International Advisors, L.P. ("Oechsle International") serves as Subadviser to the Global Equity and Global Government Bond Trusts. Roger Engemann Management Co., Inc. ("REMC") serves as Subadviser to the Pasadena Growth Trust. Fidelity Management Trust Company ("FMTC") serves as Subadviser to the Equity, and the three Automatic Asset Allocation Trusts. Goldman Sachs Asset Management ("GSAM") serves as Subadviser to the Value Equity Trust. Wellington Management Company ("Wellington Management") serves as Subadviser to the Growth and Income, Investment Quality Bond and Money Market Trusts. Salomon Brothers Asset Management ("SBAM") serves as Subadviser to the U.S. Government Securities and Strategic Bond Trusts. J.P. Morgan Investment Management Inc. ("J.P. Morgan") serves as Subadviser to the International Growth and Income Trust. The Adviser receives a fee from the Trust computed separately for each portfolio as indicated in the expense table below. The Subadviser of each portfolio receives a fee from the Adviser computed separately for each portfolio, which fee is paid out of the advisory fee and is not an additional charge to the portfolio or its shareholders. See "Management of the Trust." The Trust currently serves as the underlying investment medium for sums invested in annuity and variable life contracts issued by North American Security Life Insurance Company ("Security Life"), First North American Life Assurance Company ("FNAL") and The Manufacturers Life Insurance Company of America ("Manulife America"). The portfolios that are available for investment by Manulife America contractholders are as follows: the Equity, Value Equity, Growth and Income, U.S. Government, Aggressive Asset Allocation, Moderate Asset Allocation and Conservative Asset Allocation Trusts. The Trust may, however, be used for other purposes in the future, such as funding annuity contracts issued by other insurance companies. Security Life is controlled by The Manufacturers Life Insurance Company ("Manulife"), a mutual life insurance company based in Toronto, Canada. FNAL is a wholly-owned subsidiary of Security Life and Manulife America is a wholly owned subsidiary of Manulife. Currently, the Trust has three shareholders, Security Life, FNAL and Manulife America. Trust shares are not offered directly to and may not be purchased directly by members of the public. Consequently, as of the date of this Prospectus, the terms "shareholder" and "shareholders" in this Prospectus refer to Security Life, Manulife America and FNAL. Certain contract values will vary with the investment performance of the portfolios of the Trust. Because contract owners will allocate their investments among the portfolios, prospective purchasers should carefully consider the information about the Trust and its portfolios presented in this Prospectus before purchasing such a contract. The Trust is a no-load, open-end management investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940, and each of the portfolios, except the Global Government Bond Trust, is diversified for purposes of the Investment Company Act of 1940. See "Global Government Bond Trust." Information about the performance of each portfolio of the Trust is contained in the Trust's annual report to shareholders which may be obtained without charge. 3 8 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
GLOBAL EQUITY TRUST ------------------------------------------------------------------------------------------ YEARS ENDED DECEMBER 31, 3/18/88* ------------------------------------------------------------------------------ TO 1995 1994 1993 1992 1991 1990 1989 12/31/88 --------- --------- --------- --------- --------- -------- -------- -------- Net asset value, beginning of period........................... $ 15.74 $ 15.73 $ 12.00 $ 12.24 $ 11.00 $ 12.57 $ 10.15 $10.03 Income from investment operations: - ---------------------------------- Net investment income (loss) (B)... 0.29 0.05 0.12 0.10 0.16 0.12 0.10 (0.05) Net realized and unrealized gain (loss) on investments and foreign currency transactions.... 0.84 0.22 3.79 (0.19) 1.23 (1.41) 2.32 0.17 -------- -------- -------- -------- ------- ------- ------- ------ Total from investment operations................. 1.13 0.27 3.91 (0.09) 1.39 (1.29) 2.42 0.12 Less distributions: - ------------------- Dividends from net investment income............................ (0.08) (0.02) (0.18) (0.15) (0.15) (0.04) --- --- Distributions from capital gains.... (0.69) (0.24) --- --- --- (0.24) --- --- -------- -------- -------- -------- ------- ------- ------- ------ Total distributions............. (0.77) (0.26) (0.18) (0.15) (0.15) (0.28) --- --- -------- -------- -------- -------- ------- ------- ------- ------ Net asset value, end of period........ $ 16.10 $ 15.74 $ 15.73 $ 12.00 $ 12.24 $ 11.00 $ 12.57 $10.15 ======== ======== ======== ======== ======= ======= ======= ====== Total return.................... 7.68% 1.74% 32.89% (0.72%) 12.80% (10.43%) 23.84% 1.20% Net assets, end of period (000's)..... $648,183 $616,138 $377,871 $116,731 $89,003 $63,028 $26,223 $2,143 Ratio of operating expenses to average net assets (C)............. 1.05% 1.08% 1.16% 1.16% 1.23% 1.28% 1.62% 3.98%(A) Ratio of net investment income (loss) to average net assets............... 0.61% 0.44% 0.77% 1.12% 1.47% 1.97% 1.82% (1.71%)(A) Portfolio turnover rate............... 63% 52% 52% 69% 74% 67% 109% 81%(A) - --------------------------------- * Commencement of operations. (A) Annualized (B) After expense reimbursement per share of $0.02 in 1988. (C) The ratio of operating expenses, before reimbursement from the investment adviser, was 4.53% in 1988.
4 9 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
PASADENA GROWTH TRUST ----------------------------------------------------------- YEARS ENDED DECEMBER 31, 12/11/92* ----------------------------------------- TO 1995 1994 1993 12/31/92 -------- -------- -------- ------------ Net asset value, beginning of period....................... $ 9.05 $ 9.55 $ 9.93 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income (B)................................. 0.03 0.04 0.05 0.00 Net realized and unrealized gain (loss) on investments.................................... 2.36 (0.50) (0.42) (0.07) -------- -------- -------- ------- Total from investment operations.................. 2.39 (0.46) (0.37) (0.07) Less distributions: - ------------------- Dividends from net investment income....................... (0.04) (0.04) (0.01) --- -------- -------- -------- ------- Total distributions............................... (0.04) (0.04) (0.01) --- -------- -------- -------- ------- Net asset value, end of period............................. $ 11.40 $ 9.05 $ 9.55 $ 9.93 ======== ======== ======== ======= Total return...................................... 26.53% (4.80%) (3.80%) (0.70%) Net assets, end of period (000's).......................... $277,674 $151,727 $104,966 $31,118 Ratio of operating expenses to average net assets (C).................................. 0.975% 0.975% 0.975% 1.06%(A) Ratio of net investment income to average net assets....................................... 0.42% 0.65% 0.75% 1.04%(A) Portfolio turnover rate.................................... 57% 33% 12% 0%(A) - ----------------------------- * Commencement of operations. (A) Annualized (B) After subadviser expense reimbursement per share of $0.004, $0.006 and $0.01 for the years ended December 31, 1995, 1994 and 1993, respectively. (C) The ratio of operating expenses, before reimbursement from the subadviser, was 1.03%, 1.06% and 1.09% for the years ended December 31, 1995, 1994 and 1993, respectively.
5 10 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
EQUITY TRUST ------------------------------------------------------------------------------------------------------------ YEARS ENDED DECEMBER 31, 6/18/85* ------------------------------------------------------------------------------------------------- TO 1995 1994 1993** 1992 1991 1990 1989 1988 1987 1986 12/31/85 -------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------ Net asset value, beginning of period............ $ 14.66 $ 15.57 $ 13.97 $ 13.12 $ 11.33 $ 19.14 $ 15.17 $ 12.57 $ 13.01 $11.39 $10.72% Income from investment operations: ----------- Net investment income (B)...... 0.10 0.11 0.07 0.64 0.14 0.24 0.29 0.15 0.19 0.27 0.12 Net realized and unrealized gain (loss) on investments and foreign currency transactions.... 6.14 (0.18) 2.11 0.38 1.88 (1.95) 3.87 2.45 0.97 1.80 0.55 -------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------ Total from investment operations...... 6.24 (0.07) 2.18 1.02 2.02 (1.71) 4.16 2.60 1.16 2.07 0.67 Less distributions: -------------- Dividends from net investment income........... (0.11) (0.05) (0.58) (0.17) (0.23) (0.29) (0.12) --- (0.14) (0.24) --- Distributions from capital gains............ --- (0.79) --- --- --- (5.81) (0.07) --- (1.46) (0.21) --- -------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------ Total distributions.. (0.11) (0.84) (0.58) (0.17) (0.23) (6.10) (0.19) --- (1.60) (0.45) --- -------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------ Net asset value, end of period...... $ 20.79 $ 14.66 $ 15.57 $ 13.97 $ 13.12 $ 11.33 $ 19.14 $ 15.17 $ 12.57 $13.01 $11.39 ======== ======== ======== ======== ======= ======== ======== ========= ========= ====== ====== Total return... 42.79% (0.53%) 16.31% 7.93% 17.94% (11.79%) 27.70% 20.71% 6.87% 18.50% 6.20% Net assets, end of period (000's)..... $988,800 $534,562 $387,842 $192,626 $88,235 $36,564 $32,108 $133,852 $37,001 $1,408 $1,143 Ratio of operating expenses to average net assets (C)......... 0.80% 0.84% 0.88% 0.95% 0.89% 0.97% 1.02% 1.08% 1.15% 1.41% 1.57%(A) Ratio of net investment income to average net assets............. 0.63% 0.88% 0.50% 7.31% 2.23% 2.74% 1.90% 1.80% 1.33% 1.19% 2.05%(A) Portfolio turnover rate............... 88% 132% 173% 782% 172% 95% 111% 49% 64% 209% 214%(A) - -------------------------- * Commencement of operations. ** Net investment income per share was calculated using the average shares method for fiscal year 1993. (A) Annualized (B) After expense reimbursement per share of $0.02, $0.53 and $0.14 in 1987, 1986 and 1985, respectively. (C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.30%, 3.71% and 4.69% in 1987, 1986 and 1985, respectively.
6 11 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
VALUE EQUITY TRUST ----------------------------------------------------------- YEARS ENDED DECEMBER 31, 02/19/93* ---------------------------------------- TO 1995 1994** 12/31/93 ----------------- ----------------- ----------------- Net asset value, beginning of period.................................... $ 11.33 $ 11.31 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income.......................... 0.17 0.12 0.07 Net realized and unrealized gain (loss) on investments........................ 2.49 (0.03) 1.24 -------- -------- ------- Total from investment operations....................... 2.66 0.09 1.31 Less distributions: - ------------------- Dividends from net investment income........... (0.08) (0.05) --- Distributions from capital gains............... (0.10) (0.02) --- -------- -------- ------- Total distributions................ (0.18) (0.07) --- -------- -------- ------- Net asset value, end of period................. $ 13.81 $ 11.33 $ 11.31 ======== ======== ======= Total return....................... 23.69% 0.79% 13.10% Net assets, end of period (000's).............. $396,827 $221,835 $86,472 Ratio of operating expenses to average net assets........................... 0.85% 0.87% 0.94%(A) Ratio of net investment income to average net assets........................... 1.63% 1.08% 1.30%(A) Portfolio turnover rate........................ 52% 26% 33%(A) - ----------------------------- * Commencement of operations. ** Net investment income per share was calculated using the average shares method for fiscal year 1994. (A) Annualized
7 12 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
GROWTH AND INCOME TRUST --------------------------------------------------------------- YEARS ENDED DECEMBER 31, 4/23/91* ------------------------------------------------- TO 1995 1994 1993 1992 12/31/91 ---------- -------- -------- -------- -------- Net asset value, beginning of period.................................... $ 13.04 $ 13.05 $ 12.10 $ 11.08 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income....................... 0.27 0.25 0.17 0.20 0.13 Net realized and unrealized gain on investments and foreign currency transactions............................. 3.45 0.11 0.98 0.92 0.95 -------- -------- -------- -------- ------- Total from investment operations...... 3.72 0.36 1.15 1.12 1.08 Less distributions: - ------------------- Dividends from net investment income........ (0.26) (0.19) (0.18) (0.10) --- Distributions from capital gains............ (0.13) (0.18) (0.02) --- --- -------- -------- -------- -------- ------- Total distributions................... (0.39) (0.37) (0.20) (0.10) --- -------- -------- -------- -------- ------- Net asset value, end of period................. $ 16.37 $ 13.04 $ 13.05 $ 12.10 $ 11.08 ======== ======== ======== ======== ======= Total return......................... 29.20% 2.85% 9.62% 10.23% 10.80% Net assets, end of period (000's).............. $669,387 $409,534 $288,765 $130,984 $57,404 Ratio of operating expenses to average net assets........................... 0.80% 0.82% 0.85% 0.85% 0.98%(A) Ratio of net investment income to average net assets........................... 2.23% 2.40% 2.29% 2.78% 2.92%(A) Portfolio turnover rate....................... 39% 42% 39% 44% 62%(A) - ------------------ * Commencement of operations. (A) Annualized
8 13 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
INTERNATIONAL GROWTH AND INCOME TRUST ------------------ 01/09/95* TO 12/31/95 ------------------ Net asset value, beginning of period.................................... $ 10.00 Income from investment operations: - ---------------------------------- Net investment income....................... 0.11 Net realized and unrealized loss on investments and foreign currency transactions............................. 0.59 -------- Total from investment operations.......................... 0.70 Less distributions: - ------------------- Dividends from net investment income......... (0.12) Distributions from capital gains............. (0.11) -------- Total distributions................... (0.23) -------- Net asset value, end of period................. $ 10.47 ======== Total return.......................... 6.98% Net assets, end of period (000's).............. $88,638 Ratio of operating expenses to average net assets........................... 1.47%(A) Ratio of net investment income to average net assets........................... 0.71%(A) Portfolio turnover rate........................ 112%(A) - ----------------------------- * Commencement of operations. (A) Annualized
9 14 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
STRATEGIC BOND TRUST --------------------------------------- YEARS ENDED DECEMBER 31, 02/19/93* ------------------------- TO 1995 1994 12/31/93 ---- ---- -------- Net asset value, beginning of period.................................... $ 9.91 $10.88 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income....................... 0.78 0.57 0.33 Net realized and unrealized gain (loss) on investments and foreign currency transactions............................. 1.04 (1.22) 0.55 -------- ------ ------- Total from investment operations.......................... 1.82 (0.65) 0.88 Less distributions: - ------------------- Dividends from net investment income........ (0.47) (0.28) ---- Distributions from capital gains............ ---- (0.04) ---- -------- ------ ------- Total distributions................... (0.47) (0.32) -- -------- ------ ------- Net asset value, end of period................. $ 11.26 $ 9.91 $ 10.88 ======== ======= ======= Total return.......................... 19.22% (5.99%) 8.80% Net assets, end of period (000's).............. $122,704 $84,433 $53,640 Ratio of operating expenses to average net assets........................... 0.92% 0.91% 1.00%(A) Ratio of net investment income to average net assets........................... 8.76% 7.49% 6.56%(A) Portfolio turnover rate........................ 181% 197% 356%(A) - ---------- * Commencement of operations. (A) Annualized
10 15 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND TRUST ------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 3/18/88* --------------------------------------------------------------- TO 1995 1994 1993 1992 1991 1990 1989 12/31/88 ---- ---- ---- ---- ---- ---- ---- -------- Net asset value, beginning of period................................$ 12.47 $ 13.93 $ 12.47 $ 12.88 $ 11.59 $ 10.50 $10.21 $10.03 Income from investment operations: - ---------------------------------- Net investment income.................... 1.16 0.74 0.59 0.42 0.55 0.25 0.45 0.14 Net realized and unrealized gain (loss) on investments and foreign currency transactions........ 1.62 (1.54) 1.67 (0.16) 1.21 1.13 -- 0.04 Total from investment operations.. 2.78 (0.80) 2.26 0.26 1.76 1.38 0.45 0.18 Less distributions: - ------------------- Dividends from net investment income..... (0.69) (0.30) (0.70) (0.43) (0.46) (0.24) (0.09) -- Distributions from capital gains......... -- (0.36) (0.10) (0.24) (0.01) (0.05) (0.07) -- -------- -------- -------- ------- ------- ------- ------ ------ Total distributions............... (0.69) (0.66) (0.80) (0.67) (0.47) (0.29) (0.16) -- -------- -------- -------- ------- ------- ------- ------ ------ Net asset value, end of period.............$ 14.56 $ 12.47 $ 13.93 $ 12.47 $ 12.88 $ 11.59 $10.50 $10.21 ======== ======== ======== ======= ======= ======= ====== ====== Total return..................... 23.18% (5.75%) 18.99% 2.27% 15.86% 13.49% 4.49% 1.79% Net assets, end of period (000's)......... $235,243 $208,513 $196,817 $67,859 $28,251 $11,582 $4,065 $1,355 Ratio of operating expenses to average net assets....................... 0.93% 0.96% 1.06% 1.05% 1.14% 1.21% 1.50% 3.39%(A) Ratio of net investment income to average net assets....................... 6.83% 6.10% 5.61% 6.71% 17.28% 6.62% 7.15% 3.74%(A) Portfolio turnover rate.................... 171% 157% 154% 132% 164% 142% 50% 234%(A) - ---------- * Commencement of operations. (A) Annualized
11 16 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
INVESTMENT QUALITY BOND TRUST ------------------------------------------------------------------------------------------ YEARS ENDED DECEMBER 31, 6/18/85* -------------------------------------------------------------------------------- TO 1995 1994 1993 1992 1991** 1990 1989 1988 1987 1986 12/31/85 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -------- Net asset value, beginning of period....... $ 11.01 $ 12.12 $ 11.58 $ 11.33 $ 10.74 $ 12.37 $ 11.55 $ 10.79 $ 11.58 $11.18 $10.28 Income from investment operations: - ---------------------- Net investment income (B).............. 0.77 0.66 0.60 0.63 0.76 1.12 0.75 0.57 0.81 1.02 0.55 Net realized and unrealized gain (loss) on investments.......... 1.28 (1.23) 0.53 0.15 0.85 (1.50) 0.51 0.19 (0.50) 0.37 0.35 Total from investment operations......... 2.05 (0.57) 1.13 0.78 1.61 (0.38) 1.26 0.76 0.31 1.39 0.90 Less distributions: - ------------------- Dividends from net investment income....... (0.74) (0.54) (0.59) (0.53) (1.02) (1.25) (0.44) -- (0.88) (0.69) -- Distributions from capital gains........... -- -- -- -- -- -- -- -- (0.22) (0.30) -- -------- -------- ------- ------- ------- ------- ------- -------- ------- ------ ------ Total distributions.. (0.74) (0.54) (0.59) (0.53) (1.02) (1.25) (0.44) -- (1.10) (0.99) -- -------- -------- ------- ------- ------- ------- ------- -------- ------- ------ ------ Net asset value, end of period............. $ 12.32 $ 11.01 $ 12.12 $ 11.58 $ 11.33 $ 10.74 $ 12.37 $ 11.55 $ 10.79 $11.58 $11.18 ======== ======== ======= ======= ======= ======= ======= ======== ======= ====== ====== Total return......... 19.49% (4.64%) 10.01% 7.21% 16.07% (2.73%) 11.34% 7.09% 2.61% 13.25% 8.72% Net assets, end of period (000's)............ $143,103 $111,423 $99,474 $60,185 $38,896 $20,472 $26,965 $114,221 $25,131 $1,295 $1,120 Ratio of operating expenses to average net assets (C)................ 0.74% 0.76% 0.77% 0.80% 0.85% 0.70% 0.83% 0.89% 0.95% 1.16% 1.31%(A) Ratio of net investment income to average net assets.................... 6.91% 6.49% 6.03% 6.96% 7.47% 8.41% 8.77% 7.97% 7.46% 8.11% 9.99%(A) Portfolio turnover rate.... 137% 140% 33% 59% 115% 120% 351% 94% 201% 127% 165%(A) - ---------- * Commencement of operations. ** The Investment Quality Bond Trust is the successor to the Bond Trust effective April 23, 1991. (A) Annualized (B) After expense reimbursement per share of $0.02, $0.28 and $0.12 in 1987, 1986 and 1985, respectively. (C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.14%, 3.38% and 3.55% in 1987, 1986 and 1985, respectively.
12 17 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES TRUST -------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 3/18/88* --------------------------------------------------------------------- TO 1995 1994 1993 1992 1991 1990 1989** 12/31/88 ---- ---- ---- ---- ---- ---- ---- -------- Net asset value, beginning of period................................ $ 12.64 $ 13.48 $ 13.05 $ 12.85 $ 11.83 $ 10.98 $ 9.81 $10.03 Income from investment operations: - ---------------------------------- Net investment income (B)............... 0.89 0.77 0.48 0.10 0.19 1.07 0.20 0.07 Net realized and unrealized gain (loss) on investments.................. 0.99 (0.95) 0.49 0.65 1.40 (0.13) 1.08 (0.29) -------- -------- -------- -------- ------- ------- ------ ------ Total from investment operations.. 1.88 (0.18) 0.97 0.75 1.59 0.94 1.28 (0.22) Less distributions: - ------------------- Dividends from net investment income..... (0.87) (0.51) (0.46) (0.38) (0.53) (0.08) (0.11) -- Distributions from capital gains......... -- (0.15) (0.08) (0.17) (0.04) (0.01) -- -- -------- -------- -------- -------- ------- ------- ------ ------ Total distributions............... (0.87) (0.66) (0.54) (0.55) (0.57) (0.09) (0.11) -- -------- -------- -------- -------- ------- ------- ------ ------ Net asset value, end of period............. $ 13.65 $ 12.64 $ 13.48 $ 13.05 $ 12.85 $ 11.83 $10.98 $ 9.81 ======== ======== ======== ======== ======= ======= ====== ====== Total return..................... 15.57% (1.25%) 7.64% 6.19% 14.01% 8.63% 13.16% (2.19%) Net assets, end of period (000's).......... $216,788 $188,813 $222,072 $125,945 $29,246 $10,469 $5,905 $ 344 Ratio of operating expenses to average net assets (C).................. 0.71% 0.73% 0.75% 0.76% 0.87% 1.04% 0.90% 5.16%(A) Ratio of net investment income to average net assets....................... 6.46% 5.68% 5.05% 6.12% 7.09% 7.70% 6.66% 1.16%(A) Portfolio turnover rate.................... 212% 387% 213% 141% 233% 284% 330% 156%(A) - ---------- * Commencement of operations. ** The U.S. Government Securities Trust is the successor to the Convertible Securities Trust effective May 1, 1989. (A) Annualized (B) After expense reimbursement per share of $0.01 and $0.06 in 1989 and 1988, respectively. (C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.62% and 6.16% in 1989 and 1988, respectively.
13 18 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
MONEY MARKET TRUST -------------------------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 6/18/85* ---------------------------------------------------------------------------------------- TO 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 12/31/85 ------- ------- ------ ------ ------ ------- ------ ------ ------ ------ -------- Net asset value, beginning of period....... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00 Income from investment operations: - ---------------------- Net investment income (B)............... 0.55 0.38 0.27 0.33 0.56 0.75 0.72 0.57 0.60 0.56 0.36 Less distributions: - ------------------- Dividends from net investment income....... (0.55) (0.38) (0.27) (0.33) (0.56) (0.75) (0.72) (0.57) (0.60) (0.56) (0.36) -------- -------- -------- ------- ------- ------- ------- ------- ------ ------ ------ Net asset value, end of period.................. $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00 ======== ======== ======== ======= ======= ======= ======= ======= ====== ====== ====== Total return...... 5.62% 3.78% 2.69% 3.36% 5.71% 7.76% 8.56% 6.77% 6.13% 5.74% 3.61% Net assets, end of period (000's)............. $258,117 $276,674 $132,274 $89,535 $79,069 $85,040 $19,403 $12,268 $7,147 $1,046 $1,001 Ratio of operating expenses to average net assets (C)................ 0.54% 0.57% 0.59% 0.60% 0.60% 0.57% 0.79% 0.99% 0.78% 1.11% 1.21%(A) Ratio of net investment income to average net assets..................... 5.48% 3.93% 2.66% 3.28% 5.65% 7.27% 8.26% 6.68% 5.86% 6.84% 6.84%(A) - --------------------------------- * Commencement of operations. (A) Annualized (B) After expense reimbursement per share of $0.08, $0.23 and $0.12 in 1987, 1986 and 1985, respectively. (C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.57%, 3.43% and 3.50% in 1987, 1986 and 1985, respectively.
14 19 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
AGGRESSIVE ASSET ALLOCATION TRUST ---------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, -------------------------------------------------------------------- 8/83/89* TO 1995 1994 1993 1992 1991 1990 12/31/89 -------- ------- ------- ------- -------- -------- --------- Net asset value, beginning of period............................... $ 11.17 $ 12.03 $ 11.25 $ 10.72 $ 9.08 $ 9.88 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income .................. 0.35 0.31 0.34 0.30 0.36 0.36 0.08 Net realized and unrealized gain (loss) on investments and foreign currency transactions....... 2.07 (0.41) 0.79 0.55 1.69 (1.07) (0.20) -------- -------- -------- -------- -------- ------- ------- Total from investment operations. 2.42 (0.10) 1.13 0.85 2.05 (0.71) (0.12) Less distributions: - ------------------- Dividends from net investment income.... (0.33) (0.31) (0.30) (0.32) (0.41) (0.07) ---- Distributions from capital gains........ (0.41) (0.45) (0.05) ---- ---- (0.02) ---- -------- -------- -------- -------- -------- ------- ------- Total distributions................. (0.74) (0.76) (0.35) (0.32) (0.41) (0.09) ---- -------- -------- -------- -------- -------- ------- ------- Net asset value, end of period............ $ 12.85 $ 11.17 $ 12.03 $ 11.25 $ 10.72 $ 9.08 $ 9.88 ======== ======== ======== ======== ======== ======= ======= Total return....................... 22.77% (0.69%) 10.30% 8.24% 22.96% (7.27%) (1.20%) Net assets, end of period (000's)......... $211,757 $184,662 $174,448 $151,627 $124,632 $91,581 $87,301 Ratio of operating expenses to average net assets...................... 0.91% 0.89% 0.86% 0.89% 0.88% 0.78% 0.89%(A) Ratio of net investment income to average net assets...................... 2.76% 2.90% 2.96% 3.08% 3.63% 4.08% 3.32%(A) Portfolio turnover rate................... 111% 136% 92% 123% 172% 82% 22%(A) - ----------------------------- * Commencement of operations. (A) Annualized
15 20 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
MODERATE ASSET ALLOCATION TRUST ----------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 8/03/89* -------------------------------------------------------------------- TO 1995 1994 1993 1992 1991 1990 12/31/89 ------- ------ ------ ------ ------ ------ --------- Net asset value, beginning of period................................ $ 10.79 $ 11.76 $ 11.14 $ 10.72 $ 9.29 $ 10.03 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income ................... 0.50 0.45 0.41 0.41 0.42 0.48 0.11 Net realized and unrealized gain (loss) on investments and foreign currency transactions........ 1.65 (0.65) 0.67 0.43 1.50 (1.10) (0.08) -------- -------- -------- -------- -------- -------- -------- Total from investment operations.. 2.15 (0.20) 1.08 0.84 1.92 (0.62) 0.03 Less distributions: - ------------------- Dividends from net investment income..... (0.45) (0.40) (0.39) (0.42) (0.49) (0.10) ---- Distributions from capital gains......... (0.10) (0.37) (0.07) ---- ---- (0.02) ---- -------- -------- -------- -------- -------- -------- -------- Total distributions.................. (0.55) (0.77) (0.46) (0.42) (0.49) (0.12) ---- -------- -------- -------- -------- -------- -------- -------- Net asset value, end of period............. $ 12.39 $ 10.79 $ 11.76 $ 11.14 $ 10.72 $ 9.29 $ 10.03 ======== ======== ======== ======== ======== ======== ======== Total return........................ 20.68% (1.61%) 10.06% 8.30% 21.23% (6.23%) 0.30% Net assets, end of period (000's).......... $650,136 $604,491 $644,257 $505,967 $420,074 $327,328 $318,439 Ratio of operating expenses to average net assets....................... 0.84% 0.85% 0.84% 0.87% 0.86% 0.73% 0.79%(A) Ratio of net investment income to average net assets....................... 4.09% 4.01% 4.02% 4.21% 4.38% 5.10% 4.51%(A) Portfolio turnover rate.................... 129% 180% 135% 169% 168% 76% 41%(A) - ----------------------------- * Commencement of operations. (A) Annualized
16 21 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
CONSERVATIVE ASSET ALLOCATION TRUST ----------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 8/03/89* ------------------------------------------------------------------- TO 1995 1994 1993 1992 1991 1990 12/31/89 ------ ------ ------ ------ ------ ------ --------- Net asset value, beginning of period................................. $ 10.34 $ 11.26 $ 10.78 $ 10.63 $ 9.56 $ 10.11 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income .................... 0.54 0.55 0.50 0.47 0.58 0.62 0.15 Net realized and unrealized gain (loss) on investments and foreign currency transactions......... 1.26 (0.76) 0.44 0.26 1.15 (1.01) (0.04) -------- -------- -------- -------- -------- -------- -------- Total from investment operations... 1.80 (0.21) 0.94 0.73 1.73 (0.39) 0.11 Less distributions: - ------------------- Dividends from net investment income...... (0.55) (0.46) (0.46) (0.58) (0.66) (0.13) ---- Distributions from capital gains.......... ---- (0.25) ---- ---- ---- (0.03) ---- -------- -------- -------- -------- -------- -------- -------- Total distributions................... (0.55) (0.71) (0.46) (0.58) (0.66) (0.16) ---- -------- -------- -------- -------- -------- -------- -------- Net asset value, end of period.............. $ 11.59 $ 10.34 $ 11.26 $ 10.78 $ 10.63 $ 9.56 $ 10.11 ======== ======== ======== ======== ======== ======== ======== Total return......................... 18.07% (1.84%) 8.99% 7.36% 18.80% (3.84%) 1.10% Net assets, end of period (000's)........... $224,390 $216,716 $250,117 $201,787 $165,167 $149,901 $141,191 Ratio of operating expenses to average net assets........................ 0.87% 0.87% 0.86% 0.89% 0.88% 0.76% 0.82%(A) Ratio of net investment income to average net assets........................ 4.68% 4.86% 4.78% 4.99% 5.65% 6.68% 6.00%(A) Portfolio turnover rate..................... 110% 220% 170% 252% 211% 78% 85%(A) - ----------------------------- * Commencement of operations. (A) Annualized
17 22 INVESTMENT OBJECTIVES AND POLICIES Each portfolio has a stated investment objective which it pursues through separate investment policies. The differences in objectives and policies among the portfolios can be expected to affect the return of each portfolio and the degree of market and financial risk to which each portfolio is subject. The investment objectives of each portfolio represent fundamental policies of each such portfolio and may not be changed without the approval of the holders of a majority of the outstanding shares of the portfolio. Except for certain investment restrictions, the policies by which a portfolio seeks to achieve its investment objectives may be changed by the Trustees of the Trust without the approval of the shareholders. The following is a description of the investment objectives and policies of each portfolio. More complete descriptions of the money market instruments in which the Trust may invest and of the options, futures, currency and other derivative transactions that certain portfolios may engage in are set forth in the Statement of Additional Information. A more complete description of the debt security ratings used by the Trust assigned by Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Corporation ("S&P") is included in Appendix I to this Prospectus. SMALL/MID CAP TRUST The investment objective of the Small/Mid Cap Trust is to seek long term capital appreciation. Alger manages the Small/Mid Cap Trust and will pursue this objective by investing at least 65% of the portfolio's total assets (except during temporary defensive periods) in small/mid cap equity securities. As used in this Prospectus, small/mid cap equity securities are equity securities of companies that, at the time of purchase, have "total market capitalization" -- present market value per share multiplied by the total number of shares outstanding -- between $500 million and $5 billion. The portfolio may invest up to 35% of its total assets in equity securities of companies that, at the time of purchase, have total market capitalization of $5 billion or greater and in excess of that amount (up to 100% of its assets ) during temporary defensive periods. The Small/Mid Cap Trust seeks to achieve its investment objective by investing in equity securities, such as common or preferred stocks, or securities convertible into or exchangeable for equity securities, including warrants and rights. The portfolio will invest primarily in companies whose securities are traded on domestic stock exchanges or in the over-the-counter market. The Small/Mid Cap Trust may invest a significant portion of its assets in the securities of small companies. Small companies are those which are still in the developing stages of their life cycles and will attempt to achieve rapid growth in both sales and earnings. Investments in small companies involve greater risk than is customarily associated with more established companies. These companies often have sales and earnings growth rates which exceed those of large companies. Such growth rates may be reflected in more rapid share price appreciation. However, smaller companies often have limited operating histories, product lines, markets or financial resources, and they may be dependent upon one-person management. These companies may be subject to intense competition from larger entities, and the securities of such companies may have limited marketability and may be subject to more abrupt or erratic movements in price than securities of larger companies or the market averages in general. Therefore, the net asset values of the Small/Mid Cap Trust may fluctuate more widely than the popular market averages. Accordingly, an investment in the portfolio may not be appropriate for all investors. In order to afford the portfolio the flexibility to take advantage of new opportunities for investments in accordance with its investment objectives, it may hold up to 15% of its net assets (up to 100% of their assets during temporary defensive periods) in money market instruments, bank and thrift obligations, obligations issued or guaranteed by the U.S. Government or by its agencies or instrumentalities, foreign bank obligations and obligations of foreign branches or domestic banks, variable rate master demand notes and repurchase agreements. When the portfolio is in a defensive position, the opportunity to achieve capital growth will be limited, and, to the extent that this assessment of market conditions is incorrect, the portfolio will be foregoing the opportunity to benefit from capital growth resulting from increases in the value of its investments and may not achieve its investment objective. Foreign Securities. The portfolio may invest up to 20% of its total assets in foreign securities and will be subject to certain risks as a result of these investments. These risks are described under the caption "RISK FACTORS -- Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "GENERAL INFORMATION -Taxes" in this Prospectus. The portfolio may also purchase American Depository Receipts ("ADRs") or U.S. dollar-deonominated securities of foreign issuers that are not included in the 20% foreign securities limitation. See "RISK FACTORS - Foreign Securities" in this Prospectus for a description of ADRs. 18 23 Use of Hedging and Other Strategic Transactions. The Small/Mid Cap Trust is currently authorized to use all of the various investment strategies referred to under "RISK FACTORS -- Hedging and Other Strategic Transactions". The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. INTERNATIONAL SMALL CAP TRUST The investment objective of the International Small Cap Trust is to seek long term capital appreciation. Founder manages the International Small Cap Trust and will pursue this objective by investing primarily in securities issued by foreign companies which have total market capitalizations (present market value per share multiplied by the total number of shares outstanding) or annual revenues of $1 billion or less. These securities may represent companies in both established and emerging economies throughout the world. At least 65% of the portfolio's total assets will normally be invested in foreign securities representing a minimum of three countries (other than the United States). The portfolio may invest in larger foreign companies or in U.S. based companies if, in Founders' opinion, they represent better prospects for appreciation. The International Small Cap Trust may invest a significant portion of its assets in the securities of small companies. Small companies are those which are still in the developing stages of their life cycles and are attempting to achieve rapid growth in both sales and earnings. Investments in small companies involve greater risk than is customarily associated with more established companies. These companies often have sales and earnings growth rates which exceed those of large companies. Such growth rates may be reflected in more rapid share price appreciation. However, smaller companies often have limited operating histories, product lines, markets or financial resources, and they may be dependent upon one-person management. These companies may be subject to intense competition from larger entities, and the securities of such companies may have limited marketability and may be subject to more abrupt or erratic movements in price than securities of larger companies or the market averages in general. Therefore, the net asset values of the International Small Cap Trust may fluctuate more widely than the popular market averages. Accordingly, an investment in the portfolio may not be appropriate for all investors. The International Small Cap Trust will invest primarily in equity securities but may also invest in convertible securities, preferred stocks, bonds, debentures and other corporate obligations when Founders believes that these investments offer opportunities for capital appreciation. Current income will not be a substantial factor in the selection of these securities. The portfolio will only invest in bonds, debentures and corporate obligations--other than convertible securities and preferred stock--rated investment-grade (Baa or higher by Moody's or BBB or higher by S&P) at the time of purchase or , if unrated, of comparable quality in the opinion of Founders.. Convertible securities and preferred stocks purchased by the Portfolio may be rated in medium and lower categories by Moody's or S&P (Ba or lower by Moody's and BB or lower by S&P) but will not be rated lower than B. The portfolio may also invest in unrated convertible securities and preferred stocks in instances in which Founders believes that the financial condition of the issuer or the protection afforded by the terms of the securities limits risk to a level similar to that of securities rated in categories no lower than B. The portfolio is not required to dispose of debt securities whose ratings are down-graded below these ratings subsequent to the portfolio's purchase of the securities. See "RISK FACTORS - High Yield (High Risk) Securities." A description of the ratings used by Moody's and S & P is set forth in Appendix I to the Prospectus. The International Small Cap Trust may invest temporarily in the following securities if Founders determines that it is appropriate for purposes of enhancing liquidity or preserving capital in light of prevailing market or economic conditions: cash, cash equivalents, U.S. government obligations, commercial paper, bank obligations, repurchase agreements, and negotiable U.S. dollar-denominated obligations of domestic and foreign branches of U.S. depository institutions, U.S. branches of foreign depository institutions, and foreign depository institutions. When the portfolio is in a defensive position, the opportunity to achieve capital growth will be limited, and, to the exent that this assessment of market conditions is incorrect, the portfolio will be foregoing the opportunity to benefit from capital growth resulting from increases in the value of equity investments and may not achieve its investment objective. Foreign Securities. The portfolio may invest up to 100% of its total assets in foreign securities and will be subject to special risks as a result of these investments. These risks are described under the caption "RISK FACTORS -- Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "GENERAL INFORMATION -Taxes" in this Prospectus. In order to comply with limitations imposed by the State of California Insurance Department, the International Small Cap Trust will comply with the restrictions regarding foreign investments set forth under "Risk Factors - Additional Investment Restrictions on Borrowing and Foreign Investing." 19 24 Foreign investments of the International Small Cap Trust may include securities issued by companies located in countries not considered to be major industrialized nations. Such countries are subject to more economic, political and business risk than major industrialized nations, and the securities they issue and of issuers located in such countries are expected to be more volatile and more uncertain as to payments of interest and principal. The secondary market for such securities is expected to be less liquid than for securities of major industrialized nations. Such countries may include (but are not limited to) Argentina, Bolivia, Brazil, Chile, China, Colombia, Costa Rica, Czech Republic, Ecuador, Egypt, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Jordan, Malaysia, Mexico, New Zealand, Nigeria, North Korea, Pakistan, Paraguay, Peru, Philippines, Poland, Portugal, Singapore, Slovak Republic. South Africa, South Korea, Spain, Sri Lanka, Taiwan, Thailand, Turkey, Uruaguay, Venezuela, Vietnam and the countries of the former Soviet Union. Investments of the Portfolio may include securities created through the Brady Plan, a program under which heavily indebted countries have restructured their bank debt into bonds. See "OTHER INSTRUMENTS--High Yield Foreign Sovereign Debt Securities" in the Statement of Additional Information. Use of Hedging and Other Strategic Transactions. The International Small Cap Trust is currently authorized to use all of the various investment strategies referred to under "RISK FACTORS -- Hedging and Other Strategic Transactions." The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. GLOBAL EQUITY TRUST The investment objective of the Global Equity Trust is long-term capital appreciation. Oechsle International manages the Global Equity Trust and intends to pursue this objective by investing primarily in a globally diversified portfolio of common stocks and securities convertible into or exercisable for common stocks. At least 65% of the assets of the Global Equity Trust will generally be invested in a globally diversified portfolio of equity securities (e.g., common and preferred stocks). Up to 35% of the assets of the Global Equity Trust may be invested in securities convertible into or exercisable for common stocks and in fixed income securities. Fixed income securities are discussed in the description of the Global Government Bond Trust below. Under normal circumstances, at least 65% of the Global Equity Trust's assets will be invested in securities of at least three different countries. However, the Global Equity Trust may for temporary defensive purposes choose to invest substantially all of its assets in U.S. securities or cash and cash items. Cash is an actively managed portfolio asset. The Global Equity Trust's cash position will reflect Oechsle International's overall measure of optimism in the global equity markets. If Oechsle International foresees unusual market risks, cash reserves will be increased to reduce portfolio volatility. Cash reserves are generally held in U.S. short-term government instruments, although non-U.S. government securities may be held for this purpose from time to time. Oechsle International seeks to achieve the Global Equity Trust's investment objective of long-term capital appreciation by making investment decisions based on a two-pronged approach of (i) choosing a limited group of countries with strong and stable national financial markets, generally with total capitalization in excess of $5 billion, and (ii) identifying a select group of companies in such countries with attractive investment potential and typical capitalization of $200 million or more. The following is a brief description of the Oechsle International two-pronged investment approach. Country Selection. The Global Equity Trust will seek to maximize returns by significantly overweighing markets identified as attractive, while reducing overall portfolio risk through broad diversification of investments across a limited group of national markets. Broad diversification provides a prudent method of reducing volatility while allowing the Global Equity Trust to take advantage of the different movements of major equity markets to maximize returns. Opportunities for global investing have broadened in recent years. For example, in 1980 the U.S. stock market capitalization represented approximately 70% of the total world stock market capitalization and by 1990 such share had fallen to approximately 30%. Generally, investments will be limited to companies in countries where total market capitalization exceeds $5 billion. The Global Equity Trust's focus will normally be on the largest, most liquid international equity markets including, but not limited to, the United States, Japan, the United Kingdom, the Federal Republic of Germany, Canada, France and Italy. Security Selection. Investments will generally be made in companies with market capitalizations of at least $200 million. Oechsle International focuses its research effort on exchange listed U.S. companies and a universe of approximately 1,000 non-U.S. companies, most of which are included in either the Morgan Stanley Capital International Europe, Australia and Far East Index or other major international indices. The Global Equity Trust intends to purchase and hold securities for long-term capital appreciation and does not expect to trade for short-term gain. 20 25 Use of Hedging and Other Strategic Transactions The Global Equity Trust is currently authorized to use all of the various investment strategies referred to under "Hedging and Other Strategic Transactions." With the exception of currency transactions, however, it is not presently anticipated that any of these strategies will be used to a significant degree by the portfolio. The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. The Global Equity Trust will be subject to special risks as a result of its ability to invest up to 100% of its assets in foreign securities. These risks are described under the caption "Foreign Securities" in this Prospectus. In order to comply with limitations imposed by the State of California Insurance Department, the Global Equity Trust will comply with the restrictions regarding foreign investments set forth under "Risk Factors - Additional Investment Restrictions on Borrowing and Foreign Investing." Moreover, substantial investments in foreign securities may have adverse tax implications as described under "Taxes" in this Prospectus. The ability to diversify its investments among the equity markets in different countries may, however, reduce the overall level of market risk to the extent it may reduce the Global Equity Trust's exposure to a single market. PASADENA GROWTH TRUST The principal investment objective of the Pasadena Growth Trust is long-term growth of capital by emphasizing investments in companies with rapidly growing earnings per share, some of which may be smaller emerging growth companies. The Pasadena Growth Trust emphasizes the purchase of common stocks of domestic corporations with rapidly growing earnings per share. Some of the companies in the portfolio may be unseasoned, although most are generally well-known and established. The Pasadena Growth Trust also invests in stocks of companies with a market capitalization of less than $500 million and companies that, although not growing rapidly, are undervalued by other criteria of their fundamental net worth in the opinion of its Subadviser. The volatility of its investment portfolio is likely to be greater than that of the Standard & Poor's 500 Stock Index and greater than that of the Value Equity or Equity Trust. For this reason, the net asset value per share of the Pasadena Growth Trust may fluctuate substantially and the portfolio may not be appropriate for short-term investments. Dividend and interest income received from portfolio securities is largely incidental. The Pasadena Growth Trust's investments may also include preferred stocks, warrants, convertible debt obligations and other debt obligations that, in the Subadviser's opinion, offer the possibility of capital appreciation over the course of approximately two or more years because of the timing of such investments. In addition to the interest received from such debt instruments, if interest rates fall, these instruments are likely to increase in value. Conversely, if interest rates rise, a decrease in value can be expected. The Pasadena Growth Trust does not, however, anticipate investing a significant portion of its total assets in such instruments. The debt obligations which may be acquired by the Pasadena Growth Trust include direct and indirect obligations of the U.S. Government and its agencies, states and municipalities and their agencies, or corporate issuers. Any corporate debt obligations in which the Pasadena Growth Trust may invest must be rated at least BBB or Baa or better by national agencies, or, if unrated, are, in the Subadviser's opinion, of equivalent investment quality. Securities which are rated "BBB" or "Baa" are generally regarded as having an adequate capacity to pay interest and repay principal in accordance with the terms of the obligation, but may have some speculative characteristics. In addition, such securities are generally more sensitive to changes in economic conditions than securities rated in the higher categories, which tend to be more sensitive to interest rate changes. In the event that the rating for any security held in the Pasadena Growth Trust's portfolio drops below "BBB" or "Baa" such change will be considered by the Trust's Subadviser in evaluating the overall composition of the Trust's portfolio. From time to time, depending on the Subadviser's analysis of market and other considerations, all or part of the assets of the portfolio may be held in cash and short-term money market instruments, including obligations of the U.S. Government, high quality commercial paper, certificates of deposit, bankers' acceptances, bank interest bearing demand accounts, and repurchase agreements secured by U.S. Government securities. All such investments will be made for temporary defensive purposes to protect against the erosion of capital and pending investment in other securities. As a matter of operating policy, the Trust may invest in securities of unseasoned companies. The Subadviser regards a company as unseasoned when, for example, it is relatively new to or not yet well established in its primary line of business. Such companies generally are smaller and younger than companies whose shares are traded on the major stock exchanges. Accordingly, their shares are often traded over-the-counter and their share prices may be more volatile than those of larger, exchange-listed companies. In order to avoid undue risks, the portfolio normally will not purchase securities of any company with a record of fewer than three years' continuous operation (including that of predecessors). The Pasadena Growth Trust does not intend to engage in the purchase of securities on a when-issued or delayed delivery basis or engage in any hedging or other transactions described in the Statement of Additional Information under the caption "Hedging and Other Strategic Transactions." The Pasadena Growth Trust will be subject to certain risks as a result of its ability to invest up to 20% of its assets in 21 26 foreign securities. These risks are described under the caption "Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "Taxes" in this Prospectus. EQUITY TRUST The principal investment objective of the Equity Trust is growth of capital. Current income is a secondary consideration although growth of income may accompany growth of capital. FMTC manages the Equity Trust and seeks to attain the foregoing objective by investing primarily in common stocks of United States issuers or securities convertible into or which carry the right to buy common stocks. It may also invest to a limited degree, normally not in excess of 15% of the value of the Equity Trust's total assets, in non-convertible preferred stocks and debt securities. Portfolio securities may be selected with a view toward either short-term or long-term capital growth. When in FMTC's opinion market or economic conditions warrant a defensive posture, the Equity Trust may place any portion of its assets in investment grade debt securities (i.e., the four highest bond ratings assigned by Moody's or S&P), preferred stocks, Government securities or cash. The fourth highest category of investment grade bonds has some speculative characteristics and instruments with such ratings are subject to greater fluctuations in value than more highly rated instruments as economic conditions change. The Equity Trust is not required to dispose of such instruments in the event they are downgraded. It may also maintain amounts in cash or short-term debt securities pending selection of investments in accordance with its policies. The Equity Trust will invest primarily in securities listed on national securities exchanges, but from time to time it may also purchase securities traded in the "over the counter" market. The Equity Trust will be subject to certain risks as a result of its ability to invest up to 20% of its assets in foreign securities. These risks are described under the caption "Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "Taxes" in this Prospectus. Use of Hedging and Other Strategic Transactions The Equity Trust is currently authorized to use all of the various investment strategies referred to under "RISK FACTORS -- Hedging and Other Strategic Transactions." However, it is not presently anticipated that any of these strategies will be used to a significant degree by the portfolio. The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. VALUE EQUITY TRUST The principal investment objective of the Value Equity Trust is long-term growth of capital. GSAM manages the Value Equity Trust and will seek to attain its objective by investing under normal circumstances at least 65% of its total assets in equity securities, consisting of common or preferred stocks, including options and warrants. The Value Equity Trust will invest primarily in securities listed on national securities exchanges and securities traded in the "over-the-counter" market. Under normal market conditions the Value Equity Trust may invest up to 35% of its total assets in preferred stocks, government securities, short-term debt securities, money market instruments, cash or investment grade bonds (i.e., the four highest bond ratings assigned by Moody's or S&P or determined to be of comparable quality by GSAM.) When in GSAM's opinion market or economic conditions warrant a temporary defensive posture, the Value Equity Trust may place any portion of its assets in these types of non-equity securities. The fourth highest category of investment grade bonds has some speculative characteristics and instruments with such ratings are subject to greater fluctuations in value than more highly rated instruments as economic conditions change. The Value Equity Trust is not required to dispose of such instruments in the event they are downgraded. The Value Equity Trust will be subject to special risks as a result of its ability to invest up to 20% of its assets in foreign securities. These risks are described under the caption "Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "Taxes" in this Prospectus. Use of Hedging and Other Strategic Transactions The Value Equity Trust is currently authorized to use all of the various investment strategies referred to under "Hedging and Other Strategic Transactions." The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. GROWTH AND INCOME TRUST The investment objective of the Growth and Income Trust is to provide long-term growth of capital and income consistent with prudent investment risk. 22 27 Wellington Management manages the Growth and Income Trust and seeks to achieve the Trust's objective by investing primarily in a diversified portfolio of common stocks of U.S. issuers which Wellington Management believes are of high quality. Wellington Management believes that high quality is evidenced by a leadership position within an industry, a strong or improving balance sheet, relatively high return on equity, steady or increasing dividend payout and strong management skills. The Trust's investments will primarily emphasize dividends paying stocks of larger companies. The Trust may also invest in securities convertible into or which carry the right to buy common stocks, including those convertible securities issued in the Euromarket, preferred stocks and debt securities. When market or financial conditions warrant a temporary defensive posture, the Trust may, in order to reduce risk and achieve attractive total investment return, invest up to 100% of its assets in securities which are authorized for purchase by the Investment Quality Bond Trust (excluding non-investment grade securities) or the Money Market Trust. The Subadviser expects that under normal market conditions the Growth and Income Trust will consist primarily of equity securities. Investments will be selected on the basis of fundamental analysis to identify those securities that, in Wellington Management's judgment, provide the potential for long-term growth of capital and income. Fundamental analysis involves assessing a company and its business environment, management, balance sheet, income statement, anticipated earnings and dividends and other related measures of value. When selecting securities of issuers domiciled outside of the United States, Wellington Management will also monitor and evaluate the economic and political climate and the principal securities markets of the country in which each company is located. The Growth and Income Trust will invest primarily in securities listed on national securities exchanges, but from time to time it may also purchase securities traded in the "over the counter" market. The Growth and Income Trust will be subject to certain risks as a result of its ability to invest up to 20% of its assets in foreign securities. These risks are described under the caption "Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "Taxes" in this Prospectus. Use of Hedging and Other Strategic Transactions The Growth and Income Trust is currently authorized to use all of the various investment strategies referred to under "Hedging and Other Strategic Transactions." However, it is not presently anticipated that any of these strategies will be used to a significant degree by the portfolio. The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. INTERNATIONAL GROWTH AND INCOME TRUST The investment objective of the International Growth and Income Trust is to seek long-term growth of capital and income. The portfolio is designed for investors with a long-term investment horizon who want to take advantage of investment opportunities outside the United States. J.P. Morgan manages the International Growth and Income Trust and will seek to achieve the portfolio's objective by investing, under normal circumstances, at least 65% of its total assets in equity securities of foreign issuers, consisting of common stocks and other securities with equity characteristics such as preferred stock, warrants, rights and convertible securities. The portfolio will focus primarily on the common stock of established companies based in developed countries outside the United States. Such investments will be made in at least three foreign countries. The portfolio invests in securities listed on foreign or domestic securities exchanges and securities traded in foreign or domestic over-the-counter markets, and may invest in certain restricted or unlisted securities. See "RISK FACTORS -- Foreign Securities." Under normal circumstances, the International Growth and Income Trust expects to invest primarily in equity securities. However, the portfolio may invest up to 35% of its assets in debt obligations of corporate or sovereign or supranational organizations rated A or higher by Moody's or S&P, or if unrated, of equivalent credit quality as determined by the Subadviser. See "Global Government Bond Trust" for further information on supranational organizations. Under normal circumstances, the portfolio will be invested approximately 85% in equity securities and 15% in these fixed income securities. This allocation, however, may change over time. J.P. Morgan may allocate the portfolio's investment in these asset classes in a manner consistent with the portfolio's investment objective and current market conditions. Using a variety of analytical tools, J.P. Morgan assesses the relative attractiveness of each asset class and determines an optimal allocation between them. Yields on non-U.S. equity securities tend to be lower than those on equity securities of U.S. issuers. Therefore, current income from the portfolio may not be as high as that available from a portfolio of U.S. equity securities. In pursuing the International Growth and Income Trust's objective, J.P. Morgan will actively manage the assets of the portfolio through country allocation and stock valuation and selection. Based on fundamental research, quantitative valuation techniques and experienced judgment, J.P. Morgan uses a structured decision-making process to allocate the portfolio primarily across the developed countries of the world outside the United States. This universe is typically represented by the Morgan Stanley Europe, Australia and Far East Index (the "EAFE Index"). 23 28 Using a dividend discount model and based on analysts' industry expertise, securities within each country are ranked within economic sectors according to their relative value. Based on this valuation, J.P. Morgan selects the securities which appear the most attractive for the portfolio. J.P. Morgan believes that under normal market conditions, economic sector weightings generally will be similar to those of the relevant equity index. Finally, J.P. Morgan actively manages currency exposure, in conjunction with country and stock allocation, in an attempt to protect and possibly enhance the International Growth and Income Trust's market value. Through the use of forward currency exchange contracts, J.P. Morgan will adjust the portfolio's foreign currency weightings to reduce its exposure to currencies that the Subadviser deems unattractive and, in certain circumstances, increase exposure to currencies deemed attractive, as market conditions warrant, based on fundamental research, technical factors and the judgment of a team of experienced currency managers. The International Growth and Income Trust intends to manage its investment portfolio actively in pursuit of its investment objective. The portfolio does not expect to trade in securities for short-term profits; however, when circumstances warrant, securities may be sold without regard to the length of time held. See "GENERAL INFORMATION -- Taxes." To the extent the portfolio engages in short-term trading, it may incur increased transaction costs. The International Growth and Income Trust may also invest in securities on a when-issued or delayed delivery basis, enter into repurchase agreements, loan its portfolio securities and purchase certain privately placed securities. See "RISK FACTORS." The International Growth and Income Trust may make money market investments pending other investments or settlement or for liquidity purposes. In addition, when J.P. Morgan believes that investing for defensive purposes is appropriate, such as during periods of unusual or unfavorable market or economics conditions, up to 100% of the portfolio's assets may be temporarily invested in money market instruments. The money market investments permitted for the portfolio include obligations of the U.S. Government and its agencies and instrumentalities, other debt securities, commercial paper, bank obligations and repurchase agreements, as described below under "Money Market Trust." The International Growth and Income Trust will be subject to special risks as a result of its ability to invest up to 100% of its assets in foreign securities. These risks are described under the captions "RISK FACTORS -- Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "GENERAL INFORMATION -- Taxes" in this Prospectus. The ability to diversify its investments among the equity markets of different countries may, however, reduce the overall level of market risk to the extent it may reduce the portfolio's exposure to a single market. In order to comply with limitations imposed by the State of California Insurance Department, the International Growth and Income Trust will comply with the restrictions regarding foreign investments set forth under "Risk Factors - Additional Investment Restrictions on Borrowing and Foreign Investing." Use of Hedging and Other Strategic Transactions The International Growth and Income Trust is currently authorized to use all of the various investment strategies referred to under "RISK FACTORS -- Hedging and Other Strategic Transactions." With the exception of currency transactions, however, it is not presently anticipated that any of these strategies will be used to a significant degree by the portfolio. The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. STRATEGIC BOND TRUST The investment objective of the Strategic Bond Trust is to seek a high level of total return consistent with preservation of capital. The Strategic Bond Trust seeks to achieve its objective by giving its Subadviser, SBAM, broad discretion to deploy the Strategic Bond Trust's assets among certain segments of the fixed-income market as SBAM believes will best contribute to the achievement of the portfolio's objective. At any point in time, the Subadviser will deploy the portfolio's assets based on the Subadviser's analysis of current economic and market conditions and the relative risks and opportunities present in the following market segments: U.S. Government obligations, investment grade domestic corporate debt, high yield (high risk) corporate debt securities, mortgage backed securities and investment grade and high yield international debt securities. The Subadviser is an affiliate of Salomon Brothers Inc ("SBI"), and in making investment decisions is able to draw on the research and market expertise of SBI with respect to fixed-income securities. In pursuing its investment objective, the Strategic Bond Trust may invest without limitation in high yield (high risk) securities. High yield securities, commonly known as "junk bonds", also present a high degree of risk. High-yielding, lower-quality securities involve comparatively greater risks, including price volatility and the risk of default in the timely payment of interest and principal, than higher-quality securities. Due to the risks inherent in certain of the securities in which the Strategic Bond Trust may invest, an investment in the portfolio should not be considered as a complete investment program and may not be appropriate for all investors. See "Risk Factors--High Yield (High Risk) Securities." 24 29 The Subadviser will determine the amount of assets to be allocated to each type of security in which it invests based on its assessment of the maximum level of total return that can be achieved from a portfolio which is invested in these securities without incurring undue risks to principal value. In making this determination, the Subadviser will rely in part on quantitative analytical techniques that measure relative risks and opportunities of each type of security based on current and historical economic, market, political and technical data for each type of security, as well as on its own assessment of economic and market conditions both on a global and local (country) basis. In performing quantitative analysis, the Subadviser will employ prepayment analysis and option adjusted spread technology to evaluate mortgage securities, mean variance optimization models to evaluate international debt securities, and total rate of return analysis to measure relative risks and opportunities in other fixed-income markets. Economic factors considered will include current and projected levels of growth and inflation, balance of payment status and monetary policy. The allocation of assets to international debt securities will further be influenced by current and expected currency relationships and political and sovereign factors. The portfolio's assets may not always be allocated to the highest yielding securities if the Subadviser feels that such investments would impair the portfolio's ability to preserve shareholder capital. The Subadviser will continuously review this allocation of assets and make such adjustments as it deems appropriate. The portfolio does not plan to establish a minimum or a maximum percentage of the assets which it will invest in any particular type of fixed-income security. In addition, the Subadviser will have discretion to select the range of maturities of the various fixed-income securities in which the portfolio invests. Such maturities may vary substantially from time to time depending on economic and market conditions. The types and characteristics of the U.S. Government obligations, mortgage-backed securities, investment grade corporate debt securities and investment grade international debt securities to be purchased are set forth in the discussion of investment objectives and policies for the Investment Quality Bond, U.S. Government Securities and Global Government Bond Trusts, and in the section entitled "Other Investments" in the Statement of Additional Information; and the types and characteristics of the money market securities to be purchased are set forth in the discussion of investment objectives of the Money Market Trust. Potential investors should review the discussion therein in considering an investment in shares of the Strategic Bond Trust. As described below, the Strategic Bond Trust may also invest in high yield domestic and foreign debt securities. The Strategic Bond Trust will be subject to special risks as a result of its ability to invest up to 100% of its assets in foreign securities. These risks are described under the captions "Risk Factors--High Yield (High Risk) Securities" and "Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "Taxes" in this Prospectus. The ability to spread its investments among the fixed-income markets in a number of different countries may, however, reduce the overall level of market risk to the extent it may reduce the Strategic Bond Trust's exposure to a single market. In order to comply with limitations imposed by the State of California Insurance Department, the Strategic Bond Trust will comply with the restrictions regarding foreign investments set forth under "Risk Factors - Additional Investment Restrictions on Borrowing and Foreign Investing." The Strategic Bond Trust currently intends to invest substantially all of its assets in fixed-income securities. In order to maintain liquidity, however, the Strategic Bond Trust may invest up to 20% of its assets in high-quality short-term money market instruments. If at some future date, in the opinion of the Subadviser, adverse conditions prevail in the market for fixed-income securities, the Strategic Bond Trust for temporary defensive purposes may invest its assets without limit in high-quality short-term money market instruments. As discussed above, the Strategic Bond Trust may invest in U.S. dollar-denominated securities issued by domestic issuers that are rated below investment grade or of comparable quality. Although the Subadviser does not anticipate investing in excess of 75% of the portfolio's assets in domestic and developing country debt securities that are rated below investment grade, the portfolio may invest a greater percentage in such securities when, in the opinion of the Subadviser, the yield available from such securities outweighs their additional risks. By investing a portion of the portfolio's assets in securities rated below investment grade, as well as through investments in mortgage securities and international debt securities, as described below, the Subadviser expects to provide investors with a higher yield than a high-quality domestic corporate bond fund while at the same time presenting less risk than a fund that invests principally in securities rated below investment grade. Certain of the debt securities in which the portfolio may invest may have, or be considered comparable to securities having, the lowest ratings for non-subordinated debt instruments assigned by Moody's or S&P (i.e., rated C by Moody's or CCC or lower by S&P). See "Risk Factors--High Yield (High Risk) Securities--General." In light of the risks associated with high yield corporate and sovereign debt securities, the Subadviser will take various factors into consideration in evaluating the credit worthiness of an issue. For corporate debt securities, these will typically include the issuer's financial resources, its sensitivity to economic conditions and trends, the operating history of the issuer, and the experience and track record of the issuer's management. For sovereign debt instruments, these will typically include the economic and political conditions within the issuer's country, the issuer's overall and external debt levels and debt service ratios, the issuer's access to capital markets and other sources of funding, and the issuer's debt service payment history. The Subadviser will also review the ratings, if any, assigned to the security by any recognized rating agencies, although the Subadviser's judgment as to the quality of a debt security may differ from that suggested by the rating published by a rating service. The Strategic Bond Trust's ability to achieve its investment objective may be more dependent on the Subadviser's credit analysis than would be the case if it invested in higher quality debt securities. 25 30 A description of the ratings used by Moody's and S&P is set forth in Appendix I to this Prospectus. In addition to the types of international debt securities as set forth in the discussion of investment objectives and policies of the Global Government Bond Trust, the Strategic Bond Trust may also invest in international debt securities that are below investment grade. The high yield sovereign debt securities in which the Strategic Bond Trust may invest are U.S. dollar-denominated and non-dollar-denominated debt securities issued or guaranteed by governments or governmental entities of developing and emerging countries. The Subadviser expects that these countries will consist primarily of those which have issued or have announced plans to issue Brady Bonds, but the portfolio is not limited to investing in the debt of such countries. Brady Bonds are debt securities issued under the framework of the Brady Plan, an initiative announced by U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external indebtedness. The Subadviser anticipates that the portfolio's initial investments in sovereign debt will be concentrated in Latin American countries, including Mexico and Central and South American and Caribbean countries. The Subadviser expects to take advantage of additional opportunities for investment in the debt of North African countries, such as Nigeria and Morocco, Eastern European countries, such as Poland and Hungary, and Southeast Asian countries, such as the Philippines. Sovereign governments may include national, provincial, state, municipal or other foreign governments with taxing authority. Governmental entities may include the agencies and instrumentalities of such governments, as well as state-owned enterprises. Use of Hedging and Other Strategic Transactions The Strategic Bond Trust is currently authorized to use all of the various investment strategies referred to under "Hedging and Other Strategic Transactions." With the exception of currency transactions, however, it is not presently anticipated that any of these strategies will be used to a significant degree by the portfolio. The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. GLOBAL GOVERNMENT BOND TRUST The investment objective of the Global Government Bond Trust is to seek a high level of total return by placing primary emphasis on high current income and the preservation of capital. Oechsle International manages the Global Government Bond Trust and intends to pursue this objective by investing primarily in a selected global portfolio of high-quality, fixed-income securities of foreign and U.S. governmental entities and supranational issuers. Oechsle International will select the Global Government Bond Trust's assets from among countries and in currency denominations where opportunities for total return are expected to be the most attractive. Fundamental economic strength, credit quality, and currency and interest rate trends will be the principal determinants of the various country and sector weightings within the Global Government Bond Trust. The Global Government Bond Trust may substantially invest in one or more countries but intends to have represented in its portfolio securities from a number of different countries, although there is no limit on the value of the portfolio's assets that may be invested in any one country or in assets denominated in any one country's currency. Moreover, the Global Government Bond Trust may for temporary defensive purposes choose to invest substantially all its assets in U.S. securities or cash and cash items. The Global Government Bond Trust, unlike the other portfolios of the Trust, is non-diversified for purposes of the Investment Company Act of 1940. Due to its status as non-diversified, the Global Government Bond Trust is not subject to the general limitation under the Investment Company Act of 1940 that it not invest more than 5% of its total assets in the securities of a single issuer. The Global Government Bond Trust has elected non-diversified status so that it may invest more than 5% of its assets in the obligations of a foreign government and this practice may expose the Global Government Bond Trust to increased financial and market risks. While non-diversified for purposes of the Investment Company Act of 1940, the Global Government Bond Trust remains subject to certain diversification requirements imposed under the Internal Revenue Code which are described under the caption "Taxes" in this Prospectus. The Global Government Bond Trust will generally invest at least 65% of its assets in the following investments: (i) debt obligations issued or guaranteed by the U.S. government or one of its agencies or political subdivisions; (ii) debt obligations issued or guaranteed by a foreign sovereign government or one of its agencies or political subdivisions; (iii) debt obligations issued or guaranteed by supranational organizations. Supranational entities include international organizations designated or supported by governmental entities to promote economic reconstruction or development and international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the "World Bank"), the European Coal and Steel Community, the Asian Development Bank and the Inter-American Development Bank. Such supranational issued instruments may be denominated in multi-national currency units. Investments in multi-currency, debt securities will be limited to those assigned within the four highest bond ratings by Moody's or S&P or, if not rated, that are of equivalent investment quality as determined by Oechsle International. The Global Government Bond Trust may also invest up to 35% of its assets in (i) corporate debt securities assigned within the three highest bond ratings by Moody's or S&P or, if not rated, that are of equivalent investment quality as determined by Oechsle International, (ii) preferred stocks and (iii) securities convertible into or exercisable for common stocks. In addition, the Global Government Bond Trust will hold short-term cash 26 31 reserves (money market instruments maturing in a period of thirteen months or less) as Oechsle International believes is advisable to maintain liquidity or for temporary defensive purposes. Reserves may be held in any currency deemed attractive by Oechsle International. Oechsle International intends to invest in fixed-income securities in countries where the combination of fixed-income market returns and exchange rate movements is judged to be attractive. Oechsle International will actively manage the Global Government Bond Trust's maturity structure according to its interest rate outlook for each foreign economy. In response to rising interest rates and falling prices, the Global Government Bond Trust may invest in securities with shorter maturities to protect its principal value. Conversely, when certain interest rates are falling and prices are rising, the Global Government Bond Trust may invest in securities with longer maturities to take advantage of higher yields and to seek capital appreciation. The Global Government Bond Trust will seek to invest in countries having favorable currency and interest rate trends. Investments in countries where the currency trend is unfavorable may be made when the currency risk can be minimized through hedging. The Global Government Bond Trust does not intend to invest in longer-term fixed income securities in countries where the fixed income market is fundamentally unattractive, regardless of the currency trend, but may invest in short-term fixed income securities in such countries. Use of Hedging and Other Strategic Transactions The Global Government Bond Trust is currently authorized to use all of the various investment strategies referred to under "Hedging and Other Strategic Transactions." With the exception of currency transactions, however, it is not presently anticipated that any of these strategies will be used to a significant degree by the portfolio. The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. The Global Government Bond Trust will be subject to special risks as a result of its ability to invest up to 100% of its assets in foreign securities. These risks are described under the caption "Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "Taxes" in this Prospectus. The ability to spread its investments among the fixed-income markets in a number of different countries may, however, reduce the overall level of market risk to the extent it may reduce the Global Government Bond Trust's exposure to a single market. In order to comply with limitations imposed by the State of California Insurance Department, the Global Government Bond Trust will comply with the restrictions regarding foreign investments set forth under "Risk Factors - Additional Investment Restrictions on Borrowing and Foreign Investing." INVESTMENT QUALITY BOND TRUST The investment objective of the Investment Quality Bond Trust is to provide a high level of current income consistent with the maintenance of principal and liquidity. Wellington Management manages the Investment Quality Bond Trust and seeks to achieve the Trust's objective by investing primarily in a diversified portfolio of investment grade corporate bonds and U.S. Government bonds with intermediate to longer term maturities. Investment management will emphasize sector analysis, which focuses on relative value and yield spreads among security types and among quality, issuer, and industry sectors, call protection and credit research. Credit research on corporate bonds is based on both quantitative and qualitative criteria established by Wellington Management, such as an issuer's industry, operating and financial profiles, business strategy, management quality, and projected financial and business conditions. Wellington Management will attempt to maintain a high, steady and possibly growing income stream. At least 65% of the Investment Quality Bond Trust's assets will be invested in: (1) marketable debt securities of domestic issuers and of foreign issuers (payable in U.S. dollars) rated at the time of purchase "A" or better by Moody's or S&P or, if unrated, of comparable quality as determined by Wellington Management; (2) securities issued or guaranteed as to principal or interest by the U.S. Government or its agencies or instrumentalities, including mortgage backed securities (described below under U.S. Government Securities Trust); and (3) cash and cash equivalent securities which are authorized for purchase by the Money Market Trust. The balance of the Investment Quality Bond Trust's investments may include: domestic and foreign debt securities rated below "A" by Moody's and S&P (and unrated securities of comparable quality as determined by Wellington Management), preferred stocks, convertible securities (including those issued in the Euromarket) and securities carrying warrants to purchase equity securities, privately placed debt securities, asset-backed securities and privately issued mortgage securities. At least 65% of the Investment Quality Bond Trust's assets will be invested in bonds and debentures. In pursuing its investment objective, the Investment Quality Bond Trust may invest up to 20% of its assets in domestic and foreign high yield (high risk) corporate and government debt securities, commonly known as "junk bonds" (i.e., rated "Ba" or below by Moody's or "BB" or below by S&P, or if unrated, of comparable quality as determined by Wellington Management). The high yield sovereign debt 27 32 securities in which the portfolio will invest are described above under "Strategic Bond Trust." No minimum rating standard is required for a purchase by the Portfolio. Domestic and foreign high yield debt securities involve comparatively greater risks, including price volatility and risk of default in the payment of interest and principal, than higher-quality securities. See "RISK FACTORS -- High Yield (High Risk) Securities and "Foreign Sovereign Debt Securities." The Investment Quality Bond Trust may also invest in debt securities carrying the fourth highest quality rating ("Baa" by Moody's or "BBB" by S&P) and unrated securities of comparable quality as determined by Wellington Management. While such securities are considered as investment grade and are viewed to have adequate capacity for payment of principal and interest, investments in such securities involve a higher degree of risk than that associated with investments in debt securities in the higher rating categories and such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. For example, 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 bonds. While the Investment Quality Bond Trust may only invest up to 20% of its assets in bonds rated below "Baa" by Moody's or "BBB" by S&P (or, if unrated, of comparable quality as determined by Wellington Management) at the time of investment, it is not required to dispose of bonds owned that may be downgraded causing the portfolio to exceed this 20% maximum. Use of Hedging and Other Strategic Transactions The Investment Quality Bond Trust is currently authorized to use all of the various investment strategies referred to under "Hedging and Other Strategic Transactions." The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith . The Investment Quality Bond Trust will be subject to certain risks as a result of its ability to invest up to 20% of its assets in foreign securities. These risks are described under the caption "Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "Taxes" in this Prospectus. U.S. GOVERNMENT SECURITIES TRUST The investment objective of the U.S. Government Securities Trust is to obtain a high level of current income consistent with preservation of capital and maintenance of liquidity. SBAM manages the U.S. Government Securities Trust and seeks to attain its objective by investing a substantial portion of its assets in debt obligations and mortgage backed securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities and derivative securities such as collateralized mortgage obligations backed by such securities. The portfolio may also invest a portion of its assets in the types of securities in which the Investment Quality Bond Trust may invest. At least 80% of the total assets of the U.S. Government Securities Trust will be invested in: (1) mortgage backed securities guaranteed by the Government National Mortgage Association that are supported by the full faith and credit of the U.S. Government and which are the "modified pass-through" type of mortgage backed security ("GNMA Certificates"). Such securities entitle the holder to receive all interest and principal payments due whether or not payments are actually made on the underlying mortgages; (2) U.S. Treasury obligations; (3) obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government which are backed by their own credit and may not be backed by the full faith and credit of the U.S. Government; (4) mortgage backed securities guaranteed by agencies or instrumentalities of the U.S. Government which are supported by their own credit but not the full faith and credit of the U.S. Government, such as the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association; and (5) collateralized mortgage obligations issued by private issuers for which the underlying mortgage backed securities serving as collateral are backed (i) by the credit alone of the U.S. Government agency or instrumentality which issues or guarantees the mortgage backed securities, or (ii) by the full faith and credit of the U.S. Government. The mortgage backed securities in which the U.S. Government Securities Trust invests represent participating interests in pools of residential mortgage loans which are guaranteed by the U.S. Government, its agencies or instrumentalities. However, the guarantee of these types of securities runs only to the principal and interest payments and not to the market value of such securities. In addition, the guarantee only runs to the portfolio securities held by the U.S. Government Securities Trust and not the purchase of shares of the portfolio. Mortgage backed securities are issued by lenders such as mortgage bankers, commercial banks, and savings and loan associations. Such securities differ from conventional debt securities which provide for periodic payment of interest in fixed amounts (usually semiannually) with principal payments at maturity or specified call dates. Mortgage backed securities provide monthly payments which are, in effect, a "pass-through" of the monthly interest and principal payments (including any prepayments) made by the individual borrowers on 28 33 the pooled mortgage loans. Principal prepayments result from the sale of the underlying property or the refinancing or foreclosure of underlying mortgages. The yield of mortgage-backed securities is based on the average life of the underlying pool of mortgage loans, which is computed on the basis of the maturities of the underlying instruments. The actual life of any particular pool may be shortened by unscheduled or early payments of principal and interest. The occurrence of prepayments is affected by a wide range of economic, demographic and social factors and, accordingly, it is not possible to accurately predict the average life of a particular pool. For pools of fixed rate 30-year mortgages, it has been common practice to assume that prepayments will result in a 12-year average life. The actual prepayment experience of a pool of mortgage loans may cause the yield realized by the U.S. Government Securities Trust to differ from the yield calculated on the basis of the average life of the pool. In addition, if any of these mortgage backed securities are purchased at a premium, the premium may be lost in the event of early prepayment which may result in a loss to the portfolio. Prepayments tend to increase during periods of falling interest rates, while during periods of rising interest rates prepayments will most likely decline. Reinvestment by the U.S. Government Securities Trust of scheduled principal payments and unscheduled prepayments may occur at higher or lower rates than the original investment, thus affecting the yield of this portfolio. Monthly interest payments received by the portfolio have a compounding effect which will increase the yield to shareholders as compared to debt obligations that pay interest semiannually. Because of the reinvestment of prepayments of principal at current rates, mortgage-backed securities may be less effective than Treasury bonds of similar maturity at maintaining yields during periods of declining interest rates. Also, although the value of debt securities may increase as interest rates decline, the value of these pass-through type of securities may not increase as much due to the prepayment feature. The U.S. Government Securities Trust must comply with diversification requirements established pursuant to the Internal Revenue Code for investments of separate accounts funding contracts. Under these requirements, no more than 55% of the value of the assets of a portfolio may be represented by any one investment; no more than 70% by any two investments; no more than 80% by any three investments; and no more than 90% by any four investments. For these purposes, all securities of the same issuer are treated as a single investment and each United States government agency or instrumentality is treated as a separate issuer. As a result of these requirements, the U.S. Government Securities Trust may not invest more than 55% of the value of its assets in GNMA Certificates or in securities issued or guaranteed by any other single United States government agency or instrumentality. See the discussion under "Taxes" below for additional information. Use of Hedging and Other Strategic Transactions The U.S. Government Securities Trust is currently authorized to use only certain of the various investment strategies referred to under "Hedging and Other Strategic Transactions." Specifically, the U.S. Government Securities Trust may write covered call options and put options on securities and purchase call and put options on securities, write covered call and put options on securities indices and purchase call and put options on securities indices, and, may enter into futures contracts on financial instruments and indices and write and purchase put and call options on such futures contracts. It is not presently anticipated that any of these strategies will be used to a significant degree by the portfolio. The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. MONEY MARKET TRUST The investment objective of the Money Market Trust is to obtain maximum current income consistent with preservation of principal and liquidity. Wellington Management manages the Money Market Trust and seeks to achieve this objective by investing in high quality, U.S. dollar denominated money market instruments of the following types: (1) obligations issued or guaranteed as to principal and interest by the United States Government, or any agency or authority controlled or supervised by and acting as an instrumentality of the U.S. Government pursuant to authority granted by Congress (hereinafter "U.S. Government securities"), or obligations of foreign governments including those issued or guaranteed as to principal or interest by the Government of Canada, the government of any province of Canada, or any Canadian or provincial Crown agency (any foreign obligation acquired by the Trust will be payable in U.S. dollars); (2) certificates of deposit, bank notes, time deposits, Eurodollars, Yankee obligations and bankers' acceptances of U.S. banks, foreign branches of U.S. banks, foreign banks and U.S. savings and loan associations which at the date of investment have capital, surplus and undivided profits as of the date of their most recent published financial statements in excess of $100,000,000 (or less than $100,000 if the principal amount of such bank obligations is insured by the Federal Deposit Insurance Corporation or the Saving Association Insurance Fund); (3) commercial paper which at the date of investment is rated (or guaranteed by a company whose commercial paper is rated) within the two highest rating categories by any nationally recognized statistical rating organization ("NRSRO") (such as "P-1" or "P-2" by 29 34 Moody's or "A-1" or "A-2" by S&P) or, if not rated,is issued by a company which Wellington Management acting pursuant to guidelines established by the Trustees, has determined to be of minimal credit risk and comparable quality; (4) corporate obligations maturing in 397 days or less which at the date of investment are rated within the two highest rating categories by any NRSRO (such as "Aa" or higher by Moody's or "AA" or higher by S&P); and (5) short-term obligations issued by state and local governmental issuers; (6) securities that have been structured to be eligible money market instruments such as participation interests in special purpose trusts that meet the quality and maturity requirements in whole or in part due to arrangements for credit enhancement or for shortening effective maturity; and (7) repurchase agreements with respect to any of the foregoing obligations. Commerical paper may include variable amount master demand notes, which are obligations that permit investment of fluctuating amounts at varying rates of interest. Such notes are direct lending arrangements between the Money Market Trust and the note issuer, and Wellington Management will monitor the creditworthiness of the issuer and its earning power and cash flow, and will also consider situations in which all holders of such notes would redeem at the same time. Variable amount master demand notes are redeemable on demand. All of the Money Market Trust's investments will mature in 397 days or less and the portfolio will maintain a dollar-weighted average portfolio maturity of 90 days or less. By limiting the maturity of its investments, the Money Market Trust seeks to lessen the changes in the value of its assets caused by fluctuations in short-term interest rates. In addition, the Money Market Trust will invest only in securities the Trustees determine to present minimal credit risks and which at the time of purchase are "eligible securities" as defined by Rule 2a-7 under the Investment Company Act of 1940. The Money Market Trust also intends to maintain, to the extent practicable, a constant per share net asset value of $10.00, but there is no assurance that it will be able to do so. The Money Market Fund will be subject to certain risks as a result of its ability to invest up to 20% of its assets in foreign securities. These risks are described under "RISK FACTORS - Foreign Securities." Use of Hedging and Other Strategic Transactions The Money Market Trust is not authorized to use any of the various investment strategies referred to under "Hedging and Other Strategic Transactions." AUTOMATIC ASSET ALLOCATION TRUSTS There are three Automatic Asset Allocation Trusts - Aggressive, Moderate and Conservative. The investment objective of each of the Automatic Asset Allocation Trusts is to obtain the highest potential total return consistent with a specified level of risk tolerance -- aggressive, moderate and conservative. The Automatic Asset Allocation Trusts are designed for: * The investor who wants to maximize total return potential, but lacks the time, temperament or expertise to do so effectively; * The investor who does not want to monitor the financial markets in order to make periodic exchanges among portfolios; * The investor who wants the opportunity to improve on the return of an income-oriented investment program, but wants to take advantage of the risk management features of an asset allocation program; and * Retirement program fiduciaries who have a responsibility to limit risk in a meaningful way, while seeking the highest potential total return. Each of the Automatic Asset Allocation Trusts may invest in a combination of equity, fixed-income and money market securities. The amount of each portfolio's assets invested in each category of securities is dependent upon the judgment of FMTC as to what percentages of each portfolio's assets in each category will contribute to the limitation of risk and the achievement of its investment objective. Unlike many asset allocation and timing services offered by competitors, the Automatic Asset Allocation Trusts permit FMTC to reallocate each portfolio's assets among the categories of securities "automatically," without a delay for a request or response by the shareholder, whenever, in the subadviser's judgment, market or economic changes warrant such a reallocation. FMTC reserves complete discretion to determine the allocations among the categories of securities. The investor chooses an Automatic Asset Allocation Trust by determining which risk tolerance level most closely corresponds to the investor's individual planning needs, objectives and comfort. Generally, the higher the portfolio's level of risk tolerance, the higher is the expected total return for the portfolio over the long-term and under favorable market conditions. Over the long-term, it is expected that the 30 35 total return of the Aggressive Asset Allocation Trust will exceed that of the Moderate Asset Allocation Trust and that the total return of the Moderate Asset Allocation Trust will exceed that of the Conservative Asset Allocation Trust, although there is no assurance that this will be the case. Moreover, as a general matter, the higher the risk tolerance of a portfolio, the greater is the expected volatility of the portfolio. In adverse market conditions, it is expected that the losses will be greater in the Aggressive Asset Allocation Trust than in the Moderate Asset Allocation Trust and greater in the Moderate Asset Allocation Trust than in the Conservative Asset Allocation Trust, although again there is no assurance that this will be the case. FMTC attempts to limit the maximum amount of decline in value each portfolio incurs under very adverse market conditions, to define the level of risk tolerance -- aggressive, moderate or conservative. Very adverse market conditions are defined as a substantial increase in long-term interest rates accompanied by a similarly substantial decline in one or more commonly-followed stock market indices over a twelve month period. Of course, FMTC cannot predict with certainty when adverse market conditions will arise. Consequently, FMTC must manage each of the Automatic Asset Allocation Trusts under all market conditions with a view toward limiting risk and portfolio decline should very adverse market conditions arise. For example, since the Conservative Asset Allocation Trust has the lowest risk tolerance level, its assets under all market conditions will be invested less aggressively (i.e., with greater emphasis on fixed-income securities and money market instruments) than those of the other Automatic Asset Allocation Trusts. In addition, when market conditions deteriorate (the probability of very adverse market conditions rises), FMTC will give greater emphasis to fixed-income securities and money market instruments in an effort to limit overall declines in portfolio value. An investor should select an Automatic Asset Allocation Trust depending on his or her objective in terms of balancing the potential long-term total returns of a portfolio against limiting risk and portfolio declines in very adverse market conditions. There can be no assurance that actual declines in portfolio value will not exceed the percentage limitations set forth below in the description of each portfolio. THE AGGRESSIVE ASSET ALLOCATION TRUST The investment objective of the Aggressive Asset Allocation Trust is to seek the highest total return consistent with an aggressive level of risk tolerance. This Trust attempts to limit the decline in portfolio value in very adverse market conditions to 15% in any twelve month period. This Trust will tend to invest a greater portion of its assets in equity and foreign securities than the Moderate and Conservative Asset Allocation Trusts and a lower percentage of its assets in fixed-income securities and money market instruments than such Trusts. FMTC will invest the Aggressive Asset Allocation Trust's assets to attempt to produce a total return competitive with that of equity funds, while at the same time exposing the Trust's assets to less risk than the typical aggressive equity fund by allocating a portion of the portfolio's assets to fixed-income securities and money market instruments. There can be no assurance that FMTC will be able to attain this objective. THE MODERATE ASSET ALLOCATION TRUST The investment objective of the Moderate Asset Allocation Trust is to seek the highest total return consistent with a moderate level of risk tolerance. This Trust attempts to limit the decline in portfolio value in very adverse market conditions to 10% over any twelve month period. The amount of the Moderate Asset Allocation Trust's assets invested in each category of securities will depend on the judgment of FMTC as to what relative portions of the portfolio's assets in each category will contribute to the achievement of its objective. Generally, it will place greater emphasis on equity and foreign securities than the Conservative Asset Allocation Trust but more emphasis on fixed-income securities and money market instruments than the Aggressive Asset Allocation Trust. FMTC will invest the Moderate Asset Allocation Trust's assets to attempt to give the portfolio a substantial participation in favorable equity and bond markets, although the expected total return will not necessarily exceed the best returns available from either of those markets. THE CONSERVATIVE ASSET ALLOCATION TRUST The investment objective of the Conservative Asset Allocation Trust is to seek the highest total return consistent with a conservative level of risk tolerance. This Trust attempts to limit the decline in portfolio value in very adverse market conditions to 5% over any twelve month period. This Trust will tend to invest a greater portion of its assets in fixed-income securities and money market instruments than the Moderate and Aggressive Asset Allocation Trusts and a lower percentage of its assets in equity and foreign securities than such Trusts. FMTC will attempt to invest the Conservative Asset Allocation Trust's assets in order to produce a higher total return than that which is available from a bond or a money market portfolio alone, although there can be no assurance that FMTC will be able to attain this objective. The types and characteristics of equity securities to be purchased by the Automatic Asset Allocation Trusts are set forth above in the discussion of investment objectives and policies for the Equity Trust; the types and characteristics of the fixed-income securities to be purchased are set forth in the discussion of investment objectives and policies for the Investment Quality Bond (the Automatic Asset Allocation Trusts may not invest in below investment grade securities except as noted below) and U.S. Government Securities Trusts; and the types and characteristics of the money market securities to be purchased are set forth in the discussion of investment objectives of the Money Market Trust. Potential investors should review the discussion therein in considering an investment in shares of the Automatic Asset Allocation Trusts. 31 36 The aggressive asset allocation Trust and the Moderate Asset Allocation Trust may each invest up to 10% of their assets in domestic and foreign high yield corporate and government debt securities, commonly known as "junk bonds" (i.e., rated "Ba" or below by Moody's or "BB" or below by S & P, or if unrated, of comparable quality as determied by FMTC. Domestic and foreign high yield debt securities involve comparatively greater risks, including price volatility and risk of default in the payment of interest and principal, than higher quality securities. See "RISK FACTORS -- High Yield (High Risk) Securities" for further information. Use of Hedging and Other Strategic Transactions The Automatic Asset Allocation Trusts are currently authorized to use all of the various investment strategies referred to under "Hedging and Other Strategic Transactions." The Statement of Additional Information contains a description of these strategies and of certain risks associated therewith. The Aggressive Asset Allocation Trust may invest up to 35% of its assets, the Moderate Asset Allocation Trust may invest up to 25% of its assets and the Conservative Allocation Trust may invest up to 15% of its assets in securities issued by foreign entities and/or denominated in foreign currencies. The Automatic Asset Allocation Trusts will be subject to certain risks as a result of their ability to invest in foreign securities. These risks are described under the caption "Foreign Securities" in this Prospectus. Moreover, substantial investments in foreign securities may have adverse tax implications as described under "Taxes" in this Prospectus. In order to comply with limitations imposed by the State of California Insurance Department, the Aggressive and Moderate Asset Allocation Trusts will comply with the restrictions regarding foreign investments set forth under "Risk Factors - Additional Investment Restrictions on Borrowing and Foreign Investing." The portfolio turnover rate of each of the Trust's portfolios may vary from year to year, as well as within a year. Higher portfolio turnover rates can result in corresponding increases in portfolio transaction costs for a portfolio. See "Portfolio Turnover" in the Statement of Additional Information. RISK FACTORS INVESTMENT RESTRICTIONS GENERALLY The Trust is subject to a number of restrictions in pursuing its investment objectives and policies. The following is a brief summary of certain restrictions that may be of interest to contract owners. Some of these restrictions are subject to exceptions not stated here. Such exceptions and a complete list of the investment restrictions applicable to the individual portfolios and to the Trust are set forth in the Statement of Additional Information under the caption "Investment Restrictions." Except for the restrictions specifically identified as fundamental, all investment restrictions described in this Prospectus and in the Statement of Additional Information are not fundamental, so that the Trustees of the Trust may change them without shareholder approval. Fundamental policies may not be changed without the affirmative vote of a majority of the outstanding voting securities. Fundamental policies applicable to all portfolios include prohibitions on (i) investing more than 25% of the total assets of any portfolio in the securities of issuers having their principal activities in any particular industry (with exceptions for U.S. Government securities and certain other obligations) and (ii) borrowing money, except for temporary or emergency purposes (but not for leveraging)and then not in excess of 33 1/3% of the value of the total assets of the portfolio at the time the borrowing is made. In addition, each portfolio may borrow in connection with reverse repurchase agreements, mortgage dollar rolls and other similar transactions. Reverse repurchase agreements and mortgage dollar rolls may be considered a form of borrowing and will be treated as a borrowing for purposes of the restriction on borrowing in excess of 33 1/3% of the value of the total assets of a portfolio. A portfolio will not purchase securities while borrowings (other than reverse repurchase agreements, mortgage dollar rolls and similiar transactions) exceed 5% of total assets. In addition, each of the portfolios except the Global Government Bond Trust is prohibited from purchasing securities of any issuer if the purchase would cause more than 5% of the value of a portfolio's total assets to be invested in the securities of any one issuer (excluding U.S. Government securities and bank obligations) or cause more than 10% of the voting securities of the issuer to be held by a portfolio, except that up to 25% of the value of each portfolio's total assets (except the Money Market Trust) may be invested without regard to this restriction. Restrictions that apply to all portfolios and that are not fundamental include prohibitions on (i) knowingly investing more than 15% of the net assets of any portfolio in "illiquid" securities (including repurchase agreements maturing in more than seven days but excluding master demand notes), (ii) pledging, hypothecating, mortgaging or transferring more than 10% of the total assets of any portfolio as security for indebtedness, and (iii) purchasing securities of other investment companies, other than in connection with a merger, consolidation or reorganization, if the purchase would cause more than 10% of the value of a portfolio's total assets to be invested in investment company securities. The percentage restriction in clause (i) of the preceding sentence, however, is 10% in the case of the Money Market Trust. Finally, the Money Market Trust is subject to certain restrictions required by Rule 2a-7 under the Investment Company Act of 1940. In order to comply with such restrictions, the Money Market Trust will, inter alia, not purchase the securities of any issuer if it would cause (i) more than 5% of its total assets to be invested in the securities of any one issuer (excluding U.S. Government securities and repurchase 32 37 agreements fully collateralized by U.S. Government securities), except as permitted by the Rule for certain securities for a period of up to three business days after purchase, (ii) more than 5% of its total assets to be invested in "second tier securities," as defined by the Rule, or (iii) more than the greater of $1 million or 1% of its total net assets to be invested in the second tier securities of that issuer. There are also diversification and other requirements for all of the portfolios imposed by the federal tax laws, as described under "Taxes" in this Prospectus. The following is a description of certain investment policies subject to investment restrictions that may be of particular interest to contract owners. ADDITIONAL INVESTMENT RESTRICTIONS ON BORROWING AND FOREIGN INVESTING In order to comply with limitations imposed by the State of California Insurance Department, each Trust will comply with the following restrictions on borrowing and each Trust that invests in foreign securities will comply with the following restrictions regarding foreign investments. These restrictions are nonfundamental and may be changed without shareholder approval. Borrowing. Each portfolio of the Trust will not borrow money except that each portfolio may borrow in an amount (i) up to 25% of the portfolio's net assets for temporary purposes to facilitate redemptions (not for leveraging) and (ii) up to 10% of the portfolio's net assets in connection with reverse repurchase agreements, mortgage dollar rolls and other similar transactions. This limitation is more restrictive than the Trust's fundamental restriction on borrowing. Foreign Securities. Each portfolio of the Trust that invests in foreign securities will comply with the following restrictions: (i) A portfolio will be invested in a minimum of five different foreign countries at all times. However, this minimum is reduced to four when foreign country investments comprise less than 80% of the portfolio's net asset value; to three when less than 60% of such value; to two when less than 40%; and to one when less than 20%. (ii) Except as set forth in items (iii) and (iv) below, a portfolio will have no more than 20% of its net asset value invested in securities of issuers located in any one country. (iii) A portfolio may have an additional 15% of its net asset value invested in securities of issuers located in any one of the following countries (to the extent such investment is consistent with the investment policies of the portfolio): Australia, Canada, France, Japan, the United Kingdom or West Germany. (iv) A portfolio's investments in United States issuers are not subject to these foreign country diversification restrictions. HIGH YIELD (HIGH RISK) SECURITIES GENERAL. The Strategic Bond Trust may invest without limitation, and the Investment Quality Bond Trust may invest up to 20% of its assets, in "high yield" (high risk) securities. The International Small Cap Trust may also invest in "high yield" (high risk) securities to the extent described above under the description of the portfolio. Securities rated below investment grade and comparable unrated securities offer yields that fluctuate over time, but generally are superior to the yields offered by higher rated securities. However, securities rated below investment grade also involve greater risks than higher rated securities. Under rating agency guidelines, medium- and lower-rated securities and comparable unrated securities will likely have some quality and protective characteristics that are outweighed by large uncertainties or major risk exposures to adverse conditions. Certain of the debt securities in which the portfolios may invest may have, or be considered comparable to securities having, the lowest ratings for non-subordinated debt instruments assigned by Moody's or S&P (i.e., rated C by Moody's or CCC or lower by S&P). These securities are considered to have extremely poor prospects of ever attaining any real investment standing, to have a current identifiable vulnerability to default, to be unlikely to have the capacity to pay interest and repay principal when due in the event of adverse business, financial or economic conditions, and/or to be in default or not current in the payment of interest or principal. Such securities are considered speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. Accordingly, it is possible that these types of factors could, in certain instances, reduce the value of securities held by the portfolio with a commensurate effect on the value of the portfolio's shares. Because the Strategic Bond Trust may invest without limitation in high yield debt securities, an investment in that portfolio should not be considered as a complete investment program for all investors. 33 38 Because the Strategic Bond and Investment Quality Bond Trusts will invest primarily in fixed-income securities, the net asset value of each portfolio's shares can be expected to change as general levels of interest rates fluctuate, although the market values of securities rated below investment grade and comparable unrated securities tend to react less to fluctuations in interest rate levels than do those of higher-rated securities. Except to the extent that values are affected independently by other factors such as developments relating to a specific issuer, when interest rates decline, the value of a fixed-income portfolio can generally be expected to rise. Conversely, when interest rates rise, the value of a fixed-income portfolio can generally be expected to decline. The secondary markets for high yield corporate and sovereign debt securities are not as liquid as the secondary markets for higher rated securities. The secondary markets for high yield debt securities are concentrated in relatively few market makers and participants in the market are mostly institutional investors, including insurance companies, banks, other financial institutions and mutual funds. In addition, the trading volume for high yield debt securities is generally lower than that for higher-rated securities and the secondary markets could contract under adverse market or economic conditions independent of any specific adverse changes in the condition of a particular issuer. These factors may have an adverse effect on the Strategic Bond and Investment Quality Bond Trusts' ability to dispose of particular portfolio investments and may limit the ability of those portfolios to obtain accurate market quotations for purposes of valuing securities and calculating net asset value. If the Strategic Bond Trust or the Investment Quality Bond Trust is not able to obtain precise or accurate market quotations for a particular security, it will become more difficult for the Board of Trustees to value that portfolio's investment portfolio and the Trustees may have to use a greater degree of judgment in making such valuations. Less liquid secondary markets may also affect a portfolio's ability to sell securities at their fair value. In addition, each portfolio may invest up to 15% (10% in the case of the Money Market Trust) of its net assets, measured at the time of investment, in illiquid securities, which may be more difficult to value and to sell at fair value. If the secondary markets for high yield debt securities are affected by adverse economic conditions, the proportion of a portfolio's assets invested in illiquid securities may increase. CORPORATE DEBT SECURITIES. While the market values of securities rated below investment grade and comparable unrated securities tend to react less to fluctuations in interest rate levels than do those of higher-rated securities, the market values of certain of these securities also tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-rated securities. In addition, such securities generally present a higher degree of credit risk. Issuers of these securities are often highly leveraged and may not have more traditional methods of financing available to them, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. The risk of loss due to default by such issuers is significantly greater than with investment grade securities because such securities generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness. FOREIGN SOVEREIGN DEBT SECURITIES. Investing in foreign sovereign debt securities will expose the Strategic Bond and Investment Quality Bond Trusts to the direct or indirect consequences of political, social or economic changes in the developing and emerging countries that issue the securities. The ability and willingness of sovereign obligors in developing and emerging countries or the governmental authorities that control repayment of their external debt to pay principal and interest on such debt when due may depend on general economic and political conditions within the relevant country. Countries such as those in which these portfolios may invest have historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate trade difficulties and extreme poverty and unemployment. Many of these countries are also characterized by political uncertainty or instability. Additional factors which may influence the ability or willingness to service debt include, but are not limited to, a country's cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole, and its government's policy towards the International Monetary Fund, the World Bank and other international agencies. The ability of a foreign sovereign obligor to make timely payments on its external debt obligations will also be strongly influenced by the obligor's balance of payments, including export performance, its access to international credits and investments, fluctuations in interest rates and the extent of its foreign reserves. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. To the extent that a country receives payment for its exports in currencies other than dollars, its ability to make debt payments denominated in dollars could be adversely affected. If a foreign sovereign obligor cannot generate sufficient earnings form foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks, and multilateral organizations, and inflows of foreign investment. The commitment on the part of these foreign governments, multilateral organizations and others to make such disbursements may be conditioned on the government's implementation of economic reforms and/or economic performance and the timely service of its obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third parties' commitments to lend funds, which may further impair the obligor's ability or willingness to timely service its debts. The cost of servicing external debt will also generally be adversely affected by rising international interest rates, because many external debt obligations bear interest at rates which are adjusted based upon international interest rates. The ability to service external debt will also depend on the level of the relevant government's international currency reserves and its access to foreign exchange. Currency devaluations may affect the ability of a sovereign obligor to obtain sufficient foreign exchange to service its external debt. 34 39 As a result of the foregoing, a governmental obligor may default on its obligations. If such an event occurs, the Strategic Bond or Investment Quality Bond Trust may have limited legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting party itself, and the ability of the holder of foreign sovereign debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the holders of commercial bank debt will not contest payments to the holders of other foreign sovereign debt obligations in the event of default under their commercial bank loan agreements. Sovereign obligors in developing and emerging countries are among the world's largest debtors to commercial banks, other governments, international financial organizations and other financial institutions. These obligors have in the past experienced substantial difficulties in servicing their external debt obligations, which led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds, and obtaining new credit to finance interest payments. Holders of certain foreign sovereign debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the Brady Bonds and other foreign sovereign debt securities in which the portfolios may invest will not be subject to similar restructuring arrangements or to requests for new credit which may adversely affect the portfolio's holdings. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants. In addition to high yield foreign sovereign debt securities, the Strategic Bond and Investment Quality Bond Trusts may also invest in investment grade foreign securities. For a discussion of such securities and their associated risks, see "Foreign Securities" below. FOREIGN SECURITIES Each of the portfolios, other than the U.S. Government Securities Trust, may invest in securities of foreign issuers. Such foreign securities may be denominated in foreign currencies, except with respect to the Money Market Trust which may only invest in U.S. dollar-denominated securities of foreign issuers. The International Small Cap, Global Equity, Global Government Bond, International Growth and Income and Strategic Bond Trusts may each, without limitation, invest up to 100% of its assets in securities issued by foreign entities and/or denominated in foreign currencies. The Aggressive Asset Allocation Trust may invest up to 35% of its assets, the Moderate Asset Allocation Trust up to 25% of its assets, the Conservative Asset Allocation Trust up to 15% of its assets, and each of the other portfolios other than the U.S. Government Securities Trust up to 20% of its assets in such securities. (In the case of the Small/Mid Cap Trust, ADRs and U.S. dollar denominated securities are not included in this 20% limitation.) Securities of foreign issuers include obligations of foreign branches of U.S. banks and of foreign banks, common and preferred stocks, debt securities issued by foreign governments, corporations and supranational organizations, and American Depository Receipts, European Depository Receipts and Global Depository Receipts ("ADRs", "EDRs" and "GDRs"). ADRs are U.S. dollar-denominated securities backed by foreign securities deposited in a U.S. securities depository. ADRs are created for trading in the U.S. markets. The value of an ADR will fluctuate with the value of the underlying security, reflect any changes in exchange rates and otherwise involve risks associated with investing in foreign securities. ADRs in which the portfolios may invest may be sponsored or unsponsored. There may be less information available about foreign issuers of unsponsored ADRs. Each of the portfolios, except for the International Small Cap, Global Equity, International Growth and Income, Global Government Bond and Strategic Bond Trusts, anticipates that its foreign investments will consist primarily of ADRs that are regularly traded on recognized U.S. exchanges or in the U.S. "over-the-counter" market. Securities of foreign issuers also include EDRs and GDRs, which are receipts evidencing an arrangement with a non-U.S. bank similar to that for ADRs and are designed for use in non-U.S. securities markets. EDRs and GDRs are not necessarily quoted in the same currency as the underlying security. Foreign securities may be subject to foreign government taxes which reduce their attractiveness. See "Taxes." In addition, investing in securities denominated in foreign currencies and in the securities of foreign issuers, particularly non-governmental issuers, involves risks which are not ordinarily associated with investing in domestic issuers. These risks include political or economic instability in the country involved and the possibility of imposition of currency controls. Since certain portfolios may invest in securities denominated or quoted in currencies other than the United States dollar, changes in foreign currency exchange rates may affect the value of investments in the portfolio and the unrealized appreciation or depreciation of investments insofar as United States investors are concerned. Foreign currency exchange rates are determined by forces of supply and demand on the foreign exchange markets. These forces are, in turn, affected by the international balance of payments and other economic and financial conditions, government intervention, speculation and other factors. The portfolios may incur transaction charges in exchanging foreign currencies. There may be less publicly available information about a foreign issuer than about a domestic issuer. Foreign issuers, including foreign branches of U.S. banks, are subject to different accounting and reporting requirements which are generally less extensive than the requirements applicable to domestic issuers. Foreign stock markets (other than Japan) have substantially less volume than the United States 35 40 exchanges and securities of foreign issuers are generally less liquid and more volatile than those of comparable domestic issuers. There is frequently less governmental regulation of exchanges, broker-dealers and issuers than in the United States, and brokerage costs may be higher. In addition, investments in foreign companies may be subject to the possibility of nationalization, withholding of dividends at the source, expropriation or confiscatory taxation, currency blockage, political or economic instability or diplomatic developments that could adversely affect the value of those investments. Finally, in the event of a default on any foreign obligation, it may be difficult for the Trust to obtain or to enforce a judgment against the issuer. Foreign markets, especially emerging markets, may have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Delays in settlement could result in temporary periods when a portion of the assets of a portfolio is uninvested and no return is earned thereon. The inability of a portfolio to make intended security purchases due to settlement problems could cause the portfolio to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result in losses to a portfolio due to subsequent declines in values of the portfolio securities or, if the portfolio has entered into a contract to sell the security, possible liability to the purchaser. Certain foreign markets, especially emerging markets, may require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. A portfolio could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application to the portfolio of any restrictions on investments. In addition to the foreign securities listed above, the Strategic Bond and Investment Quality Bond Trusts may also invest in foreign sovereign debt securities, which involve certain additional risks. See "Risk Factors--High Yield (High Yield) Securities--Foreign Sovereign Debt Securities" above. WARRANTS Subject to certain restrictions, each of the Portfolios except the Money Market Trust may purchase warrants, including warrants traded independently of the underlying securities. LENDING SECURITIES Each portfolio may lend its securities so long as such loans do not represent in excess of 33 1/3% of a portfolio's total assets. This is a fundamental policy. The procedure for lending securities is for the borrower to give the lending portfolio collateral consisting of cash, cash equivalents or securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The lending portfolio may invest the cash collateral and earn additional income or receive an agreed upon fee from a borrower which has delivered cash equivalent collateral. The Trust anticipates that its securities will be loaned only under the following conditions: (1) the borrower must furnish collateral equal at all times to the market value of the securities loaned and the borrower must agree to increase the collateral on a daily basis if the securities increase in value; (2) the loan will be made in accordance with New York Stock Exchange rules, which presently require the borrower, after notice, to redeliver the securities within five business days; and (3) the portfolio making the loan may pay reasonable service, placement, custodian or other fees in connection with loans of securities and share a portion of the interest from these investments with the borrower of the securities. As with other extensions of credit there are risks of delay in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. WHEN-ISSUED SECURITIES ("FORWARD COMMITMENTS") In order to help ensure the availability of suitable securities, each of the portfolios may purchase debt securities on a "when-issued" or on a "forward delivery" basis, which means that the obligations will be delivered to the portfolio at a future date, which may be a month or more after the date of commitment (referred to as "forward commitments"). It is expected that, under normal circumstances, a portfolio purchasing securities on a when-issued or forward delivery basis will take delivery of the securities, but the portfolio may sell the securities before the settlement date, if such action is deemed advisable. In general, a portfolio does not pay for the securities or start earning interest on them until the obligations are scheduled to be settled, but it does, in the meantime, record the transaction and reflect the value each day of the securities in determining its net asset value. At the time delivery is made, the value of when-issued or forward delivery securities may be more or less than the transaction price, and the yields then available in the market may be higher than those obtained in the transaction. While awaiting delivery of the obligations purchased on such bases, a portfolio will establish a segregated account consisting of cash or high quality debt securities equal to the amount of the commitments to purchase when-issued or forward delivery securities. The availability of liquid assets for this purpose and the effect of asset segregation on a portfolio's ability to meet its current obligations, to honor requests for redemption and to have its investment portfolio managed properly will limit the extent to which the portfolio may purchase when-issued or forward delivery securities. Except as may be imposed by these factors, there is no limit on the percent of a portfolio's total assets that may be committed to such transactions. 36 41 REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS Each of the Trust's portfolios may enter into repurchase agreements and reverse repurchase agreements. Repurchase agreements involve the acquisition by a portfolio of debt securities subject to an agreement to resell them at an agreed-upon price. Under a repurchase agreement, at the time the portfolio acquires a security, it agrees to resell it to the original seller (a financial institution or broker/dealer which meets the guidelines established by the Trustees) and must deliver the security (and/or securities that may be added to or substituted for it under the repurchase agreement) to the original seller on an agreed-upon date in the future. The repurchase price is in excess of the purchase price. The arrangement is in economic effect a loan collateralized by securities. The Trustees have adopted procedures that establish certain creditworthiness, asset and collateralization requirements for the counterparties to a portfolio's repurchase agreements. The Trustees will regularly monitor the use of repurchase agreements and the Subadvisers will, pursuant to procedures adopted by the Trustees, continuously monitor the amount of collateral held with respect to a repurchase transaction so that it equals or exceeds the amount of the obligation. A portfolio's risk in a repurchase transaction is limited to the ability of the seller to pay the agreed-upon sum on the delivery date. In the event of bankruptcy or other default by the seller, there may be possible delays and expenses in liquidating the instrument purchased, decline in its value and loss of interest. Securities subject to repurchase agreements will be valued every business day and additional collateral will be requested if necessary so that the value of the collateral is at least equal to the value of the repurchase obligation, including the interest accrued thereon. Each portfolio of the Trust may enter into "reverse" repurchase agreements. Under a reverse repurchase agreement, a portfolio may sell a debt security and agree to repurchase it at an agreed upon time and at an agreed upon price. The portfolio retains record ownership of the security and the right to receive interest and principal payments thereon. At an agreed upon future date, the portfolio repurchases the security by remitting the proceeds previously received, plus interest. The difference between the amount the portfolio receives for the security and the amount it pays on repurchase is deemed to be payment of interest. The portfolio will maintain in a segregated custodial account cash, Treasury bills or other U.S. Government securities having an aggregate value equal to the amount of such commitment to repurchase including accrued interest, until payment is made. In certain types of agreements, there is no agreed-upon repurchase date and interest payments are calculated daily, often based on the prevailing overnight repurchase rate. While a reverse repurchase agreement may be considered a form of leveraging and may, therefore, increase fluctuations in a portfolio's net asset value per share, each portfolio will cover the transaction as described above. MORTGAGE DOLLAR ROLLS Each portfolio of the Trust (except the Money Market Trust) may enter into mortgage dollar rolls. Under a mortgage dollar roll, a portfolio sells mortgage-backed securities for delivery in the future (generally within 30 days) and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, the portfolio forgoes principal and interest paid on the mortgage-backed securities. A portfolio is compensated by the difference between the current sale price and the lower forward price for the future purchase (often referred to as the "drop") as well as by the interest earned on the cash proceeds of the initial sale. A portfolio may also be compensated by receipt of a commitment fee. A portfolio may only enter into covered rolls. A "covered roll" is a specific type of dollar roll for which there is an offsetting cash or cash equivalent security position which matures on or before the forward settlement date of the dollar roll transaction. Dollar roll transactions involve the risk that the market value of the securities sold by the portfolio may decline below the repurchase price of those securities. While a mortgage dollar roll may be considered a form of leveraging, and may, therefore, increase fluctuations in a portfolio's net asset value per share, each portfolio will cover the transaction as described above. HEDGING AND OTHER STRATEGIC TRANSACTIONS Individual portfolios may be authorized to use a variety of investment strategies described below for hedging purposes only, including hedging various market risks (such as interest rates, currency exchange rates and broad or specific market movements) and managing the effective maturity or duration of debt instruments held by the portfolio. The description in this Prospectus of each portfolio indicates which, if any, of these types of transactions may be used by the portfolio. Although these strategies are regularly used by some investment companies and other institutional investors, it is not presently anticipated that any of these strategies will be used to a significant degree by any portfolio unless otherwise specifically indicated in the description of the portfolio contained in this Prospectus. Limitations on the portion of a portfolio's assets that may be used in connection with the investment strategies described below are set out in the Statement of Additional Information. 37 42 Subject to the constraints described above, an individual portfolio may (if and to the extent so authorized) purchase and sell (or write) exchange-listed and over-the-counter put and call options on securities, financial futures contracts and fixed income indices and other financial instruments, enter into financial futures contracts, enter into interest rate transactions, and enter into currency transactions (collectively, these transactions are referred to in this Prospectus as "Hedging and Other Strategic Transactions"). A portfolio's interest rate transactions may take the form of swaps, caps, floors and collars, and a portfolio's currency transactions may take the form of currency forward contracts, currency futures contracts, currency swaps and options on currencies or currency futures contracts. Hedging and Other Strategic Transactions may be used to attempt to protect against possible changes in the market value of securities held or to be purchased by a portfolio resulting from securities markets or currency exchange rate fluctuations, to protect a portfolio's unrealized gains in the value of its securities, to facilitate the sale of those securities for investment purposes, to manage the effective maturity or duration of a portfolio's securities or to establish a position in the derivatives markets as a temporary substitute for purchasing or selling particular securities. A portfolio may use any or all types of Hedging and Other Strategic Transactions which it is authorized to use at any time; no particular strategy will dictate the use of one type of transaction rather than another, as use of any authorized Hedging and Other Strategic Transaction will be a function of numerous variables, including market conditions. The ability of a portfolio to utilize Hedging and Other Strategic Transactions successfully will depend on, in addition to the factors described above, the subadviser's ability to predict pertinent market movements, which cannot be assured. These skills are different from those needed to select a portfolio's securities. None of the portfolios is a "commodity pool" (i.e., a pooled investment vehicle which trades in commodity futures contracts and options thereon and the operator of which is registered with the Commodity Futures Trading Commission (the "CFTC")) and Hedging and Other Strategic Transactions involving futures contracts and options on futures contracts will be purchased, sold or entered into only for bona fide hedging, risk management or appropriate portfolio management purposes and not for speculative purposes. The use of certain Hedging and Other Strategic Transactions will require that a portfolio segregate cash, liquid high grade debt obligations or other assets to the extent a portfolio's obligations are not otherwise "covered" through ownership of the underlying security, financial instrument or currency. Risks associated with Hedging and Other Strategic Transactions are described in "Hedging and Other Strategic Transactions -- Risk Factors" in the Statement of Additional Information. A detailed discussion of various Hedging and Other Strategic Transactions, including applicable regulations of the CFTC and the requirement to segregate assets with respect to these transactions, also appears in the Statement of Additional Information. ILLIQUID SECURITIES Each of the portfolios is precluded from investing in excess of 15% of its net assets in securities that are not readily marketable, except that the Money Market Trust may not invest in excess of 10% of its net assets in such securities. Excluded from the 10% and 15% limitation are securities that are restricted as to resale but for which a ready market is available pursuant to exemption provided by Rule 144A adopted pursuant to the Securities Act of 1933 ("1933 Act") or other exemptions from the registration requirements of the 1933 Act. Whether securities sold pursuant to Rule 144A are readily marketable for purposes of the Trust's investment restriction is a determination to be made by the Subadvisers subject to the Trustees' oversight and for which the Trustees are ultimately responsible. The Subadvisers will also monitor the liquidity of Rule 144A securities held by the portfolios for which they are responsible. To the extent Rule 144A securities held by a portfolio should become illiquid because of a lack of interest on the part of qualified institutional investors, the overall liquidity of the portfolio could be adversely affected. In addition, the Money Market Trust may invest in commercial paper issued in reliance on the exemption from registration afforded by Section 4(2) of the 1933 Act. Section 4(2) commercial paper is restricted as to the disposition under federal securities law, and is generally sold to institutional investors, such as the Trust, who agree that they are purchasing the paper for investment purposes and not with a view to public distribution. Any resale by the purchaser must be made in an exempt transaction. Section 4(2) commercial paper is normally resold to other institutional investors like the Money Market Trust through or with the assistance of the issuer or investment dealers who make a market in Section 4(2) commercial paper, thus providing liquidity. The Money Market Trust's subadviser believes that Section 4(2) commercial paper meets its criteria for liquidity and is quite liquid. The Money Market Trust intends, therefore, to treat Section 4(2) commercial paper as liquid and not subject to the investment limitation applicable to illiquid securities. The Money Market Trust's subadviser will monitor the liquidity of 4(2) commercial paper held by the Money Market Trust, subject to the Trustees' oversight and for which the Trustees are ultimately responsible. MANAGEMENT OF THE TRUST Under Massachusetts law and the Trust's Declaration of Trust and By-Laws, the management of the business and affairs of the Trust is the responsibility of its Trustees. The Trust was originally organized on August 3, 1984 as "NASL Series Fund, Inc." (the "Fund"), a Maryland corporation. Pursuant to an Agreement and Plan of Reorganization and Liquidation approved at the Special Meeting of Shareholders held on December 2, 1988, the Fund was reorganized as a Massachusetts business trust established pursuant to an Agreement and Declaration of Trust dated September 29, 1988 (the "Declaration of Trust"). The reorganization became effective on December 31, 1988. At that time, the assets and liabilities of each of the Fund's separate investment portfolios were assumed by the corresponding portfolios of the Trust and the Trust carried on the business and operations of the Fund with the same investment management arrangements as were in effect for the Fund immediately prior to such reorganization. 38 43 ADVISORY ARRANGEMENTS NASL Financial Services, Inc. ("NASL Financial" or, in its capacity as investment adviser to the Trust the "Adviser"), a Massachusetts corporation whose principal offices are located at 116 Huntington Avenue, Boston, Massachusetts 02116, is a wholly-owned subsidiary of Security Life the ultimate parent of which is The Manufacturers Life Insurance Company ("Manulife"), a Canadian mutual life insurance company based in Toronto, Canada. Prior to January 1, 1996, Security Life was a wholly owned subsidiary of North American Life Assurance Company ("NAL"), a Canadian mutual life insurance company. On January 1, 1996 NAL and Manulife merged with the combined company retaining the name Manulife. NASL Financial is registered as an investment adviser under the Investment Advisers Act of 1940 and as a broker-dealer under the Securities Exchange Act of 1934, and it is a member of the National Association of Securities Dealers, Inc. ("NASD"). In addition, NASL Financial serves as principal underwriter of certain contracts issued by Security Life and as investment adviser to one other investment company, North American Funds. Under the terms of the Advisory Agreement, the Adviser administers the business and affairs of the Trust. The Adviser is responsible for performing or paying for various administrative services for the Trust, including providing at the Adviser's expense, (i) office space and all necessary office facilities and equipment, (ii) necessary executive and other personnel for managing the affairs of the Trust and for performing certain clerical, accounting and other office functions, and (iii) all other information and services, other than services of counsel, independent accountants or investment subadvisory services provided by any subadviser under a subadvisory agreement, required in connection with the preparation of all tax returns and documents required to comply with the federal securities laws. The Adviser pays the cost of (i) any advertising or sales literature relating solely to the Trust, (ii) the cost of printing and mailing prospectuses to persons other than current holders of Trust shares or of variable contracts funded by Trust shares and (iii) the compensation of the Trust's officers and Trustees that are officers, directors or employees of the Adviser or its affiliates. In addition, advisory fees are reduced or the Adviser reimburses the Trust if the total of all expenses (excluding advisory fees, taxes, portfolio brokerage commissions, interest, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Trust's business) applicable to a portfolio exceeds an annual rate of .75% in the case of the International Small Cap, Global Equity, Global Government Bond and International Growth and Income Trusts or .50% in the case of all other portfolios of the average annual net assets of such portfolio. The expense limitations will continue in effect from year to year unless otherwise terminated at any year end by the Adviser on 30 days' notice to the Trust. For the prior fiscal year, the Adviser did not reimburse the Trust for any expenses since expenses were below the expense limitations. However, if expenses were to increase above the expense limits and the reimbursements were terminated, Trust expenses would increase. In addition to providing the services and expense limitations described above, the Adviser selects, contracts with and compensates subadvisers to manage the investment and reinvestment of the assets of the portfolios of the Trust. The Adviser monitors the compliance of such subadvisers with the investment objectives and related policies of each portfolio and reviews the performance of such subadvisers and reports periodically on such performance to the Trustees of the Trust. As compensation for its services, the Adviser receives a fee from the Trust computed separately for each portfolio. The fee for each portfolio is stated as an annual percentage of the current value of the net assets of the portfolio. The fee, which is accrued daily and payable monthly, is calculated for each day by multiplying the daily equivalent of the annual percentage prescribed for a portfolio by the value of the net assets of the portfolio at the close of business on the previous business day of the Trust. The following is a schedule of the management fees each portfolio currently is obligated to pay the Adviser: PORTFOLIO Small/Mid Cap Trust .................... 1.000% International Small Cap Trust .......... 1.100% Global Equity Trust .................... .900% Pasadena Growth Trust .................. .975% Equity Trust ........................... .750% Value Equity Trust ..................... .800% Growth and Income Trust ................ .750% International Growth and Income Trust .. .950% Strategic Bond Trust ................... .775% Global Government Bond Trust ........... .800% Investment Quality Bond Trust .......... .650% U.S. Government Securities Trust ....... .650% Money Market Trust ..................... .500% Aggressive Asset Allocation Trust ...... .750% Moderate Asset Allocation Trust ........ .750% Conservative Asset Allocation Trust .... .750%
39 44 The fees shown above, other than those paid by the Investment Quality Bond and U.S. Government Securities Trusts and the Money Market Trust, are higher than those paid by most funds to their advisers, but are not higher than the fees paid by many funds with similar investment objectives and policies. For the year ended December 31, 1995 the aggregate investment advisory fees paid by the Trust was $33,808,255, allocated among the portfolios as follows: $5,513,312-- Global Equity Trust, $2,115,434-- Pasadena Growth Trust, $5,643,363-- Equity Trust, $2,459,247-- Value Equity, $3,922,671-- Growth and Income Trust, $450,200-- International Growth and Income Trust (January 9, 1995, commencement of operations, to December 31, 1995), $767,448 - Strategic Bond Trust, $1,757,909-- Global Government Bond Trust, $798,045--Investment Quality Bond Trust, $1,291,668-- U.S. Government Securities Trust, $1,318,573-- Money Market Trust, $1,463,421-- Aggressive Asset Allocation Trust, $4,667,061-- Moderate Asset Allocation Trust and $1,639,903-- Conservative Asset Allocation Trust. SUBADVISORY ARRANGEMENTS Each of the Trust's subadvisers, except Fidelity Management Trust Company, is registered as an investment adviser under the Investment Advisers Act of 1940. Fidelity Management Trust Company ("FMTC"), the subadviser to the Equity and Automatic Asset Allocation Trusts, founded in 1946, is located at 82 Devonshire Street, Boston, Massachusetts 02109. FMTC is part of Fidelity Investments, a group of companies that provides investment management and other financial services. FMTC is a wholly-owned subsidiary of FMR Corp., the parent company of the Fidelity companies. Founded in 1981, FMTC serves as investment manager to institutional clients, managing assets for insurance companies, tax-exempt retirement funds, endowments, foundations and other institutional investors. As of February 29, 1996 FMTC had investment management responsibility for approximately $31.8 billion of assets. Fidelity Investments, founded by Edward C. Johnson 2d, the father of the current chairman, Edward C. Johnson 3d, is the country's largest privately-owned investment management organization and as of February 29, 1996 had assets under management exceeding $428.4 billion. Fidelity Investments maintains a staff of over 100 in-house research analysts and follows some 7000 companies worldwide. Robert Stansky has been primarily responsible for the day-to-day management of the Equity Trust since December 1991. Scott D. Stewart and Boyce I. Greer have been primarily responsible for the day-to-day management of the three Asset Allocation Trusts since December 1991. Robert Stansky is presently the Portfolio Manager of the Fidelity Growth Company Fund and the Fidelity Advisor Equity Portfolio: Growth. In addition, Mr. Stansky has worked as an assistant on the Magellan Fund, managed both the Emerging Growth Fund and the Fidelity Select Defense and Aerospace Fund. Mr. Stansky has worked for Fidelity since 1983. Scott Stewart joined Fidelity in 1987, and is Senior Vice President, Portfolio Manager and head of the Structured Equity Group. Boyce Greer is the Group Leader and Senior Vice President of FMTC and Vice President of FMR in the Fixed Income Group. He joined Fidelity in 1987 as a Portfolio Manager responsible for portfolio risk analysis. Oechsle International Advisors, L.P. ("Oechsle International"), the subadviser to the Global Equity and Global Government Bond Trusts, founded in 1986, is a Delaware limited partnership whose principal offices are located at One International Place, Boston, Massachusetts 02110. Oechsle International, which also has offices in London, England, Frankfurt, Germany and Tokyo, Japan, as of March 31, 1996 manages approximately $8.7 billion for institutional and private investors. Oechsle International is a money manager providing management and advisory services with respect to all primary international securities markets. Each year Oechsle International's investment professionals concentrate on 25 different countries, averaging 600 visits to companies annually. Steven H. Schaefer has been primarily responsible for the day-to-day management of the Global Equity Trust since March 1988 and since 1991 Stephen J. Butters has shared this responsibility. Astrid Vogler has been primarily responsible for the day-to-day management of the Global Government Bond Trust since March 1988. Messrs. Schaefer and Butters are also portfolio managers to North American Funds' Global Growth Fund. Mr. Schaefer has been a General Partner and Portfolio Manager at Oechsle International and Managing Director for the firm's London subsidiary since 1986. Mr. Butters works in the U.S. Equity management sector of Oechsle International. Prior to joining Oechsle International in 1991, Mr. Butters worked at the Putnam Management Company as Senior Vice President and Portfolio Manager from 1982 to 1988. He also founded his own firm, Butters Lyons, in 1988 where he provided investment management services to individuals and small business corporations. 40 45 Ms. Vogler has been a Fixed Income Portfolio Manager at Oechsle International in Frankfurt, West Germany since 1988. Roger Engemann Management Co., Inc. ("REMC") is the subadviser for the Pasadena Growth Trust. The business address of REMC is 600 North Rosemead Boulevard, Pasadena, California 91107-2138. Roger Engemann & Associates, Inc. ("RE&A"), which is a wholly-owned subsidiary of Pasadena Capital Corporation, owns 93.5% of REMC's capital stock. Roger Engemann, controlling shareholder of Pasadena Capital Corporation, is the Chairman of the Board and President of RE&A and REMC. RE&A has been engaged in the business of investment management since 1969, and provides investment counseling services to retirement plans, colleges, corporations, trusts and individuals. REMC has been in business since 1985 and manages The Pasadena Group of Mutual Funds. The portfolio managers, research analysts and supporting staff are substantially the same for both REMC and RE&A. The combined assets under management of REMC and RE&A as of March 31, 1996 are approximately $4.6 billion. Roger Engemann, James E. Mair and John S. Tilson are primarily responsible for the day-to-day management of the Pasadena Growth Trust, and have been since its inception. Mr. Engemann has been the president of the Subadviser, REMC, since its organization in 1985, and has been President of its parent, REA, since its organization in 1969. Messrs. Mair and Tilson are both Executive Vice Presidents and Managing Directors of portfolio management of REMC and REA, and both have been with REMC since its inception and with REA since 1983. Goldman Sachs Asset Management ("GSAM"), the subadviser to the Value Equity Trust, is a separate operating division of Goldman, Sachs & Co., located at 85 Broad Street, New York, New York 10004. The main business address of GSAM is One New York Plaza, New York, New York 10004. GSAM also has offices in London, Tokyo, Singapore and Sydney. Goldman, Sachs & Co. was registered as an investment adviser in 1981 and together with its affiliates currently acts as an investment adviser, administrator or distributor to 75 mutual fund portfolios. As of March 27, 1996, GSAM and its affiliates managed a total of approximately $58.5 billion of assets; approximately $39.4 billion in mutual fund assets and approximately $19.1 billion in assets for various individual and institutional accounts including 9 of the 50 largest U.S. Pension funds and three central banks. Goldman, Sachs & Co. was founded in 1869, has 32 offices world wide, employs over 8900 individuals, and is one of the leading worldwide investment banking and brokerage organizations and provides a broad range of financing and investing services both in the U.S. and abroad. GSAM has access to the resources of Goldman Sachs & Co., including its highly regarded staff of over 504 research professionals that cover more than 1,600 companies in over 60 industries. Mitch Cantor and Paul Farrell have been primarily responsible for the day-to-day management of the Value Equity Trust since February 1993. Messrs. Cantor and Farrell are senior portfolio managers for the Value Equity Trust as well as North American Funds' Value Equity Fund. Mitch Cantor is also a senior equity portfolio manager for the North American Funds' Asset Allocation Fund. Mr. Cantor joined Goldman Sachs Asset Management in 1991. Before joining GSAM, he was a senior partner at Sanford C. Bernstein & Co. where he served as Research Director for the Investment Management Division. Mr. Cantor was at Sanford C. Bernstein & Co. from August 1983 to October 1991. Before joining GSAM in 1991, Paul Farrell served as a managing director at Plaza Investments, the investment subsidiary of GEICO Corp., a major insurance company, from February 1991 to August 1991. Mr. Farrell was previously employed in the Investment Research Department at Goldman Sachs from June 1986 to February 1991. Mr. Farrell is a Certified Financial Analyst as well. Wellington Management Company ("Wellington Management"), the subadviser to the Growth and Income, Investment Quality Bond and Money Market Trusts, founded in 1933, is a Massachusetts partnership whose principal business address is 75 State Street, Boston, Massachusetts 02109. Wellington Management is a professional investment counseling firm which provides investment services to investment companies, employee benefit plans, endowments, foundations and other institutions and individuals. As of December 31, 1995, Wellington Management had investment management authority with respect to approximately $104.6 billion of client assets. The managing partners of Wellington Management are Robert W. Doran, Duncan M. McFarland and John R. Ryan. Matthew E. Megargel, Senior Vice President of Wellington Management, has served as portfolio manager to the Growth and Income Trust since February 1992. Mr. Megargel also serves as the portfolio manager for the North American Funds' Growth and Income Fund. Mr. Megargel joined Wellington Management in 1983 as a research analyst and took on additional responsibilities as a portfolio manager in 1988. In 1991, he became solely a portfolio manager with Wellington Management. Thomas L. Pappas, Vice President of Wellington Management, has served as portfolio manager to the Investment Quality Bond Trust since March 1994. Mr. Pappas also serves as portfolio manager to the North American Funds' Investment Quality Bond Fund. Mr. Pappas has been a portfolio manager with Wellington Management since 1987. 41 46 John C. Keogh, Senior Vice President of Wellington Management, serves as portfolio manager to the Money Market Trust. He has served as portfolio manager to the Money Market Trust since December 1991, when Wellington Management became subadviser to the Money Market Trust. Mr. Keogh also serves as the portfolio manager for the North American Funds' Money Market Fund. Mr. Keogh has been a portfolio manager with Wellington Management since 1983. J.P. Morgan Investment Management, Inc. ("J.P. Morgan") is the Subadviser to the International Growth and Income Trust. J.P. Morgan, with principal offices at 522 Fifth Avenue, New York 10036, is a wholly-owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan & Co."), a bank holding company organized under the laws of Delaware which is located at 60 Wall Street, New York, New York 10260. Through offices in New York City and abroad, J.P. Morgan & Co., through J.P. Morgan and other subsidiaries, offers a wide range of services to governmental, institutional, corporate and individual customers and acts as investment adviser to individual and institutional clients with combined assets under management of approximately $179 billion (of which J.P. Morgan advises over $5 billion) as of December 31, 1995. J.P. Morgan has managed international securities for institutional investors since 1974. As of December 31, 1995, the non-U.S. securities under J.P. Morgan's management was approximately $42 billion. J.P. Morgan provides investment advice and portfolio management services to the portfolio. Subject to the supervision of the Trustees, J.P. Morgan makes the portfolio's day-to-day investment decisions, arranges for the execution of portfolio transactions and generally manages the Portfolio's investments. J.P. Morgan uses a sophisticated, disciplined, collaborative process for managing the portfolio. The following persons are primarily responsible for the day-to-day management of the portfolio (their business experience for the past five years is indicated parenthetically): Paul A. Quinsee, Vice President (employed by J.P. Morgan since February 1992, previously Vice President, Citibank) and Gareth A. Fielding, Assistant Vice President (employed by J.P. Morgan since February 1992, previously he received his MBA from Imperial College at London University, while he was a self -employed trader on the London International Financial Futures Exchange.) Mr. Quinsee is primarily responsible for the day-to-day management of eleven other institutional and investment company accounts that invest in international securities constituting approximately $2.6 billion of assets. Since July 1994, Mr. Fielding has been responsible for the day-to-day management (in some cases with another person) of 11 institutional and investment company portfolios that invest primarily in international fixed income securities, constituting approximately $1 billion of assets. Mr. Fielding is a specialist in mortgage and asset-backed securities. Prior to July 1994, Mr. Fielding traded global fixed income products on J.P. Morgan's London trading desk. Salomon Brothers Asset Management Inc ("SBAM"), the subadviser to the U.S. Government Securities and Strategic Bond Trusts, is an indirect, wholly-owned subsidiary of Salomon Inc ("SI") incorporated in 1987. The business address of SBAM is 7 World Trade Center, New York, New York 10048. Through its office in New York and affiliates in London, Frankfurt, Hong Kong and Tokyo, SBAM provides a full range of fixed income and equity investment advisory services for its individual and institutional clients around the world, including European and Far East central banks, pension funds, endowments, insurance companies, and various investment companies (including portfolios thereof). As of March 31, 1996, SBAM Limited, SBAM and their advisory affiliates had investment advisory responsibility for approximately $14.3 billion of assets. SBAM has access to SI's more than 400 economists, mortgage, bond, sovereign and equity analysts. In connection with SBAM's service as subadviser to the Strategic Bond Trust, SBAM's London based affiliate, Salomon Brothers Asset Management Limited ("SBAM Limited"), whose business address is Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB, England, provides certain advisory services to SBAM relating to currency transactions and investments in non-dollar denominated debt securities for the benefit of the Strategic Bond Trust. SBAM Limited is compensated by SBAM at no additional expense to the Trust. SBAM Limited was formed to acquire the asset management division of a sister company, Salomon Brothers International Limited, which currently has approximately $2 billion under management. Like SBAM, SBAM Limited is an indirect, wholly-owned subsidiary of Salomon Inc. SBAM Limited is a member of the Investment Management Regulatory Organization Limited in the United Kingdom and is registered as an investment adviser in the United States pursuant to the Investment Advisers Act of 1940. Steven Guterman has been primarily responsible for the day-to-day management of the mortgage-backed securities and U.S. government securities portions of the U.S. Government Securities Trust since December 1991 and the Strategic Bond Trust since February 1993. Mr. Guterman is assisted in the management of the two foregoing Trusts by Roger Lavan. Peter J. Wilby has been primarily responsible for the day-to-day management of the high yield and sovereign debt portions of the Strategic Bond Trust since February 1993. Mr. David Scott is primarily responsible for the international portion of the Strategic Bond Trust. Mr. Guterman, who joined SBAM in 1990, is a Managing Director of Salomon Brothers Inc. and a Senior Portfolio Manager, responsible for the SBAM's investment company and institutional portfolios which invest primarily in mortgage-backed securities and U.S. government issues. Mr. Guterman also serves as portfolio manager for North American Funds' U.S. Government Securities and Strategic Income Funds, Salomon Brothers Mortgage Investment Fund, and Salomon Brothers Mortgage Arbitrage Finance Limited. In addition, Mr. Guterman serves as portfolio manager for a number of SBAM's institutional clients. Mr. Guterman joined Salomon Brothers, Inc. in 1983. He initially worked in the mortgage research group where he became a Research Director and later traded derivative mortgage-backed securities for Salomon Brothers, Inc. 42 47 Mr. Lavan has assisted Mr. Guterman with the day to day management of the mortgage-backed securities portions of the U.S. Government Securities Trust since December 1991 and the Strategic Bond Trust since February 1993. Mr. Lavan joined SBAM in 1990 and is a Portfolio Manager and Quantitative Fixed Income Analyst for SBAM where he is responsible for working with senior portfolio managers to monitor and analyze market relationships and identify and implement relative value transactions in SBAM's investment company and institutional portfolios which invest in mortgage-backed securities and U.S. Government Securities. Mr. Lavan also assists Mr. Guterman with the day to day management of the mortgage-backed securities portions of the North American Funds' U.S. Government Securities and Strategic Income Funds. Prior to joining SBAM, Mr. Lavan spent four years analyzing portfolios for Salomon's Fixed Income Sales Group and Product Support Divisions. Mr. Wilby, who joined SBAM in 1989, is a Managing Director of Salomon Brothers Inc. and a Senior Portfolio Manager, responsible for SBAM's investment company and institutional portfolios which invest in high yield U.S. corporate debt securities and high yield foreign sovereign debt securities. Mr. Wilby is also primarily responsible for the day-to-day management of the high yield and sovereign debt portions of North American Fund's Strategic Income Fund, Salomon Brothers High Income Fund, Inc, The Emerging Markets Income Fund, Inc, The Emerging Markets Income Fund, Inc and the Latin America Investment Fund, Inc. (with respect to the Fund's investment in Latin American sovereign debt). From 1984 to 1989, Mr. Wilby was employed by Prudential Capital Management Group ("Prudential"). He served as director of Prudential's credit research unit and as a corporate and sovereign credit analyst with Prudential. Mr. Wilby later managed high yield bonds and leveraged equities in the mutual funds and institutional portfolios at Prudential. David Scott is a senior fixed-income portfolio manager with SBAM Limited in London. His primary responsibility is managing long term global bond portfolios. He also takes an integral role in developing investment strategy. Prior to joining Salomon Brothers in April 1994, Mr. Scott worked at J.P. Morgan Investment Management ("J.P. Morgan") from October 1990 to March 1994 where he had responsibility for global and non-dollar portfolios. Clients included government departments, pension funds and insurance companies. Before joining J.P. Morgan, Mr. Scott worked for Mercury Asset Management from January 1987 to October 1990 where he had responsibility for captive insurance portfolios and product. Mr. Scott is a Fellow of the Institute of Actuaries and worked for the Wyatt Company from November 1984 to January 1987 as a consultant advising companies on pension and employee related benefit issues. He received a BSc in Mathematics and Economics from Nottingham University. Investment decisions for the Small/Mid Cap Trust are made by its Subadviser, Fred Alger Management, Inc. ("Alger"). Alger, located at 75 Maiden Lane, New York, New York 10038, has been in the business of providing investment advisory services since 1964 and as of December 31, 1995 had approximately $4.8 billion under management, including $3 billion in mutual fund accounts and $ 1.8 billion in other advisory accounts. Alger Management is wholly owned by Fred Alger & Company, Incorporated which in turn is wholly owned by Alger Associates, Inc., a financial services holding company. Fred M. Alger, III and his brother, David D. Alger, are the majority shareholders of Alger Associates, Inc. and may be deemed to control that company and its subsidiaries. David D. Alger, President of Alger Management, is primarily responsible for the day-to-day management of the Small/Mid CAP Trust. He has been employed by Alger as Executive Vice President and Director of Research since 1971 and as President since 1995 and he serves as portfolio manager for other mutual funds and investment accounts managed by Alger Management. Also participating in the management of the Small/Mid Cap Trust are Ronald Tartaro and Seilai Khoo. Mr. Tartaro has been employed by Alger Management since 1990 and he serves as a Senior Vice President. Prior to 1990, he was a member of the technical staff at AT&T Bell Laboratories. Ms. Khoo has been employed by Alger Management since 1989 and she serves as a Senior Vice President. Investment decisions for the International Small Cap Trust are made by its Subadviser, Founders Asset Management, Inc., ("Founders") located at 2930 East Third Avenue, Denver, Colorado 80206, a registered investment adviser first established as an asset manager in 1938. Bjorn K. Borgen, Chief Investment Officer and Chairman of Founders, owns 100% of the voting stock of Founders. As of March 31, 1996, Founders had approximatelly $3.5 billion of assets under management, including $2.8 billion in mutual fund accounts and $.7 billion in other advisory accounts. To facilitate the day-to-day investment management of the International Small Cap Trust, Founders employs a unique team-and-lead-manager system. The management team is composed of several members of the Investment Department, including Founders' chief Investment Officer, lead portfolio managers, assistant portfolio managers, portfolio traders and research analysts. Team members share responsibility for providing ideas, information, knowledge and expertise in the management of the portfolios. Each team member has one or more areas of expertise that is applied to the management of the Portfolio. Daily decisions on portfolio selection for the Portfolio rests with a lead portfolio manager assigned to the Portfolio. Michael W. Gerding, Vice President of Investments, is the lead portfolio manager for the International Small Cap Trust. Mr. Gerding is a chartered financial analyst who has been part of Founders' investment department for five years. Mr. Gerding is the lead 43 48 portfolio manager of the International Small Cap Trust. Prior to joining Founders, Mr. Gerding served as a portfolio manager and research analyst with NCNB Texas for several years. Mr. Gerding earned a BBA in finance and an MBA from Texas Christian University. Under the terms of each of the Subadvisory Agreements, the subadviser manages the investment and reinvestment of the assets of the assigned portfolios, subject to the supervision of the Trustees of the Trust. The subadviser formulates a continuous investment program for each such portfolio consistent with its investment objectives and policies outlined in this Prospectus. Each subadviser implements such programs by purchases and sales of securities and regularly reports to the Adviser and the Trustees of the Trust with respect to the implementation of such programs. In addition, the subadviser to the Pasadena Growth Trust has agreed to reimburse the Pasadena Growth Trust for its "Other Expenses," as defined in the Subadvisory Agreement and set forth in the Statement of Additional Information, to a maximum on an annual basis of .15% of the average net assets of the Pasadena Growth Trust. As compensation for their services, the subadvisers receive fees from the Adviser computed separately for each portfolio. The fee for each portfolio is stated as an annual percentage of the current value of the net assets of such portfolio. The fees are calculated on the basis of the average of all valuations of net assets of each portfolio made at the close of business on each business day of the Trust during the period for which such fees are paid. Once the average net assets of a portfolio exceed specified amounts, the fee is reduced with respect to such excess. The following is a schedule of the management fees the Adviser currently is obligated to pay the subadvisers out of the advisory fee it receives from each portfolio as specified above:
BETWEEN BETWEEN $50,000,000 $200,000,000 FIRST AND AND EXCESS OVER PORTFOLIO $50,000,000 $200,000,000 $500,000,000 $500,000,000 Small/Mid Cap Trust .............. .525% .500% .475% .450% International Small Cap Trust .... . .650% .600% .500% .400% Global Equity Trust .............. .500% .450% .375% .325% Pasadena Growth Trust ............ .550% .500% .450% .375% Equity Trust ..................... .325% .275% .225% .150% Value Equity Trust ............... .400% .300% .200% .200% Growth and Income Trust .......... .325% .275% .225% .150% International Growth and Income Trust .................... .500% .450% .400% .350% Strategic Bond Trust* ............ .350% .300% .250% .200% Global Government Bond Trust ..... .375% .350% .300% .250% Investment Quality Bond Trust .... .225% .225% .150% .100% U.S. Government Securities Trust .225% .225% .150% .100% Money Market Trust ............... .075% .075% .075% .020% Aggressive Asset Allocation Trust .325% .275% .225% .150% Moderate Asset Allocation Trust .. .325% .275% .225% .150% Conservative Asset Allocation Trust. .......................... .325% .275% .225% .150%
* In connection with the subadvisory consulting agreement between SBAM and SBAM Limited, SBAM will pay SBAM Limited, as full compensation for all services provided under the subadvisory consulting agreement, a portion of its subadvisory fee, such amount being an amount equal to the fee payable under SBAM's subadvisory agreement multiplied by the current value of the net assets of the portion of the assets of the Strategic Bond Trust that SBAM Limited has been delegated to manage divided by the current value of the net assets of the portfolio. For the year ended December 31, 1995, the Adviser paid aggregate subadvisory fees of $12,007,940, allocated among the portfolios as follows: Global Equity Trust - $2,415,918, Pasadena Growth Trust - $978,146, Equity Trust - $1,628,673, Value Equity Trust - $864,812, Growth & Income Trust - $1,267,236, International Growth & Income Trust - $232,320, Global Government Bond Trust - $771,716, Investment Quality Bond Trust - $276,246, U.S. Government Securities Trust - $442,603, Money Market Trust - $197,786, Aggressive Asset Allocation Trust - $560,019, Moderate Asset Allocation Trust - $1,433,417, Conservative Asset Allocation Trust - $616,971, Strategic Bond Trust - $322,077 ($63,321 of this amount was paid to SBAM Limited.) Above are brief summaries of the advisory agreement with NASL Financial ("Advisory Agreement") and the subadvisory agreements with the subadvisers ("Subadvisory Agreements"). A more comprehensive statement of the terms of such agreements appears in the Statement of Additional Information under the caption "Investment Management Arrangements". 44 49 All or a portion of Trust brokerage commissions may be paid to affiliates of Salomon, J.P. Morgan, Goldman, Alger, Fidelity and Oechsle. Information on the amount of these commissions is set forth in the Statement of Additional Information under "Portfolio Brokerage." EXPENSES Subject to the expense limitations discussed above, the Trust is responsible for the payment of all expenses of its organization, operations and business, except for those expenses the Adviser or subadvisers have agreed to pay pursuant to the Advisory or Subadvisory Agreements. Among the expenses to be borne by the Trust are charges and expenses of the custodian, independent accountants and transfer, bookkeeping and dividend disbursing agents appointed by the Trust; brokers' commissions and issue and transfer taxes on securities transactions to which the Trust is a party; taxes payable by the Trust; and legal fees and expenses in connection with the affairs of the Trust, including registering and qualifying its shares with regulatory authorities and in connection with any litigation. For the year ended December 31, 1995, the expenses, including the Adviser's fee but excluding portfolio brokerage commissions, expressed as a percentage of average net assets, for each of the Trust's portfolios was as follows: 1.05% -- Global Equity Trust, .975% -- Pasadena Growth Trust, .80% -- Equity Trust .85% -- Value Equity Trust, .80% -- Growth and Income Trust 1.47% (annualized) -- International Growth and Income Trust, .92% - Strategic Bond Trust, .93% -- Global Government Bond Trust, .74% -- Investment Quality Bond Trust, .71% -- U.S. Government Securities Trust, .54% -- Money Market Trust, .91% -- Aggressive Asset Allocation Trust, .84% -- Moderate Asset Allocation Trust and .87% -- Conservative Asset Allocation Trust. For the year ended December 31, 1995, the expenses, excluding the Adviser's fee and portfolio brokerage commissions, expressed as a percentage of average net assets, for each of the Trust's portfolios was as follows: .15% -- Global Equity Trust, 0% -- Pasadena Growth Trust, .05% -- Equity Trust .05% -- Value Equity Trust, .05% -- Growth and Income Trust .52% (annualized) -- International Growth and Income Trust, .15% - Strategic Bond Trust, .13% -- Global Government Bond Trust, .09% -- Investment Quality Bond Trust, .06% -- U.S. Government Securities Trust, .04% -- Money Market Trust, .16% -- Aggressive Asset Allocation Trust, .09% -- Moderate Asset Allocation Trust and .12% -- Conservative Asset Allocation Trust. Each of the portfolios, except the Global Equity, Pasadena Growth, Equity, Value Equity and Growth and Income porfolios, anticipate that their annual portfolio turnover rates will exceed 100%. A high portfolio turnover rate generally involves correspondingly greater brokerage commission expenses, which must be borne directly by the portfolio. PERFORMANCE DATA From time to time the Trust may publish advertisements containing performance data relating to its portfolios. Performance data will consist of total return quotations which will always include quotations for recent one-year and, when applicable, five-year and ten-year periods and where less than five or ten years, for the period since the date the portfolio, including its predecessor prior to the reorganization of the Fund on December 31, 1988, became available for investment. Such quotations for such periods will be the average annual rates of return required for an initial investment of $1,000 to equal the market value of such investment on the last day of the period, after reflection of all Trust charges and expenses and assuming reinvestment of all dividends and distributions. Performance figures used by the Trust are based on the actual historical performance of its portfolios for specified periods, and the figures are not intended to indicate future performance. Moreover, the Trust's performance figures are not comparable to those for public mutual funds. Trust shares are only available as the underlying investment medium for contracts which provide for certain charges, as described in the accompanying contract Prospectus. The impact of such charges is not reflected in the Trust's performance figures. More detailed information on the computations is set forth in the Statement of Additional Information. The Trust's annual report, which is available without charge upon request, contains further discussions of Fund performance. The Trust may also from time to time advertise the performance of certain portfolios relative to that of unmanaged indices, including but not limited to the Dow Jones Industrial Average, the Lehman Brothers Bond, Government Corporate, Corporate and Aggregate Indices, the Standard and Poor's 500, the Value Line Composite and the Morgan Stanley Capital International Europe, Australia and Far East ("EAFE") and World Indices. The Trust may also advertise the performance rankings assigned certain portfolios or their investment subadvisers by various statistical services, including but not limited to SEI, Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis and Variable Insurance Products Performance Analysis, Variable Annuity Research and Data Service, Intersec Research Survey of Non-U.S. Equity Fund Returns and Frank Russell International Universe, and any other data which may be presented from time to time by such analysts as Dow Jones, Morning Star, Chase International Performance, Wilson Associates, Stanger, CDA Investment Technology, the Consumer Price Index ("CPI"), The Bank Rate Monitor National Index, IBC/Donaghue's Average U.S. Government and Agency, or as they appear in various publications, including The Wall Street Journal, New York Times, Forbes, Barrons, Fortune, Money Magazine, Financial World and Financial Services Week. 45 50 GENERAL INFORMATION SHARES OF THE TRUST The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of $.01 per share, to divide such shares into an unlimited number of series of shares and to designate the relative rights and preferences thereof, all without shareholder approval. In addition, the Trustees are authorized to divide any series of shares into separate classes, also without shareholder approval. The Trust currently has sixteen series of shares, one for each portfolio. Shares of each portfolio have equal rights with regard to redemptions, dividends, distributions and liquidations with respect to that portfolio. When issued, shares are fully paid and non-assessable and do not have preemptive or conversion rights or cumulative voting rights. All shares are entitled to one vote and are voted by series, except that when voting for the election of Trustees and when otherwise permitted by the Investment Company Act of 1940, shares are voted in the aggregate. Only shares of a particular portfolio are entitled to vote on matters determined by the Trustees to affect only the interests of that portfolio. The Trust currently has three shareholders, Security Life, Manulife America and FNAL. Security Life provided the Fund with its initial capital. Currently, Security Life owns Trust shares attributable to the initial capitalization of the Growth and Income Trust. Each shareholder owns the Trust shares attributable to contracts participating in its separate accounts and will vote such shares and, in the case of Security Life, Trust shares owned beneficially by Security Life, in accordance with instructions received from contract owners. Shares of the Trust may be sold to both variable annuity separate accounts and variable life insurance separate accounts of affiliated insurance companies. The Trust currently does not foresee any disadvantages to the owners of variable annuity or variable life insurance contracts arising from the fact that the interests of those owners may differ. Nevertheless, the Trust's Board of Trustees will monitor events in order to identify any material irreconcilable conflicts which may possibly arise due to differences of tax treatment or other considerations and to determine what action, if any, should be taken in response thereto. Such an action could include the withdrawal of a separate account from participation in the Trust. TAXES TAX STATUS. The Trust believes that each portfolio will qualify as a regulated investment company under Subchapter M, Chapter 1, Subtitle A of the Internal Revenue Code (the "Code"), and the Trust intends to take the steps necessary to so qualify each portfolio. As a result of qualifying as a regulated investment company, each portfolio will not be subject to Federal income tax to the extent that the portfolio distributes its net income, including its net realized capital gains, to its shareholders. Accordingly, each portfolio intends to distribute substantially all of its net income, including all of its net realized capital gains, to its shareholders. Under current law, net income, including net realized capital gain, is not taxed to a life insurance company to the extent that it is applied to increase the reserves for the company's variable annuity and life insurance contracts. SOURCES OF GROSS INCOME. To qualify for treatment as a regulated investment company, a portfolio must, among other things, derive its income from certain sources. Specifically, in each taxable year a portfolio must derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, 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. A portfolio must also derive less than 30% of its gross income from the sale or other disposition of any of the following which was held for less than three months: (1) stock or securities, (2) options, futures, or forward contracts (other than options, futures, or forward contracts on foreign currencies), or (3) foreign currencies (or options, futures, or forward contracts on foreign currencies) but only if such currencies (or options, futures, or forward contracts) are not directly related to the portfolio's principal business of investing in stock or securities (or options and futures with respect to stocks or securities). For purposes of these tests, gross income generally is determined without regard to losses from the sale or other disposition of stock or securities or other portfolio assets. Compliance with these requirements may prevent a portfolio from utilizing options, futures, and forward contracts as much as the subadviser might otherwise believe to be desirable. DIVERSIFICATION OF ASSETS. To qualify for treatment as a regulated investment company, a portfolio must also satisfy certain requirements with respect to the diversification of its assets. A portfolio must have, at the close of each quarter of the taxable year, at least 50% of the value of its total assets represented by cash, cash items, United States Government securities, securities of other regulated investment companies, and other securities which, in respect of any one issuer, do not represent more than 5% of the value of the assets of the portfolio nor more than 10% of the voting securities of that issuer. In addition, at those times not more than 25% of the value of the portfolio's assets may be invested in securities (other than United States Government securities or the securities of other regulated investment companies) of any one issuer, or of two or more issuers which the portfolio controls and which are engaged in the same or similar trades or businesses or related trades or businesses. 46 51 Because the Trust is established as an investment medium for insurance company separate accounts, regulations under Subchapter L of the Code impose additional diversification requirements on each portfolio. These requirements generally are that no more than 55% of the value of the assets of a portfolio may be represented by any one investment; no more than 70% by any two investments; no more than 80% by any three investments; and no more than 90% by any four investments. For these purposes, all securities of the same issuer are treated as a single investment and each United States government agency or instrumentality is treated as a separate issuer. FOREIGN INVESTMENTS. Portfolios investing in foreign securities or currencies may be required to pay withholding or other taxes to foreign governments. Foreign tax withholding from dividends and interest, if any, is generally at a rate between 10% and 35%. The investment yield of any portfolio that invests in foreign securities or currencies will be reduced by these foreign taxes. Shareholders will bear the cost of any foreign tax withholding, but may not be able to claim a foreign tax credit or deduction for these foreign taxes. Portfolios investing in securities of passive foreign investment companies may be subject to U.S. federal income taxes and interest charges (and investment yield of the portfolios making such investments will be reduced by these taxes and interest charges). Shareholders will bear the cost of these taxes and interest charges, but will not be able to claim a deduction for these amounts. ADDITIONAL TAX CONSIDERATIONS. If a portfolio failed to qualify as a regulated investment company, owners of contracts based on the portfolio (1) might be taxed currently on the investment earnings under their contracts and thereby lose the benefit of tax deferral, and (2) the portfolio might incur additional taxes. In addition, if a portfolio failed to comply with the diversification requirements of the regulations under Subchapter L of the Code, owners of contracts based on the portfolio would be taxed on the investment earnings under their contracts and thereby lose the benefit of tax deferral. Accordingly, compliance with the above rules is carefully monitored by the Adviser and the Subadvisers and it is intended that the portfolios will comply with these rules as they exist or as they may be modified from time to time. Compliance with the tax requirements described above may result in a reduction in the return under a portfolio, since, to comply with the above rules, the investments utilized (and the time at which such investments are entered into and closed out) may be different from that Subadvisers might otherwise believe to be desirable. OTHER INFORMATION. For more information regarding the tax implications for the purchaser of a variable annuity or life insurance contracts who allocates investments to the Trust, please refer to the prospectus for the contract. The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury Regulations currently in effect. It is not intended to be a complete explanation or a substitute for consultation with individual tax advisors. For the complete provisions, reference should be made to the pertinent Code sections and the Treasury Regulations promulgated thereunder. The Code and Regulations are subject to change. DIVIDENDS The Trust intends to declare as dividends substantially all of the net investment income, if any, of each portfolio. For dividend purposes, net investment income of each portfolio except the Money Market Trust will consist of all payments of dividends (other than stock dividends) or interest received by such portfolio less the estimated expenses of such portfolio (including fees payable to the Adviser) and for the Money Market Trust it will consist of the interest income earned on investments, plus or minus amortized purchase discount or premium, plus or minus realized gains and losses, less estimated expenses. Dividends from the net investment income and the net realized short-term and long-term capital gains, if any, for each portfolio except the Money Market Trust will be declared not less frequently than annually and reinvested in additional full and fractional shares of that portfolio or paid in cash. Dividends from net investment income and net realized short-term and long-term capital gains, if any, for the Money Market Trust will be declared and reinvested, or paid in cash, daily. PURCHASE AND REDEMPTION OF SHARES Shares of the Trust are offered continuously, without sales charge, at prices equal to the respective net asset values of the portfolio. The Trust sells its shares directly without the use of any underwriter. Shares of the Trust are sold and redeemed at their net asset value next computed after a purchase payment or redemption request is received by Security Life from the contract owner or after any other purchase or redemption order is received by the Trust. Depending upon the net asset values at that time, the amount paid upon redemption may be more or less than the cost of the shares redeemed. Payment for shares redeemed will be made as soon as possible, but in any event within seven days after receipt of a request for redemption. The net asset value of the shares of each portfolio is determined once daily as of the close of regularly scheduled trading of the New York Stock Exchange, Monday through Friday, except that no determination is required on (i) days on which changes in the value of such portfolio's portfolio securities will not materially affect the current net asset value of the shares of the portfolio, (ii) days during which no shares of such portfolio are tendered for redemption and no order to purchase or sell such shares is received by the Trust, or (iii) the following business holidays or the days on which such holidays are observed by the New York Stock Exchange: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Generally, trading in non-U.S. securities, as well as U.S. Government securities and money market instruments, is substantially completed each day at various times prior to the close of regularly scheduled trading of the New York Stock Exchange. The values of such securities used in computing the net asset 47 52 value of a portfolio's shares are generally determined as of such times. Occasionally, events which affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange and would therefore not be reflected in the computation of a portfolio's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by the subadvisers under procedures established and regularly reviewed by the Trustees. The net asset values per share of all portfolios other than the Money Market Trust are computed by adding the sum of the value of the securities held by each portfolio plus any cash or other assets it holds, subtracting all its liabilities, and dividing the result by the total number of shares outstanding of that portfolio at such time. Securities held by each of the portfolios other than the Money Market Trust, except for money market instruments with remaining maturities of 60 days or less, are valued at their market value if market quotations are readily available. Otherwise, such securities are valued at fair value as determined in good faith by the Trustees although the actual calculations may be made by persons acting pursuant to the direction of the Trustees. All instruments held by the Money Market Trust and money market instruments with a remaining maturity of 60 days or less held by the other portfolios are valued on an amortized cost basis. CUSTODIAN State Street Bank and Trust Company, ("State Street") 225 Franklin Street, Boston, Massachusetts 02110, currently acts as custodian and bookkeeping agent of all the Trust assets. State Street has selected various banks and trust companies in foreign countries to maintain custody of certain foreign securities. State Street is authorized to use the facilities of the Depository Trust Company, the Participants Trust Company and the book-entry system of the Federal Reserve Banks. APPENDIX I DEBT SECURITY RATINGS STANDARD & POOR'S RATINGS GROUP ("S&P") Commercial Paper: A-1 The rating A-1 is the highest rating assigned by S&P to commercial paper. This designation indicates that the degree of safety regarding timely payment is either overwhelming or very strong. Those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign designation. A-2 Capacity for timely payment on issues with this designation is strong. However, the relative degree of safety is not as high for issuers designated "A-1". Bonds: 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 higher 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 an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate 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 in higher rated categories. BB-B-CCC-CC Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. BB indicates the lowest degree of speculation and CC the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. D Bonds rated D are in default. The D 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. The D rating is also used upon the filing of a bankruptcy petition if debt service payments are jeopardized.
The ratings set forth above may be modified by the addition of a plus or minus to show relative standing within the major rating categories. 48 53 MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") Commercial Paper: P-1 The rating P-1 is the highest commercial paper rating assigned by Moody's. Issuers rated P-1 (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations. P-1 repayment capacity will normally be evidenced by the following characteristics: (1) leading market positions in established industries; (2) high rates of return on funds employed; (3) conservative capitalization structures with moderate reliance on debt and ample asset protection; (4) broad margins in earnings coverage of fixed financial charges and high internal cash generation; and (5) well established access to a range of financial markets and assured sources of alternate liquidity. P-2 Issuers rated P-2 (or related supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternative liquidity is maintained. Bonds: Aaa Bonds which are rated Aaa by Moody's 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 by Moody's 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 make the long term risks appear somewhat larger than in Aaa securities. A Bonds which are rated A by Moody's 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 by Moody's are considered as medium grade obligations, that is, 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. B Bonds which are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance and 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 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.
Moody's applies numerical modifiers "1", "2" and "3" to certain of its rating classifications. 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. 49 54 APPENDIX II STRATEGIC BOND TRUST DEBT RATING The average distribution of investments in corporate and government bonds by ratings for the fiscal year ended December 31, 1995, calculated monthly on a dollar-weighted basis, for the Strategic Bond Trust, are as follows: UNRATED BUT OF MOODY'S STANDARD & POOR'S COMPARABLE QUALITY PERCENTAGE* Aaa AAA 11% 0% Aa AA 0% 0% A A 0% 2% Baa BBB 0% 3% Ba BB 23% 4% B B 0% 33% Caa CCC 0% 2% Ca CC 0% 0% C C 0% 0% D 0% 0%
Unrated as a Group 34% U.S. Government Securities* 22% 100% The actual distribution of the Strategic Bond Trust's corporate and government bond investments by ratings on any given date will vary. In addition, the distribution of the Trust's investments by ratings as set forth above should not be considered as representative of the Trust's future portfolio composition. *Obligations issued or guaranteed by the U.S. Government or its agencies, authorities or instrumentalities. INVESTMENT QUALITY BOND TRUST DEBT RATINGS The average distribution of investments in corporate and government bonds by ratings for the fiscal year ended December 31, 1995, calculated monthly on a dollar-weighted basis, for the Investment Quality Bond Trust, are as follows: UNRATED BUT OF MOODY'S STANDARD & POOR'S COMPARABLE QUALITY PERCENTAGE* Aaa AAA 0% 9% Aa AA 0% 5% A A 0% 19% Baa BBB 0% 5% Ba BB 0% 2% B B 0% 1% Caa CCC 0% 0% Ca CC 0% 0% C C 0% 0% D 0% 0%
Unrated as a Group 0% U.S. Government Securities* 59% --- 100% The actual distribution of the Investment Quality Bond Trust's corporate and government bond investments by ratings on any given date will vary. In addition, the distribution of the Trust's investments by ratings as set forth above should not be considered as representative of the Trust's future portfolio composition. *Obligations issued or guaranteed by the U.S. Government or its agencies, authorities or instrumentalities. 50 55 PART B 56 - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- NASL SERIES TRUST (the "Trust") This Statement of Additional Information is not a prospectus but should be read in conjunction with the Trust's Prospectus dated May 1, 1996 which may be obtained from NASL Series Trust, 116 Huntington Avenue, Boston, Massachusetts, 02116. The date of this Statement of Additional Information is May 1, 1996. 1 57 TABLE OF CONTENTS INVESTMENT POLICIES .............................................................. 3 Money Market Instruments .................................................... 3 Other Instruments ........................................................... 4 HEDGING AND OTHER STRATEGIC TRANSACTIONS ......................................... 9 General Characteristics of Options .......................................... 9 General Characteristics of Futures Contracts and Options on Futures Contracts 11 Options on Securities Indices and Other Financial Indices.................... 11 Currency Transactions........................................................ 11 Combined Transactions........................................................ 12 Swaps, Caps, Floors and Collars.............................................. 12 Eurodollar Instruments....................................................... 13 Risk Factors................................................................. 13 Risks of Hedging and Other Strategic Transactions Outside the United States.. 14 Use of Segregated and Other Special Accounts................................. 14 Other Limitations............................................................ 15 INVESTMENT RESTRICTIONS .......................................................... 15 Fundamental.................................................................. 15 Nonfundamental............................................................... 16 PORTFOLIO TURNOVER ............................................................... 17 MANAGEMENT OF THE TRUST .......................................................... 18 Compensation of Trustees .................................................... 19 INVESTMENT MANAGEMENT ARRANGEMENTS ............................................... 19 The Advisory Agreement ...................................................... 20 The Subadvisory Agreements .................................................. 21 Agreement With Prior Subadviser.............................................. 24 PORTFOLIO BROKERAGE .............................................................. 24 PURCHASE AND REDEMPTION OF SHARES ................................................ 28 DETERMINATION OF NET ASSET VALUE ................................................. 28 PERFORMANCE DATA ................................................................. 29 ORGANIZATION OF THE TRUST ....................................................... 30 Shares of the Trust ........................................................ 30 Principal Holders of Securities ............................................ 31 REPORTS TO SHAREHOLDERS ......................................................... 32 INDEPENDENT ACCOUNTANTS ......................................................... 32 LEGAL COUNSEL ................................................................... 32 FINANCIAL STATEMENTS ............................................................ 33
2 58 INVESTMENT POLICIES The following discussion supplements the Trust's "Investment Objectives and Policies" set forth in the Prospectus. MONEY MARKET INSTRUMENTS The Money Market Trust will be invested in the types of money market instruments described below. Certain of the instruments listed below may also be purchased by the other portfolios in accordance with their investment policies and all portfolios may purchase such instruments to invest otherwise idle cash or for defensive purposes, except that the U.S. Government Securities Trust may not invest in the instruments described in 2. below. 1. U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS. Government obligations are debt securities issued or guaranteed as to principal or interest by the U.S. Treasury. These securities include treasury bills, notes and bonds. U.S. Government agency obligations are debt securities issued or guaranteed as to principal or interest by an agency or instrumentality of the U.S. Government pursuant to authority granted by Congress. U.S. Government agency obligations include, but are not limited to, the Student Loan Marketing Association, Federal Home Loan Banks, Federal Intermediate Credit Banks and the Federal National Mortgage Association. U.S. instrumentality obligations include, but are not limited to, the Export-Import Bank and Farmers Home Administration. Some obligations issued or guaranteed by U.S. Government agencies or instrumentalities are supported by the right of the issuer to borrow from the U.S. Treasury or the Federal Reserve Banks, such as those issued by Federal Intermediate Credit Banks; others, such as those issued by the Federal National Mortgage Association, by discretionary authority of the U.S. Government to purchase certain obligations of the agency or instrumentality; and others, such as those issued by the Student Loan Marketing Association, only by the credit of the agency or instrumentality. There are also separately traded interest components of securities issued or guaranteed by the United States Treasury. No assurance can be given that the U.S. Government will provide financial support to such U.S. Government sponsored agencies or instrumentalities in the future, since it is not obligated to do so by law. The foregoing types of instruments are hereafter collectively referred to as "U.S. Government securities." 2. CANADIAN AND PROVINCIAL GOVERNMENT AND CROWN AGENCY Obligations. Canadian Government obligations are debt securities issued or guaranteed as to principal or interest by the Government of Canada pursuant to authority granted by the Parliament of Canada and approved by the Governor in Council, where necessary. These securities include treasury bills, notes, bonds, debentures and marketable Government of Canada loans. Canadian Crown agency obligations are debt securities issued or guaranteed by a Crown corporation, company or agency ("Crown agencies") pursuant to authority granted by the Parliament of Canada and approved by the Governor in Council, where necessary. Certain Crown agencies are by statute agents of Her Majesty in right of Canada, and their obligations, when properly authorized, constitute direct obligations of the Government of Canada. Such obligations include, but are not limited to, those issued or guaranteed by the Export Development Corporation, Farm Credit Corporation, Federal Business Development Bank and Canada Post Corporation. In addition, certain Crown agencies which are not by law agents of Her Majesty may issue obligations which by statute the Governor in Council may authorize the Minister of Finance to guarantee on behalf of the Government of Canada. Other Crown agencies which are not by law agents of Her Majesty may issue or guarantee obligations not entitled to be guaranteed by the Government of Canada. No assurance can be given that the Government of Canada will support the obligations of Crown agencies which are not agents of Her Majesty, which it has not guaranteed, since it is not obligated to do so by law. Provincial Government obligations are debt securities issued or guaranteed as to principal or interest by the government of any province of Canada pursuant to authority granted by the Legislature of any such province and approved by the Lieutenant Governor in Council of any such province, where necessary. These securities include treasury bills, notes, bonds and debentures. Provincial Crown agency obligations are debt securities issued or guaranteed by a provincial Crown corporation, company or agency ("provincial Crown agencies") pursuant to authority granted by a provincial Legislature and approved by the Lieutenant Governor in Council of such province, where necessary. Certain provincial Crown agencies are by statute agents of Her Majesty in right of a particular province of Canada, and their obligations, when properly authorized, constitute direct obligations of such province. Other provincial Crown agencies which are not by law agents of Her Majesty in right of a particular province of Canada may issue obligations which by statute the Lieutenant Governor in Council of such province may guarantee, or may authorize the Treasurer thereof to guarantee, on behalf of the government of such province. Finally, other provincial Crown agencies which are not by law agencies of Her Majesty may issue or guarantee obligations not entitled to be guaranteed by a provincial government. No assurance can be given that the government of any province of Canada will support the obligations of provincial Crown agencies which are not agents of Her Majesty, which it has not guaranteed, as it is not obligated to do so by law. Provincial Crown agency obligations described above include, but are not limited to, those issued or guaranteed by a provincial railway corporation, a provincial hydroelectric or power commission or authority, a provincial municipal financing corporation or agency and a provincial telephone commission or authority. Any Canadian obligation acquired by the Money Market Trust will be payable in U.S. dollars. 3 59 3. CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Certificates of deposit are certificates issued against funds deposited in a bank or a savings and loan. They are for a definite period of time and earn a specified rate of return. Bankers' acceptances are short-term credit instruments evidencing the obligation of a bank to pay a draft which has been drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the face amount of the instrument upon maturity. They are primarily used to finance the import, export, transfer or storage of goods. They are termed "accepted" when a bank guarantees their payment at maturity. Trust portfolios may acquire obligations of foreign banks and foreign branches of U.S. banks. These obligations are not insured by the Federal Deposit Insurance Corporation. 4. COMMERCIAL PAPER. Commercial paper consists of unsecured promissory notes issued by corporations to finance short-term credit needs. Commercial paper is issued in bearer form with maturities generally not exceeding nine months. Commercial paper obligations may include variable amount master demand notes. Variable amount master demand notes are obligations that permit the investment of fluctuating amounts at varying rates of interest pursuant to direct arrangements between a portfolio, as lender, and the borrower. These notes permit daily changes in the amounts borrowed. The portfolio has the right to increase the amount under the note at any time up to the full amount provided by the note agreement, or to decrease the amount, and the borrower may prepay up to the full amount of the note without penalty. Because variable amount master demand notes are direct lending arrangements between the lender and borrower, it is not generally contemplated that such instruments will be traded, and there is no secondary market for these notes, although they are redeemable (and thus immediately repayable by the borrower) at face value, plus accrued interest, at any time. A portfolio will only invest in variable amount master demand notes issued by companies which at the date of investment have an outstanding debt issue rated "Aaa" or "Aa" by Moody's or "AAA" or "AA" by S&P and which the applicable Subadviser has determined present minimal risk of loss to the portfolio. A Subadviser will look generally at the financial strength of the issuing company as "backing" for the note and not to any security interest or supplemental source such as a bank letter of credit. A master demand note will be valued each day a portfolio's net asset value is determined, which value will generally be equal to the face value of the note plus accrued interest unless the financial position of the issuer is such that its ability to repay the note when due is in question. 5. CORPORATE OBLIGATIONS. Corporate obligations include bonds and notes issued by corporations to finance long-term credit needs. 6. REPURCHASE AGREEMENTS. Repurchase agreements are arrangements involving the purchase of obligations by a portfolio and the simultaneous agreement to resell the same obligations on demand or at a specified future date and at an agreed upon price. A repurchase agreement can be viewed as a loan made by a portfolio to the seller of the obligation with such obligation serving as collateral for the seller's agreement to repay the amount borrowed with interest. Such transactions afford an opportunity for a portfolio to earn a return on cash which is only temporarily available. Repurchase agreements entered into by the portfolio will be with banks, brokers or dealers. However, a portfolio will enter into a repurchase agreement with a broker or dealer only if the broker or dealer agrees to deposit additional collateral should the value of the obligation purchased by the portfolio decrease below the resale price. In selecting sellers with whom the portfolio will enter into repurchase transactions, the Trustees have adopted procedures that establish certain credit worthiness, asset and collateralization requirements and limit the counterparties to repurchase transactions to those financial institutions which are members of the Federal Reserve System and for a primary government securities dealer reporting to the Federal Reserve Bank of New York's Market Reports Division or a broker/dealer which meet certain credit worthiness criteria or which report U.S. Government securities positions to the Federal Reserve Board. However, the Trustees reserve the right to change the criteria used to select such financial institutions and broker/dealers. The Trustees will regularly monitor the use of repurchase agreements and the Subadviser will, pursuant to procedures adopted by the Trustees, continuously monitor that the collateral held with respect to a repurchase transaction equals or exceeds the amount of the obligations. Should an issuer of a repurchase agreement fail to repurchase the underlying obligation, the loss to the portfolio, if any, would be the difference between the repurchase price and the underlying obligation's market value. A portfolio might also incur certain costs in liquidating the underlying obligation. Moreover, if bankruptcy or other insolvency proceedings should be commenced with respect to the seller, realization upon the underlying obligation by the Trust might be delayed or limited. Generally, repurchase agreements are of a short duration, often less than one week but on occasion for longer periods. OTHER INSTRUMENTS The following provides a more detailed explanation of some of the other instruments in which the International Small Cap, Value Equity, Strategic Bond, International Growth and Income, U.S. Government Securities, Investment Quality Bond and Automatic Asset Allocation Trusts may invest. 4 60 1. MORTGAGE SECURITIES Mortgage securities differ from conventional bonds in that principal is paid over the life of the securities rather than at maturity. As a result, a portfolio receives monthly scheduled payments of principal and interest, and may receive unscheduled principal payments representing prepayments on the underlying mortgages. When a portfolio reinvests the payments and any unscheduled prepayments of principal it receives, it may receive a rate of interest which is higher or lower than the rate on the existing mortgage securities. For this reason, mortgage securities may be less effective than other types of debt securities as a means of locking in long term interest rates. In addition, because the underlying mortgage loans and assets may be prepaid at any time, if a portfolio purchases mortgage securities 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 a portfolio purchases these securities at a discount, faster than expected prepayments will increase, while slower than expected payments will reduce, yield to maturity. Adjustable rate mortgage securities, are similar to the mortgage securities discussed above, except that unlike fixed rate mortgage securities, adjustable rate mortgage securities are collateralized by or represent interests in mortgage loans with variable rates of interest. These variable rates of interest reset periodically to align themselves with market rates. Most adjustable rate mortgage securities provide for an initial mortgage rate that is in effect for a fixed period, typically ranging from three to twelve months. Thereafter, the mortgage interest rate will reset periodically in accordance with movements in a specified published interest rate index. The amount of interest due to an adjustable rate mortgage holder is determined in accordance with movements in a specified published interest rate index by adding a pre-determined increment or "margin" to the specified interest rate index. Many adjustable rate mortgage securities reset their interest rates based on changes in the one-year, three-year and five-year constant maturity Treasury rates, the three-month or six-month Treasury Bill rate, the 11th District Federal Home Loan Bank Cost of Funds, the National Median Cost of Funds, the one-month, three-month, six-month or one-year London Interbank Offered Rate ("LIBOR") and other market rates. A portfolio will not benefit from increases in interest rates to the extent that interest rates rise to the point where they cause the current coupon of adjustable rate mortgages held as investments to exceed any maximum allowable annual or lifetime reset limits (or "cap rates") for a particular mortgage. In this event, the value of the mortgage securities in a portfolio would likely decrease. Also, the portfolio's net asset value could vary to the extent that current yields on adjustable rate mortgage securities are different than market yields during interim periods between coupon reset dates. During periods of declining interest rates, income to a portfolio derived from adjustable rate mortgages which remain in a mortgage pool will decrease in contrast to the income on fixed rate mortgages, which will remain constant. Adjustable rate mortgages also have less potential for appreciation in value as interest rates decline than do fixed rate investments. Privately-Issued Mortgage Securities. Privately-issued pass through securities provide for the monthly principal and interest payments made by individual borrowers to pass through to investors on a corporate basis, and in privately issued collateralized mortgage obligations, as further described below. Privately-issued mortgage securities are issued by private originators of, or investors in, mortgage loans, including mortgage bankers, commercial banks, investment banks, savings and loan associations and special purpose subsidiaries of the foregoing. Since privately-issued mortgage certificates are not guaranteed by an entity having the credit status of GNMA or FHLMC, such securities generally are structured with one or more types of credit enhancement. For a description of the types of credit enhancements that may accompany privately-issued mortgage securities, see "Types of Credit Support" below. A portfolio will not limit its investments to asset-backed securities with credit enhancements. Collateralized Mortgage Obligations ("CMOs"). CMOs generally are bonds or certificates issued in multiple classes that are collateralized by or represent an interest in mortgages. CMOs may be issued by single-purpose, stand-alone finance subsidiaries or trusts of financial institutions, government agencies, investment banks or other similar institutions. Each class of CMOs, often referred to as a "tranche", may be issued with a specific fixed coupon rate (which may be zero) or a floating coupon rate, and has a stated maturity or final distribution date. Principal prepayments on the underlying mortgages may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates. Interest is paid or accrued on CMOs on a monthly, quarterly or semiannual basis. The principal of and interest on the underlying mortgages may be allocated among the several classes of a series of a CMO in many ways. The general goal sought to be achieved in allocating cash flows on the underlying mortgages to the various classes of a series of CMOs is to create tranches on which the expected cash flows have a higher degree of predictability than the underlying mortgages. As a general matter, the more predictable the cash flow is on a CMO tranche, the lower the anticipated yield will be on that tranche at the time of issuance. As part of the process of creating more predictable cash flows on most of the tranches in a series of CMOs, one or more tranches generally must be created that absorb most of the volatility in the cash flows on the underlying mortgages. The yields on these tranches are relatively higher than on tranches with more predictable cash flows. Because of the uncertainty of the cash flows on these tranches, and the sensitivity thereof to changes in prepayment rates on the underlying mortgages, the market prices of and yield on these tranches tend to be highly volatile. 5 61 CMOs purchased may be: (1) collateralized by pools of mortgages in which each mortgage is guaranteed as to payment of principal and interest by an agency or instrumentality of the U.S. Government; (2) collateralized by pools of mortgages in which payment of principal and interest is guaranteed by the issuer and the guarantee is collateralized by U.S. Government securities; or (3) securities for which the proceeds of the issuance are invested in mortgage securities and payment of the principal and interest is supported by the credit of an agency or instrumentality of the U.S. Government. STRIPS. In addition to the U.S. Government securities discussed above, certain portfolios may invest in separately traded interest components of securities issued or guaranteed by the United States Treasury. The interest components of selected securities are traded independently under the Separate Trading of Registered Interest and Principal of Securities program ("STRIPS"). Under the STRIPS program, the interest components are individually numbered and separately issued by the United States Treasury at the request of depository financial institutions, which then trade the component parts independently. Stripped Mortgage Securities. Stripped mortgage securities are derivative multiclass mortgage securities. Stripped mortgage securities may be issued by agencies or instrumentalities of the U.S. Government, or by private issuers, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Stripped mortgage securities have greater volatility than other types of mortgage securities in which the portfolio invests. Although stripped mortgage securities are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, the market for such securities has not yet been fully developed. Accordingly, stripped mortgage securities are generally illiquid and to such extent, together with any other illiquid investments, will not exceed 15% of a portfolio's net assets. Stripped mortgage securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of stripped mortgage security will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder 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 not only to changes in prevailing interest rates but also the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the portfolio's yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the portfolio may fail to fully recoup its initial investment in these securities even if the securities are rated AAA by S&P. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. The value of the other mortgage securities described in this Prospectus, like other debt instruments, will tend to move in the opposite direction to interest rates. Accordingly, the Trust believes that investing in IOs, in conjunction with the other mortgage securities described herein, will contribute to a portfolio's relatively stable net asset value. In addition to the stripped mortgage securities described above, the Strategic Bond Trust may invest in similar securities such as Super POs and Levered IOs which are more volatile than POs IOs and IOettes. Risks associated with instruments such as Super POs are similar in nature to those risks related to investments in POs. Risks connected with Levered IOs and IOettes are similar in nature to those associated with IOs. The Strategic Bond Trust may also invest in other similar instruments developed in the future that are deemed consistent with the investment objectives, policies and restrictions of the portfolio. Under the Internal Revenue Code of 1986, as amended (the "Code"), POs may generate taxable income from the current accrual of original issue discount, without a corresponding distribution of cash to the portfolio. See "Additional Information Concerning Taxes." Inverse Floaters. The Strategic Bond Trust may invest in inverse floaters which are also derivative mortgage securities. Inverse floaters may be issued by agencies or instrumentalities of the U.S. Government, or by private issuers, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Inverse floaters have greater volatility than other types of mortgage securities in which the portfolio invests (with the exception of stripped mortgage securities). Although inverse floaters are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, the market for such securities has not yet been fully developed. Accordingly, inverse floaters are generally illiquid and to such extent, together with any other illiquid investments, will not exceed 15% of a portfolio's net assets. 6 62 Inverse floaters are structured as a class of security that receives distributions on a pool of mortgage assets and whose yields move in the opposite direction of short-term interest rates and at an accelerated rate. Inverse floaters may be volatile and there is a risk that their market value will vary from their amortized cost. 2. ASSET-BACKED SECURITIES The securitization techniques used to develop mortgage securities are also being applied to a broad range of other assets. Through the use of trusts and special purpose corporations, automobile and credit card receivables are being securitized in pass-through structures similar to mortgage pass-through structures or in a pay-through structure similar to the CMO structure. Generally the issuers of asset-backed bonds, notes or pass-through certificates are special purpose entities and do not have any significant assets other than the receivables securing such obligations. In general, the collateral supporting asset-backed securities is of shorter maturity than mortgage loans. As a result, investment in these securities should result in greater price stability for the portfolio's shares. Instruments backed by pools of receivables are similar to mortgage-backed securities in that they are subject to unscheduled prepayments of principal prior to maturity. When the obligations are prepaid, the portfolio must reinvest the prepaid amounts in securities the yields of which reflect interest rates prevailing at the time. Therefore, a portfolio's ability to maintain a portfolio which includes high-yielding asset-backed securities will be adversely affected to the extent that prepayments of principal must be reinvested in securities which have lower yields than the prepaid obligations. Moreover, prepayments of securities purchased at a premium could result in a realized loss. A portfolio will only invest in asset-backed securities rated, at the time of purchase, AA or better by S&P or Aa or better by Moody's or which, in the opinion of the investment subadviser, are of comparable quality. As with mortgage securities, asset-backed securities are often backed by a pool of assets representing the obligation of a number of different parties and use similar credit enhancement techniques. For a description of the types of credit enhancement that may accompany privately-issued mortgage securities, see "Types of Credit Support" below. A portfolio will not limit its investments to asset-backed securities with credit enhancements. Although asset-backed securities are not generally traded on a national securities exchange, such securities are widely traded by brokers and dealers, and to such extent will not be considered illiquid securities for the purposes of the investment restriction under "Investment Restrictions" below. TYPES OF CREDIT SUPPORT. Mortgage securities and asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failure by obligors on underlying assets to make payments, such securities may contain elements of credit support. Such credit support falls into two categories: (i) liquidity protection and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the pass-through of payments due on the underlying pool occurs in a timely fashion. Protection against losses resulting from ultimate default enhances the likelihood of ultimate payment of the obligations on at least a portion of the assets in the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security. The ratings of mortgage securities and asset-backed securities for which third-party credit enhancement provides liquidity protection or protection against losses from default are generally dependent upon the continued creditworthiness of the provider of the credit enhancement. The ratings of such securities could be subject to reduction in the event of deterioration in the creditworthiness of the credit enhancement provider even in cases where the delinquency and loss experience on the underlying pool of assets is better than expected. Examples of credit support arising out of the structure of the transaction include "senior-subordinated securities" (multiple class securities with one or more classes subordinate to other classes as to the payment of principal thereof and interest thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class), creation of "reserve funds" (where cash or investments sometimes funded from a portion of the payments on the underlying assets, are held in reserve against future losses) and "over-collateralization" (where the scheduled payments on, or the principal amount of, the underlying assets exceed those required to make payment of the securities and pay any servicing or other fees). The degree of credit support provided for each issue is generally based on historical information with respect to the level of credit risk associated with the underlying assets. Delinquency or loss in excess of that which is anticipated could adversely affect the return on an investment in such security. 7 63 3. ZERO COUPON SECURITIES AND PAY-IN-KIND BONDS Zero coupon securities and pay-in-kind bonds involve special risk considerations. Zero coupon securities are debt securities that pay no cash income but are sold at substantial discounts from their value at maturity. When a zero coupon security is held to maturity, its entire return, which consists of the amortization of discount, comes from the difference between its purchase price and its maturity value. This difference is known at the time of purchase, so that investors holding zero coupon securities until maturity know at the time of their investment what the return on their investment will be. Certain zero coupon securities also are sold at substantial discounts from their maturity value and provide for the commencement of regular interest payments at a deferred date. The portfolios also may purchase pay-in-kind bonds. Pay-in-kind bonds are bonds that pay all or a portion of their interest in the form of debt or equity securities. Zero coupon securities and pay-in-kind bonds tend to be subject to greater price fluctuations in response to changes in interest rates than are ordinary interest-paying debt securities with similar maturities. The value of zero coupon securities appreciates more during periods of declining interest rates and depreciates more during periods of rising interest rates. Zero coupon securities and pay-in-kind bonds may be issued by a wide variety of corporate and governmental issuers. Although zero coupon securities and pay-in-kind bonds are generally not traded on a national securities exchange, such securities are widely traded by brokers and dealers and, to such extent, will not be considered illiquid for the purposes of the investment restriction under "Investment Restrictions" below. Current federal income tax law requires the holder of a zero coupon security or certain pay-in-kind bonds to accrue income with respect to these securities prior to the receipt of cash payments. To maintain its qualification as a regulated investment company and avoid liability for federal income and excise taxes, a portfolio may be required to distribute income accrued with respect to these securities and may have to dispose of portfolio securities under disadvantageous circumstances in order to generate cash to satisfy these distribution requirements. See "Taxes--Pay-in-kind Bonds and Zero Coupon Bonds" below. 4. HIGH YIELD (HIGH RISK) DOMESTIC CORPORATE DEBT SECURITIES The market for high yield U.S. corporate debt securities has undergone significant changes in the past decade. Issuers in the U.S. high yield market originally consisted primarily of growing small capitalization companies and larger capitalization companies whose credit quality had declined from investment grade. During the mid-1980's, participants in the U.S. high yield market issued high yield securities principally in connection with leveraged buyouts and other leveraged recapitalizations. In late 1989 and 1990, the volume of new issues of high yield U.S. corporate debt declined significantly and liquidity in the market decreased. Since early 1991, the volume of new issues of high yield U.S. corporate debt securities has increased substantially and secondary market liquidity has improved. During the same periods, the U.S. high yield debt market exhibited strong returns, and it continues to be an attractive market in terms of yield and yield spread over U.S. Treasury securities. Currently, most new offerings of U.S. high yield securities are being issued to refinance higher coupon debt and to raise funds for general corporate purposes. High yield U.S. corporate debt securities in which the portfolios may invest include bonds, debentures, notes and commercial paper and will generally be unsecured. Most of these debt securities will bear interest at fixed rates. However, the portfolios may also invest in debt securities with variable rates of interest or which involve equity features, such as contingent interest or participations based on revenues, sales or profits (i.e., interest or other payments, often in addition to a fixed rate of return, that are based on the borrower's attainment of specified levels of revenues, sales or profits and thus enable the holder of the security to share in the potential success of the venture). 5. HIGH YIELD FOREIGN SOVEREIGN DEBT SECURITIES The International Small Cap, Strategic Bond and Investment Quality Bond Trusts expect that a significant portion of their emerging market governmental debt obligations will consist of "Brady Bonds." In addition, the Moderate and Aggressive Asset Allocation Trusts may also invest in Brady Bonds. Brady Bonds are debt securities issued under the framework of the "Brady Plan," an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. The Brady Plan framework, as it has developed, contemplates the exchange of external commercial bank debt for newly issued bonds (Brady Bonds). Brady Bonds may also be issued in respect of new money being advanced by existing lenders in connection with the debt restructuring. Investors should recognize that Brady Bonds have been issued only recently, and accordingly do not have a long payment history. Brady Bonds issued to date generally have maturities of between 15 and 30 years from the date of issuance and have traded at a deep discount from their face value. The Trusts may invest in Brady Bonds of emerging market countries that have been issued to date, as well as those which may be issued in the future. In addition to Brady Bonds, the Trusts may invest in emerging market governmental obligations issued as a result of debt restructuring agreements outside of the scope of the Brady Plan. 8 64 Agreements implemented under the Brady Plan to date are designed to achieve debt and debt-service reduction through specific options negotiated by a debtor nation with its creditors. As a result, the financial packages offered by each country differ. The types of options have included the exchange of outstanding commercial bank debt for bonds issued at 100% of face value of such debt which carry a below-market stated rate of interest (generally known as par bonds), bonds issued at a discount from face value of such debt (generally known as discount bonds), bonds bearing an interest rate which increases over time and bonds issued in exchange for the advancement of new money by existing lenders. Discount bonds issued to date under the framework of the Brady Plan have generally borne interest computed semi-annually at a rate equal to 13/16 of one percent above the current six month LIBOR rate. Regardless of the stated face amount and stated interest rate of the various types of Brady Bonds, the Trusts will purchase Brady Bonds in secondary markets, as described below, in which the price and yield to the investor reflect market conditions at the time of purchase. Brady Bonds issued to date have traded at a deep discount from their face value. Certain sovereign bonds are entitled to "value recovery payments" in certain circumstances, which in effect constitute supplemental interest payments but generally are not collateralized. Certain Brady Bonds have been collateralized as to principal due at maturity (typically 15 to 30 years from the date of issuance) by U.S. Treasury zero coupon bonds with a maturity equal to the final maturity of such Brady Bonds, although the collateral is not available to investors until the final maturity of the Brady Bonds. Collateral purchases are financed by the International Monetary Fund (the "IMF"), the World Bank and the debtor nations' reserves. In addition, interest payments on certain types of Brady Bonds may be collateralized by cash or high-grade securities in amounts that typically represent between 12 and 18 months of interest accruals on these instruments with the balance of the interest accruals being uncollateralized. The Trusts may purchase Brady Bonds with no or limited collateralization, and will be relying for payment of interest and (except in the case of principal collateralized Brady Bonds) principal primarily on the willingness and ability of the foreign government to make payment in accordance with the terms of the Brady Bonds. Brady Bonds issued to date are purchased and sold in secondary markets through U.S. securities dealers and other financial institutions and are generally maintained through European transactional securities depositories. A substantial portion of the Brady Bonds and other sovereign debt securities in which the portfolios invest are likely to be acquired at a discount. HEDGING AND OTHER STRATEGIC TRANSACTIONS As described in the Prospectus under "Hedging and Other Strategic Transactions", an individual portfolio may be authorized to use a variety of investment strategies. These strategies will be used for hedging purposes only, including hedging various market risks (such as interest rates, currency exchange rates and broad or specific market movements), and managing the effective maturity or duration of debt instruments held by the portfolio (such investment strategies and transactions are referred to herein as "Hedging and Other Strategic Transactions"). The description in this Prospectus of each portfolio indicates which, if any, of these types of transactions may be used by the portfolio. A detailed discussion of Hedging and Other Strategic Transactions follows below. No portfolio which is authorized to use any of these investment strategies will be obligated, however, to pursue any of such strategies and no portfolio makes any representation as to the availability of these techniques at this time or at any time in the future. In addition, a portfolio's ability to pursue certain of these strategies may be limited by the Commodity Exchange Act, as amended, applicable rules and regulations of the CFTC thereunder and the federal income tax requirements applicable to regulated investment companies which are not operated as commodity pools. GENERAL CHARACTERISTICS OF OPTIONS Put options and call options typically have similar structural characteristics and operational mechanics regardless of the underlying instrument on which they are purchased or sold. Thus, the following general discussion relates to each of the particular types of options discussed in greater detail below. In addition, many Hedging and Other Strategic Transactions involving options require segregation of portfolio assets in special accounts, as described below under "Use of Segregated and Other Special Accounts." A put option gives the purchaser of the option, upon payment of a premium, the right to sell, and the writer the obligation to buy, the underlying security, commodity, index, currency or other instrument at the exercise price. A portfolio's purchase of a put option on a security, for example, might be designed to protect its holdings in the underlying instrument (or, in some cases, a similar instrument) against a substantial decline in the market value of such instrument by giving the portfolio the right to sell the instrument at the option exercise price. A call option, upon payment of a premium, gives the purchaser of the option the right to buy, and the seller the obligation to sell, the underlying instrument at the exercise price. A portfolio's purchase of a call option on a security, financial futures contract, index, currency or other instrument might be intended to protect the portfolio against an increase in the price of the underlying instrument that it intends to purchase in the future by fixing the price at which it may purchase the instrument. An "American" style put or call option may be exercised at any time during the option period, whereas a "European" style put or call option may be exercised only upon expiration or during a fixed period prior to expiration. Exchange-listed options are issued by a regulated intermediary such as the Options Clearing Corporation ("OCC"), which guarantees the performance of the obligations of the parties to the options. The discussion below uses the OCC as an example, but is also applicable to other similar financial intermediaries. 9 65 OCC-issued and exchange-listed options, with certain exceptions, generally settle by physical delivery of the underlying security or currency, although in the future, cash settlement may become available. Index options and Eurodollar instruments (which are described below under "Eurodollar Instruments") are cash settled for the net amount, if any, by which the option is "in-the-money" (that is, the amount by which the value of the underlying instrument exceeds, in the case of a call option, or is less than, in the case of a put option, the exercise price of the option) at the time the option is exercised. Frequently, rather than taking or making delivery of the underlying instrument through the process of exercising the option, listed options are closed by entering into offsetting purchase or sale transactions that do not result in ownership of the new option. A portfolio's ability to close out its position as a purchaser or seller of an OCC-issued or exchange-listed put or call option is dependent, in part, upon the liquidity of the particular option market. Among the possible reasons for the absence of a liquid option market on an exchange are: (1) insufficient trading interest in certain options, (2) restrictions on transactions imposed by an exchange, (3) trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options or underlying securities, including reaching daily price limits, (4) interruption of the normal operations of the OCC or an exchange, (5) inadequacy of the facilities of an exchange or the OCC to handle current trading volume or (6) a decision by one or more exchanges to discontinue the trading of options (or a particular class or series of options), in which event the relevant market for that option on that exchange would cease to exist, although any such outstanding options on that exchange would continue to be exercisable in accordance with their terms. The hours of trading for listed options may not coincide with the hours during which the underlying financial instruments are traded. To the extent that the option markets close before the markets for the underlying financial instruments, significant price and rate movements can take place in the underlying markets that would not be reflected in the corresponding option markets. Over-the-counter ("OTC") options are purchased from or sold to securities dealers, financial institutions or other parties (collectively referred to as "Counterparties" and individually referred to as a "Counterparty") through direct bilateral agreement with the Counterparty. In contrast to exchange-listed options, which generally have standardized terms and performance mechanics, all of the terms of an OTC option, including such terms as method of settlement, term, exercise price, premium, guaranties and security, are determined by negotiation of the parties. It is anticipated that any portfolio authorized to use OTC options will generally only enter into OTC options that have cash settlement provisions, although it will not be required to do so. Unless the parties provide for it, no central clearing or guaranty function is involved in an OTC option. As a result, if a Counterparty fails to make or take delivery of the security, currency or other instrument underlying an OTC option it has entered into with a portfolio or fails to make a cash settlement payment due in accordance with the terms of that option, the portfolio will lose any premium it paid for the option as well as any anticipated benefit of the transaction. Thus, the subadviser must assess the creditworthiness of each such Counterparty or any guarantor or credit enhancement of the Counterparty's credit to determine the likelihood that the terms of the OTC option will be met. A portfolio will enter into OTC option transactions only with U.S. Government securities dealers recognized by the Federal Reserve Bank of New York as "primary dealers," or broker-dealers, domestic or foreign banks, or other financial institutions that are deemed creditworthy by the subadviser. In the absence of a change in the current position of the staff of the Commission, OTC options purchased by a portfolio and the amount of the portfolio's obligation pursuant to an OTC option sold by the portfolio (the cost of the sell-back plus the in-the-money amount, if any) or the value of the assets held to cover such options will be deemed illiquid. If a portfolio sells a call option, the premium that it receives may serve as a partial hedge, to the extent of the option premium, against a decrease in the value of the underlying securities or instruments held by the portfolio or will increase the portfolio's income. Similarly, the sale of put options can also provide portfolio gains. If and to the extent authorized to do so, a portfolio may purchase and sell call options on securities and on Eurodollar instruments that are traded on U.S. and foreign securities exchanges and in the OTC markets, and on securities indices, currencies and futures contracts. All calls sold by a portfolio must be "covered" (that is, the portfolio must own the securities or futures contract subject to the call) or must otherwise meet the asset segregation requirements described below for so long as the call is outstanding. Even though a portfolio will receive the option premium to help protect it against loss, a call sold by the portfolio will expose the portfolio during the term of the option to possible loss of opportunity to realize appreciation in the market price of the underlying security or instrument and may require the portfolio to hold a security or instrument that it might otherwise have sold. Each portfolio reserves the right to invest in options on instruments and indices which may be developed in the future to the extent consistent with applicable law, the portfolio's investment objective and the restrictions set forth herein. If and to the extent authorized to do so, a portfolio may purchase and sell put options on securities (whether or not it holds the securities in its portfolio) and on securities indices, currencies and futures contracts. A portfolio will not sell put options if, as a result, more than 50% of the portfolio's assets would be required to be segregated to cover its potential obligations under put options other than those with 10 66 respect to futures contracts. In selling put options, a portfolio faces the risk that it may be required to buy the underlying security at a disadvantageous price above the market price. GENERAL CHARACTERISTICS OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS If and to the extent authorized to do so, a portfolio may trade financial futures contracts or purchase or sell put and call options on those contracts as a hedge against anticipated interest rate, currency or market changes, for duration management and for risk management purposes. Futures contracts are generally bought and sold on the commodities exchanges on which they are listed with payment of initial and variation margin as described below. The sale of a futures contract creates a firm obligation by a portfolio, as seller, to deliver to the buyer the specific type of financial instrument called for in the contract at a specific future time for a specified price (or, with respect to certain instruments, the net cash amount). Options on futures contracts are similar to options on securities except that an option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract and obligates the seller to deliver that position. A portfolio's use of financial futures contracts and options thereon will in all cases be consistent with applicable regulatory requirements and in particular the rules and regulations of the CFTC and will be entered into only for bona fide hedging, risk management (including duration management) or other appropriate portfolio management purposes. Maintaining a futures contract or selling an option on a futures contract will typically require a portfolio to deposit with a financial intermediary, as security for its obligations, an amount of cash or other specified assets ("initial margin") that initially is from 1% to 10% of the face amount of the contract (but may be higher in some circumstances). Additional cash or assets ("variation margin") may be required to be deposited thereafter daily as the mark-to-market value of the futures contract fluctuates. The purchase of an option on a financial futures contract involves payment of a premium for the option without any further obligation on the part of a portfolio. If a portfolio exercises an option on a futures contract it will be obligated to post initial margin (and potentially variation margin) for the resulting futures position just as it would for any futures position. Futures contracts and options thereon are generally settled by entering into an offsetting transaction, but no assurance can be given that a position can be offset prior to settlement or that delivery will occur. No portfolio will enter into a futures contract or option thereon if, immediately thereafter, the sum of the amount of its initial margin and premiums on open futures contracts and options thereon would exceed 5% of the current fair market value of the portfolio's total assets; however, in the case of an option that is in-the-money at the time of the purchase, the in-the-money amount may be excluded in calculating the 5% limitation. The value of all futures contracts sold by a portfolio (adjusted for the historical volatility relationship between such portfolio and the contracts) will not exceed the total market value of the portfolio's securities. The segregation requirements with respect to futures contracts and options thereon are described below under "Use of Segregated and Other Special Accounts". OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES If and to the extent authorized to do so, a portfolio may purchase and sell call and put options on securities indices and other financial indices. In so doing, the portfolio can achieve many of the same objectives it would achieve through the sale or purchase of options on individual securities or other instruments. Options on securities indices and other financial indices are similar to options on a security or other instrument except that, rather than settling by physical delivery of the underlying instrument, options on indices settle by cash settlement; that is, an option on an index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the index upon which the option is based exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the option (except if, in the case of an OTC option, physical delivery is specified). This amount of cash is equal to the excess of the closing price of the index over the exercise price of the option, which also may be multiplied by a formula value. The seller of the option is obligated, in return for the premium received, to make delivery of this amount. The gain or loss on an option on an index depends on price movements in the instruments comprising the market, market segment, industry or other composite on which the underlying index is based, rather than price movements in individual securities, as is the case with respect to options on securities. CURRENCY TRANSACTIONS If and to the extent authorized to do so, a portfolio may engage in currency transactions with Counterparties to hedge the value of portfolio securities denominated in particular currencies against fluctuations in relative value. Currency transactions include currency forward contracts, exchange-listed currency futures contracts and options thereon, exchange-listed and OTC options on currencies, and currency swaps. A forward currency contract involves a privately negotiated obligation to purchase or sell (with delivery generally required) a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. A currency swap is an agreement to exchange cash flows based on the notional difference among two or more currencies and operates similarly to an interest rate swap, which is described below under "Swaps, Caps, Floors and Collars". A portfolio may enter into currency transactions only with Counterparties that are deemed creditworthy by the subadviser. 11 67 A portfolio's dealings in forward currency contracts and other currency transactions such as futures contracts, options, options on futures contracts and swaps will be limited to hedging and other non-speculative purposes, including transaction hedging and position hedging. Transaction hedging is entering into a currency transaction with respect to specific assets or liabilities of a portfolio, which will generally arise in connection with the purchase or sale of the portfolio's portfolio securities or the receipt of income from them. Position hedging is entering into a currency transaction with respect to portfolio securities positions denominated or generally quoted in that currency. A portfolio will not enter into a transaction to hedge currency exposure to an extent greater, after netting all transactions intended wholly or partially to offset other transactions, than the aggregate market value (at the time of entering into the transaction) of the securities held by the portfolio that are denominated or generally quoted in or currently convertible into the currency, other than with respect to proxy hedging as described below. A portfolio may cross-hedge currencies by entering into transactions to purchase or sell one or more currencies that are expected to increase or decline in value relative to other currencies to which the portfolio has or in which the portfolio expects to have exposure. To reduce the effect of currency fluctuations on the value of existing or anticipated holdings of its securities, a portfolio may also engage in proxy hedging. Proxy hedging is often used when the currency to which a portfolio's holdings is exposed is difficult to hedge generally or difficult to hedge against the dollar. Proxy hedging entails entering into a forward contract to sell a currency, the changes in the value of which are generally considered to be linked to a currency or currencies in which some or all of a portfolio's securities are or are expected to be denominated, and to buy dollars. The amount of the contract would not exceed the market value of the portfolio's securities denominated in linked currencies. Currency transactions are subject to risks different from other portfolio transactions, as discussed below under "Risk Factors". If a portfolio enters into a currency hedging transaction, the portfolio will comply with the asset segregation requirements described below under "Use of Segregated and Other Special Accounts". COMBINED TRANSACTIONS If and to the extent authorized to do so, a portfolio may enter into multiple transactions, including multiple options transactions, multiple futures transactions, multiple currency transactions (including forward currency contracts), multiple interest rate transactions and any combination of futures, options, currency and interest rate transactions, instead of a single Hedging and Other Strategic Transaction, as part of a single or combined strategy when, in the judgment of the subadviser, it is in the best interests of the portfolio to do so. A combined transaction will usually contain elements of risk that are present in each of its component transactions. Although combined transactions will normally be entered into by a portfolio based on the subadviser's judgment that the combined strategies will reduce risk or otherwise more effectively achieve the desired portfolio management goal, it is possible that the combination will instead increase the risks or hinder achievement of the portfolio management objective. SWAPS, CAPS, FLOORS AND COLLARS Among the Hedging and Other Strategic Transactions into which a portfolio may be authorized to enter are interest rate, currency and index swaps, the purchase or sale of related caps, floors and collars and other derivatives. A portfolio will enter into these transactions primarily to seek to preserve a return or spread on a particular investment or portion of its portfolio, to protect against currency fluctuations, as a duration management technique or to protect against any increase in the price of securities a portfolio anticipates purchasing at a later date. A portfolio will use these transactions for non-speculative purposes and will not sell interest rate caps or floors if it does not own securities or other instruments providing the income the portfolio may be obligated to pay. Interest rate swaps involve the exchange by a portfolio with another party of their respective commitments to pay or receive interest (for example, an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal). A currency swap is an agreement to exchange cash flows on a notional amount based on changes in the values of the reference indices. The purchase of a cap entitles the purchaser to receive payments on a notional principal amount from the party selling the cap to the extent that a specified index exceeds a predetermined interest rate. The purchase of an interest rate floor entitles the purchaser to receive payments of interest on a notional principal amount from the party selling the interest rate floor to the extent that a specified index falls below a predetermined interest rate or amount. The purchase of a floor entitles the purchaser to receive payments on a notional principal amount from the party selling the floor to the extent that a specific index falls below a predetermined interest rate or amount. A collar is a combination of a cap and a floor that preserves a certain return with a predetermined range of interest rates or values. A portfolio will usually enter into interest rate swaps on a net basis, that is, two payment streams are netted out in a cash settlement on the payment date or dates specified in the instrument, with the portfolio receiving or paying, as the case may be, only the net amount of the two payments. Inasmuch as these swaps, caps, floors, collars and other similar derivatives are entered into for good faith hedging or other non-speculative purposes, they do not constitute senior securities under the Investment Company Act of 1940, as amended, and, thus, will not be treated as being subject to the portfolio's borrowing restrictions. A portfolio will not enter into any swap, cap, floor, collar or other derivative transaction unless the Counterparty is deemed creditworthy by the subadviser. If a Counterparty defaults, a portfolio may have 12 68 contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid. Caps, floors and collars are more recent innovations for which standardized documentation has not yet been fully developed and, for that reason, they are less liquid than swaps. The liquidity of swap agreements will be determined by a Subadviser based on various factors, including (1) the frequency of trades and quotations, (2) the number of dealers and prospective purchasers in the marketplace, (3) dealer undertakings to make a market, (4) the nature of the security (including any demand or tender features), and (5) the nature of the marketplace for trades (including the ability to assign or offset a portfolio's rights and obligations relating to the investment). Such determination will govern whether a swap will be deemed to be within the 15% restriction on investments in securities that are not readily marketable. Each portfolio will maintain cash and appropriate liquid assets in a segregated custodial account to cover its current obligations under swap agreements. If a portfolio enters into a swap agreement on a net basis, it will segregate assets with a daily value at least equal to the excess, if any, of the portfolio's accrued obligations under the swap agreement over the accrued amount the portfolio is entitled to receive under the agreement. If a portfolio enters into a swap agreement on other than a net basis, it will segregate assets with a value equal to the full amount of the portfolio's accrued obligations under the agreement. See also, "Use of Segregated and Other Special Accounts." EURODOLLAR INSTRUMENTS If and to the extent authorized to do so, a portfolio may make investments in Eurodollar instruments, which are typically dollar-denominated futures contracts or options on those contracts that are linked to the London Interbank Offered Rate ("LIBOR"), although foreign currency denominated instruments are available from time to time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. A portfolio might use Eurodollar futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps and fixed income instruments are linked. RISK FACTORS Hedging and Other Strategic Transactions have special risks associated with them, including possible default by the Counterparty to the transaction, illiquidity and, to the extent the subadviser's view as to certain market movements is incorrect, the risk that the use of the Hedging and Other Strategic Transactions could result in losses greater than if they had not been used. Use of put and call options could result in losses to a portfolio, force the sale or purchase of portfolio securities at inopportune times or for prices higher than (in the case of put options) or lower than (in the case of call options) current market values, or cause a portfolio to hold a security it might otherwise sell. The use of futures and options transactions entails certain special risks. In particular, the variable degree of correlation between price movements of futures contracts and price movements in the related securities position of a portfolio could create the possibility that losses on the hedging instrument are greater than gains in the value of the portfolio's position. In addition, futures and options markets could be illiquid in some circumstances and certain over-the-counter options could have no markets. As a result, in certain markets, a portfolio might not be able to close out a transaction without incurring substantial losses. Although a portfolio's use of futures and options transactions for hedging should tend to minimize the risk of loss due to a decline in the value of the hedged position, at the same time it will tend to limit any potential gain to a portfolio that might result from an increase in value of the position. Finally, the daily variation margin requirements for futures contracts create a greater ongoing potential financial risk than would purchases of options, in which case the exposure is limited to the cost of the initial premium. Currency hedging involves some of the same risks and considerations as other transactions with similar instruments. Currency transactions can result in losses to a portfolio if the currency being hedged fluctuates in value to a degree or in a direction that is not anticipated. Further, the risk exists that the perceived linkage between various currencies may not be present or may not be present during the particular time that a portfolio is engaging in proxy hedging. Currency transactions are also subject to risks different from those of other portfolio transactions. Because currency control is of great importance to the issuing governments and influences economic planning and policy, purchases and sales of currency and related instruments can be adversely affected by government exchange controls, limitations or restrictions on repatriation of currency, and manipulations or exchange restrictions imposed by governments. These forms of governmental actions can result in losses to a portfolio if it is unable to deliver or receive currency or monies in settlement of obligations and could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Buyers and sellers of currency futures contracts are subject to the same risks that apply to the use of futures contracts generally. Further, settlement of a currency futures contract for the purchase of most currencies must occur at a bank based in the issuing nation. Trading options on currency futures contracts is relatively new, and the ability to establish and close out positions on these options is subject to the maintenance of a liquid market that may not always be available. Currency exchange rates may fluctuate based on factors extrinsic to that country's economy. 13 69 Losses resulting from the use of Hedging and Other Strategic Transactions will reduce a portfolio's net asset value, and possibly income, and the losses can be greater than if Hedging and Other Strategic Transactions had not been used. RISKS OF HEDGING AND OTHER STRATEGIC TRANSACTIONS OUTSIDE THE UNITED STATES When conducted outside the United States, Hedging and Other Strategic Transactions may not be regulated as rigorously as in the United States, may not involve a clearing mechanism and related guarantees, and will be subject to the risk of governmental actions affecting trading in, or the prices of, foreign securities, currencies and other instruments. The value of positions taken as part of non-U.S. Hedging and Other Strategic Transactions also could be adversely affected by: (1) other complex foreign political, legal and economic factors, (2) lesser availability of data on which to make trading decisions than in the United States, (3) delays in a portfolio's ability to act upon economic events occurring in foreign markets during non-business hours in the United States, (4) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States and (5) lower trading volume and liquidity. USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS Use of many Hedging and Other Strategic Transactions by a portfolio will require, among other things, that the portfolio segregate cash, liquid high grade debt obligations or other assets with its custodian, or a designated sub-custodian, to the extent the portfolio's obligations are not otherwise "covered" through ownership of the underlying security, financial instrument or currency. In general, either the full amount of any obligation by a portfolio to pay or deliver securities or assets must be covered at all times by the securities, instruments or currency required to be delivered, or, subject to any regulatory restrictions, an amount of cash or liquid high grade debt obligations at least equal to the current amount of the obligation must be segregated with the custodian or sub-custodian. The segregated assets cannot be sold or transferred unless equivalent assets are substituted in their place or it is no longer necessary to segregate them. A call option on securities written by a portfolio, for example, will require the portfolio to hold the securities subject to the call (or securities convertible into the needed securities without additional consideration) or to segregate liquid high grade debt obligations sufficient to purchase and deliver the securities if the call is exercised. A call option sold by a portfolio on an index will require the portfolio to own portfolio securities that correlate with the index or to segregate liquid high grade debt obligations equal to the excess of the index value over the exercise price on a current basis. A put option on securities written by a portfolio will require the portfolio to segregate liquid high grade debt obligations equal to the exercise price. Except when a portfolio enters into a forward contract in connection with the purchase or sale of a security denominated in a foreign currency or for other non-speculative purposes, which requires no segregation, a currency contract that obligates the portfolio to buy or sell a foreign currency will generally require the portfolio to hold an amount of that currency or liquid securities denominated in that currency equal to a portfolio's obligations or to segregate liquid high grade debt obligations equal to the amount of the portfolio's obligations. OTC options entered into by a portfolio, including those on securities, currency, financial instruments or indices, and OCC-issued and exchange-listed index options will generally provide for cash settlement, although a portfolio will not be required to do so. As a result, when a portfolio sells these instruments it will segregate an amount of assets equal to its obligations under the options. OCC-issued and exchange-listed options sold by a portfolio other than those described above generally settle with physical delivery, and the portfolio will segregate an amount of assets equal to the full value of the option. OTC options settling with physical delivery or with an election of either physical delivery or cash settlement will be treated the same as other options settling with physical delivery. In the case of a futures contract or an option on a futures contract, a portfolio must deposit initial margin and, in some instances, daily variation margin in addition to segregating assets sufficient to meet its obligations to purchase or provide securities or currencies, or to pay the amount owed at the expiration of an index-based futures contract. These assets may consist of cash, cash equivalents, liquid debt or equity securities or other acceptable assets. A portfolio will accrue the net amount of the excess, if any, of its obligations relating to swaps over its entitlements with respect to each swap on a daily basis and will segregate with its custodian, or designated sub-custodian, an amount of cash or liquid high grade debt obligations having an aggregate value equal to at least the accrued excess. Caps, floors and collars require segregation of assets with a value equal to a portfolio's net obligation, if any. Hedging and Other Strategic Transactions may be covered by means other than those described above when consistent with applicable regulatory policies. A portfolio may also enter into offsetting transactions so that its combined position, coupled with any segregated assets, equals its net outstanding obligation in related options and Hedging and Other Strategic Transactions. A portfolio could purchase a put option, for example, if the strike price of that option is the same or higher than the strike price of a put option sold by the portfolio. Moreover, instead of segregating assets if it holds a futures contracts or forward contract, a portfolio could purchase a put option on the same futures contract or forward contract with a strike price as high or higher than the price of the contract held. Other Hedging and Other Strategic Transactions may also be offset in combinations. If the offsetting transaction terminates at the time of or after the primary transaction, no segregation is required, but if it terminates prior to that time, assets equal to any remaining obligation would need to be segregated. 14 70 OTHER LIMITATIONS No portfolio will maintain open short positions in futures contracts, call options written on futures contracts, and call options written on securities indices if, in the aggregate, the current market value of the open positions exceeds the current market value of that portion of its securities portfolio being hedged by those futures and options plus or minus the unrealized gain or loss on those open positions, adjusted for the historical volatility relationship between that portion of the portfolio and the contracts (e.g., the Beta volatility factor). For purposes of the limitation stated in the immediately preceding sentence, to the extent the portfolio has written call options on specific securities in that portion of its portfolio, the value of those securities will be deducted from the current market value of that portion of the securities portfolio. If this limitation should be exceeded at any time, the portfolio will take prompt action to close out the appropriate number of open short positions to bring its open futures and options positions within this limitation. The degree to which a portfolio may utilize Hedging and Other Strategic Transactions may also be affected by certain provisions of the Internal Revenue Code of 1986, as amended. INVESTMENT RESTRICTIONS There are two classes of investment restrictions to which the Trust is subject in implementing the investment policies of the portfolios: fundamental and nonfundamental. Nonfundamental restrictions are subject to change by the Trustees of the Trust without shareholder approval. Fundamental restrictions may only be changed by a vote of the lesser of (i) 67% or more of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares. With respect to the submission of a change in an investment restriction to the holders of the Trust's outstanding voting securities, the matter shall be deemed to have been effectively acted upon with respect to a particular portfolio if a majority of the outstanding voting securities of the portfolio vote for the approval of the matter, notwithstanding (1) that the matter has not been approved by the holders of a majority of the outstanding voting securities of any other portfolio affected by the matter, and (2) that the matter has not been approved by the vote of a majority of the outstanding voting securities of the Trust. All of the restrictions through restriction 8. are fundamental. Restrictions 9. through 15. are nonfundamental. FUNDAMENTAL The Trust may not issue senior securities, except to the extent that the borrowing of money in accordance with restriction 3. may constitute the issuance of a senior security. (For purposes of this restriction, purchasing securities on a when-issued or delayed delivery basis and engaging in Hedging and Other Strategic Transactions will not be deemed to constitute the issuance of a senior security.) In addition, unless a portfolio is specifically excepted by the terms of a restriction, each portfolio will not: (1) Invest more than 25% of the value of its total assets in securities of issuers having their principal activities in any particular industry, excluding United States Government securities and obligations of domestic branches of U.S. banks and savings and loan associations. [The Trust has determined to forego the exclusion from the above policy of obligations of domestic branches of U.S. savings and loan associations and to limit the exclusion of obligations of domestic branches of U.S. banks to the Money Market Trust.] For purposes of this restriction, neither finance companies as a group nor utility companies as a group are considered to be a single industry. Such companies will be grouped instead according to their services; for example, gas, electric and telephone utilities will each be considered a separate industry. Also for purposes of this restriction, foreign government issuers and supranational issuers are not considered members of any industry. (2) Purchase the securities of any issuer if the purchase would cause more than 5% of the value of the portfolio's total assets to be invested in the securities of any one issuer (excluding United States Government securities) or cause more than 10% of the voting securities of the issuer to be held by the portfolio, except that up to 25% of the value of each portfolio's total assets may be invested without regard to these restrictions. The Global Government Bond Trust is not subject to this restriction. (3) Borrow money, except that each portfolio may borrow (i) for temporary or emergency purposes (not for leveraging) up to 33 1/3% of the value of the portfolio's total assets (including amounts borrowed) less liabilities (other than borrowings) and (ii) in connection with reverse repurchase agreements, mortgage dollar rolls and other similar transactions. (4) Underwrite securities of other issuers except insofar as the Trust may be considered an underwriter under the Securities Act of 1933 in selling portfolio securities. 15 71 (5) Purchase or sell real estate, except that each portfolio may invest in securities issued by companies which invest in real estate or interests therein and each of the portfolios other than the Money Market Trust may invest in mortgages and mortgage backed securities. (6) Purchase or sell commodities or commodity contracts except that each portfolio other than the Money Market Trust may purchase and sell futures contracts on financial instruments and indices and options on such futures contracts and each portfolio other than the Money Market Trust and U.S. Government Securities Trust may purchase and sell futures contracts on foreign currencies and options on such futures contracts. (7) Lend money to other persons except by the purchase of obligations in which the portfolio is authorized to invest and by entering into repurchase agreements. For purposes of this restriction, collateral arrangements with respect to options, forward currency and futures transactions will not be deemed to involve the lending of money. (8) Lend securities in excess of 33 1/3% of the value of its total assets. For purposes of this restriction, collateral arrangements with respect to options, forward currency and futures transactions will not be deemed to involve loans of securities. NONFUNDAMENTAL (9) Knowingly invest more than 15% of the value of its net assets in securities or other investments, including repurchase agreements maturing in more than seven days but excluding master demand notes, that are not readily marketable, except that the Money Market Trust may not invest in excess of 10% of its net assets in such securities or other investments. (10) Sell securities short or purchase securities on margin except that it may obtain such short-term credits as may be required to clear transactions. For purposes of this restriction, collateral arrangements with respect to Hedging and Other Strategic Transactions will not be deemed to involve the use of margin. (11) Write or purchase options on securities, financial indices or currencies except to the extent a portfolio is specifically authorized to engage in Hedging and Other Strategic Transactions. (12) Purchase securities for the purpose of exercising control or management. (13) Purchase securities of other investment companies if the purchase would cause more than 10% of the value of the portfolio's total assets to be invested in investment company securities, provided that (i) no investment will be made in the securities of any one investment company if immediately after such investment more than 3% of the outstanding voting securities of such company would be owned by the portfolio or more than 5% of the value of the portfolio's total assets would be invested in such company and (ii) no restrictions shall apply to a purchase of investment company securities in connection with a merger, consolidation or reorganization. For purposes of this restriction, privately issued collateralized mortgage obligations will not be treated as investment company securities if issued by "Exemptive Issuers". Exemptive Issuers are defined as unmanaged, fixed-asset issuers that (a) invest primarily in mortgage-backed securities, (b) do not issue redeemable securities as defined in section 2(a)(32) of the Investment Company Act of 1940, (c) operate under general exemptive orders exempting them from "all provisions of the Investment Company Act of 1940," and (d) are not registered or regulated under the Investment Company Act of 1940 as investment companies. (14) Pledge, hypothecate, mortgage or transfer (except as provided in restriction 8.) as security for indebtedness any securities held by the portfolio except in an amount of not more than 10% of the value of the portfolio's total assets and then only to secure borrowings permitted by restrictions 3. and 10. For purposes of this restriction, collateral arrangements with respect to Hedging and Other Strategic Transactions will not be deemed to involve a pledge of assets. (15) Purchase securities of foreign issuers, except that (A) the Aggressive Asset Allocation Trust may invest up to 35% of its assets in such securities; (B) the Moderate Asset Allocation Trust may invest up to 25% of its assets in such securities; (C) the Conservative Asset Allocation Trust may invest up to 15% of its assets in such securities; (D) each other portfolio other than the U.S. Government Securities Trust may invest up to 20% of its total assets in such securities (in the case of the Small/Mid Cap Trust, ADRs and U.S. dollar-denominated securities are not included in the 20% limit); and (E) this restriction shall not apply to the International Small Cap, Global Equity, Global Government Bond, International Growth and Income and Strategic Bond Trusts. In addition to the above policies, the Money Market Trust is subject to certain restrictions required by Rule 2a-7 under the Investment Company Act of 1940. In order to comply with such restrictions, the Money Market Trust will, inter alia, not purchase the securities of any issuer if it would cause (i) more than 5% of its total assets to be invested in the securities of any one issuer (excluding U.S. 16 72 Government securities and repurchase agreements fully collateralized by U.S. Government securities), except as permitted by Rule 2a-7 for certain securities for a period of up to three business days after purchase, (ii) more than 5% of its total assets to be invested in "second tier securities," as defined by Rule, or (iii) more than the greater of $1 million or 1% of its total assets to be invested in the second tier securities of that issuer. If a percentage restriction is adhered to at the time of an investment, a later increase or decrease in the investment's percentage of the value of a portfolio's total assets resulting from a change in such values or assets will not constitute a violation of the percentage restriction, except in the case of the Money Market Trust where the percentage limitation of restriction 9. must be met at all times. PORTFOLIO TURNOVER The annual rate of portfolio turnover will normally differ for each portfolio and may vary from year to year. Portfolio turnover is calculated by dividing the lesser of purchases or sales of portfolio securities during the fiscal year by the monthly average of the value of the portfolio's securities (excluding from the computation all securities, including options, with maturities at the time of acquisition of one year or less). A high rate of portfolio turnover generally involves correspondingly greater brokerage commission expenses, which must be borne directly by the portfolio. No portfolio turnover rate can be calculated for the Money Market Trust due to the short maturities of the instruments purchased. The portfolio turnover rate may vary from year to year, as well as within a year. The Small/Mid Cap and the International Small Cap Trusts anticipate that their turnover rates generally will not exceed 120%, and 100%, respectively. High portfolio turnover rates (100% or more) can result in corresponding increases in brokerage commissions for the portfolio. The portfolio turnover rates for the other portfolios of the Trust for the years ended December 31, 1995 and 1994 were as follows: 1994 1995 Global Equity Trust ................ 52% 63% Pasadena Growth Trust .............. 33% 57% Equity Trust ....................... 132% 88% Value Equity Trust ................. 26% 52% Growth and Income Trust ............ 42% 39% International Growth and Income .... NA 112%* Strategic Bond Trust ............... 197% 181% Global Government Bond Trust ....... 157% 171% Investment Quality Bond Trust ...... 140% 137% U.S. Government Securities Trust ... 387% 212% Aggressive Asset Allocation Trust .. 136% 111% Moderate Asset Allocation Trust .... 180% 129% Conservative Asset Allocation Trust 220% 110%
*Annualized Prior rates of portfolio turnover do not provide an accurate guide as to what the rate will be in any future year, and prior rates and estimated rates are not a limiting factor when it is deemed appropriate to purchase or sell securities for a portfolio. Each portfolio of the Trust intends to comply with the various requirements of the Internal Revenue Code so as to qualify as a "regulated investment company" thereunder. One such requirement is that a portfolio must derive less than 30% of its gross income from the sale or other disposition of stock or securities held for less than three months. Accordingly, the ability of a particular portfolio to effect certain portfolio transactions may be limited. 17 73 MANAGEMENT OF THE TRUST The Trustees and officers of the Trust, together with information as to their principal occupations during the past five years, are listed below: ====================================================================================================================================
NAME, ADDRESS AND AGE POSITION WITH THE PRINCIPAL OCCUPATION TRUST DURING PAST FIVE YEARS - ------------------------------------------------------------------------------------------------------------------------------------ Don B. Allen Trustee Senior Lecturer, Willian E. Simon Graduate School of Business 136 Knickerbocker Road Administration, University of Rochester Pittsford, NY 14534 Age: 67 - ------------------------------------------------------------------------------------------------------------------------------------ William J. Atherton* President President and Director, North American Security Life Insurance Company; 116 Huntington Avenue Vice President, U.S. Annuities (Boston), Manulife, January 1, 1996 to Boston, MA, 02116 date Age: 56 - ------------------------------------------------------------------------------------------------------------------------------------ Charles L. Bardelis Trustee President and Executive Officer, Island Commuter Corp. (Marine 297 Dillingham Ave. Transport) Falmouth, MA 02450 Age: 54 - ------------------------------------------------------------------------------------------------------------------------------------ Samuel Hoar** Trustee Senior Mediator, Judicial Arbitration Mediation Services 73 Tremont Street "JAMS/Endispute," June 1, 1994 to date; Partner, Goodwin, Proctor and Boston, MA 02109 Hoar , prior to June 1, 1994 Age: 67 - ------------------------------------------------------------------------------------------------------------------------------------ Brian L. Moore* Chairman of Exective vice President, Canadian Insurance Operations, The 5650 Yonge Street Trustees Manufacturers Life Insurance Company, January 1, 1996 to date; North York, Ontario Canada, M2M 4G4 Chief Executive Officer, The North American Group, Oct. 1993 to December Age: 51 31, 1995; Executive Vice President and Chief Financial Officer, Sept. 1988 to Oct. 1993, North American Life Insurance Company - ------------------------------------------------------------------------------------------------------------------------------------ Roobert J. Myers Trustee Consulting Actuary (self-employed), April 1983 to date; Chairman, 9610 Wire Avenue Commision on Railroad Retirement Reform, 1988 to 1990 Silver Springs, MD 20921 Age: 82 - ------------------------------------------------------------------------------------------------------------------------------------ John G. Vrysen Vice President Vice President, Chief Financial Officer, U.S. Operations, of Manulife, 116 Huntington Avenue January to date; Vice President and Actuary, January 1986 to date, North Boston, MA 02116 American Security Life Insurance Company ====================================================================================================================================
18 74 ==================================================================================================================================== James D. Gallagher Secretary Vice President, Legal Services, of Manulife, January to date; Vice 116 Huntington Avenue President, Secretary and Gneral Cousel, June 1994 to date, North Boston, MA 02116 American Security Life Insurance Company; Vice President and Associate Age: 41 General Counsel, 1990 to 1994, The Prudential Insurance Company of America - ------------------------------------------------------------------------------------------------------------------------------------ Richard C. Hirtle Vice President Vice President, Chief Financial Officer, Annuities, of Manulife, January 116 Huntington Avenue and Treasurer to date; Vice President, Treasurer and Chief Financial Officer, November Boston, MA 02116 1988 to date, North American Security Life Insurance Comopany ====================================================================================================================================
*Trustee who is an "interested person", as defined in the Investment Company Act of 1940. **Trustee who is an "interested person" of the Trust but not the Adviser. COMPENSATION OF TRUSTEES The Trust does not pay any remuneration to its Trustees who are officers or employees of the Adviser or its affiliates. Trustees not so affiliated receive an annual retainer of $14,000, a fee of $4,750 for each meeting of the Trustees that they attend in person and a fee of $200 for each such meeting conducted by telephone. Trustees are reimbursed for travel and other out-of-pocket expenses. The officers listed above are furnished to the Trust pursuant to the Advisory Agreement described below and receive no compensation from the Trust. These officers spend only a portion of their time on the affairs of the Trust. NAMES OF PERSON, POSTION AGGREGATE TOTAL COMPENSATION COMPENSATION FROM FROM TRUST COMPLEX TRUST FOR PRIOR FOR PRIOR FISCAL FISCAL YEAR* YEAR*# Don B. Allen, Trustee $35,000 $42,500 Charles L. Bardelis, Trustee $35,000 $42,500 Samuel Hoar, Trustee $35,000 $42,500 Robert J. Myers, Trustee $35,000 $42,500
*Compensation received for services as Trustee. #Trust Complex includes all portfolios of the Trust as well as all portfolios of North American Funds of which Security Life is the investment advisor. INVESTMENT MANAGEMENT ARRANGEMENTS The following information supplements the material appearing in the Prospectus under the caption "Management of the Trust." Copies of the Advisory and Subadvisory Agreements discussed below have been filed with and are available from the Securities and Exchange Commission. The Trust, formerly a Maryland corporation known as "NASL Series Fund, Inc." (the "Fund"), was reorganized as a Massachusetts business trust effective December 31, 1988. Pursuant to such reorganization, the Trust assumed all the assets and liabilities of the Fund and 19 75 carried on its business and operations with the same investment management arrangements as were in effect for the Fund at the time of the reorganization. The assets and liabilities of each of the Fund's separate portfolios were assumed by the corresponding portfolios of the Trust. NASL Financial (the "Adviser") is a Massachusetts corporation whose principal offices are located at 116 Huntington Avenue, Boston, Massachusetts 02116. NASL Financial is registered as an investment adviser under the Investment Advisers Act of 1940 and as a broker-dealer under the Securities Exchange Act of 1934. It is a member of the National Association of Securities Dealers, Inc. (the "NASD"). In addition, NASL Financial serves as principal underwriter of certain contracts issued by Security Life. The Advisory Agreement, each Subadvisory Agreement (except the Founders Asset Management, Inc. Subadvisory Agreement and the Fred Alger Management, Inc. Subadvisory Agreement) and the Salomon Brothers Asset Management Limited Consulting Agreement were approved by the Trustees on September 28, 1995 and by the shareholders of the portfolios on December 5, 1995. These approvals occurred in connection with the change of control of NASL Financials as a result of the merger of North American Life Assurance Company, the ultimate controlling parent of NASL Financial, with The Manufacturers Life Insurance Company on January 1, 1996. On December 15, 1995, the Trustees appointed Fred Alger Management, Inc. ("Alger") pursuant to a new Subadvisory Agreement with Alger ("Alger Subadvisory Agreement") to manage the Small/Mid Cap Trust. The Alger Subadvisory Agreement and an amendment to the Advisory Agreement, both to provide for the management of the Small/Mid Cap Trust, were approved by the Trustees, including a majority of the Trustees who are not parties to the agreements or interested persons of any party to such agreements. The Alger Subadvisory Agreement and the related amendment to the Advisory Agreement have been approved by the sole shareholder of the Small/Mid Cap Trust. On December 15, 1995, the Trustees appointed Founders Asset Management, Inc ("Founders") pursuant to a new Subadvisory Agreement with Founders ("Founders Subadvisory Agreement") to manage the International Small Cap Trust. The Founders Subadvisory Agreement and an amendment to the Advisory Agreement, both to provide for the management of the International Small Cap Trust, were approved by the Trustees, including a majority of the Trustees who are not parties to the agreements or interested persons of any party to such agreements. The Founders Subadvisory Agreement and the related amendment to the Advisory Agreement have been approved by the sole shareholder of the International Small Cap Trust. THE ADVISORY AGREEMENT Under the terms of the Advisory Agreement, the Adviser administers the business and affairs of the Trust. The Adviser is responsible for performing or paying for various administrative services for the Trust, including providing at the Adviser's expense (i) office space and all necessary office facilities and equipment, (ii) necessary executive and other personnel for managing the affairs of the Trust and for performing certain clerical, accounting and other office functions, and (iii) all other information and services, other than services of counsel, independent accountants or investment subadvisory services provided by any subadviser under a subadvisory agreement, required in connection with the preparation of all tax returns and documents required to comply with the federal securities laws. The Adviser pays the cost of any advertising or sales literature relating solely to the Trust, the cost of printing and mailing Prospectuses to persons other than current holders of Trust shares or of variable contracts funded by Trust shares and the compensation of the Trust's officers and Trustees that are officers, directors or employees of the Adviser or its affiliates. In addition, advisory fees are reduced or the Adviser reimburses the Trust if the total of all expenses (excluding advisory fees, taxes, portfolio brokerage commissions, interest, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Trust's business) applicable to a portfolio exceeds an annual rate of .75% in the case of the two global and two international portfolios or .50% in the case of all other portfolios of the average net asset value of such portfolio. The expense limitation will continue in effect from year to year unless otherwise terminated at any year end by the Adviser on 30 days' notice to the Trust. In addition to providing the services and expense limitation described above, the Adviser selects, contracts with and compensates subadvisers to manage the investment and reinvestment of the assets of the Trust portfolios. The Adviser monitors the compliance of such subadvisers with the investment objectives and related policies of each portfolio and reviews the performance of such subadvisers and reports periodically on such performance to the Trustees of the Trust. As compensation for its services, the Adviser receives a fee from the Trust computed separately for each portfolio. The fee for each portfolio is stated as an annual percentage of the current value of the net assets of such portfolio. The fee, which is accrued daily and payable monthly, is calculated for each day by multiplying the daily equivalent of the annual percentage prescribed for a portfolio by the value of its net assets at the close of business on the previous business day of the Trust. The following is a schedule of the management fees each portfolio currently is obligated to pay the Adviser: 20 76 PORTFOLIO - ----------------------------------------------- Small/Mid Cap Trust .................... 1.000% International Small Cap Trust .......... 1.100% Global Equity Trust .................... .900% Pasadena Growth Trust .................. .975% Equity Trust ........................... .750% Value Equity Trust ..................... .800% Growth and Income Trust ................ .750% International Growth and Income Trust .. .950% Strategic Bond Trust ................... .775% Global Government Bond Trust ........... .800% Investment Quality Bond Trust .......... .650% U.S. Government Securities Trust ....... .650% Money Market Trust ..................... .500% Aggressive Asset Allocation Trust ...... .750% Moderate Asset Allocation Trust ........ .750% Conservative Asset Allocation Trust .... .750%
The fees shown above, other than those paid by the Investment Quality Bond and U.S. Government Securities Trusts and the Money Market Trust, are higher than those paid by most funds to their advisers, but are not higher than the fees paid by many funds with similar investment objectives and policies. For the years ended December 31, 1995, 1994 and 1993 the aggregate investment advisory fee payable by the Trust under the fee schedule then in effect, absent the expense limitation provision, was $33,808,255, $27,076,438 and $16,988,737 allocated among the portfolios as follows: PORTFOLIO 1995 1994 1993 - -------------------------------------------------------------------- Global Equity .................. $5,513,312 $4,916,694 $1,813,650 Pasadena Growth ................ $2,115,434 $1,255,314 $ 675,183 Equity ......................... $5,643,363 $3,483,279 $1,953,233 Value Equity ................... $2,459,247 $1,274,807 $ 308,485 Growth and Income .............. $3,922,671 $2,670,229 $1,544,607 International Growth & Income .. $ 450,200* N/A N/A Strategic Bond ................. $ 767,448 $ 588,051 $ 189,565 Global Government Bond ......... $1,757,909 $1,742,81 $ 947,963 Investment Quality Bond ........ $ 798,045 $ 709,069 $ 529,433 U.S. Government Securities ..... $1,291,668 $1,350,850 $1,153,241 Money Market Trust ............. $1,318,573 $1,158,400 $ 606,603 Aggressive Asset Allocation .... $1,463,421 $1,354,682 $1,226,006 Moderate Asset Allocation ...... $4,667,061 $4,783,431 $4,341,909 Conservative Asset Allocation .. $1,639,903 $1,788,821 $1,698,859
*For the period January 9, 1995 (commencement of operations) to December 31, 1995 Prior to April 23, 1991, the investment advisory fees paid by the Trust were generally lower than the fees set forth above and were subject to a different expense limitation. Pursuant to the Advisory Agreement, no advisory fee was charged to the Growth and Income Trust until the portfolio reached $10,000,000 in net assets, which occurred on June 21, 1991. THE SUBADVISORY AGREEMENTS Under the terms of each of the current subadvisory agreements, including the SBAM Limited Consulting Agreement (collectively "Subadvisory Agreements"), the Subadviser manages the investment and reinvestment of the assets of the assigned portfolios, subject to the supervision of the Trust's Trustees. The Subadviser formulates a continuous investment program for each such portfolio consistent with its investment objectives and policies outlined in the Prospectus. Each Subadviser implements such programs by purchases and sales of securities and regularly reports to the Adviser and the Trustees of the Trust with respect to the implementation of such programs. Each Subadviser, at its expense, furnishes all necessary investment and management facilities, including salaries of personnel required for it to execute its duties, as well as administrative facilities, including bookkeeping, clerical personnel, and equipment necessary for the conduct of the investment affairs of the assigned portfolios. With regards to the Pasadena Growth Trust subadvisory agreement, the subadviser shall 21 77 reimburse the Pasadena Growth Trust for its "Other Expenses" to a maximum on an annual basis of .15% of the average net assets of the portfolio. For purposes of this provision, "Other Expenses" means all the expenses of the portfolio excluding: (1) taxes, (ii) portfolio brokerage commissions, (iii) interest, (iv) litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the portfolio's business, (v) advisory fees, and (vi) expenses for services assumed by the Adviser under the Advisory Agreement. The Adviser shall be entitled to deduct such reimbursement from the amount of subadviser's subadvisory fees payable pursuant to the subadvisory agreement. As compensation for their services, the Subadvisers receive fees from the Adviser computed separately for each portfolio. The fee for each portfolio is stated as an annual percentage of the current value of the net assets of the portfolio. The fees are calculated on the basis of the average of all valuations of net assets of each portfolio made at the close of business on each business day of the Trust during the period for which such fees are paid. Once the average net assets of a portfolio exceed specified amounts, the fee is reduced with respect to such excess. The following is a schedule of the management fees the Adviser currently is obligated to pay the Subadvisers out of the advisory fee it receives from each portfolio as specified above:
BETWEEN BETWEEN $50,000,000 $200,000,000 FIRST AND AND EXCESS OVER PORTFOLIO $50,000,000 $200,000,000 $500,000,000 $500,000,000 - ---------------------------------------------------------------------------------------- Small/Mid Cap Trust .............. .525% .500% .475% .450% International Small Cap Trust .... .650% .600% .500% .400% Global Equity Trust .............. .500% .450% .375% .325% Pasadena Growth Trust ............ .550% .500% .450% .375% Equity Trust ..................... .325% .275% .225% .150% Value Equity Trust ............... .400% .300% .200% .200% Growth and Income Trust .......... .325% .275% .225% .150% International Growth and Income Trust .................... .500% .450% .400% .350% Strategic Bond Trust ............. .350% .300% .250% .200% Global Government Bond Trust ..... .375% .350% .300% .250% Investment Quality Bond Trust .... .225% .225% .150% .100% U.S. Government Securities Trust .225% .225% .150% .100% Money Market Trust ............... .075% .075% .075% .020% Aggressive Asset Allocation Trust .325% .275% .225% .150% Moderate Asset Allocation Trust .. .325% .275% .225% .150% Conservative Asset Allocation Trust............................ .325% .275% .225% .150%
*The prospectus refers to a subadvisory consulting agreement between SBAM and Salomon Brothers Asset Management Limited ("SBAM Limited") which is subject to certain conditions as set forth in the prospectus. Under that agreement SBAM Limited provides certain investment advisory services to SBAM relating to currency transactions and investments in non-dollar denominated debt securities for the benefit of the Strategic Bond Trust. SBAM pays SBAM Limited, as full compensation for all services provided under the subadvisory consulting agreement, a portion of its subadvisory fee, such amount being an amount equal to the fee payable under SBAM's subadvisory agreement multiplied by the current value of the net assets of the portion of the assets of the Strategic Bond Trust that SBAM Limited has been delegated to manage divided by the current value of the net assets of the portfolio. The Trust will not incur any expenses in connection with SBAM Limited's services. SBAM Limited is a wholly owned subsidiary of Salomon Brothers Europe Limited ("SBEL"). Salomon (International) Finance A G ("SIF") owns 100% of SBEL's Convertible Redeemable Preference Shares and 36.8% of SBEL's Ordinary Shares, while the remaining 63.2% of SBEL's Ordinary Shares are owned by Salomon Brothers Holding Company Inc ("SBH"). SIF is wholly owned by SBH, which is in turn, a wholly owned subsidiary of Salomon Inc. For the years ended December 31, 1995, 1994 and 1993, the Adviser paid aggregate subadvisory fees of $12,007,940 $9,905,072, and $6,285,555, respectively, allocated among the portfolios as follows: 22 78 PORTFOLIO 1995 1994 1993 Global Equity .................. $2,415,918 $2,192,713 $ 905,318 Pasadena Growth ................ $ 978,146 $ 558,057 $ 280,422 Equity ......................... $1,628,673 $1,166,032 $ 710,703 Value Equity ................... $ 864,812 $ 525,739 $ 148,581 Growth and Income .............. $1,267,236 $ 926,068 $ 579,977 Intern'l Growth & Income ....... $ 232,320* N/A N/A Strategic Bond ................. $ 322,077+ $ 252,633 $ 85,576 Global Government Bond ......... $ 771,716 $ 766,324 $ 427,234 Investment Quality Bond ........ $ 276,246 $ 245,447 $ 183,265 U.S. Government Securities ..... $ 442,603 $ 458,245 $ 395,910 Money Market Trust ............. $ 197,786 $ 173,760 $ 90,990 Aggressive Asset Allocation .... $ 560,019 $ 521,717 $ 474,535 Moderate Asset Allocation ...... $1,433,417 $ 456,691 $1,368,386 Conservative Asset Allocation .. $ 616,971 $ 661,646 $ 634,658
*For the period January 9, 1995 (commencement of operations) to December 31, 1995. + Of this amount, $63,231 was paid by SBAM to SBAM Limited under the Subadvisory Consulting Agreement. Subject to the expense limitations discussed above, the Trust is responsible for the payment of all expenses of its organization, operations and business, except those which the Adviser or Subadvisers have agreed to pay pursuant to the Advisory or Subadvisory Agreements. Expenses borne by the Trust include charges and expenses of the custodian, independent accountants and transfer, bookkeeping and dividend disbursing agent appointed by the Trust; brokers' commissions and issue and transfer taxes on securities transactions to which the Trust is a party; taxes and fees payable by the Trust; and legal fees and expenses in connection with the affairs of the Trust, including registering and qualifying its shares with regulatory authorities and in connection with any litigation. The Advisory Agreement and each Subadvisory Agreement will continue in effect as to a portfolio for a period no more than two years from the date of its execution or the execution of an amendment making the agreement applicable to that portfolio only so long as such continuance is specifically approved at least annually either by the Trustees or by the vote of a majority of the outstanding voting securities of the Trust, provided that in either event such continuance shall also be approved by the vote of the majority of the Trustees who are not interested persons of any party to the Agreements, cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval of any continuance of any of the Agreements shall be effective with respect to any portfolio if a majority of the outstanding voting securities of the series of shares of beneficial interest of that portfolio vote to approve such continuance, notwithstanding that such continuance may not have been approved by a majority of the outstanding voting securities of (i) any other portfolio affected by the Agreement or (ii) all of the portfolios of the Trust. If the holders of any series of shares of beneficial interest of any portfolio fail to approve any continuance of the Advisory Agreement or the Subadvisory Agreement, the Adviser or Subadviser (including SBAM Limited) will continue to act as investment adviser or subadviser with respect to such portfolio pending the required approval of the continuance of such Agreement, of a new contract with the Adviser or Subadviser or different adviser or subadviser, or other definitive action. In the case of the Adviser, or Oechsle International, the compensation received by the Adviser or Subadviser in respect of such a portfolio during such period will be no more than its actual costs incurred in furnishing investment advisory and management services to such portfolio or the amount it would have received under the Advisory Agreement or Subadvisory Agreement in respect of such portfolio, whichever is less. In the case of Alger, Founders, J.P. Morgan, Wellington Management, FMTC, SBAM, GSAM or REMC, the compensation received by it in respect of such a portfolio during such period will be no more than that permitted by Rule 15a-4 under the Investment Company Act of 1940. With respect to REMC, in the event the subadvisory agreement with REMC is terminated the Adviser has agreed to take any action necessary to cause the Trust to discontinue the use of the name "Pasadena" in any portfolio. The Adviser has further agreed that it will use such name in connection with any portfolio of the Trust only so long as REMC serves as the subadviser to such portfolio. The Advisory Agreement and the Subadvisory Agreements may be terminated at any time without the payment of any penalty on 60 days' written notice to the other party or parties to the Agreements, and to the Trust in the case of the Subadvisory Agreements, (i) by the Trustees of the Trust; (ii) by the vote of a majority of the outstanding voting securities of the Trust, or with respect to any portfolio, by the vote of a majority of the outstanding voting securities of the series of shares of beneficial interest of such portfolio; and (iii) by the Adviser, and in the case of the Subadvisory Agreements, by the respective Subadvisers. The Agreements will automatically terminate in the event of their assignment. 23 79 The Advisory Agreement may be amended by the Trust and the Adviser and the Subadvisory Agreements by the Adviser and respective Subadvisers provided such amendment is specifically approved by the vote of a majority of the outstanding voting securities of the Trust and by the vote of a majority of the Trustees of the Trust who are not interested persons of the Trust, the Adviser or the applicable Subadviser (including SBAM Limited) cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval of any amendment shall be effective with respect to any portfolio if a majority of the outstanding voting securities of that portfolio vote to approve the amendment, notwithstanding that the amendment may not have been approved by a majority of the outstanding voting securities of (i) any other portfolio affected by the amendment or (ii) all the portfolios of the Trust. AGREEMENT WITH PRIOR SUBADVISER The Conservative, Moderate and Aggressive Asset Allocation Trusts for which Sass Investors acted as Subadviser up until December 13, 1991, and the Bond Trust (now Investment Quality Bond Trust) for which Sass Investors acted as Subadviser up until April 23, 1991, acquired certain taxable revenue bonds, the value of which has declined substantially due to the default of the bonds caused by the Conservatorship of Executive Life Insurance Company. The Trust retained legal counsel to advise it as to any potential claims it may have arising out of its purchase of such bonds. On the basis of the advice received and, to avoid any prejudice resulting from the passage of time, the Trust has sought to obtain agreements from certain persons which would toll the running of statutes of limitations that might in time bar the assertion of any claims related to its purchase of the bonds. In February 1991 the Trust entered into an agreement with Sass Investors, its principals and affiliated companies concerning any claims the Trust may have arising out of Sass Investors' performance under the Sass Subadvisory Agreement in connection with the purchase or sale of the aforementioned bonds. The parties agreed that the running of time under any statute of limitations or by way of laches with respect to any claims or defenses arising out of such purchase or sale would be tolled until thirty days after termination of the agreement by either party giving written notice to the other. PORTFOLIO BROKERAGE Pursuant to the Subadvisory Agreements, the Subadvisers are responsible for placing all orders for the purchase and sale of portfolio securities of the Trust. The Subadvisers have no formula for the distribution of the Trust's brokerage business, their intention being to place orders for the purchase and sale of securities with the primary objective of obtaining the most favorable overall results for the Trust. The cost of securities transactions for each portfolio will consist primarily of brokerage commissions or dealer or underwriter spreads. Bonds and money market instruments are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. Occasionally, securities may be purchased directly from the issuer. For securities traded primarily in the over-the-counter market, the Subadvisers will, where possible, deal directly with dealers who make a market in the securities unless better prices and execution are available elsewhere. Such dealers usually act as principals for their own account. In selecting brokers or dealers through whom to effect transactions, the Subadvisers will give consideration to a number of factors, including price, dealer spread or commission, if any, the reliability, integrity and financial condition of the broker-dealer, size of the transaction and difficulty of execution. Consideration of these factors by a Subadviser, either in terms of a particular transaction or the Subadviser's overall responsibilities with respect to the Trust and any other accounts managed by the Subadviser, could result in the Trust paying a commission or spread on a transaction that is in excess of the amount of commission or spread another broker-dealer might have charged for executing the same transaction. In selecting brokers and dealers, the Subadvisers will also give consideration to the value and quality of any research, statistical, quotation or valuation services provided by the broker or dealer. In placing a purchase or sale order, a Subadviser may use a broker whose commission in effecting the transaction is higher than that of some other broker if the Subadviser determines in good faith that the amount of the higher commission is reasonable in relation to the value of the brokerage and research services provided by such broker, viewed in terms of either the particular transaction or the Subadviser's overall responsibilities with respect to the Trust and any other accounts managed by the Subadviser. Brokerage and research services provided by brokers and dealers include advice, either directly or through publications or writings, as to the value of securities, the advisability of purchasing or selling securities, the availability of securities or purchasers or sellers of securities, and analyses and reports concerning issuers, industries, securities, economic factors and trends and portfolio strategy. Consistent with the foregoing considerations and the Rules of Fair Practice of the NASD, sales of contracts for which the broker-dealer or an affiliate thereof is responsible may be considered as a factor in the selection of such brokers or dealers. A higher cost broker-dealer will not be selected, however, solely on the basis of sales volume but will be selected in accordance with the criteria set forth above. To the extent research services are used by the Subadvisers in rendering investment advice to the Trust, such services would tend to reduce the Subadvisers' expenses. However, the Subadvisers do not believe that an exact dollar value can be assigned to these services. Research services received by the Subadvisers from brokers or dealers executing transactions for the Trust will be available also for the benefit of other portfolios managed by the Subadvisers. 24 80 The Subadvisers manage a number of accounts other than the Trust's portfolios. Although investment recommendations or determinations for the Trust's portfolios will be made by the Subadvisers independently from the investment recommendations and determinations made by them for any other account, investments deemed appropriate for the Trust's portfolios by the Subadvisers may also be deemed appropriate by them for other accounts, so that the same security may be purchased or sold at or about the same time for both the Trust's portfolios and other accounts. In such circumstances, the Subadvisers may determine that orders for the purchase or sale of the same security for the Trust's portfolios and one or more other accounts should be combined, in which event the transactions will be priced and allocated in a manner deemed by the Subadvisers to be equitable and in the best interests of the Trust Portfolios and such other accounts. While in some instances combined orders could adversely affect the price or volume of a security, the Trust believes that its participation in such transactions on balance will produce better overall results for the Trust. For the years ended December 31, 1995, 1994 and 1993, the Trust paid brokerage commissions in connection with portfolio transactions of $6,609,957, $5,510,656 and $2,877,317, respectively, allocated among the portfolios as follows:
PORTFOLIO 1995 1994 1993 - ---------------------------------------------------------------------- Global Equity .................... $2,684,254 $2,358,799 $1,196,630 Pasadena Growth .................. $ 388,904 $ 187,089 $ 114,811 Equity ........................... $ 861,497 $1,011,437 $ 600,555 Value Equity ..................... $ 606,918 $ 383,033 $ 181,956 Growth and Income ................ $ 697,618 $ 487,223 $ 308,818 International Growth and Income .. $ 374,962* NA NA Aggressive Asset Allocation ...... $ 286,517 $ 280,679 $ 122,305 Moderate Asset Allocation ........ $ 604,766 $ 682,814 $ 292,232 Conservative Asset Allocation .... $ 104,521 $ 119,582 $ 60,010
*For the period January 9, 1995 (commencement of operations) to December 31, 1995. Goldman Sachs & Co. ("Goldman"), Salomon Brothers Inc. ("Salomon"), J.P. Morgan Securities Inc and J.P. Morgan Securities Ltd. (J.P. Morgan"), Dresdner Bank and Fidelity Capital Markets are affiliated brokers of the Trust due to the positions of Goldman, Salomon, J.P. Morgan, Oechsle International and FMTC respectively, as Subadviser to Trust Portfolios. For the years ended December 31, 1995, 1994 and 1993, brokerage commissions were paid to GOLDMAN, SACHS & CO. by the portfolios as follows: YEAR ENDED DECEMBER 31, 1995
% OF AGGREGATE % OF TRUST'S BROKERAGE $AMOUNT OF COMMISSIONS REPRESENTED TRANSACTIONS PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD - ----------------------------------------------------------------------------------------- Global Equity .................... $ 6,951 0.26% 0.08% Pasadena Growth .................. $24,855 6.39% 0.52% Equity ........................... $13,799 1.60% 0.62% Value Equity ..................... $63,836 10.52% 0.19% Growth and Income ................ $33,000 4.73% 0.46% International Growth and Income .. $ 6,651* 1.77% 1.05% Agressive Asset Allocation ....... $ 7,202 2.51% 0.43% Moderate Asset Allocaton ......... $11,975 1.98% 0.69% Conservative Asset Allocation .... $ 2,080 1.99% 0.80%
* For the period January 9, 1995 (commencement of operations) to December 31, 1995. 25 81 YEAR ENDED DECEMBER 31, 1994
% OF AGGREGATE % OF TRUST'S BROKERAGE $AMOUNT OF COMMISSIONS REPRESENTED TRANSACTIONS PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD - -------------------------------------------------------------------------------------- Pasadena Growth ................ $ 6,376 3.41% 5.71% Equity ......................... $ 8,032 0.79% 0.03% Value Equity ................... $20,741 5.41% 3.98% Growth and Income .............. $12,612 2.59% 1.14% Agressive Asset Allocation ..... $10,644 3.79% 0.53% Moderate Asset Allocaton ....... $25,501 3.73% 3.21% Conservative Asset Allocation .. $ 676 0.57% 0.08%
YEAR ENDED DECEMBER 31, 1993
% OF AGGREGATE % OF TRUST'S BROKERAGE $AMOUNT OF COMMISSIONS REPRESENTED TRANSACTIONS PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD - ---------------------------------------------------------------------------- Global Equity ...... $15,566 1.30% 1.95% Pasadena Growth .... $ 4,500 3.92% 9.33% Equity ............. $ 5,755 0.96% 1.71% Value Equity ....... $27,565 15.15% 16.68% Growth and Income .. $ 9,480 3.07% 3.73%
For the years ended December 31, 1995, 1994 and 1993, brokerage commissions were paid to SALOMON BROTHERS INC by the portfolios as follows: YEAR ENDED DECEMBER 31, 1995
% OF AGGREGATE % OF TRUST'S BROKERAGE $AMOUNT OF COMMISSIONS REPRESENTED TRANSACTIONS PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD - -------------------------------------------------------------------------------------- Global Equity ................. $ 34,352 1.28% 0.19% Pasadena ...................... $ 16,380 4.21% 0.26% Equity ........................ $ 13,968 1.62% 0.14% Value Equity .................. $ 35,568 5.86% 0.14% Growth and Income ............. $128,844 18.47% 1.45% Aggressive Asset Allocation ... $ 3,072 1.07% 0.88% Moderate Asset Allocation ..... $ 3,967 0.66% 1.42% Conservative Asset Allocaton .. $ 999 0.96% 1.87%
YEAR ENDED DECEMBER 31, 1994
% OF AGGREGATE % OF TRUST'S BROKERAGE $AMOUNT OF COMMISSIONS REPRESENTED TRANSACTIONS PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD - -------------------------------------------------------------------------------------- Global Equity ................. $17,818 0.76% 0.43% Pasadena ...................... $ 4,200 2.24% 2.08% Equity ........................ $24,110 2.38% 2.59% Value Equity .................. $17,052 4.45% 4.09% Growth and Income ............. $46,848 9.62% 3.08% Aggressive Asset Allocation ... $ 1,063 0.38% 4.74% Moderate Asset Allocation ..... $ 2,641 0.39% 6.03% Conservative Asset Allocaton .. $ 607 0.51% 2.07%
26 82 YEAR ENDED DECEMBER 31, 1993
% OF AGGREGATE % OF TRUST'S BROKERAGE $AMOUNT OF COMMISSIONS REPRESENTED TRANSACTIONS PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD - ------------------------------------------------------------------------------- Global Equity ...... $14,144 1.18% 0.71% Equity ............. $15,426 2.57% 1.58% Value Equity ....... $ 8,748 4.81% 3.34% Growth and Income .. $23,534 7.62% 6.93%
For the year ended December 31, 1995, brokerage commissions were paid to J.P. Morgan Securities by the portfolios as follows: YEAR ENDED DECEMBER 31, 1995
% OF AGGREGATE % OF TRUST'S BROKERAGE $AMOUNT OF COMMISSIONS REPRESENTED TRANSACTIONS PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD - ----------------------------------------------------------------------------------------- Global Equity .................... $15,349 0.57% 0.90% Pasadena ......................... $ 2,482 0.64% 0.03% Equity ........................... $ 8,890 1.03% 0.06% Value Equity ..................... $40,124 6.61% 0.20% Growth and Income ................ $12,798 1.83% 0.30% International Growth and Income .. $ 554* 0.15% 0.41% Aggressive Asset Allocation ...... $ 721 0.25% 0.24% Moderate Asset Allocation ........ $ 1,680 0.28% 0.31% Conservative Asset Allocaton ..... $ 397 0.38% 0.14%
*For the period January 9, 1995 (commencement of operations) to December 31, 1995. For the year ended December 31, 1995, brokerage commissions were paid to Dresdner Bank by the portfolios as follows:
% OF AGGREGATE % OF TRUST'S BROKERAGE $AMOUNT OF COMMISSIONS REPRESENTED TRANSACTIONS PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD - -------------------------------------------------------------------------------------- Equity ......................... $277 0.03% 0.00% International Growth & Income .. 408* 0.11% 0.04%
*For the period January 9, 1995 (commencement of operations) to December 31, 1995. For the year ended December 31, 1995, brokerage commissions were paid to Fidelity Capital Markets by the portfolios as follows:
% OF AGGREGATE % OF TRUST'S BROKERAGE $AMOUNT OF COMMISSIONS REPRESENTED TRANSACTIONS PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD - ---------------------------------------------------------------------------------------- Global Equity .................. $31,110 1.16% 0.77% International Growth & Income .. 197* 0.05% 0.15% Aggressive Asset Allocation .... 3,240 1.13% 0.08% Moderate Asset Allocation ...... 8,815 1.46% 0.07% Conservative Asset Allocation .. 1,920 1.84% 0.05%
*For the period January 9, 1995 (commencement of operations) to December 31, 1995. 27 83 PURCHASE AND REDEMPTION OF SHARES The Trust will redeem all full and fractional portfolio shares for cash at the net asset value per share of each portfolio. Payment for shares redeemed will generally be made within seven days after receipt of a proper notice of redemption. However, the Trust may suspend the right of redemption or postpone the date of payment beyond seven days during any period when (a) trading on the New York Stock Exchange is restricted, as determined by the Securities and Exchange Commission, or such Exchange is closed for other than weekends and holidays; (b) an emergency exists, as determined by the Commission, 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 (c) the Commission by order so permits for the protection of security holders of the Trust. DETERMINATION OF NET ASSET VALUE The following supplements the discussion of the valuation of portfolio assets set forth in the Prospectus under the caption "Purchase and Redemption of Shares." Securities held by the portfolios except for debt instruments with remaining maturities of 60 days or less and all debt instruments held by the Money Market Trust will be valued as follows: securities which are traded on stock exchanges (including securities traded in both the over-the-counter market and on an exchange) are valued at the last sales price as of the close of the regularly scheduled trading of the New York Stock Exchange on the day the securities are being valued, or, lacking any sales, at the closing bid prices. Securities traded only in the over-the-counter market are valued at the last bid prices quoted by brokers that make markets in the securities at the close of trading on the New York Stock Exchange. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Trustees. Generally, trading in non-U.S. securities, as well as U.S. Government securities and money market instruments, is substantially completed each day at various times prior to the close of the regularly scheduled trading of the New York Stock Exchange. The values of such securities used in computing the net asset value of a portfolio's shares are generally determined as of such times. Occasionally, events which affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange and would therefore not be reflected in the computation of a portfolio's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by the Subadvisers under procedures established and regularly reviewed by the Trustees. Debt instruments with a remaining maturity of 60 days or less held by each of the portfolios other than the Money Market Trust, and all instruments held by the Money Market Trust, will be valued on an amortized cost basis. Under this method of valuation, the instrument is initially valued at cost (or in the case of instruments initially valued at market value, at the market value on the day before its remaining maturity is such that it qualifies for amortized cost valuation); thereafter, the Trust assumes a constant proportionate amortization in value until maturity of any discount or premium, 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 that would be received upon sale of the instrument. The Money Market Trust uses the amortized cost valuation method in reliance upon Rule 2a-7 under the Investment Company Act of 1940. As required by the Rule, the Money Market Trust will maintain a dollar weighted average maturity of 90 days or less. In addition, the Money Market Trust is permitted to purchase only securities that the Trustees determine to present minimal credit risks and which are at the time of purchase "eligible securities," as defined by the Rule. Generally, eligible securities must be rated by a nationally recognized statistical rating organization in one of the two highest rating categories for short-term debt obligations or be of comparable quality. The Money Market Trust will invest only in obligations that have remaining maturities of thirteen months or less. The Trustees have established procedures designed to stabilize, to the extent reasonably possible, the Money Market Trust's price per share as computed for the purpose of sales and redemptions at $10.00. Such procedures include a direction to the Adviser to establish procedures which will allow for the monitoring of the propriety of the continued use of amortized cost valuation to maintain a constant net asset value of $10.00 per share. Such procedures include a directive to the Adviser that requires that on determining net asset value per share based upon available market quotations, the Money Market Trust shall value weekly (a) all portfolio instruments for which market quotations are readily available at market, and (b) all portfolio instruments for which market quotations are not readily available or are not obtainable from a pricing service, at their fair value as determined in good faith by the Trustees, although the actual calculations may be made by persons acting pursuant to the direction of the Trustees. If the fair value of a security needs to be determined, the Subadviser will provide determinations, in accordance with procedures and methods established by the Trustees of the Trust, of the fair value of securities held by the Money Market Trust for which market quotations are not readily available for purposes of enabling the Money Market Trust's Custodian to calculate net asset value. The Adviser, with the Subadviser's assistance, periodically (but no less frequently than annually) shall prepare a 28 84 written report to the Trustees verifying the accuracy of the pricing system or estimate. A non-negotiable security which is not treated as an illiquid security because it may be redeemed with the issuer, subject to a penalty for early redemption, shall be assigned a value that takes into account the reduced amount that would be received if it were currently liquidated. In the event that the deviation from the amortized cost exceeds .50 of 1% or more or a difference of $.05 per share in net asset value, the Adviser shall promptly call a special meeting of the Trustees to determine what, if any, action should be initiated. Where the Trustees believe the extent of any deviation from the Money Market Trust's amortized cost price per share may result in material dilution or other unfair results to investors or existing shareholders, they shall take such action as they deem appropriate to eliminate or reduce to the extent reasonably practical such dilution or unfair results. The actions that may be taken by the Trustees include, but are not limited to: (a) redeeming shares in kind; (b) selling portfolio instruments prior to maturity to realize capital gains or losses or to shorten the average portfolio maturity of the Money Market Trust; (c) withholding or reducing dividends;(d) utilizing a net asset value per share based on available market quotations; (e)investing all cash in instruments with a maturity on the next business day. The Money Market Trust may also reduce the number of shares outstanding by redeeming proportionately from shareholders, without the payment of any monetary compensation, such number of full and fractional shares as is necessary to maintain the net asset value at $10.00 per share. Any such redemption will be treated as a negative dividend for purposes of the Net Investment Factor under the contracts issued by North American Security Life Insurance Company. PERFORMANCE DATA Each of the portfolios may quote total return figures in its advertising and sales materials. Such figures will always include the average annual total return for recent one year and, when applicable, five and ten year periods and where less than five or ten years, the period since the portfolio, including its predecessor prior to the reorganization of the Fund on December 31, 1988, became available for investment. Where the period since inception is less than one year, the total return quoted will be the aggregate return for the period. The average annual total return is the average annual compounded rate of return that equates the initial amount invested to the market value of such investment on the last day of the period for which such return is calculated. For purposes of the calculation it is assumed that an initial payment of $1,000 is made on the first day of the period for which the return is calculated and that all dividends and distributions are reinvested at the net asset value on the reinvestment dates during the period. All recurring fees such as advisory fees charged to the Trust and all Trust expenses are reflected in the calculations. There are no non-recurring fees such as sales loads, surrender charges or account fees charged by the Trust. If the period since inception is less than one year, the figures will be based on an aggregate total return rather than an average annual total return. Because the Investment Quality Bond Trust changed its investment objective and investment subadviser effective April 23, 1991, the Trust has elected to quote performance for that portfolio only since the date of the change in order to quote returns representative of its current objectives and/or produced by its current portfolio manager. For the same reasons, the Trust may elect to quote performance for the Equity, U.S. Government Securities, Money Market, and the three Asset Allocation Trusts only since December 13, 1991 when such portfolios changed portfolio managers. 29 85 TOTAL ANNUALIZED RETURN ==================================================================================================
Since Incerption or 10 Years, whochever is One Year Ended Five Years Ended shorter through Trust 12/31/95 12/31/95 12/31/95 Date First Available - -------------------------------------------------------------------------------------------------- Global Equity 7.68% 10.27% 8.07% 03/18/88 Pasadena Growth 26.53% N/A 4.70% 12/11/92 Equity 42.79% 16.03% 13.73%** 06/18/85 Value Equity 23.69% N/A 12.75% 02/19/93 Growth and Income 29.20% N/A 13.06% 04/23/91 International Growth and Income 6.98%* N/A N/A 01/9/95 Strategic Bond 19.22% N/A 7.17% 02/19/93 Global Government Bond 23.18% 10.36% 9.13% 03/18/88 Investment Quality Bond 19.49% N/A 9.46% 04/23/91 U.S. Government Securities 15.57% 8.26% 8.54% 05/01/89 Money Market 5.62% 4.23% 5.60%** 06/18/85 Cons. Asset Allocation 18.07% 10.01% 7.25% 08/03/89 Mod. Asset Allocation 20.68% 11.40% 7.75% 08/03/89 Aggr. Asset Allocation 22.77% 12.35% 8.02% 08/03/89 * Aggregate total return from January 9, 1995 (inception date). ** 10 Years
The Trust may also from time to time include in advertising and sales literature the following: 1) information regarding its portfolio subadvisers, such as information regarding a subadvisers specific investment expertise, client base, assets under management or other relevant information; 2) quotations about the Trust, its portfolios or its investment subadvisers that appear in various publications and media; and 3) general discussions of economic theories, including but not limited to discussions of how demographics and political trends may effect future financial markets, as well as market or other relevant information. ORGANIZATION OF THE TRUST SHARES OF THE TRUST The Declaration of Trust authorizes the Trustees of the Trust to issue an unlimited number of full and fractional shares of beneficial interest having a par value of $.01 per share, to divide such shares into an unlimited number of series of shares and to designate the relative rights and preferences thereof, all without shareholder approval. The Trust currently has sixteen series of shares: the Small/Mid Cap, the International Small Cap, the Global Equity Trust, the Pasadena Growth Trust, the Equity Trust, the Value Equity Trust, the Growth and Income Trust, the International Growth and Income Trust, the Strategic Bond Trust, the Global Government Bond Trust, the Investment Quality Bond Trust, the Money Market Trust, the U.S. Government Securities Trust, the Conservative Asset Allocation Trust, the Moderate 30 86 Asset Allocation Trust and the Aggressive Asset Allocation Trust. The shares of each portfolio, when issued and paid for, will be fully paid and non-assessable and will have no preemptive or conversion rights. Holders of shares of any portfolio are entitled to redeem their shares as set forth under "Purchase and Redemption of Shares." The Trust reserves the right to later issue additional series of shares or separate classes of existing series of shares without the consent of outstanding shareholders. Each issued and outstanding share is entitled to participate equally in dividends and distributions declared by the respective portfolio and upon liquidation in the net assets of such portfolio remaining after satisfaction of outstanding liabilities. For these purposes and for purposes of determining the sale and redemption prices of shares, any assets which are not clearly allocable to a particular portfolio will be allocated in the manner determined by the Trustees. Accrued liabilities which are not clearly allocable to one or more portfolios will also be allocated among the portfolios in the manner determined by the Trustees. Shareholders of each portfolio of the Trust are entitled to one vote for each full share held (and fractional votes for fractional shares held) irrespective of the relative net asset values of the shares of the portfolio. All shares entitled to vote are voted by series, except that when voting for the election of Trustees and when otherwise permitted by the Investment Company Act of 1940, shares are voted in the aggregate and not by series. Only shares of a particular portfolio are entitled to vote on matters determined by the Trustees to affect only the interests of that portfolio. Pursuant to the Investment Company Act of 1940 and the rules and regulations thereunder, certain matters approved by a vote of a majority of all the shareholders of the Trust may not be binding on a portfolio whose shareholders have not approved such matter. There will normally be no meetings of shareholders for the purpose of electing Trustees unless and until less than a majority of the Trustees holding office has been elected by shareholders, at which time the Trustees then in office will call a shareholders' meeting for the election of Trustees. Holders of not less than two-thirds of the outstanding shares of the Trust may remove a Trustee by a vote cast in person or by proxy at a meeting called for such purpose. Shares of the Trust do not have cumulative voting rights, which means that the holders of more than 50% of the Trust's shares voting for the election of Trustees can elect all of the Trustees if they so choose. In such event, the holders of the remaining shares would not be able to elect any Trustees. Shares held in Security Life's registered separate account are voted in accordance with instructions from variable contract owners. Under Massachusetts law, shareholders of the Trust could, under certain circumstances, be held personally liable for the obligations of the Trust. The Declaration of Trust contains an express disclaimer of shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the Trustees or any officer of the Trust. The Declaration of Trust provides for indemnification out of the property of a Trust portfolio for all losses and expenses of any shareholder held personally liable for the obligations of such portfolio. The Declaration of Trust also provides that the Trust shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the Trust and satisfy any judgment thereon, but only out of the property of a particular portfolio. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which a particular portfolio would be unable to meet its obligations. PRINCIPAL HOLDERS OF SECURITIES Security Life, a Delaware corporation and a wholly-owned subsidiary of North American Life, provided the initial capital for the Fund, the Trust's corporate predecessor, by purchasing for its general account 100,000 shares of the Equity Portfolio, 100,000 shares of the Bond Portfolio and 100,000 shares of the Money Market Portfolio, each at a price of $10.00 per share. On March 20, 1987, North American Life purchased all of Security Life's shares from Security Life at a price equal to the net asset value of the shares at the close of business on March 20, 1987. On December 23, 1987, the Fund redeemed all of the shares of the Equity and Bond Portfolios owned by North American Life. On February 12, 1988 North American Life provided the initial capital to the Global Equity, Global Government Bond and Convertible Securities Portfolios (now the U.S. Government Securities Trust) by purchasing 25,000 shares of each such portfolio at a price of $10.00 per share. On April 1, 1991 Security Life provided the initial capital to the Growth and Income Trust by purchasing 10,000 shares at the price of $10.00 per share. On January 6, 1995 and January 9, 1995, Security Life provided the initial capital to the International Growth and Income Trust by purchasing one share and 500,000 shares, respectively, at 10.00 per share. On March 1, 1996, Security Life purchased one share of the Small/Mid Cap Trust and one share of the International Small Cap Trust at $12.50 per share. On March 4, 1996, Security Life provided the initial capital for the Small/Mid Cap and the International Small Cap Trusts by purchasing 80,000 shares of each Trust at $12.50 per share. The Trust currently has three shareholders: The Manufacturers Life Insurance Company of America ("Manulife America"), Security Life and First North American Life Assurance Company ("FNAL"). Each shareholder holds Trust shares attributable to variable and variable life contracts in their separate accounts registered under the Investment Company Act of 1940. Each shareholder will solicit voting instructions from such variable and variable life contract owners and vote all shares held in proportion to the instructions received. Reflecting the conditions of section 817(h) and other provisions of the Internal Revenue Code and regulations thereunder, the By-laws of the Trust provide that shares of the Trust may be purchased only by the following eligible shareholders: (a) separate accounts of Security Life or of other insurance companies; (b) Security Life; (c) NASL Financial; (d) any corporation related in a manner specified in 31 87 section 267(b) of the Internal Revenue Code to Security Life or to NASL Financial, including North American Life; and (e) any Trustee of a qualified pension of retirement plan. As a matter of operating policy, shares of the Trust may be purchased only by the eligible shareholders of categories (a), (b) and (d). REPORTS TO SHAREHOLDERS Annual and semi-annual reports containing financial statements of the Trust will be sent to contract owners. INDEPENDENT ACCOUNTANTS The audited financial statements of the Trust at December 31, 1995 included in this Statement of Additional Information and the Supplementary Information for the period from the commencement of operations of the Trust's corporate predecessor through December 31, 1995 included in the Prospectus have been audited by Coopers & Lybrand L.L.P., independent public accountants, as indicated in their report in this Statement of Additional Information and are included herein in reliance upon such report and upon the authority of such firm as experts in accounting and auditing. LEGAL COUNSEL Messrs. Jones & Blouch L.L.P., 1025 Thomas Jefferson Street, N.W., N.W., Washington, DC 20007, have passed upon certain legal matters relating to the federal securities laws. 32 88 REPORT OF INDEPENDENT ACCOUNTANTS - ---------------------------------------------------------------------------- To the Board of Trustees and Shareholders of NASL Series Trust: We have audited the accompanying statements of assets and liabilities of NASL Series Trust (comprising, respectively, the Global Equity, Pasadena Growth, Equity, Value Equity, Growth and Income, International Growth and Income, Strategic Bond, Global Government Bond, Investment Quality Bond, U.S. Government Securities, Money Market and Aggressive, Moderate and Conservative Asset Allocation Trusts), including the portfolio of investments, as of December 31, 1995, and the related statements of operations, the statements of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentations. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Trusts comprising NASL Series Trust as of December 31, 1995, and the results of their operations, the changes in their net assets and the financial highlights for each of the periods indicated therein, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts February 15, 1996 1 89 NASL SERIES TRUST STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995 - --------------------------------------------------------------------------------
GLOBAL PASADENA VALUE GROWTH AND EQUITY GROWTH EQUITY EQUITY INCOME TRUST TRUST TRUST TRUST TRUST ------------ ------------ ------------ ------------ ------------ ASSETS Investments in securities, at value* (Includes repurchase agreements of $100,188,000 and $43,932,000 in the Equity and Value Equity Trusts, respectively) (See accompanying portfolio of investments)................... $641,380,864 $277,336,287 $976,065,248 $395,072,032 $671,637,979 Receivable for forward foreign currency contracts to sell (Notes 2 and 8).......................................... 61,469,216 --- --- --- --- Forward foreign currency contracts to buy, at value (Cost: $695,035 and $754,098 in the Global Equity and Equity Trusts, respectively) (Notes 2 and 8)........ 691,930 --- --- --- --- Cash....................................................... 720 523 436 979 80 Foreign currency (Cost: $3,360,167 and $12,691 in the Global Equity and Growth and Income Trusts, respectively)........................................... 3,363,884 --- --- --- 12,446 Receivables: Investments sold..................................... 179,026 --- 12,352,489 2,482,291 --- Fund shares sold..................................... 3,115,242 23,627 622,018 679,814 --- Dividends............................................ 746,923 361,811 1,177,702 493,226 1,482,685 Interest............................................. 3,043 8,810 41,745 21,051 290,650 Foreign tax withholding reclaims..................... 295,928 2,860 --- --- --- Deferred organization expenses (Note 2).................... --- 3,901 --- 4,284 3,982 Other assets............................................... 6,862 2,420 8,285 3,357 5,639 ------------ ------------ ------------ ------------ ------------ Total assets................................... 711,253,638 277,740,239 991,017,931 398,757,034 673,433,461 ------------ ------------ ------------ ------------ ------------ LIABILITIES Forward foreign currency contracts to sell, at value (Cost: $61,469,216) (Notes 2 and 8)...................... 61,343,070 --- --- --- --- Payables: Forward foreign currency contracts to buy (Notes 2 and 8).................................... 695,035 --- 754,098 --- --- Investments purchased................................ 691,930 22,266 1,327,519 1,878,666 --- Fund shares redeemed................................. 113 37 199 118 3,936,441 Dividend and interest withholding tax................ 48,554 4,741 5,389 --- 28,124 Custodian fee........................................ 245,614 21,979 63,554 27,494 41,799 Due to custodian..................................... --- --- 8,744 --- --- Other accrued expenses............................... 46,684 17,023 58,223 24,200 39,853 ------------ ------------ ------------ ------------ ------------ Total liabilities.............................. 63,071,000 66,046 2,217,726 1,930,478 4,046,217 ------------ ------------ ------------ ------------ ------------ NET ASSETS................................................. $648,182,638 $277,674,193 $988,800,205 $396,826,556 $669,387,244 ============ ============ ============ ============ ============ Net assets consist of: Accumulated undistributed net investment income (Note 2)........................................... $ 11,144,253 $ 908,877 $ 4,695,040 $ 5,009,152 $ 11,667,389 Accumulated undistributed net realized gain (loss) on investments.............................. (17,623,479) (10,560,793) 95,984,414 25,890,743 15,781,628 Unrealized appreciation (depreciation) on: Investments....................................... 60,373,069 50,433,536 165,527,270 29,865,194 121,037,410 Foreign currency and forward foreign currency contracts....................................... 131,742 --- (583) --- 585 Capital shares at par value of $.01 (Note 4)......... 402,496 243,632 475,620 287,336 408,931 Additional paid-in capital........................... 593,754,557 236,648,941 722,118,444 335,774,131 520,491,301 ------------ ------------ ------------ ------------ ------------ Net assets..................................... $648,182,638 $277,674,193 $988,800,205 $396,826,556 $669,387,244 ============ ============ ============ ============ ============ Capital shares outstanding (Note 4)....................... 40,249,612 24,363,208 47,562,040 28,733,585 40,893,098 ------------ ------------ ------------ ------------ ------------ Net asset value, offering price and redemption price per share............................................ $ 16.10 $ 11.40 $ 20.79 $ 13.81 $ 16.37 ============ ============ ============ ============ ============ *Investments in securities, at identified cost (Note 2).... $581,007,795 $226,902,751 $810,537,978 $365,206,838 $550,600,569 ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. 2 90 NASL SERIES TRUST STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995 - --------------------------------------------------------------------------------
INTERNATIONAL GLOBAL INVESTMENT U.S. GROWTH AND STRATEGIC GOVERNMENT QUALITY GROWTH AND INCOME BOND BOND BOND SECURITIES TRUST TRUST TRUST TRUST TRUST ------------ ------------ ------------ ------------ ------------ ASSETS Investments in securities at value* (Includes a repurchase agreement of $44,490,000 in the U.S. Government Securities Trust) (See accompanying portfolio of investments)............................................. $ 87,198,943 $124,924,833 $227,153,803 $142,715,378 $256,049,772 Receivable for forward foreign currency contracts to sell (Notes 2 and 8).......................................... 17,464,735 25,190,430 37,531,659 --- --- Forward foreign currency contracts to buy, at value (Cost: $3,978,000, $12,176,927 and $27,021,808 in the International Growth and Income, Strategic Bond and Global Government Bond Trusts, respectively) (Notes 2 and 8).......................................... 3,894,573 12,240,348 26,955,123 --- --- Cash....................................................... 586 2,778 438 809 183 Foreign currency (Cost: $1,313,615, $74,923 and $980,292 in the International Growth and Income, Strategic Bond and Global Government Bond Trusts, respectively)............................................ 1,309,544 68,838 981,243 --- --- Receivables: Investments sold..................................... 155,214 289,844 --- --- 10,063,542 Fund shares sold..................................... 321,297 272,483 1,295,000 474,391 1,346,586 Dividends............................................ 93,761 3,200 --- --- --- Interest............................................. 146,235 2,661,951 5,418,631 2,466,906 3,027,603 Foreign tax withholding reclaims..................... 72,170 11,073 37,352 --- --- Deferred organization expenses (Note 2).................... 9,531 6,427 --- --- --- Other assets............................................... 1,477 1,041 2,355 1,227 2,075 ------------ ------------ ------------ ------------ ------------ Total assets.................................... 110,668,066 165,673,246 299,375,604 145,658,711 270,489,761 ------------ ------------ ------------ ------------ ------------ LIABILITIES Forward foreign currency contracts to sell, at value (Cost: $17,464,735, $25,190,430 and $37,531,659 in the International Growth and Income, Strategic Bond and Global Government Bond Trusts, respectively) (Notes 2 and 8).......................................... 17,104,645 25,352,278 36,899,027 --- --- Payables: Forward foreign currency contracts to buy (Notes 2 and 8).................................... 3,978,000 12,176,927 27,021,808 --- --- Investments purchased................................ 830,745 5,381,312 --- 2,524,479 53,664,033 Fund shares redeemed................................. --- 39 50 32 51 Dividend and interest withholding tax................ 13,897 910 121,343 544 --- Custodian fee........................................ 102,745 48,059 72,711 21,015 20,337 Other accrued expenses............................... --- 8,180 17,731 10,037 16,921 Deferred mortgage dollar roll income....................... --- 1,365 --- --- --- ------------ ------------ ------------ ------------ ------------ Total liabilities............................... 22,030,032 42,969,070 64,132,670 2,556,107 53,701,342 ------------ ------------ ------------ ------------ ------------ NET ASSETS................................................. $ 88,638,034 $122,704,176 $235,242,934 $143,102,604 $216,788,419 ============ ============ ============ ============ ============ Net assets consist of : Accumulated undistributed net investment income (loss) (Note 2)............................. ($ 70,205) $ 10,644,655 $ 20,496,692 $ 8,478,262 $ 12,847,931 Accumulated undistributed net realized gain (loss) on investments..................................... (233,834) (3,633,638) (7,654,732) (4,660,721) (2,689,400) Unrealized appreciation (depreciation) on: Investments..................................... 2,485,964 2,064,219 11,626,147 8,108,959 4,786,681 Foreign currency and forward foreign currency contracts..................................... 267,627 (103,335) 602,685 --- --- Capital shares at par value of $.01 (Note 4)......... 84,621 108,985 161,601 116,180 158,806 Additional paid-in capital........................... 86,103,861 113,623,290 210,010,541 131,059,924 201,684,401 ------------ ------------ ------------ ------------ ------------ Net assets...................................... $ 88,638,034 $122,704,176 $235,242,934 $143,102,604 $216,788,419 ============ ============ ============ ============ ============ Capital shares outstanding (Note 4)........................ 8,462,125 10,898,515 16,160,125 11,618,055 15,880,625 ------------ ------------ ------------ ------------ ------------ Net asset value, offering price and redemption price per share............................................ $ 10.47 $ 11.26 $ 14.56 $ 12.32 $ 13.65 ============ ============ ============ ============ ============ *Investments in securities, at identified cost (Note 2).... $ 84,712,979 $122,860,614 $215,527,656 $134,606,419 $251,263,091 ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. 3 91 NASL SERIES TRUST STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995 - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE MONEY ASSET ASSET ASSET MARKET ALLOCATION ALLOCATION ALLOCATION TRUST TRUST TRUST TRUST ------------ ------------ ------------ ------------ ASSETS Investments in securities at value* (Includes a repurchase agreement of $28,289,000 in the Conservative Asset Allocation Trust) (See accompanying portfolio of investments)............................................. $258,581,602 $211,255,251 $648,772,669 $224,247,646 Cash....................................................... 701 45 19 666 Foreign currency (Cost: $668,359, $1,374,374 and $173,662 in the Aggressive, Moderate and Conservative Asset Allocation Trusts, respectively)................... --- 670,983 1,380,451 174,353 Receivables: Investments sold..................................... --- 5,676,891 13,635,978 2,792,279 Variation margin for open futures contracts.......... --- --- --- 274 Dividends............................................ --- 224,167 465,505 91,168 Interest............................................. 446,107 811,153 5,078,193 2,193,821 Foreign tax withholding reclaims..................... --- 33,216 62,604 10,128 Other assets............................................... 2,865 2,058 6,508 2,247 ------------ ------------ ------------ ------------ Total assets............................... 259,031,275 218,673,764 669,401,927 229,512,582 ------------ ------------ ------------ ------------ LIABILITIES Payables: Investments purchased................................ --- 6,451,236 18,628,439 4,673,692 Variation margin for open futures contracts.......... --- 8,211 18,437 2,100 Fund shares redeemed................................. 877,850 360,587 425,485 361,305 Dividend and interest withholding tax................ --- 8,711 25,288 4,892 Custodian fee........................................ 17,052 71,415 116,078 62,164 Other accrued expenses............................... 19,410 16,652 52,063 18,429 ------------ ------------ ------------ ------------ Total liabilities........................... 914,312 6,916,812 19,265,790 5,122,582 ------------ ------------ ------------ ------------ NET ASSETS................................................. $258,116,963 $211,756,952 $650,136,137 $224,390,000 ============ ============ ============ ============ Net assets consist of : Accumulated undistributed net investment income (Note 2).................................... --- $ 5,427,633 $ 26,460,562 $ 10,622,367 Accumulated undistributed net realized gain on investments..................................... --- 10,450,155 26,127,969 2,923,461 Unrealized appreciation on: Investments..................................... --- 25,134,308 59,137,555 14,724,168 Futures contracts............................... --- 182,187 369,218 61,996 Foreign currency and forward foreign currency contracts..................................... --- 1,759 4,594 462 Capital shares at par value of $.01 (Note 4)......... $ 258,117 164,844 524,617 193,632 Additional paid-in capital........................... 257,858,846 170,396,066 537,511,622 195,863,914 ------------ ------------ ------------ ------------ Net assets........................................... $258,116,963 $211,756,952 $650,136,137 $224,390,000 ============ ============ ============ ============ Capital shares outstanding (Note 4)........................ 25,811,696 16,484,402 52,461,719 19,363,198 ------------ ------------ ------------ ------------ Net asset value, offering price and redemption price per share............................................ $ 10.00 $ 12.85 $ 12.39 $ 11.59 ============ ============ ============ ============ *Investments in securities, at identified cost (Note 2).... $258,581,602 $186,120,943 $589,635,114 $209,523,478 ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. 4 92 NASL SERIES TRUST STATEMENTS OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------
GLOBAL PASADENA VALUE GROWTH AND EQUITY GROWTH EQUITY EQUITY INCOME TRUST TRUST TRUST TRUST TRUST ------------ ------------ ------------ ------------ ------------ Investment Income: Interest (Net of $1,035 withholding tax in the Equity Trust)...................................... $ 891,167 $ 696,239 $ 2,722,339 $ 3,046,996 $ 1,545,025 Dividends (Net of $1,014,252, $25,871, $34,217, $4,543 and $169,439 withholding tax in the Global Equity, Pasadena Growth, Equity, Value Equity and Growth and Income Trusts, respectively)........ 9,309,807 2,328,072 8,022,622 4,568,101 14,278,070 ------------ ----------- ------------ ----------- ------------ Total income.................................... 10,200,974 3,024,311 10,744,961 7,615,097 15,823,095 ------------ ----------- ------------ ----------- ------------ Expenses: Investment adviser fee (Note 6)...................... 5,513,312 2,115,434 5,643,363 2,459,247 3,922,671 Custodian fee........................................ 785,264 74,896 252,762 86,085 129,943 Audit and legal fees................................. 83,433 29,420 101,513 40,856 70,047 Amortization of deferred organization expenses (Note 2)........................................... --- 2,000 --- 2,000 14,983 Trustees fees and expenses (Note 7).................. 21,687 7,971 27,892 11,364 19,050 Miscellaneous........................................ 49,554 4,726 16,087 6,393 11,805 ------------ ----------- ------------ ----------- ------------ Expenses before reimbursement by subadviser (Note 6).............................. 6,453,250 2,234,447 6,041,617 2,605,945 4,168,499 Reimbursement of expenses by subadviser............ --- 119,013 --- --- --- ------------ ----------- ------------ ----------- ------------ Net expenses.................................... 6,453,250 2,115,434 6,041,617 2,605,945 4,168,499 ------------ ----------- ------------ ----------- ------------ Net investment income........................... 3,747,724 908,877 4,703,344 5,009,152 11,654,596 ------------ ----------- ------------ ----------- ------------ Realized and unrealized gain (loss) on investments and foreign currency: Net realized gain (loss) on: Investment transactions......................... (14,280,171) (2,374,757) 103,448,333 25,890,743 15,108,131 Foreign currency and forward foreign currency contracts........................... 7,051,110 --- (319,018) --- 686,290 Change in unrealized appreciation (depreciation) on: Investments..................................... 48,700,520 49,321,341 142,487,931 29,918,641 103,848,140 Translation of foreign currency and forward foreign currency contracts............ 156,091 --- (1,045) --- 1,588 ------------ ----------- ------------ ----------- ------------ Net gain on investments and foreign currency................................... 41,627,550 46,946,584 245,616,201 55,809,384 119,644,149 ------------ ----------- ------------ ----------- ------------ Net increase in net assets resulting from operations............................... $ 45,375,274 $47,855,461 $250,319,545 $60,818,536 $131,298,745 ============ =========== ============ =========== ============
The accompanying notes are an integral part of the financial statements. 5 93 NASL SERIES TRUST STATEMENTS OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------
INTERNATIONAL GLOBAL INVESTMENT U.S. GROWTH AND STRATEGIC GOVERNMENT QUALITY GROWTH AND INCOME BOND BOND BOND SECURITIES TRUST* TRUST TRUST TRUST TRUST ------------ ------------ ------------ ------------ ------------ Investment Income: Interest (Net of $2,498, $7,132, $219,802 and $544 withholding tax in the International Growth and Income, Strategic Bond, Global Government Bond and Investment Quality Bond Trusts, respectively)...................................... $ 344,831 $ 9,588,869 $17,051,448 $ 9,389,063 $14,251,650 Dividends (Net of $102,758 withholding tax in the International Growth and Income Trust)............. 689,974 --- --- --- --- ---------- ----------- ----------- ----------- ----------- Total income................................... 1,034,805 9,588,869 17,051,448 9,389,063 14,251,650 Expenses: Investment adviser fee (Note 6)..................... 450,200 767,448 1,757,909 798,045 1,291,668 Custodian fee........................................ 202,978 122,909 236,109 77,646 73,716 Audit and legal fees................................. 9,464 13,950 32,342 18,173 30,850 Amortization of deferred organization expenses (Note 2)........................................... 3,100 3,000 --- --- --- Trustees fees and expenses (Note 7).................. 3,478 3,585 7,854 4,698 7,431 Miscellaneous........................................ 27,065 2,966 12,523 4,284 5,273 ---------- ----------- ----------- ----------- ----------- Total expenses.................................. 696,285 913,858 2,046,737 902,846 1,408,938 ---------- ----------- ----------- ----------- ----------- Net investment income........................... 338,520 8,675,011 15,004,711 8,486,217 12,842,712 ---------- ----------- ----------- ----------- ----------- Realized and unrealized gain (loss) on investments and foreign currency: Net realized gain (loss) on: Investment transactions......................... 1,781,900 653,754 3,183,386 934,173 6,615,440 Foreign currency and forward foreign currency contracts............................ (549,770) 827,091 5,204,326 --- --- Change in unrealized appreciation (depreciation) on: Investments..................................... 2,485,964 7,494,670 21,692,894 12,443,229 9,054,850 Translation of foreign currency and forward foreign currency contracts............ 267,627 (60,522) 662,786 --- --- ---------- ----------- ----------- ----------- ----------- Net gain on investments and foreign currency................................... 3,985,721 8,914,993 30,743,392 13,377,402 15,670,290 ---------- ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations............................... $4,324,241 $17,590,004 $45,748,103 $21,863,619 $28,513,002 ========== =========== =========== =========== =========== * For the period January 9, 1995 (commencement of operations) to December 31, 1995.
The accompanying notes are an integral part of the financial statements. 6 94 STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995 - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE MONEY ASSET ASSET ASSET MARKET ALLOCATION ALLOCATION ALLOCATION TRUST TRUST TRUST TRUST ------------ ------------ ------------ ------------ Investment Income: Interest (Net of $1,020, $10,807 and $2,724 withholding tax in the Aggressive, Moderate and Conservative Asset Allocation Trusts, respectively) $15,862,051 $ 4,557,825 $ 25,112,904 $11,016,349 Dividends (Net of $130,512, $283,361 and $39,594 withholding tax in the Aggressive, Moderate and Conservative Asset Allocation Trusts, respectively) --- 2,609,671 5,596,929 1,117,122 ----------- ----------- ----------- ----------- Total income.................................... 15,862,051 7,167,496 30,709,833 12,133,471 Expenses: Investment adviser fee (Note 6)...................... 1,318,573 1,463,421 4,667,061 1,639,903 Custodian fee........................................ 52,444 269,362 434,383 213,781 Audit and legal fees................................ 35,918 29,273 93,532 33,581 Trustees fees and expenses (Note 7).................. 9,424 7,033 22,306 7,834 Miscellaneous........................................ 7,222 5,486 17,954 6,235 ----------- ----------- ----------- ----------- Total expenses................................. 1,423,581 1,774,575 5,235,236 1,901,334 ----------- ----------- ----------- ----------- Net investment income........................... 14,438,470 5,392,921 25,474,597 10,232,137 ----------- ----------- ----------- ----------- Realized and unrealized gain (loss) on investments and foreign currency: Net realized gain (loss) on: Investment transactions......................... --- 10,182,865 23,729,858 8,403,516 Futures contracts............................... --- (1,726,285) (3,962,742) (658,525) Foreign currency and forward foreign currency contracts............................ --- 1,938,306 7,845,216 727,483 Change in unrealized appreciation (depreciation) on: Investments..................................... --- 23,406,053 62,959,219 17,450,440 Futures contracts............................... --- 371,422 782,113 129,621 Translation of foreign currency and forward foreign currency contracts............ --- (10,764) (71,271) (34,355) ----------- ----------- ----------- ----------- Net gain on investments, futures and foreign currency................................... --- 34,161,597 91,282,393 26,017,820 ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations............................... $14,438,470 $39,554,518 $116,756,990 $36,249,957 =========== =========== ============ ===========
The accompanying notes are an integral part of the financial statements. 7 95 NASL SERIES TRUST STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
GLOBAL PASADENA VALUE EQUITY TRUST GROWTH TRUST EQUITY TRUST EQUITY TRUST ------------------------- ------------------------- ------------------------- ------------------------- YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED 12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Increase in net assets: Operations: Net investment income.......... $ 3,747,724 $ 2,412,913 $ 908,877 $ 834,112 $ 4,703,344 $ 4,079,883 $ 5,009,152 $ 1,721,862 Net realized gain (loss) on: Investment transactions.. (14,280,171) 27,723,033 (2,374,757) (6,205,010) 103,448,333 (5,142,011) 25,890,743 2,091,517 Foreign currency and forward foreign currency contracts..... 7,051,110 (3,297,130) --- --- (319,018) 12,970 --- --- Change in unrealized appreciation (depreciation) on: Investments.... 48,700,520 (30,879,531) 49,321,341 (746,806) 142,487,931 (2,473,332) 29,918,641 (5,044,529) Foreign currency and forward foreign currency contracts..... 156,091 29,893 --- --- (1,045) 462 --- --- ------------ ------------ ------------ ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations....... 45,375,274 (4,010,822) 47,855,461 (6,117,704) 250,319,545 (3,522,028) 60,818,536 (1,231,150) Distribution to shareholders from: Net investment income......... (2,969,604) (677,274 ) (834,112) (520,348) (4,092,853) (1,293,216) (1,721,862) (499,620) Net realized gains on investments and foreign currency transactions.... (27,013,345) (7,076,483) --- --- --- (21,652,190) (2,091,517) (262,345) Increase in net assets from capital share transactions (Note 4)......... 16,652,433 250,031,306 78,926,143 53,398,858 208,011,562 173,187,168 117,986,065 137,356,061 ------------ ------------ ------------ ----------- ------------ ------------ ------------ ------------ Increase in net assets........... 32,044,758 238,266,727 125,947,492 46,760,806 454,238,254 146,719,734 174,991,222 135,362,946 Net assets at beginning of period........... 616,137,880 377,871,153 151,726,702 104,965,896 534,561,951 387,842,217 221,835,334 86,472,388 Net assets at end of period........ $648,182,638 $616,137,880 $277,674,194 $151,726,702 $988,800,205 $534,561,951 $396,826,556 $221,835,334 ============ ============ ============ ============ ============ ============ ============ ============ Accumulated undistributed net investment income........... $ 11,144,253 $ 2,412,913 $ 908,877 $ 834,112 $ 4,695,040 $ 4,079,883 $ 5,009,152 $ 1,721,862 ============ ============ ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. 8 96 NASL SERIES TRUST STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
INTERNATIONAL GLOBAL GROWTH AND GROWTH AND STRATEGIC GOVERNMENT INCOME TRUST INCOME TRUST BOND TRUST BOND TRUST ------------------------- ------------- --------------------------- ------------------------- YEAR YEAR 01/09/95* YEAR YEAR YEAR YEAR ENDED ENDED to ENDED ENDED ENDED ENDED 12/31/95 12/31/94 12/31/95 12/31/95 12/31/94 12/31/95 12/31/94 ------------ ------------ -------------- ------------ ------------ ------------ ----------- Increase in net assets: Operations: Net investment income............. $ 11,654,596 $ 8,554,134 $ 338,520 $ 8,675,011 $ 5,682,980 $ 15,004,711 $ 13,288,441 Net realized gain (loss) on: Investment transactions.. 15,108,131 4,449,869 1,781,900 653,754 (2,356,585) 3,183,386 (15,161,567) Foreign currency and forward foreign currency contracts..... 686,290 (4,973) (549,770) 827,091 (2,128,445) 5,204,326 2,805,755 Change in unrealized appreciation (depreciation) on: Investments..... 103,848,140 (4,089,736) 2,485,964 7,494,670 (5,649,435) 21,692,894 (14,313,961) Foreign currency and forward foreign currency contracts..... 1,588 (1,002) 267,627 (60,522) (138,382) 662,786 (252,058) ------------ ------------ ----------- ------------ ----------- ------------ ------------ Net increase (decrease) in net assets resulting from operations...... 131,298,745 8,908,292 4,324,241 17,590,004 (4,589,876) 45,748,103 (13,633,390) Distribution to shareholders from: Net investment income......... (8,549,161) (4,722,494) (998,757) (4,125,434) (1,838,642) (11,483,093) 4,984,315) Net realized gains on investments and foreign currency transactions... (4,313,653) (4,429,956) (875,932) --- (291,974) --- (6,059,984) Increase in net assets from capital share transactions (Note 4)......... 141,416,968 121,013,774 86,188,482 24,806,640 37,513,081 (7,534,746) 36,373,364 ------------ ------------ ----------- ------------ ----------- ------------ ------------ Increase in net assets........... 259,852,899 120,769,616 88,638,034 38,271,210 30,792,598 26,730,264 11,695,675 Net assets at beginning of period........... 409,534,345 288,764,729 --- 84,432,966 53,640,368 208,512,670 196,816,995 ------------ ------------ ----------- ------------ ----------- ------------ ------------ Net assets at end of period........ $669,387,244 $409,534,345 $88,638,034 $122,704,176 $84,432,966 $235,242,934 $208,512,670 ============ ============ =========== ============ =========== ============ ============ Accumulated undistributed net investment income (loss)........... $ 11,667,389 $ 8,554,134 ($ 70,205) $ 10,644,655 $ 5,682,980 $ 20,496,692 $ 13,288,441 ============ ============ =========== ============ =========== ============ ============ - ---------------------------- * Commencement of operations
The accompanying notes are an integral part of the financial statements. 9 97 NASL SERIES TRUST STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
INVESTMENT QUALITY U.S. GOVERNMENT MONEY MARKET BOND TRUST SECURITIES TRUST TRUST -------------------------- -------------------------- -------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED 12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94 ------------ ------------ ------------ ------------ ------------ ------------ Increase (decrease) in net assets: Operations: Net investment income.................... $ 8,486,217 $ 7,074,815 $ 12,842,712 $ 11,807,528 $ 14,438,470 $ 9,112,848 Net realized gain (loss) on investment transactions................ 934,173 (4,776,012) 6,615,440 (9,158,110) --- --- Change in unrealized appreciation (depreciation) on investments........... 12,443,229 (7,428,247) 9,054,850 (5,645,645) --- --- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations................. 21,863,619 (5,129,444) 28,513,002 (2,996,227) 14,438,470 9,112,848 Distribution to shareholders from: Net investment income.................... (7,077,320) (4,745,354) (11,856,226) (8,773,625) (14,438,470) (9,112,848) Net realized gains on investments........ --- --- --- (2,599,570) --- --- Increase (decrease) in net assets from capital share transactions (Note 4)........ 16,892,949 21,823,760 11,318,295 (18,888,972) (18,556,843) 144,399,345 ------------ ------------ ------------ ------------ ------------ ------------ Increase (decrease) in net assets........... 31,679,248 11,948,962 27,975,071 (33,258,394) (18,556,843) 144,399,345 Net assets at beginning of period........... 111,423,356 99,474,394 188,813,348 222,071,742 276,673,806 132,274,461 ------------ ------------ ------------ ------------ ------------ ------------ Net assets at end of period................. $143,102,604 $111,423,356 $216,788,419 $188,813,348 $258,116,963 $276,673,806 ============ ============ ============ ============ ============ ============ Accumulated undistributed net investment income...................... $ 8,478,262 $ 7,074,815 $ 12,847,931 $ 11,807,528 --- --- ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. 10 98 NASL SERIES TRUST STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
AGGRESSIVE ASSET MODERATE ASSET CONSERVATIVE ASSET ALLOCATION TRUST ALLOCATION TRUST ALLOCATION TRUST -------------------------- -------------------------- -------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED 12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94 ------------ ------------ ------------ ------------ ------------ ------------ Increase (decrease) in net assets: Operations: Net investment income.................... $ 5,392,921 $ 5,235,271 $ 25,474,597 $ 25,570,598 $ 10,232,137 $ 11,588,833 Net realized gain (loss) on: Investment transactions................ 10,182,865 6,569,414 23,729,858 5,151,440 8,403,516 (5,512,747 Futures contracts...................... (1,726,285) (180,011) (3,962,742) (921,011) (658,525) 49,768 Foreign currency and forward foreign currency contracts........... 1,938,306 17,865 7,845,216 (657,486) 727,483 (352,436) Change in unrealized appreciation (depreciation) on: Investments............................ 23,406,053 (12,785,972) 62,959,219 (39,233,463) 17,450,440 (10,429,286) Futures contracts...................... 371,422 (185,853) 782,113 (404,043) 129,261 (54,855) Foreign currency and forward foreign currency contracts........... (10,764) 12,523 (71,271) 75,865 (34,355) 34,817 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations................. 39,554,518 (1,316,763) 116,756,990 (10,418,100) 36,249,957 (4,675,906) Distribution to shareholders from: Net investment income.................... (5,166,253) (4,671,543) (24,223,191) (22,106,187) (10,860,847) (10,206,968) Net realized gains on investments, futures and foreign currency transactions...... (6,299,483) (6,656,551) (5,181,586) (20,585,004) --- (5,487,838) Increase (decrease) in net assets from capital share transactions (Note 4)........ (993,645) 22,858,831 (41,707,151) 13,343,677 (17,714,850) (13,031,012) ------------ ------------ ------------ ------------ ------------ ------------ Increase (decrease) in net assets........... 27,095,137 10,213,974 45,645,062 (39,765,614) 7,674,260 (33,401,724) Net assets at beginning of period........... 184,661,815 174,447,841 604,491,075 644,256,689 216,715,740 250,117,464 ------------ ------------ ------------ ------------ ------------ ------------ Net assets at end of period................. $211,756,952 $184,661,815 $650,136,137 $604,491,075 $224,390,000 $216,715,740 ============ ============ ============ ============ ============ ============ Accumulated undistributed net investment income..................... $ 5,427,633 $ 5,235,271 $ 26,460,562 $ 25,570,598 $ 10,622,367 $ 11,588,833 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. 11 99 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
GLOBAL EQUITY TRUST ------------------------------------------------------------------------------------------ YEARS ENDED DECEMBER 31, 3/18/88* ------------------------------------------------------------------------------ TO 1995 1994 1993 1992 1991 1990 1989 12/31/88 --------- --------- --------- --------- --------- -------- -------- -------- Net asset value, beginning of period........................... $ 15.74 $ 15.73 $ 12.00 $ 12.24 $ 11.00 $ 12.57 $ 10.15 $10.03 Income from investment operations: - ---------------------------------- Net investment income (loss) (B)... 0.29 0.05 0.12 0.10 0.16 0.12 0.10 (0.05) Net realized and unrealized gain (loss) on investments and foreign currency transactions.... 0.84 0.22 3.79 (0.19) 1.23 (1.41) 2.32 0.17 -------- -------- -------- -------- ------- ------- ------- ------ Total from investment operations................. 1.13 0.27 3.91 (0.09) 1.39 (1.29) 2.42 0.12 Less distributions: - ------------------- Dividends from net investment income............................ (0.08) (0.02) (0.18) (0.15) (0.15) (0.04) --- --- Distributions from capital gains.... (0.69) (0.24) --- --- --- (0.24) --- --- -------- -------- -------- -------- ------- ------- ------- ------ Total distributions............. (0.77) (0.26) (0.18) (0.15) (0.15) (0.28) --- --- -------- -------- -------- -------- ------- ------- ------- ------ Net asset value, end of period........ $ 16.10 $ 15.74 $ 15.73 $ 12.00 $ 12.24 $ 11.00 $ 12.57 $10.15 ======== ======== ======== ======== ======= ======= ======= ====== Total return.................... 7.68% 1.74% 32.89% (0.72%) 12.80% (10.43%) 23.84% 1.20% Net assets, end of period (000's)..... $648,183 $616,138 $377,871 $116,731 $89,003 $63,028 $26,223 $2,143 Ratio of operating expenses to average net assets (C)............. 1.05% 1.08% 1.16% 1.16% 1.23% 1.28% 1.62% 3.98%(A) Ratio of net investment income (loss) to average net assets............... 0.61% 0.44% 0.77% 1.12% 1.47% 1.97% 1.82% (1.71%)(A) Portfolio turnover rate............... 63% 52% 52% 69% 74% 67% 109% 81%(A) - --------------------------------- * Commencement of operations. (A) Annualized (B) After expense reimbursement per share of $0.02 in 1988. (C) The ratio of operating expenses, before reimbursement from the investment adviser, was 4.53% in 1988.
The accompanying notes are an integral part of the financial statements. 12 100 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
PASADENA GROWTH TRUST ----------------------------------------------------------- YEARS ENDED DECEMBER 31, 12/11/92* ----------------------------------------- TO 1995 1994 1993 12/31/92 -------- -------- -------- ------------ Net asset value, beginning of period....................... $ 9.05 $ 9.55 $ 9.93 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income (B)................................. 0.03 0.04 0.05 0.00 Net realized and unrealized gain (loss) on investments.................................... 2.36 (0.50) (0.42) (0.07) -------- -------- -------- ------- Total from investment operations.................. 2.39 (0.46) (0.37) (0.07) Less distributions: - ------------------- Dividends from net investment income....................... (0.04) (0.04) (0.01) --- -------- -------- -------- ------- Total distributions............................... (0.04) (0.04) (0.01) --- -------- -------- -------- ------- Net asset value, end of period............................. $ 11.40 $ 9.05 $ 9.55 $ 9.93 ======== ======== ======== ======= Total return...................................... 26.53% (4.80%) (3.80%) (0.70%) Net assets, end of period (000's).......................... $277,674 $151,727 $104,966 $31,118 Ratio of operating expenses to average net assets (C).................................. 0.975% 0.975% 0.975% 1.06%(A) Ratio of net investment income to average net assets....................................... 0.42% 0.65% 0.75% 1.04%(A) Portfolio turnover rate.................................... 57% 33% 12% 0%(A) - ----------------------------- * Commencement of operations. (A) Annualized (B) After subadviser expense reimbursement per share of $0.004, $0.006 and $0.01 for the years ended December 31, 1995, 1994 and 1993, respectively. (C) The ratio of operating expenses, before reimbursement from the subadviser, was 1.03%, 1.06% and 1.09% for the years ended December 31, 1995, 1994 and 1993, respectively.
The accompanying notes are an integral part of the financial statements. 13 101 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
EQUITY TRUST ------------------------------------------------------------------------------------------------------------ YEARS ENDED DECEMBER 31, 6/18/85* ------------------------------------------------------------------------------------------------- TO 1995 1994 1993** 1992 1991 1990 1989 1988 1987 1986 12/31/85 -------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------ Net asset value, beginning of period............ $ 14.66 $ 15.57 $ 13.97 $ 13.12 $ 11.33 $ 19.14 $ 15.17 $ 12.57 $ 13.01 $11.39 $10.72% Income from investment operations: ----------- Net investment income (B)...... 0.10 0.11 0.07 0.64 0.14 0.24 0.29 0.15 0.19 0.27 0.12 Net realized and unrealized gain (loss) on investments and foreign currency transactions.... 6.14 (0.18) 2.11 0.38 1.88 (1.95) 3.87 2.45 0.97 1.80 0.55 -------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------ Total from investment operations...... 6.24 (0.07) 2.18 1.02 2.02 (1.71) 4.16 2.60 1.16 2.07 0.67 Less distributions: -------------- Dividends from net investment income........... (0.11) (0.05) (0.58) (0.17) (0.23) (0.29) (0.12) --- (0.14) (0.24) --- Distributions from capital gains............ --- (0.79) --- --- --- (5.81) (0.07) --- (1.46) (0.21) --- -------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------ Total distributions.. (0.11) (0.84) (0.58) (0.17) (0.23) (6.10) (0.19) --- (1.60) (0.45) --- -------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------ Net asset value, end of period...... $ 20.79 $ 14.66 $ 15.57 $ 13.97 $ 13.12 $ 11.33 $ 19.14 $ 15.17 $ 12.57 $13.01 $11.39 ======== ======== ======== ======== ======= ======== ======== ========= ========= ====== ====== Total return... 42.79% (0.53%) 16.31% 7.93% 17.94% (11.79%) 27.70% 20.71% 6.87% 18.50% 6.20% Net assets, end of period (000's)..... $988,800 $534,562 $387,842 $192,626 $88,235 $36,564 $32,108 $133,852 $37,001 $1,408 $1,143 Ratio of operating expenses to average net assets (C)......... 0.80% 0.84% 0.88% 0.95% 0.89% 0.97% 1.02% 1.08% 1.15% 1.41% 1.57%(A) Ratio of net investment income to average net assets............. 0.63% 0.88% 0.50% 7.31% 2.23% 2.74% 1.90% 1.80% 1.33% 1.19% 2.05%(A) Portfolio turnover rate............... 88% 132% 173% 782% 172% 95% 111% 49% 64% 209% 214%(A) - -------------------------- * Commencement of operations. ** Net investment income per share was calculated using the average shares method for fiscal year 1993. (A) Annualized (B) After expense reimbursement per share of $0.02, $0.53 and $0.14 in 1987, 1986 and 1985, respectively. (C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.30%, 3.71% and 4.69% in 1987, 1986 and 1985, respectively.
The accompanying notes are an integral part of the financial statements. 14 102 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
VALUE EQUITY TRUST ----------------------------------------------------------- YEARS ENDED DECEMBER 31, 02/19/93* ---------------------------------------- TO 1995 1994** 12/31/93 ----------------- ----------------- ----------------- Net asset value, beginning of period.................................... $ 11.33 $ 11.31 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income.......................... 0.17 0.12 0.07 Net realized and unrealized gain (loss) on investments........................ 2.49 (0.03) 1.24 -------- -------- ------- Total from investment operations....................... 2.66 0.09 1.31 Less distributions: - ------------------- Dividends from net investment income........... (0.08) (0.05) --- Distributions from capital gains............... (0.10) (0.02) --- -------- -------- ------- Total distributions................ (0.18) (0.07) --- -------- -------- ------- Net asset value, end of period................. $ 13.81 $ 11.33 $ 11.31 ======== ======== ======= Total return....................... 23.69% 0.79% 13.10% Net assets, end of period (000's).............. $396,827 $221,835 $86,472 Ratio of operating expenses to average net assets........................... 0.85% 0.87% 0.94%(A) Ratio of net investment income to average net assets........................... 1.63% 1.08% 1.30%(A) Portfolio turnover rate........................ 52% 26% 33%(A) - ----------------------------- * Commencement of operations. ** Net investment income per share was calculated using the average shares method for fiscal year 1994. (A) Annualized
The accompanying notes are an integral part of the financial statements. 15 103 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
GROWTH AND INCOME TRUST --------------------------------------------------------------- YEARS ENDED DECEMBER 31, 4/23/91* ------------------------------------------------- TO 1995 1994 1993 1992 12/31/91 ---------- -------- -------- -------- -------- Net asset value, beginning of period.................................... $ 13.04 $ 13.05 $ 12.10 $ 11.08 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income....................... 0.27 0.25 0.17 0.20 0.13 Net realized and unrealized gain on investments and foreign currency transactions............................. 3.45 0.11 0.98 0.92 0.95 -------- -------- -------- -------- ------- Total from investment operations...... 3.72 0.36 1.15 1.12 1.08 Less distributions: - ------------------- Dividends from net investment income........ (0.26) (0.19) (0.18) (0.10) --- Distributions from capital gains............ (0.13) (0.18) (0.02) --- --- -------- -------- -------- -------- ------- Total distributions................... (0.39) (0.37) (0.20) (0.10) --- -------- -------- -------- -------- ------- Net asset value, end of period................. $ 16.37 $ 13.04 $ 13.05 $ 12.10 $ 11.08 ======== ======== ======== ======== ======= Total return......................... 29.20% 2.85% 9.62% 10.23% 10.80% Net assets, end of period (000's).............. $669,387 $409,534 $288,765 $130,984 $57,404 Ratio of operating expenses to average net assets........................... 0.80% 0.82% 0.85% 0.85% 0.98%(A) Ratio of net investment income to average net assets........................... 2.23% 2.40% 2.29% 2.78% 2.92%(A) Portfolio turnover rate....................... 39% 42% 39% 44% 62%(A) - ------------------ * Commencement of operations. (A) Annualized
The accompanying notes are an integral part of the financial statements. 16 104 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
INTERNATIONAL GROWTH AND INCOME TRUST ------------------ 01/09/95* TO 12/31/95 ------------------ Net asset value, beginning of period.................................... $ 10.00 Income from investment operations: - ---------------------------------- Net investment income....................... 0.11 Net realized and unrealized loss on investments and foreign currency transactions............................. 0.59 -------- Total from investment operations.......................... 0.70 Less distributions: - ------------------- Dividends from net investment income......... (0.12) Distributions from capital gains............. (0.11) -------- Total distributions................... (0.23) -------- Net asset value, end of period................. $ 10.47 ======== Total return.......................... 6.98% Net assets, end of period (000's).............. $88,638 Ratio of operating expenses to average net assets........................... 1.47%(A) Ratio of net investment income to average net assets........................... 0.71%(A) Portfolio turnover rate........................ 112%(A) - ----------------------------- * Commencement of operations. (A) Annualized
The accompanying notes are an integral part of the financial statements. 17 105 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
STRATEGIC BOND TRUST --------------------------------------- YEARS ENDED DECEMBER 31, 02/19/93* ------------------------- TO 1995 1994 12/31/93 ---- ---- -------- Net asset value, beginning of period.................................... $ 9.91 $10.88 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income....................... 0.78 0.57 0.33 Net realized and unrealized gain (loss) on investments and foreign currency transactions............................. 1.04 (1.22) 0.55 -------- ------ ------- Total from investment operations.......................... 1.82 (0.65) 0.88 Less distributions: - ------------------- Dividends from net investment income........ (0.47) (0.28) ---- Distributions from capital gains............ ---- (0.04) ---- -------- ------ ------- Total distributions................... (0.47) (0.32) -- -------- ------ ------- Net asset value, end of period................. $ 11.26 $ 9.91 $ 10.88 ======== ======= ======= Total return.......................... 19.22% (5.99%) 8.80% Net assets, end of period (000's).............. $122,704 $84,433 $53,640 Ratio of operating expenses to average net assets........................... 0.92% 0.91% 1.00%(A) Ratio of net investment income to average net assets........................... 8.76% 7.49% 6.56%(A) Portfolio turnover rate........................ 181% 197% 356%(A) - ---------- * Commencement of operations. (A) Annualized
The accompanying notes are an integral part of the financial statements. 18 106 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
GLOBAL GOVERNMENT BOND TRUST ------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 3/18/88* --------------------------------------------------------------- TO 1995 1994 1993 1992 1991 1990 1989 12/31/88 ---- ---- ---- ---- ---- ---- ---- -------- Net asset value, beginning of period................................$ 12.47 $ 13.93 $ 12.47 $ 12.88 $ 11.59 $ 10.50 $10.21 $10.03 Income from investment operations: - ---------------------------------- Net investment income.................... 1.16 0.74 0.59 0.42 0.55 0.25 0.45 0.14 Net realized and unrealized gain (loss) on investments and foreign currency transactions........ 1.62 (1.54) 1.67 (0.16) 1.21 1.13 -- 0.04 Total from investment operations.. 2.78 (0.80) 2.26 0.26 1.76 1.38 0.45 0.18 Less distributions: - ------------------- Dividends from net investment income..... (0.69) (0.30) (0.70) (0.43) (0.46) (0.24) (0.09) -- Distributions from capital gains......... -- (0.36) (0.10) (0.24) (0.01) (0.05) (0.07) -- -------- -------- -------- ------- ------- ------- ------ ------ Total distributions............... (0.69) (0.66) (0.80) (0.67) (0.47) (0.29) (0.16) -- -------- -------- -------- ------- ------- ------- ------ ------ Net asset value, end of period.............$ 14.56 $ 12.47 $ 13.93 $ 12.47 $ 12.88 $ 11.59 $10.50 $10.21 ======== ======== ======== ======= ======= ======= ====== ====== Total return..................... 23.18% (5.75%) 18.99% 2.27% 15.86% 13.49% 4.49% 1.79% Net assets, end of period (000's)......... $235,243 $208,513 $196,817 $67,859 $28,251 $11,582 $4,065 $1,355 Ratio of operating expenses to average net assets....................... 0.93% 0.96% 1.06% 1.05% 1.14% 1.21% 1.50% 3.39%(A) Ratio of net investment income to average net assets....................... 6.83% 6.10% 5.61% 6.71% 17.28% 6.62% 7.15% 3.74%(A) Portfolio turnover rate.................... 171% 157% 154% 132% 164% 142% 50% 234%(A) - ---------- * Commencement of operations. (A) Annualized
The accompanying notes are an integral part of the financial statements. 19 107 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
INVESTMENT QUALITY BOND TRUST ------------------------------------------------------------------------------------------ YEARS ENDED DECEMBER 31, 6/18/85* -------------------------------------------------------------------------------- TO 1995 1994 1993 1992 1991** 1990 1989 1988 1987 1986 12/31/85 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -------- Net asset value, beginning of period....... $ 11.01 $ 12.12 $ 11.58 $ 11.33 $ 10.74 $ 12.37 $ 11.55 $ 10.79 $ 11.58 $11.18 $10.28 Income from investment operations: - ---------------------- Net investment income (B).............. 0.77 0.66 0.60 0.63 0.76 1.12 0.75 0.57 0.81 1.02 0.55 Net realized and unrealized gain (loss) on investments.......... 1.28 (1.23) 0.53 0.15 0.85 (1.50) 0.51 0.19 (0.50) 0.37 0.35 Total from investment operations......... 2.05 (0.57) 1.13 0.78 1.61 (0.38) 1.26 0.76 0.31 1.39 0.90 Less distributions: - ------------------- Dividends from net investment income....... (0.74) (0.54) (0.59) (0.53) (1.02) (1.25) (0.44) -- (0.88) (0.69) -- Distributions from capital gains........... -- -- -- -- -- -- -- -- (0.22) (0.30) -- -------- -------- ------- ------- ------- ------- ------- -------- ------- ------ ------ Total distributions.. (0.74) (0.54) (0.59) (0.53) (1.02) (1.25) (0.44) -- (1.10) (0.99) -- -------- -------- ------- ------- ------- ------- ------- -------- ------- ------ ------ Net asset value, end of period............. $ 12.32 $ 11.01 $ 12.12 $ 11.58 $ 11.33 $ 10.74 $ 12.37 $ 11.55 $ 10.79 $11.58 $11.18 ======== ======== ======= ======= ======= ======= ======= ======== ======= ====== ====== Total return......... 19.49% (4.64%) 10.01% 7.21% 16.07% (2.73%) 11.34% 7.09% 2.61% 13.25% 8.72% Net assets, end of period (000's)............ $143,103 $111,423 $99,474 $60,185 $38,896 $20,472 $26,965 $114,221 $25,131 $1,295 $1,120 Ratio of operating expenses to average net assets (C)................ 0.74% 0.76% 0.77% 0.80% 0.85% 0.70% 0.83% 0.89% 0.95% 1.16% 1.31%(A) Ratio of net investment income to average net assets.................... 6.91% 6.49% 6.03% 6.96% 7.47% 8.41% 8.77% 7.97% 7.46% 8.11% 9.99%(A) Portfolio turnover rate.... 137% 140% 33% 59% 115% 120% 351% 94% 201% 127% 165%(A) - ---------- * Commencement of operations. ** The Investment Quality Bond Trust is the successor to the Bond Trust effective April 23, 1991. (A) Annualized (B) After expense reimbursement per share of $0.02, $0.28 and $0.12 in 1987, 1986 and 1985, respectively. (C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.14%, 3.38% and 3.55% in 1987, 1986 and 1985, respectively.
The accompanying notes are an integral part of the financial statements. 20 108 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES TRUST -------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 3/18/88* --------------------------------------------------------------------- TO 1995 1994 1993 1992 1991 1990 1989** 12/31/88 ---- ---- ---- ---- ---- ---- ---- -------- Net asset value, beginning of period................................ $ 12.64 $ 13.48 $ 13.05 $ 12.85 $ 11.83 $ 10.98 $ 9.81 $10.03 Income from investment operations: - ---------------------------------- Net investment income (B)............... 0.89 0.77 0.48 0.10 0.19 1.07 0.20 0.07 Net realized and unrealized gain (loss) on investments.................. 0.99 (0.95) 0.49 0.65 1.40 (0.13) 1.08 (0.29) -------- -------- -------- -------- ------- ------- ------ ------ Total from investment operations.. 1.88 (0.18) 0.97 0.75 1.59 0.94 1.28 (0.22) Less distributions: - ------------------- Dividends from net investment income..... (0.87) (0.51) (0.46) (0.38) (0.53) (0.08) (0.11) -- Distributions from capital gains......... -- (0.15) (0.08) (0.17) (0.04) (0.01) -- -- -------- -------- -------- -------- ------- ------- ------ ------ Total distributions............... (0.87) (0.66) (0.54) (0.55) (0.57) (0.09) (0.11) -- -------- -------- -------- -------- ------- ------- ------ ------ Net asset value, end of period............. $ 13.65 $ 12.64 $ 13.48 $ 13.05 $ 12.85 $ 11.83 $10.98 $ 9.81 ======== ======== ======== ======== ======= ======= ====== ====== Total return..................... 15.57% (1.25%) 7.64% 6.19% 14.01% 8.63% 13.16% (2.19%) Net assets, end of period (000's).......... $216,788 $188,813 $222,072 $125,945 $29,246 $10,469 $5,905 $ 344 Ratio of operating expenses to average net assets (C).................. 0.71% 0.73% 0.75% 0.76% 0.87% 1.04% 0.90% 5.16%(A) Ratio of net investment income to average net assets....................... 6.46% 5.68% 5.05% 6.12% 7.09% 7.70% 6.66% 1.16%(A) Portfolio turnover rate.................... 212% 387% 213% 141% 233% 284% 330% 156%(A) - ---------- * Commencement of operations. ** The U.S. Government Securities Trust is the successor to the Convertible Securities Trust effective May 1, 1989. (A) Annualized (B) After expense reimbursement per share of $0.01 and $0.06 in 1989 and 1988, respectively. (C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.62% and 6.16% in 1989 and 1988, respectively.
The accompanying notes are an integral part of the financial statements. 21 109 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
MONEY MARKET TRUST -------------------------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 6/18/85* ---------------------------------------------------------------------------------------- TO 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 12/31/85 ------- ------- ------ ------ ------ ------- ------ ------ ------ ------ -------- Net asset value, beginning of period....... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00 Income from investment operations: - ---------------------- Net investment income (B)............... 0.55 0.38 0.27 0.33 0.56 0.75 0.72 0.57 0.60 0.56 0.36 Less distributions: - ------------------- Dividends from net investment income....... (0.55) (0.38) (0.27) (0.33) (0.56) (0.75) (0.72) (0.57) (0.60) (0.56) (0.36) -------- -------- -------- ------- ------- ------- ------- ------- ------ ------ ------ Net asset value, end of period.................. $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00 ======== ======== ======== ======= ======= ======= ======= ======= ====== ====== ====== Total return...... 5.62% 3.78% 2.69% 3.36% 5.71% 7.76% 8.56% 6.77% 6.13% 5.74% 3.61% Net assets, end of period (000's)............. $258,117 $276,674 $132,274 $89,535 $79,069 $85,040 $19,403 $12,268 $7,147 $1,046 $1,001 Ratio of operating expenses to average net assets (C)................ 0.54% 0.57% 0.59% 0.60% 0.60% 0.57% 0.79% 0.99% 0.78% 1.11% 1.21%(A) Ratio of net investment income to average net assets..................... 5.48% 3.93% 2.66% 3.28% 5.65% 7.27% 8.26% 6.68% 5.86% 6.84% 6.84%(A) - --------------------------------- * Commencement of operations. (A) Annualized (B) After expense reimbursement per share of $0.08, $0.23 and $0.12 in 1987, 1986 and 1985, respectively. (C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.57%, 3.43% and 3.50% in 1987, 1986 and 1985, respectively.
The accompanying notes are an integral part of the financial statements. 22 110 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
AGGRESSIVE ASSET ALLOCATION TRUST ---------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, -------------------------------------------------------------------- 8/83/89* TO 1995 1994 1993 1992 1991 1990 12/31/89 -------- ------- ------- ------- -------- -------- --------- Net asset value, beginning of period............................... $ 11.17 $ 12.03 $ 11.25 $ 10.72 $ 9.08 $ 9.88 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income .................. 0.35 0.31 0.34 0.30 0.36 0.36 0.08 Net realized and unrealized gain (loss) on investments and foreign currency transactions....... 2.07 (0.41) 0.79 0.55 1.69 (1.07) (0.20) -------- -------- -------- -------- -------- ------- ------- Total from investment operations. 2.42 (0.10) 1.13 0.85 2.05 (0.71) (0.12) Less distributions: - ------------------- Dividends from net investment income.... (0.33) (0.31) (0.30) (0.32) (0.41) (0.07) ---- Distributions from capital gains........ (0.41) (0.45) (0.05) ---- ---- (0.02) ---- -------- -------- -------- -------- -------- ------- ------- Total distributions................. (0.74) (0.76) (0.35) (0.32) (0.41) (0.09) ---- -------- -------- -------- -------- -------- ------- ------- Net asset value, end of period............ $ 12.85 $ 11.17 $ 12.03 $ 11.25 $ 10.72 $ 9.08 $ 9.88 ======== ======== ======== ======== ======== ======= ======= Total return....................... 22.77% (0.69%) 10.30% 8.24% 22.96% (7.27%) (1.20%) Net assets, end of period (000's)......... $211,757 $184,662 $174,448 $151,627 $124,632 $91,581 $87,301 Ratio of operating expenses to average net assets...................... 0.91% 0.89% 0.86% 0.89% 0.88% 0.78% 0.89%(A) Ratio of net investment income to average net assets...................... 2.76% 2.90% 2.96% 3.08% 3.63% 4.08% 3.32%(A) Portfolio turnover rate................... 111% 136% 92% 123% 172% 82% 22%(A) - ----------------------------- * Commencement of operations. (A) Annualized
The accompanying notes are an integral part of the financial statements. 23 111 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
MODERATE ASSET ALLOCATION TRUST ----------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 8/03/89* -------------------------------------------------------------------- TO 1995 1994 1993 1992 1991 1990 12/31/89 ------- ------ ------ ------ ------ ------ --------- Net asset value, beginning of period................................ $ 10.79 $ 11.76 $ 11.14 $ 10.72 $ 9.29 $ 10.03 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income ................... 0.50 0.45 0.41 0.41 0.42 0.48 0.11 Net realized and unrealized gain (loss) on investments and foreign currency transactions........ 1.65 (0.65) 0.67 0.43 1.50 (1.10) (0.08) -------- -------- -------- -------- -------- -------- -------- Total from investment operations.. 2.15 (0.20) 1.08 0.84 1.92 (0.62) 0.03 Less distributions: - ------------------- Dividends from net investment income..... (0.45) (0.40) (0.39) (0.42) (0.49) (0.10) ---- Distributions from capital gains......... (0.10) (0.37) (0.07) ---- ---- (0.02) ---- -------- -------- -------- -------- -------- -------- -------- Total distributions.................. (0.55) (0.77) (0.46) (0.42) (0.49) (0.12) ---- -------- -------- -------- -------- -------- -------- -------- Net asset value, end of period............. $ 12.39 $ 10.79 $ 11.76 $ 11.14 $ 10.72 $ 9.29 $ 10.03 ======== ======== ======== ======== ======== ======== ======== Total return........................ 20.68% (1.61%) 10.06% 8.30% 21.23% (6.23%) 0.30% Net assets, end of period (000's).......... $650,136 $604,491 $644,257 $505,967 $420,074 $327,328 $318,439 Ratio of operating expenses to average net assets....................... 0.84% 0.85% 0.84% 0.87% 0.86% 0.73% 0.79%(A) Ratio of net investment income to average net assets....................... 4.09% 4.01% 4.02% 4.21% 4.38% 5.10% 4.51%(A) Portfolio turnover rate.................... 129% 180% 135% 169% 168% 76% 41%(A) - ----------------------------- * Commencement of operations. (A) Annualized
The accompanying notes are an integral part of the financial statements. 24 112 NASL SERIES TRUST FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
CONSERVATIVE ASSET ALLOCATION TRUST ----------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 8/03/89* ------------------------------------------------------------------- TO 1995 1994 1993 1992 1991 1990 12/31/89 ------ ------ ------ ------ ------ ------ --------- Net asset value, beginning of period................................. $ 10.34 $ 11.26 $ 10.78 $ 10.63 $ 9.56 $ 10.11 $ 10.00 Income from investment operations: - ---------------------------------- Net investment income .................... 0.54 0.55 0.50 0.47 0.58 0.62 0.15 Net realized and unrealized gain (loss) on investments and foreign currency transactions......... 1.26 (0.76) 0.44 0.26 1.15 (1.01) (0.04) -------- -------- -------- -------- -------- -------- -------- Total from investment operations... 1.80 (0.21) 0.94 0.73 1.73 (0.39) 0.11 Less distributions: - ------------------- Dividends from net investment income...... (0.55) (0.46) (0.46) (0.58) (0.66) (0.13) ---- Distributions from capital gains.......... ---- (0.25) ---- ---- ---- (0.03) ---- -------- -------- -------- -------- -------- -------- -------- Total distributions................... (0.55) (0.71) (0.46) (0.58) (0.66) (0.16) ---- -------- -------- -------- -------- -------- -------- -------- Net asset value, end of period.............. $ 11.59 $ 10.34 $ 11.26 $ 10.78 $ 10.63 $ 9.56 $ 10.11 ======== ======== ======== ======== ======== ======== ======== Total return......................... 18.07% (1.84%) 8.99% 7.36% 18.80% (3.84%) 1.10% Net assets, end of period (000's)........... $224,390 $216,716 $250,117 $201,787 $165,167 $149,901 $141,191 Ratio of operating expenses to average net assets........................ 0.87% 0.87% 0.86% 0.89% 0.88% 0.76% 0.82%(A) Ratio of net investment income to average net assets........................ 4.68% 4.86% 4.78% 4.99% 5.65% 6.68% 6.00%(A) Portfolio turnover rate..................... 110% 220% 170% 252% 211% 78% 85%(A) - ----------------------------- * Commencement of operations. (A) Annualized
The accompanying notes are an integral part of the financial statements. 25 113 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - -------------------------------------------------------------------------------- GLOBAL EQUITY TRUST
Shares Value ------ ----- COMMON STOCK - 97.85% AEROSPACE - 0.80% British Aerospace 415,000 $ 5,129,091 ----------- ALUMINUM - 0.50% Aluminum Company of America 60,800 3,214,800 ----------- APPAREL & TEXTILES - 1.88% Albany International Corporation 200,000 3,625,000 Itochu Corporation 1,000,000 6,731,235 Oneida, Ltd. 95,000 1,674,375 ----------- 12,030,610 AUTO PARTS - 0.88% Danaher Corporation 178,000 5,651,500 ----------- AUTOMOBILES - 3.36% Daimler Benz AG 18,177 9,148,689 Fiat SPA 2,962,798 9,626,470 Hayes Wheels International, Incorporated 109,000 2,793,125 ----------- 21,568,284 BANKING - 6.12% Bangkok Bank 280,200 3,403,779 Bankamerica Corporation 48,000 3,108,000 Hang Seng Bank 759,000 6,797,381 HSBC Holdings 461,400 7,205,120 Sakura Bank 260,000 3,298,789 Societe Generale 53,180 6,570,125 Sumitomo Bank 230,000 4,878,450 Sumitomo Trust & Banking 280,000 3,959,322 ----------- 39,220,966 BROADCASTING - 0.76% Wolters Kluwer 51,640 4,884,995 ----------- BUILDING CONSTRUCTION - 1.03% Fluor Corporation 100,000 6,600,000 ----------- BUSINESS SERVICES - 4.05% Eaux (Cie Generale) 51,400 5,131,603 Havas 52,030 4,127,763 Interpublic Group Companies, Incorporated 100,000 4,337,500 Secom Company 178,000 12,378,111 ----------- 25,974,977 CHEMICALS - 4.93% Dow Chemical Company 83,700 5,890,388 Imperial Chemical Industries PLC, ADR 509,300 6,031,080 Sekisui Chemical 520,000 7,655,206 Sumitomo Chemical 1,200,000 5,985,472 Toray Industries, Incorporated 920,000 6,059,080 ----------- 31,621,226 COMPUTERS & BUSINESS EQUIPMENT - 3.15% International Business Machines Corporation 15,400 $ 1,412,950 Olivetti & C SPA* 22,175,000 17,774,908 Tandy Corporation 25,000 1,037,500 ----------- 20,225,358 CONGLOMERATES - 3.71% Berjaya Sports 1,968,000 4,571,879 BTR PLC 1,425,100 7,259,401 Hutchison Whampoa 1,262,000 7,687,061 Renong BHD 2,908,000 4,305,264 ----------- 23,823,605 CONSTRUCTION MATERIALS - 0.99% Maeda Road Construction 342,000 6,326,586 ----------- CONTAINERS & GLASS - 0.78% Mark IV Industries, Incorporated 254,822 5,032,734 ----------- DOMESTIC OIL - 0.70% Phillips Petroleum Company 132,400 4,518,150 ----------- DRUGS & HEALTH CARE - 5.45% Astra AB, Series A 502,685 20,062,883 Astra AB, Series B 273,760 10,843,695 Bristol Myers Squibb Company 17,700 1,519,988 Isolyser Company, Incorporated* 180,000 2,520,000 ----------- 34,946,566 ELECTRICAL EQUIPMENT - 2.32% General Electric Company 126,600 9,115,200 NEC Corporation 470,000 5,735,593 ----------- 14,850,793 ELECTRONICS - 6.91% AMP, Incorporated 152,200 5,840,675 Emulex Corporation* 138,600 1,420,650 Intel Corporation 53,600 3,041,800 Kyocera Corporation 43,000 3,194,286 Mitsumi Electric 615,000 14,831,477 Rohm Company 135,000 7,622,760 TDK Corporation 103,000 5,257,240 Tokyo Electron 80,000 3,099,274 ----------- 44,308,162 ENERGY SERVICES - 0.25% Companhia Energetica De Sao Paulo* 182,400 1,592,735 ----------- FINANCIAL SERVICES - 2.07% Daiwa Securities 600,000 9,181,598 Partner Re Holding 150,000 4,125,000 ----------- 13,306,598 FOOD & BEVERAGES - 1.77% Fraser & Neave 404,000 5,141,039 Universal Foods Corporation 155,000 6,219,375 ----------- 11,360,414
The accompanying notes are an integral part of the financial statements. 26 114 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- GAS & PIPELINE UTILITIES - 1.29% Osaka Gas Company 2,400,000 $ 8,298,305 ------------ GOLD - 1.40% Placer Dome, Incorporated 371,300 8,957,613 ------------ HOMEBUILDERS - 1.84% Toyo Exterior Company 65,000 1,599,031 Yokogawa Bridge Company 676,000 10,213,656 ------------ 11,812,687 HOUSEHOLD APPLIANCES FURNISHING - 1.70% Sharp Corporation 681,000 10,882,809 ------------ HOTELS & RESTAURANTS - 1.80% Equity Inns, Incorporated 100,200 1,152,300 HFS, Incorporated* 100,000 8,175,000 Morrison Restaurants, Incorporated 157,700 2,207,800 ------------ 11,535,100 INDUSTRIAL MACHINERY - 6.26% Ebara Corporation 456,000 6,668,862 Exedy Corporation 323,000 5,130,460 Keppel Corporation 752,000 6,698,621 Kolbenschmidt AG* 29,946 4,279,491 Mannesmann AG 26,758 8,518,912 Mitsubishi Heavy Industries 1,110,000 8,847,748 ------------ 40,144,094 INSURANCE - 0.80% Tokio Marine & Fire Insurance Company, Ltd. 390,000 5,099,274 ------------ LEISURE TIME - 1.29% Genting BHD 292,000 2,437,453 Resorts World BHD 1,091,000 5,842,265 ------------ 8,279,718 LIQUOR - 1.04% LVMH Moet Hennessy 32,060 6,677,803 ------------ MISCELLANEOUS - 0.41% New World Infrastructure, Ltd. 731 1,399 Warehouse Group 1,000,000 2,654,289 ------------ 2,655,688 MUTUAL FUNDS - 1.34% India Gateway Fund* 78,000 1,364,220 Indian Opportunities Fund* 180,088 1,685,624 Korea Equity Fund, Incorporated 319,000 2,631,750 R.O.C. Taiwan Fund* 280,100 2,941,050 ------------ 8,622,644 NEWSPAPERS - 0.77% Gannett, Incorporated 80,000 4,910,000 ------------ NON-FERROUS METALS - 3.09% QNI, Ltd. 6,505,400 13,732,225 WMC, Ltd. 949,525 6,097,737 ------------ 19,829,962 PAPER - 0.53% Schmalbach Lubeca 24,200 $ 3,404,364 ------------ PETROLEUM SERVICES - 1.24% Schlumberger, Ltd. 114,700 7,942,975 ------------ PHOTOGRAPHY - 0.65% Minolta Camera Company* 711,000 4,152,378 ------------ PUBLISHING - 0.90% Ver Ned Uitgevers 42,210 5,794,767 ------------ REAL ESTATE - 2.72% Mitsubishi Estate 350,000 4,372,881 New World Development Company 439,000 1,913,262 Storage USA, Incorporated 30,000 978,750 Sun Hung Kai Properties 1,247,000 10,200,162 ------------ 17,465,055 RETAIL GROCERY - 0.74% Hac-Kimisawa Company 298,000 4,733,366 ------------ RETAIL TRADE - 4.53% Carrefour 6,510 3,949,604 Friedmans, Incorporated, Class A* 160,000 3,080,000 Wal Mart Stores, Incorporated 240,000 5,370,000 Walgreen Company 250,000 7,468,750 Xebio Company 260,000 9,191,283 ------------ 29,059,637 STEEL - 1.34% Nippon Steel Corporation 2,500,000 8,571,429 ------------ TELECOMMUNICATION SERVICES - 1.13% Cable & Wireless 603,100 4,317,893 Seibu Electric & Machine 448,000 2,950,508 ------------ 7,268,401 TELEPHONE - 6.96% British Telecommunications PLC 1,086,400 5,955,881 DDI Corporation 1,378 10,676,998 Nippon Telegraph & Telephone Corporation 1,295 10,469,646 Telefonica De Espana SA 738,230 10,224,455 Telephone & Data Systems, Incorporated 30,000 1,185,000 VodaFone Group 1,709,500 6,132,854 ------------ 44,644,834 TIRES AND RUBBER - 0.57% Michelin Company Generale De Establishment, Class B 91,710 3,657,538 ------------ TRUCKING & FREIGHT - 1.09% Yamato Transport 588,000 7,004,746 ------------ TOTAL COMMON STOCKS (Cost: $566,710,109) $627,593,337 ------------
The accompanying notes are an integral part of the financial statements. 27 115 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- PREFERRED STOCK - 0.46% AUTOMOBILES - 0.39% Porsche AG* 4,803 $ 2,504,457 ------------ MUTUAL FUNDS - 0.07% India Gateway Fund* 80,000 441,600 ------------ TOTAL PREFERRED STOCKS (Cost: $3,920,896) $ 2,946,057 ------------ WARRANTS - 0.55* MISCELLANEOUS - 0.55% Volkswagen International AG (Expiration date 10/27/98; strike price DEM 221) 39,800 3,537,470 ------------ TOTAL WARRANTS (Cost: $3,072,790) $ 3,537,470 ------------ REPURCHASE AGREEMENT - 1.14% Principal Amount Value - ---------- ----- $7,304,000 Repurchase Agreement with State Street Bank & Trust Company, dated 12/29/95 at 5.00%, to be repurchased at $7,308,058 on 01/02/96 collateralized by $6,670,000 U.S. Treasury Notes, 7.50% due 05/15/02 (valued at $7,513,147 including interest) $ 7,304,000 ------------ TOTAL INVESTMENTS (Global Equity Trust) (Cost: $581,007,795) $641,380,864 ============ PASADENA GROWTH TRUST Shares Value ------ ----- COMMON STOCK - 92.09% AUTO PARTS - 1.15% Autozone, Incorporated* 110,000 $ 3,176,250 ------------ BANKING - 4.83% First Interstate Bancorporation 15,000 2,047,500 Nationsbank Corporation 25,000 1,740,625 Roosevelt Financial Group, Incorporated 50,000 968,750 Wells Fargo & Company 40,000 8,640,000 ------------ 13,396,875 BUSINESS SERVICES - 7.45% Automatic Data Processing, Incorporated 45,000 3,341,250 Comshare, Incorporated* 45,000 1,170,000 Electro Rent Corporation* 50,000 1,087,500 First Data Corporation 55,000 3,678,125 General Motors Corporation, Class E 55,000 2,860,000 The Gymboree Corporation* 50,000 1,031,250 BUSINESS SERVICES - CONTINUED Interpublic Group Companies, Incorporated 34,000 $ 1,474,750 Legato Systems, Incorporated* 25,000 775,000 Mail Boxes, Etc.* 80,000 1,000,000 Mecon, Incorporated* 7,000 111,125 Nokia Corporation, ADR 32,000 1,244,000 Polygram NV, ADR 20,000 1,050,000 StrataCom, Incorporated* 25,000 1,837,500 ------------ 20,660,500 COMPUTERS & BUSINESS EQUIPMENT - 5.82% 3Com Corporation* 29,000 1,352,125 Bay Networks, Incorporated* 30,000 1,233,750 Casino Data Systems* 75,000 1,875,000 Cisco Systems, Incorporated* 55,000 4,104,375 Compaq Computer Corporation* 34,000 1,632,000 DST Systems, Incorporated* 60,000 1,710,000 Hewlett-Packard Company 25,000 2,093,750 Saville Systems PLC, ADR* 70,000 997,500 Verifone, Incorporated* 40,000 1,145,000 ------------ 16,143,500 COSMETICS & TOILETRIES - 0.99% Avon Products, Incorporated 20,000 1,507,500 International Flavours 26,000 1,248,000 ------------ 2,755,500 DRUGS & HEALTH CARE - 10.64% ARV Assisted Living* 20,000 235,000 Columbia/HCA-Healthcare Corporation 50,000 2,537,500 Elan Corporation PLC, ADR* 30,000 1,458,750 IDEXX Laboratories, Incorporated* 80,000 3,760,000 Johnson & Johnson 30,000 2,568,750 Luxottica Group SPA, ADR 30,000 1,755,000 Medtronic, Incorporated 65,000 3,631,875 Merck & Company, Incorporated 65,000 4,273,750 Pfizer, Incorporated 100,000 6,300,000 Roche Holdings, Ltd., ADR* 38,000 2,997,250 ------------ 29,517,875 ELECTRICAL EQUIPMENT - 1.71% Alliance Semiconductor Corporation* 30,000 348,750 ANADIGICS, Incorporated* 30,000 637,500 Duracell International, Incorporated 45,000 2,328,750 General Electric Company 20,000 1,440,000 ------------ 4,755,000 ELECTRIC UTILITIES - 0.72% Korea Electric Power Corporation, ADR 75,000 2,006,250 ------------ ELECTRONICS - 8.56% Altera Corporation* 10,000 497,500 Burr-Brown Corporation* 23,400 596,700 DSC Communications Corporation* 20,000 737,500 Elantec Semiconductor, Incorporated* 25,000 256,250 L.M. Ericsson Telephone Company, Class B, ADR 123,500 2,408,250 ETEC Systems, Incorporated* 50,000 562,500
The accompanying notes are an integral part of the financial statements. 28 116 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- ELECTRONICS - CONTINUED Integrated Device Technology* 11,000 $ 141,625 Intel Corporation 75,000 4,256,250 KLA Instruments Corporation* 20,000 521,250 Linear Technology Corporation 55,000 2,158,750 LSI Logic Corporation* 62,000 2,030,500 Maxim Integrated Products, Incorporated* 30,000 1,155,000 MicroCom, Incorporated* 35,000 910,000 Motorola, Incorporated 60,000 3,420,000 Photon Dynamics, Incorporated* 50,000 400,000 Silicon Graphics, Incorporated* 45,000 1,237,500 Tellabs, Incorporated* 40,000 1,480,000 VLSI Technology, Incorporated* 20,000 362,500 Xilinx, Incorporated* 20,000 610,000 ----------- 23,742,075 FINANCIAL SERVICES - 7.85% American Express Company 75,000 3,103,125 Dean Witter Discover & Company 55,000 2,585,000 Federal Home Loan Mortgage Corporation 80,000 6,680,000 Federal National Mortgage Association 55,000 6,826,875 Imperial Credit Industries, Incorporated* 100,000 2,175,000 Mercury Finance Corporation 30,000 397,500 ----------- 21,767,500 FOOD & BEVERAGES - 5.04% The Coca Cola Company 100,000 7,425,000 PepsiCo, Incorporated 75,000 4,190,625 WM Wrigley Jr. Company 45,000 2,362,500 ----------- 13,978,125 HOTELS & RESTAURANTS - 1.39% McDonald's Corporation 70,000 3,158,750 Mirage Resorts, Incorporated* 20,000 690,000 ----------- 3,848,750 HOUSEHOLD APPLIANCES FURNISHING - 0.45% Aaron Rents, Incorporated, Class B 70,000 1,260,000 ----------- HOUSEHOLD PRODUCTS - 4.24% Colgate Palmolive Company 40,000 2,810,000 Gillette Company 140,000 7,297,500 Procter & Gamble Company 20,000 1,660,000 ----------- 11,767,500 INDUSTRIAL MACHINERY - 1.13% Applied Materials, Incorporated* 35,000 1,378,125 MSC Industrial Direct, Incorporated, Class A 50,000 1,375,000 Silicon Valley Group, Incorporated* 15,000 378,750 ----------- 3,131,875 INVESTMENT COMPANIES - 0.70% Invesco PLC, ADR 50,000 1,937,500 ----------- LEISURE TIME - 5.69% Anchor Gaming* 156,600 $ 3,562,650 Carnival Corporation 200,000 4,875,000 Circus Circus Enterprises, Incorporated* 65,000 1,811,875 The Walt Disney Company 75,000 4,425,000 Regal Cinemas, Incorporated* 37,500 1,115,625 ----------- 15,790,150 MUTUAL FUNDS - 2.21% Asia Tigers Fund, Incorporated 125,000 1,390,625 Central European Equity Fund, Incorporated 50,000 818,750 India Fund, Incorporated* 200,000 1,775,000 Korea Fund, Incorporated 55,759 1,226,698 Thai Fund, Incorporated 41,128 920,239 ----------- 6,131,312 NEWSPAPERS - 2.22% News Corporation, Ltd., ADR 93,000 1,790,250 Reuters Holdings PLC, ADR 79,000 4,354,875 ----------- 6,145,125 OFFICE FURNISHINGS & SUPPLIES - 0.99% Staples, Incorporated* 75,000 1,828,125 Viking Office Products, Incorporated* 20,000 930,000 ----------- 2,758,125 POLLUTION CONTROL - 1.08% WMX Technologies, Incorporated 100,000 2,987,500 ----------- RETAIL GROCERY - 0.41% Albertsons, Incorporated 35,000 1,150,625 ----------- RETAIL TRADE - 9.02% Bed Bath & Beyond, Incorporated* 30,000 1,164,375 Circuit City Stores, Incorporated 50,000 1,381,250 Claire's Stores, Incorporated 50,000 881,250 Department 56, Incorporated* 20,000 767,500 Dollar General Corporation 110,000 2,282,500 Home Depot, Incorporated 105,000 5,026,875 Kohl's Corporation* 50,000 2,625,000 Leslie's Poolmart* 52,500 735,000 Office Depot, Incorporated* 85,000 1,678,750 Trend Lines, Incorporated* 67,500 675,000 Wal Mart Stores, Incorporated 225,000 5,034,375 Williams Sonoma, Incorporated* 150,000 2,775,000 ----------- 25,026,875 SOFTWARE - 2.79% Informix Corporation* 48,000 1,440,000 Insignia Solutions PLC, ADR* 40,000 470,000 Microsoft Corporation* 30,000 2,632,500 Oracle Systems Corporation* 64,000 2,712,000 Pinnacle Systems, Incorporated* 20,000 495,000 ----------- 7,749,500
The accompanying notes are an integral part of the financial statements. 29 117 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- TELECOMMUNICATION SERVICES - 1.29% CKS Group, Incorporated* 25,000 $ 975,000 MRV Communications, Incorporated* 15,000 380,625 Paging Network, Incorporated* 45,000 1,096,875 Spectrian Corporation* 20,000 445,000 Visioneer Communications, Incorporated* 30,000 667,500 ------------ 3,565,000 TELEPHONE - 0.46% PT Telekomunikasi Indonesia, ADR* 50,000 1,262,500 ------------ TOBACCO - 1.47% Philip Morris Companies, Incorporated 45,000 4,072,500 ------------ TRUCKING & FREIGHT - 1.77% Federal Express Corporation* 34,000 2,511,750 Harper Group, Incorporated 75,000 1,331,250 Smart & Final, Incorporated 50,000 1,062,500 ------------ 4,905,500 TOTAL COMMON STOCKS (Cost: $204,631,642) $255,389,787 ------------ WARRANTS - 0.29% ELECTRONICS - 0.29% Intel Corporation (Expiration date 03/14/98; strike price $38.75) 30,000 802,500 ------------ TOTAL WARRANTS (Cost: $1,127,109) $ 802,500 ------------ REPURCHASE AGREEMENT - 7.62% Principal Amount Value ------ ----- $21,144,000 Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95 at 5.00%, to be repurchased at $21,155,747 on 01/02/96, collateralized by $14,830,000 U.S. Treasury Bonds, 9.875% due 11/15/15 (valued at $21,756,996 including interest) $ 21,144,000 ------------ TOTAL INVESTMENTS (Pasadena Growth Trust) (Cost: $226,902,751) $277,336,287 ============ EQUITY TRUST Shares Value ------ ----- COMMON STOCK - 89.73% AEROSPACE - 1.38% Computer Sciences Corporation* 20,700 $ 1,454,175 Sun Microsystems, Incorporated* 83,100 3,791,437 U.S. Robotics Corporation* 94,200 8,266,050 ------------ 13,511,662 AGRICULTURAL MACHINERY - 0.63% Deere & Company 174,300 $ 6,144,075 ------------ AIR TRAVEL - 1.25% America West Airlines, Incorporated, Class B* 73,400 1,247,800 AMR Corporation* 44,300 3,289,275 Atlantic Southeast Airlines, Incorporated 12,600 270,900 Delta Air Lines, Incorporated 49,600 3,664,200 Midwest Express Holdings, Incorporated* 800 22,200 Northwest Airlines Corporation, Class A* 17,600 897,600 Southwest Airlines Company 65,400 1,520,550 Trans World Airlines, Incorporated* 15,500 160,812 UAL Corporation * 6,100 1,088,850 ------------ 12,162,187 ALUMINUM - 0.84% Aluminum Company of America 154,700 8,179,762 ------------ APPAREL & TEXTILES - 1.26% American Eagle Outfitters* 17,200 101,050 Cygne Designs, Incorporated* 24,300 22,781 Gucci Group NV* 3,400 132,175 Intimate Brands, Incorporated* 19,200 288,000 Just For Feet, Incorporated* 38,650 1,381,738 Kellwood Company 14,200 289,325 Mohawk Industrials, Incorporated* 9,800 153,125 Nautica Enterprises, Incorporated* 8,400 367,500 Nike, Incorporated, Class B 58,200 4,052,175 Reebok International, Ltd. 42,900 1,211,925 Talbots, Incorporated 65,800 1,891,750 Tommy Hilfiger Corporation* 57,800 2,449,275 ------------ 12,340,819 AUTOMOBILES - 3.66% Chrysler Corporation 240,000 13,290,000 General Motors Corporation 166,900 8,824,837 General Motors Corporation, Class E 175,200 9,110,400 General Motors Corporation, Class H 86,100 4,229,662 Honda Motor Company 11,000 226,925 ------------ 35,681,824 AUTO PARTS - 0.53% Autozone, Incorporated* 155,900 4,501,613 Dana Corporation 22,100 646,425 Lear Seating Corporation* 1,900 55,100 ------------ 5,203,138 BANKING - 3.60% Banc One Corporation 16,400 619,100 Bank of New York, Incorporated 51,900 2,530,125 Bank of Boston Corporation 17,900 827,875 Chase Manhattan Corporation 31,000 1,879,375 Chemical Banking Corporation 71,400 4,194,750 Citicorp 149,500 10,053,875 First Interstate Bancorp 56,300 7,684,950 Nationsbank Corporation 105,000 7,310,625 ------------ 35,100,675
The accompanying notes are an integral part of the financial statements. 30 118 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- BROADCASTING - 1.61% American Radio Systems Corporation* 7,100 $ 198,800 Belo (A.H.) Corporation 6,300 218,925 British Sky Broadcast Group, ADR* 1,300 48,913 Clear Channel Communications* 26,000 1,147,250 Comcast Corporation 42,000 763,875 Grupo Televisa S.A., ADR 29,700 668,250 Emmis Broadcasting Corporation* 8,100 251,100 Infinity Broadcasting Corporation* 75,692 2,819,527 Viacom, Incorporated, Class A* 6,952 318,923 Viacom, Incorporated, Class B* 195,873 9,279,483 ----------- 15,715,046 BUSINESS SERVICES - 1.75% America Online, Incorporated* 100,000 3,750,000 Automatic Data Processing, Incorporated 51,500 3,823,875 Boca Research, Incorporated* 4,700 124,550 CUC International, Incorporated* 158,025 5,392,603 Danka Business Systems, ADR 3,400 125,800 First Data Corporation 25,691 1,718,086 Nokia Corporation, ADR 30,600 1,189,575 Paychex, Incorporated 13,650 680,794 Spectrum Holobyte, Incorporated* 12,000 78,000 Stratacom, Incorporated* 3,300 242,550 ----------- 17,125,833 CHEMICALS - 0.92% Airgas, Incorporated* 28,700 954,275 E.I. Du Pont De Nemours & Company, Incorporated 54,500 3,808,187 First Mississippi Corporation 15,500 410,750 Guilford Pharmaceuticals, Incorporated* 19,900 315,913 Monsanto Company 5,100 624,750 Rohm & Haas Company 1,800 115,875 Union Carbide Corporation 67,600 2,535,000 Wang Laboratories, Incorporated* 13,700 227,763 ----------- 8,992,513 COMPUTERS & BUSINESS EQUIPMENT - 9.20% 3Com Corporation* 186,916 8,714,958 Bay Networks, Incorporated* 270,900 11,140,762 Cabletron Systems, Incorporated* 8,200 664,200 Ceridian Corporation* 43,800 1,806,750 Cisco Systems, Incorporated* 263,900 19,693,537 Compaq Computer Corporation* 357,300 17,150,400 Dell Computer Corporation* 170,000 5,886,250 Digital Equipment Corporation* 53,600 3,437,100 Digital Link Corporation* 12,900 182,213 DST Systems, Incorporated* 4,600 131,100 Hewlett-Packard Company 76,200 6,381,750 International Business Machines Corporation 63,100 5,789,425 Komag, Incorporated* 28,100 1,296,112 Oak Technology* 21,300 899,925 Seagate Technology* 63,700 3,025,750 COMPUTERS & BUSINESS EQUIPMENT - CONTINUED Stratus Computer, Incorporated* 11,300 391,263 Tech Data Corporation* 19,900 298,500 Xerox Corporation 20,800 2,849,600 Xircom, Incorporated* 4,300 53,213 ----------- 89,792,808 CONSTRUCTION & MINING EQUIPMENT - 0.36% Caterpillar, Incorporated 60,100 3,530,875 ----------- CONSTRUCTION MATERIALS - 0.07% Armstrong World Industrials, Incorporated 11,400 706,800 ----------- CRUDE PETROLEUM AND NATURAL GAS - 0.27% Barrett Resources Corporation* 2,100 61,688 Burlington Resources, Incorporated 23,200 910,600 Enron Oil and Gas Company 31,100 746,400 Union Pacific Resources Group, Incorporated 36,100 916,037 ----------- 2,634,725 DOMESTIC OIL - 0.04% Unocal Corporation 11,900 346,588 ----------- DRUGS & HEALTH CARE - 11.18% Allergan, Incorporated 26,800 871,000 Alza Corporation* 45,900 1,136,025 American Home Products Corporation 58,400 5,664,800 Amgen, Incorporated* 151,800 9,013,125 Baxter International, Incorporated 35,000 1,465,625 Becton Dickinson & Company 43,000 3,225,000 Biogen, Incorporated* 81,500 5,012,250 Bristol Myers Squibb Company 77,700 6,672,487 Columbia/HCA-Healthcare Corporation 114,480 5,809,860 Elan Corporation PLC, ADR* 12,350 600,519 Exogen, Incorporated* 10,500 202,125 General Nutrition Companies, Incorporated* 138,300 3,180,900 Genetics Institute, Incorporated* 5,100 272,850 Grupo Casa Autrey, ADR 18,400 246,100 Guidant Corporation 9,400 397,150 Healthsouth Corporation 154,600 4,502,725 IVAX Corporation 7,800 222,300 Johnson & Johnson 188,500 16,140,312 Eli Lilly & Company 67,000 3,768,750 Lincare Holdings, Incorporated* 4,900 122,500 Medisense, Incorporated* 13,300 420,613 Medtronic, Incorporated 22,600 1,262,775 Merck & Company, Incorporated 182,300 11,986,225 National Surgery Centers, Incorporated* 600 13,800 Pfizer, Incorporated 125,800 7,925,400 Rhone Poulenc Rorer, Incorporated 20,100 1,070,325 Schering Plough Corporation 175,600 9,614,100 St. Jude Medical, Incorporated 29,550 1,270,650
The accompanying notes are an integral part of the financial statements. 31 119 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- DRUGS & HEALTH CARE - CONTINUED Therapeutic Discovery Corporation* 3,000 $ 21,750 U.S. Healthcare, Incorporated 135,000 6,277,500 Vencor, Incorporated* 15,700 510,250 Watson Pharmaceuticals, Incorporated* 4,600 225,400 ------------ 109,125,191 EDUCATIONAL SERVICES - 0.01% Apollo Group, Incorporated, Class A* 6,799 266,011 ------------ ELECTRICAL EQUIPMENT - 3.61% Atmel Corporation* 108,200 2,420,975 Boston Scientific Corporation* 20,200 989,800 General Electric Company 402,400 28,972,800 Hitachi 1,000 10,073 Micros Systems, Incorporated* 36,200 1,782,850 Millipore Corporation 8,200 337,225 Novellus Systems, Incorporated* 14,000 756,000 ------------ 35,269,723 ELECTRONICS - 6.54% Adaptec, Incorporated 34,700 1,422,700 ADC Telecommunications, Incorporated* 25,000 912,500 Adflex Solutions, Incorporated* 8,700 232,725 Altera Corporation* 118,900 5,915,275 Analog Devices, Incorporated* 126,250 4,466,094 DSC Communications Corporation* 246,200 9,078,625 General Instrument Corporation* 4,900 114,538 Intel Corporation 108,000 6,129,000 Inter-Tel, Incorporated* 10,600 163,637 Iomega Corporation 1,500 72,938 Leitch Technology Corporation* 14,100 353,662 Linear Technology Corporation 144,000 5,652,000 LSI Logic Corporation* 129,300 4,234,575 Maxim Integrated Products, Incorporated* 167,300 6,441,050 Microcom, Incorporated* 16,000 416,000 Newbridge Networks Corporation* 52,400 2,168,050 S 3, Incorporated* 95,300 1,679,661 Scientific Atlanta, Incorporated 53,000 795,000 SGS Thomson Microelectronics, Incorporated* 38,900 1,565,725 Silicon Graphics, Incorporated* 197,970 5,444,175 Tencor Instruments* 42,900 1,045,688 Texas Instruments, Incorporated 19,000 983,250 Uniphase Corporation* 47,600 1,701,700 Xilinx, Incorporated* 93,300 2,845,650 ----------- 63,834,218 FINANCIAL SERVICES - 6.52% Allmerica Financial Corporation* 1,700 45,900 Allstate Corporation 35,876 1,475,400 American Express Company 314,600 13,016,575 Beneficial Corporation 29,000 1,352,125 Case Corporation 54,900 2,511,675 FINANCIAL SERVICES - CONTINUED Corporate Express, Incorporated* 47,000 1,415,875 Daiwa Securities 72,000 1,101,792 Federal Home Loan Mortgage Corporation 136,300 11,381,050 Federal National Mortgage Association 164,300 20,393,737 Green Tree Financial Corporation 79,800 2,104,725 Household International, Incorporated 700 41,388 Merrill Lynch & Company, Incorporated 105,500 5,380,500 Student Loan Marketing Association 13,100 862,963 Travelers Group, Incorporated 23,199 1,458,637 Yamaichi Securities Company 142,000 1,104,368 ------------ 63,646,710 FOOD & BEVERAGES - 0.61% Nabisco Holdings Corporation 49,400 1,611,675 Outback Steakhouse, Incorporated* 19,600 703,150 Panamerican Beverages, Incorporated* 14,900 476,800 PepsiCo, Incorporated 55,900 3,123,412 ------------ 5,915,037 HOMEBUILDERS - 0.04% Centex Corporation 10,600 368,353 ------------ HOTELS AND RESTAURANTS - 0.20% Brinker International, Incorporated* 8,100 122,512 Bristol Hotel Company* 1,100 26,813 HFS, Incorporated* 10,100 825,675 La Quinta Inns, Incorporated 10,500 287,437 Mirage Resorts, Incorporated* 21,000 724,500 ------------ 1,986,937 HOUSEHOLD APPLIANCES FURNISHING - 0.30% Campo Electronics Appliances* 30,000 90,000 Leggett & Platt, Incorporated 29,800 722,650 Whirlpool Corporation 40,000 2,130,000 ------------ 2,942,650 INDUSTRIAL MACHINERY - 0.38% Applied Materials, Incorporated* 49,700 1,956,938 Integrated Process Equipment Corporation* 24,000 564,000 Magna International, Incorporated 17,500 756,875 MSC Industrial Direct, Incorporated, Class A* 3,500 96,250 Pall Corporation 3,600 96,750 Thermo Electron Corporation* 5,500 286,000 ------------ 3,756,813 INTERNATIONAL OIL - 0.26% British Petroleum PLC, ADR 25,214 2,574,980 ------------ INSURANCE - 0.52% Aetna Life & Casualty Company 22,200 1,537,350 American International Group, Incorporated 4,300 397,750 Chubb Corporation 5,100 493,425
The accompanying notes are an integral part of the financial statements. 32 120 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- INSURANCE - CONTINUED Cigna Corporation 16,200 $ 1,672,650 General Re Corporation 4,300 666,500 Prudential Reinsurance Holdings, Incorporated* 11,500 268,813 ----------- 5,036,488 INVESTMENT COMPANIES - 0.32% Morgan Stanley Group, Incorporated 4,500 362,813 Nomura Securities 47,000 1,024,213 Charles Schwab Corporation 86,700 1,744,837 ----------- 3,131,863 LEISURE TIME - 0.69% Callaway Golf Company 46,300 1,047,537 Carnival Corporation 39,200 955,500 Cobra Golf, Incorporated* 31,100 1,107,937 The Walt Disney Company 48,500 2,861,500 Hollywood Entertainment Corporation* 61,900 518,413 International Game Technology 19,400 210,975 ----------- 6,701,862 LIQUOR - 0.08% Pete's Brewing Company* 600 8,400 Boston Beer Company, Incorporated, Class A* 500 11,875 Seagram, Ltd. 23,300 806,762 ----------- 827,037 MINING - 0.31% Diamond Offshore Drilling, Incorporated* 20,900 705,375 Inco, Ltd. 68,400 2,274,300 ----------- 2,979,675 MISCELLANEOUS - 0.05% Adidas AG* 6,900 365,082 ARV Assisted Living* 7,800 91,650 Mecon, Incorporated* 600 9,525 Spacetex IMC Corporation * 1,700 19,975 ----------- 486,232 NEWSPAPERS - 0.58% Dow Jones & Company, Incorporated 33,300 1,327,837 Gannett, Incorporated 30,300 1,859,662 News Corporation, Ltd., ADR 15,600 333,450 Knight Ridder, Incorporated 34,200 2,137,500 ----------- 5,658,449 OFFICE FURNISHINGS & SUPPLIES - 1.47% OfficeMax, Incorporated* 217,850 4,874,394 Staples, Incorporated* 338,175 8,243,016 U.S. Office Products Company* 1,900 43,225 Viking Office Products, Incorporated* 24,700 1,148,550 ----------- 14,309,185 PAPER - 0.37% Alco Standard Corporation 47,400 2,162,625 Champion International Corporation 35,600 1,495,200 ----------- 3,657,825 PETROLEUM SERVICES - 0.83% Dresser Industrials, Incorporated 15,400 375,375 McDermott International, Incorporated 6,900 151,800 Petroleum Geo-Services A/S, ADR* 13,300 332,500 PETROLEUM SERVICES - CONTINUED Schlumberger, Ltd. 79,800 $ 5,526,150 Western Atlas, Incorporated* 33,500 1,691,750 ----------- 8,077,575 PHOTOGRAPHY - 0.38% Canon, Incorporated 91,000 1,648,136 Eastman Kodak Company 31,200 2,090,400 ----------- 3,738,536 POLLUTION CONTROL - 0.43% Sanifill, Incorporated* 6,300 210,263 WMX Technologies, Incorporated 132,800 3,967,400 ----------- 4,177,663 PUBLISHING - 0.59% Big Flower Press Holdings, Incorporated* 30,700 475,850 Time Warner, Incorporated 138,700 5,253,262 ----------- 5,729,112 RAILROADS & EQUIPMENT - 0.93% Burlington Northern Santa Fe 6,900 538,200 Conrail, Incorporated 19,200 1,344,000 CSX Corporation 145,600 6,643,000 Swift Transportation Company, Incorporated* 38,200 582,550 ----------- 9,107,750 REAL ESTATE - 0.01% Welcome Home, Incorporated* 18,000 51,750 ----------- RETAIL GROCERY - 0.09% Starbucks Corporation* 41,000 861,000 ----------- RETAIL TRADE - 6.78% Barnes & Noble, Incorporated* 16,200 469,800 Bed Bath & Beyond, Incorporated* 43,900 1,703,869 Circuit City Stores, Incorporated 57,600 1,591,200 CompUSA, Incorporated* 129,800 4,040,025 Dayton Hudson Corporation 125,700 9,427,500 Ellett Brothers, Incorporated 25,300 202,400 Federated Department Stores, Incorporated* 35,000 962,500 GAP, Incorporated 81,600 3,427,200 Global Directmail Corporation* 7,600 209,000 Henry Schein, Incorporated* 5,400 159,300 Home Depot, Incorporated 141,700 6,783,887 Limited, Incorporated 212,300 3,688,713 Lowes Companies, Incorporated 431,900 14,468,650 Nine West Group, Incorporated* 2,700 101,250 Office Depot, Incorporated* 119,825 2,366,544 PeopleSoft, Incorporated* 38,800 1,668,400 Pep Boys (Manny Moe & Jack) 56,800 1,455,500 Petco Animal Supplies, Incorporated* 7,500 219,375 Price Costco, Incorporated* 10,500 160,125 Price Enterprises, Incorporated* 93,200 1,432,950 Sears Roebuck & Company 38,700 1,509,300 Sunglass Hut International, Incorporated* 78,700 1,869,125 TJX Companies, Incorporated 94,400 1,781,800
The accompanying notes are an integral part of the financial statements. 33 121 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- RETAIL TRADE - CONTINUED ValueVision International, Incorporated* 1,700 $ 9,456 Waban, Incorporated* 19,400 363,750 Wal Mart Stores, Incorporated 265,800 5,947,275 Woolworth Corporation* 15,600 202,800 ------------ 66,221,694 SOFTWARE - 6.72% A.D.A.M. Software, Incorporated* 6,500 42,250 Arbor Software Corporation* 300 14,175 Broderbund Software, Incorporated* 52,600 3,195,450 Business Objects SA, ADR* 2,400 116,100 Cadence Design Systems, 169,950 7,137,900 Incorporated* Cooper & Chyan Technology, Incorporated* 1,200 18,900 Diamond Multimedia Systems, Incorporated* 5,200 186,550 Discreet Logic, Incorporated* 19,200 480,000 Electronic Arts* 103,500 2,703,937 FTP Software, Incorporated* 21,800 632,200 Insignia Solutions PLC, ADR* 8,100 95,175 Madge Networks NV* 26,200 1,172,450 Mercury Interactive Corporation* 20,400 372,300 Micro Warehouse, Incorporated* 71,900 3,109,675 Microsoft Corporation* 153,500 13,469,625 Oracle Systems Corporation* 576,550 24,431,306 Parametric Technology Corporation* 93,200 6,197,800 Softkey International, Incorporated* 5,000 115,625 Sterling Software, Incorporated* 900 56,138 Structural Dynamics Research Corporation* 30,000 881,250 Symantec Corporation* 39,300 913,725 Tivoli Systems, Incorporated* 6,300 212,625 Verity, Incorporated* 400 17,700 Visio Corporation* 700 19,775 ------------ 65,592,631 STEEL - 0.09% Nucor Corporation 15,300 874,012 ------------ TELECOMMUNICATION SERVICES - 2.65% Ascend Communications, Incorporated* 82,900 6,725,262 Cascade Communications Corporation* 19,700 1,679,425 Hummingbird Communications, Ltd.* 7,700 311,850 K-III Communications Corporation* 30,700 372,238 NETCOM On-Line Communications* 18,800 676,800 Palmer Wireless, Incorporated* 7,900 173,800 SBC Communications, Incorporated 211,400 12,155,500 Tele-Communications, Incorporated, Class A 55,000 1,093,125 Tele-Communications, Incorporated 13,750 369,531 Telular Corporation* 9,500 81,938 TeleCommun Brasil-Telebras, ADR* 36,000 1,705,500 Vanguard Cellular Systems, Incorporated* 27,500 556,875 ------------ 25,901,844 TELEPHONE - 6.22% AirTouch Communications, Incorporated* 269,435 $ 7,611,539 Ameritech Corporation 189,500 11,180,500 American Telephone & Telegraph Corporation 163,700 10,599,575 Bell Atlantic Corporation 70,700 4,728,062 Bellsouth Corporation 333,200 14,494,200 Frontier Corporation 116,700 3,501,000 LCI International, Incorporated* 62,600 1,283,300 NYNEX Corporation 99,500 5,373,000 Telefonos De Mexico SA, ADR 25,300 806,438 Worldcom, Incorporated* 33,200 1,170,300 ------------ 60,747,914 TIRES & RUBBER - 0.08% Goodyear Tire and Rubber 16,400 744,150 ------------ TOBACCO - 2.31% Philip Morris Companies, Incorporated 246,000 22,263,000 RJR Nabisco Holdings Corporation 10,360 319,865 ------------ 22,582,865 TRUCKING & FREIGHT - 0.18% Airborne Freight Corporation 11,500 306,187 J.B. Hunt Transport Services, Incorporated 15,300 256,275 PST Vans, Incorporated* 3,300 15,263 Landstar Systems, Incorporated* 44,900 1,201,075 ------------ 1,778,800 TOTAL COMMON STOCKS (Cost: $710,326,341) $875,831,865 ------------ PREFERRED STOCK - 0.01% SOFTWARE - 0.01% Sap AG 300 45,383 ------------ TOTAL PREFERRED STOCKS (Cost: $23,637) $ 45,383 ------------ REPURCHASE AGREEMENT - 10.26% Principal Amount Value ------ ----- $100,188,000 Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95 at 5.00%, to be repurchased at $100,243,660 on 01/02/96, collateralized by $89,055,000 U.S. Treasury Bonds, 7.25% due 05/15/16 (valued at $102,998,896 including interest) $100,188,000 ----------- TOTAL INVESTMENTS (Equity Trust) (Cost: $810,537,978) $976,065,248 ============
The accompanying notes are an integral part of the financial statements. 34 122 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - -------------------------------------------------------------------------------- VALUE EQUITY TRUST
Shares Value ------ ----- COMMON STOCK - 88.88% AEROSPACE - 4.53% McDonnell Douglas Corporation 86,600 $ 7,967,200 Northrop Grumman Corporation 155,400 9,945,600 ----------- 17,912,800 AIR TRAVEL - 1.97% AMR Corporation 104,600 7,766,550 ----------- AUTOMOBILES - 2.91% Ford Motor Company 396,400 11,495,600 ------------ AUTO PARTS - 2.37% Lear Seating Corporation* 323,300 9,375,700 ----------- BANKING - 2.79% Nationsbank Corporation 158,300 11,021,637 ----------- CHEMICALS - 1.95% Geon Company 316,800 7,722,000 ----------- COMPUTERS & BUSINESS EQUIPMENT - 1.11% Compaq Computer Corporation* 91,200 4,377,600 ----------- CONTAINERS & GLASS - 0.62% Owens-Illinois, Incorporated* 167,800 2,433,100 ----------- CONSTRUCTION & MINING EQUIPMENT - 1.60% Harnischfeger Industries, Incorporated 189,800 6,310,850 ----------- DOMESTIC OIL - 1.06 % Tenneco, Incorporated 84,300 4,183,388 ----------- DRUGS & HEALTH CARE - 5.78% Beverly Enterprises, Incorporated* 46,500 494,063 Columbia/HCA Healthcare Corporation 115,400 5,856,550 Tambrands, Incorporated 60,100 2,869,775 Tenet Healthcare Corporation* 537,600 11,155,200 U.S. Healthcare, Incorporated 52,700 2,450,550 ----------- 22,826,138 ELECTRICAL EQUIPMENT - 3.30% Fisher Scientific International, Incorporated 148,900 4,969,538 Millipore Corporation 196,000 8,060,500 ----------- 13,030,038 ELECTRIC UTILITIES - 0.91% Long Island Lighting Company 220,600 3,612,325 ----------- ELECTRONICS - 3.01% Intel Corporation 71,800 4,074,650 National Semiconductor Corporation* 91,500 2,035,875 Perkin Elmer Corporation 93,200 3,518,300 Varian Associates, Incorporated 47,100 2,249,025 ----------- 11,877,850 FINANCIAL SERVICES - 7.78% Federal Home Loan Mortgage Corporation 7,900 $ 659,650 Federal National Mortgage Association 65,900 8,179,838 First USA, Incorporated 183,600 8,147,250 Fleet Financial Group, Incorporated 96,179 3,919,294 Partner Re Holding 298,100 8,197,750 Salomon, Incorporated 46,200 1,640,100 ----------- 30,743,882 FOOD & BEVERAGES - 0.44% Chiquita Brands International, Incorporated 126,100 1,733,875 ----------- FOREST PRODUCTS - 3.05% Georgia Pacific Corporation 175,300 12,029,962 ----------- HOUSEHOLD PRODUCTS - 2.10% Snap On, Incorporated 183,300 8,294,325 ----------- INDUSTRIAL MACHINERY - 3.04% Keystone International, Incorporated 37,000 740,000 Pall Corporation 279,700 7,516,937 Silicon Valley Group, Incorporated* 149,400 3,772,350 ----------- 12,029,287 INSURANCE - 1.37% Integon Corporation 53,800 1,109,625 Lincoln National Corporation, Incorporated 79,900 4,294,625 ----------- 5,404,250 INTERNATIONAL OIL - 5.49% Amoco Corporation 24,300 1,746,563 Chevron Corporation 27,800 1,459,500 Exxon Corporation 29,300 2,347,662 Mobil Corporation 32,200 3,606,400 Royal Dutch Petroleum Company 12,900 1,820,513 Texaco, Incorporated 136,300 10,699,550 ----------- 21,680,188 INVESTMENT COMPANIES - 1.01% Lehman Brothers Holdings, Incorporated 188,300 4,001,375 ----------- NEWSPAPERS - 0.61% Knight Ridder, Incorporated 38,500 2,406,250 ----------- PAPER - 2.08% Stone Container Corporation 572,800 8,234,000 ----------- PLASTICS - 0.82% First Brands Corporation 67,900 3,233,737 ----------- RAILROADS & EQUIPMENT - 0.65% Trinity Industries, Incorporated 81,400 2,564,100 -----------
The accompanying notes are an integral part of the financial statements. 35 123 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- RETAIL TRADE - 9.90% Charming Shoppes, Incorporated 864,300 $ 2,484,863 Dillard Department Stores, Incorporated 362,100 10,319,850 Musicland Stores Corporation* 376,500 1,600,125 J.C. Penney Company, Incorporated 78,600 3,743,325 Sears Roebuck & Company 48,800 1,903,200 Service Merchandise Company, Incorporated* 531,900 2,659,500 TJX Companies, Incorporated 399,300 7,536,788 Wal Mart Stores, Incorporated 395,300 8,844,837 ------------ 39,092,488 STEEL - 0.88% Quanex Corporation 178,600 3,460,375 ------------ TELECOMMUNICATION SERVICES - 4.76% Tele-Communications, Incorporated* 484,400 9,627,450 Valassis Communications, Incorporated* 525,100 9,189,250 ------------ 18,816,700 TELEPHONE - 1.75% American Telephone & Telegraph Corporation 106,900 6,921,775 ------------ TOBACCO - 5.38% Philip Morris Companies, Incorporated 108,800 9,846,400 RJR Nabisco Holdings Corporation 123,600 3,816,150 Universal Corporation 312,100 7,607,437 ------------ 21,269,987 TRUCKING & FREIGHT - 3.87% Consolidated Freightways, Incorporated 423,100 11,212,150 Kirby Corporation* 250,200 4,065,750 ------------ 15,277,900 TOTAL COMMON STOCKS (Cost: $321,274,838) $351,140,032 ------------ REPURCHASE AGREEMENT - 11.12% Principal Amount Value ------ ----- $43,932,000 Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95 at 5.75%, to be repurchased at $43,960,068 on 01/02/96, collateralized by $28,310,000 U.S. Treasury Bonds, 12.00% due 08/15/13 (valued at $46,087,004 including interest) $ 43,932,000 ------------ TOTAL INVESTMENTS (Value Equity Trust) (Cost: $365,206,838) $395,072,032 ============ GROWTH AND INCOME TRUST Shares Value ------ ----- COMMON STOCK - 94.70% AEROSPACE - 1.84% Boeing Company 60,000 $ 4,702,500 Northrop Grumman Corporation 120,000 7,680,000 ------------ 12,382,500 ALUMINUM - 1.16% Alcan Aluminum, Ltd. 250,000 7,781,250 ------------ AUTOMOBILES - 2.56% Chrysler Corporation 149,450 8,275,794 Ford Motor Company 306,436 8,886,638 ------------ 17,162,432 BANKING - 4.44% Citicorp 139,000 9,347,750 J.P. Morgan & Company, Incorporated 170,000 13,642,500 Republic New York Corporation 110,000 6,833,750 ------------ 29,824,000 BROADCASTING - 2.12% Viacom, Incorporated, Class B* 300,000 14,212,500 ------------ BUSINESS SERVICES - 1.85% First Data Corporation 107,000 7,155,625 Nokia Corporation, ADR 135,000 5,248,125 ------------ 12,403,750 CHEMICALS - 4.80% Dow Chemical Company 120,900 8,508,338 Engelhard Corporation 270,000 5,872,500 Morton International, Incorporated 290,000 10,403,750 Zeneca Group PLC, ADR 127,500 7,442,812 ------------ 32,227,400 COMPUTERS & BUSINESS EQUIPMENT - 4.47% Hewlett Packard Company 115,000 9,631,250 International Business Machines Corporation 145,000 13,303,750 Metatools, Incorporated 200 5,200 Xerox Corporation 51,600 7,069,200 ------------ 30,009,400 CONSTRUCTION & MINING EQUIPMENT - 1.04% Foster Wheeler Corporation 165,000 7,012,500 ------------ DOMESTIC OIL - 1.86% Unocal Corporation 430,000 12,523,750 ------------ DRUGS & HEALTH CARE - 10.23% Abbott Labs 220,000 9,185,000 Bristol Myers Squibb Company 90,000 7,728,750 Johnson & Johnson 97,000 8,305,625 McKesson Corporation 183,000 9,264,375 Pfizer, Incorporated 236,000 14,868,000 Rhone Poulenc Rorer, Incorporated 187,500 9,984,375 Sankyo Company 265,000 5,954,479 Warner Lambert Company 35,000 3,399,375 ------------ 68,689,979
The accompanying notes are an integral part of the financial statements. 36 124 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- ELECTRICAL EQUIPMENT - 2.51% General Electric Company 125,000 $ 9,000,000 Hubbell, Incorporated, Class B 120,000 7,890,000 ------------ 16,890,000 ELECTRIC UTILITIES - 4.12% DPL, Incorporated 350,000 8,662,500 Pinnacle West Capital Corporation 275,000 7,906,250 Texas Utilities Company 270,000 11,103,750 ------------ 27,672,500 ELECTRONICS - 2.42% AMP, Incorporated 300,000 11,512,500 General Instrument Corporation 202,105 4,724,210 ------------ 16,236,710 FINANCIAL SERVICES - 3.63% Federal National Mortgage Association 60,000 7,447,500 Fleet Financial Group, Incorporated 238,000 9,698,500 State Street Boston Corporation 161,000 7,245,000 ------------ 24,391,000 FOOD & BEVERAGES - 3.10% General Mills, Incorporated 117,000 6,756,750 PepsiCo, Incorporated 115,000 6,425,625 Sara Lee Corporation 239,900 7,646,813 ------------ 20,829,188 FOREST PRODUCTS - 0.78% Georgia Pacific Corporation 76,200 5,229,225 ------------ HOUSEHOLD PRODUCTS - 2.61% Colgate Palmolive Company 120,000 8,430,000 Procter & Gamble Company 109,900 9,121,700 ------------ 17,551,700 INDUSTRIAL MACHINERY - 2.14% Keystone International, Incorporated 356,000 7,120,000 York International Corporation 154,200 7,247,400 ------------ 14,367,400 INSURANCE - 4.75% Chubb Corporation 126,000 12,190,500 General Re Corporation 88,000 13,640,000 Marsh & McLennan Companies, Incorporated 68,400 6,070,500 ------------ 31,901,000 INTERNATIONAL OIL - 5.04% Amoco Corporation 165,000 11,859,375 Chevron Corporation 208,500 10,946,250 Exxon Corporation 138,000 11,057,250 ------------ 33,862,875 LIQUOR - 1.37% Anheuser-Busch Companies, Incorporated 138,000 9,228,750 ------------ NEWSPAPERS - 1.69% Gannett, Incorporated 185,000 11,354,375 ------------ PAPER - 5.24% International Paper Company 300,000 $ 11,362,500 Kimberly Clark Corporation 145,000 11,998,750 Minnesota Mining & Manufacturing Company 179,000 11,858,750 ------------ 35,220,000 PETROLEUM SERVICES - 1.02% Dresser Industries, Incorporated 280,000 6,825,000 ------------ PHOTOGRAPHY - 0.52% Eastman Kodak Company 51,900 3,477,300 ------------ POLLUTION CONTROL - 1.12% Browning Ferris Industries, Incorporated 255,000 7,522,500 ------------ PUBLISHING - 1.49% Dun & Bradstreet Corporation 155,000 10,036,250 ------------ REAL ESTATE - 0.53% Storage USA, Incorporated 108,200 3,530,025 ------------ RETAIL TRADE - 4.49% May Department Stores Company 175,000 7,393,750 J.C. Penney Company, Incorporated 140,000 6,667,500 Rite Aid Corporation 255,000 8,733,750 Wal Mart Stores, Incorporated 330,000 7,383,750 ------------ 30,178,750 SOFTWARE - 0.99% Policy Management Systems Corporation* 140,000 6,667,500 ------------ TELEPHONE - 7.78% American Telephone & Telegraph Corporation 179,000 11,590,250 BCE, Incorporated 250,000 8,625,000 NYNEX Corporation 228,400 12,333,600 U.S. West, Incorporated 388,860 13,901,745 VodaFone Group PLC, ADR 165,000 5,816,250 ------------ 52,266,845 TIRES & RUBBER - 0.98% Goodyear Tire and Rubber 145,000 6,579,375 ------------ TOTAL COMMON STOCKS (Cost: $516,858,855) $636,047,729 ------------ PREFERRED STOCKS - 0.70% COMPUTERS & BUSINESS EQUIPMENT - 0.70% Ceridian Corporation 50,900 4,708,250 ------------ TOTAL PREFERRED STOCKS (Cost: $2,575,030) $ 4,708,250 ------------
The accompanying notes are an integral part of the financial statements. 37 125 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- CONVERTIBLE BONDS - 3.25% AMR Corporation, 6.125% due 11/01/24 $6,000,000 $ 6,210,000 Beverly Enterprises, Incorporated, 5.50% due 08/01/18 7,500,000 7,200,000 Noble Affiliates, Incorporated, 4.25% due 11/01/03 8,400,000 8,400,000 ------------ TOTAL CONVERTIBLE BONDS (Cost: $22,094,684) $ 21,810,000 ------------ REPURCHASE AGREEMENT - 1.35% Principal Amount Value ------ ----- $9,072,000 Repurchase Agreement with Shearson Lehman dated 12/29/95 at 5.93%, to be repurchased at $9,077,977 on 01/02/96, collateralized by $26,310,000 U.S. Treasury Strips, 5.59% due 02/15/13 (valued at $9,657,068 including interest) $ 9,072,000 ------------ TOTAL INVESTMENTS (Growth & Income Trust) (Cost: $550,600,569) $671,637,979 ============ INTERNATIONAL GROWTH & INCOME TRUST Shares Value ------ ----- COMMON STOCK - 83.30% AIR TRAVEL - 0.11% Singapore Airlines 10,000 $ 93,319 ------------ AGRICULTURAL MACHINERY - 0.23% Kvaerner AS 6,000 200,818 ------------ ALUMINUM - 0.33% Sankyo Aluminium 53,000 283,864 ------------ APPAREL & TEXTILES - 1.13% Christian Dior 2,925 315,377 Kurabo Industries 60,000 229,540 Tomen Corporation 120,000 442,809 ------------ 987,726 AUTO PARTS - 0.50% Fuji Heavy Industries* 80,000 315,351 Nissan Diesel Motor* 25,000 116,465 ------------ 431,816 AUTOMOBILES - 3.81% Cycle & Carriage 12,000 119,618 Daimler Benz AG 335 168,609 Honda Motor Company 20,000 412,591 Mitsubishi Motor Corporation 45,000 366,538 AUTOMOBILES - CONTINUED Nissan Motor Company, Ltd. 25,000 $ 192,010 Regie Nationale Des Usines Renault 7,100 204,431 Rolls Royce PLC 73,000 213,139 Toyota Motor Corporation 60,000 1,272,639 Volkswagen AG 1,120 374,452 ------------ 3,324,027 BANKING - 12.87% ABN AMRO Holdings NV 6,000 273,322 Asahi Bank, Ltd. 50,000 629,540 Barclays 26,000 297,997 Banco Intercontinental Espanol 1,580 153,702 Banco Popular Espanol SA 1,250 230,523 Credit Company France 5,800 295,981 Credit Local De France 2,070 165,701 CS Holdings AG 4,485 459,776 Dai Ichi Kangyo Bank 35,000 688,136 Daiwa Bank 120,000 970,460 Deutsche Bank AG 8,000 379,059 Development Bank Singapore 16,000 199,081 Dresdner Bank AG 5,000 133,496 Deutsche Pfandbrief & Hypobk 5,180 201,133 Fukui Bank 30,000 159,806 Generale De Banque 925 320,591 Hokkaido Takushoku Bank, Ltd. 90,000 266,731 HSBC Holdings - HKD 24,000 363,143 HSBC Holdings - [Pound Sterling] 16,000 249,852 Hyakugo Bank 30,000 171,429 Juroku Bank 35,000 181,695 Lloyds TSB Group PLC 43,264 222,737 Nanto Bank 15,000 103,148 National Australia Bank, Ltd. 44,600 401,115 National Westminster 30,000 302,143 Nippon Credit Bank 40,000 182,857 Public Bank BHD 190,000 363,586 The Royal Bank of Scotland Group 29,000 263,923 Sakura Bank 50,000 634,383 Sanwa Bank 25,000 508,475 Schweizerische Bankgesellschaft 130 140,876 Schweizerischer Bankverein 715 291,951 Shiga Bank 16,000 94,528 Societe Generale 2,258 278,965 Standard Chartered Bank 18,000 153,191 Toyo Trust & Banking 12,000 105,995 United Overseas Bank 9,000 86,532 Yasuda Trust & Banking 50,000 295,884 ------------ 11,221,443 BROADCASTING - 0.78% Gakken Company* 10,000 65,860 News Corporation 35,000 186,785 Pearson 16,000 154,931 Television Broadcast 41,000 146,078 TV Francaise 1,210 129,722 ------------ 683,376
The accompanying notes are an integral part of the financial statements. 38 126 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- BUILDING CONSTRUCTION - 0.12% SXL Corporation 10,000 $ 103,632 ---------- BUSINESS SERVICES - 1.74% Eaux (Cie Generale Des) 3,576 357,016 Havas 1,750 138,835 Inchcape 49,000 189,486 Kawasho Corporation* 40,000 167,361 Nichias Corporation 15,000 78,596 SGS Holdings 380 130,126 South West Water 32,000 257,928 Toppan Printing Company, Ltd. 15,000 197,579 ---------- 1,516,927 CHEMICALS - 4.21% Air Liquide 1,466 242,787 Allied Colloids 83,000 171,440 Bayer AG 1,020 269,132 BOC Group 5,500 76,961 Ciba Geigy AG 590 519,159 Hoechst AG 540 146,434 Kumiai Chemical Industry Company 8,000 45,869 Kuraray Company 15,000 164,165 Mitsubishi Chemical Corporation 60,000 291,719 Mitsubishi Gas Chemical Company 30,000 135,109 Mitsui Petrochemical Industry 40,000 327,361 Mitsui Toatsu Chemicals 50,000 200,968 Nagase & Company 15,000 129,007 Nippon Zeon Company 30,000 161,259 Rhone-Poulenc SA, Class A 7,300 156,375 Showa Denko K.K.* 90,000 282,421 Solvay SA 335 181,842 UBE Industries 45,000 169,976 ---------- 3,671,984 COMPUTERS & BUSINESS EQUIPMENT - 0.16% Ricoh Company 13,000 142,276 ---------- CONGLOMERATES - 1.85% Aker AS 6,000 72,939 Asatsu, Incorporated 3,000 126,102 BIC Corporation 750 76,271 BTR PLC 61,800 314,807 CSR, Ltd. 85,200 277,372 Grand Metropolitan 35,000 251,941 Hanson 42,600 127,026 Preussag AG 380 106,225 Tomkins 37,000 161,756 Tractebel International 245 101,147 ---------- 1,615,586 CONSTRUCTION MATERIALS - 0.66% Holderbank Financier Glarus AG 110 84,395 Lafarge 1,470 94,708 Tarmac 104,000 166,361 Toyo Construction Company 40,000 233,220 ---------- 578,684 CONSTRUCTION & MINING EQUIPMENT - 0.43% Daito Trust Construction 10,000 118,160 Ryobi 50,000 257,143 ---------- 375,303 CONTAINERS & GLASS - 0.56% Caradon PLC 55,000 166,990 Central Glass Company* 10,000 33,801 Companie De Saint-Gobain 1,280 139,579 Nippon Sheet Glass 35,000 152,203 ---------- 492,573 CRUDE PETROLEUM AND NATURAL GAS - 0.37% Societe Nationale Elf Aquitaine 4,347 320,277 ---------- DRUGS & HEALTH CARE - 5.02% Amersham International 12,300 169,438 Chugai Pharmaceutical Company 35,000 335,254 Daiichi Pharmaceutical Company 9,000 128,136 Essilor International 825 157,688 Glaxo Wellcome 50,900 723,303 Hafslund Nycomed, Class B 7,000 177,373 Kaken Pharmaceutical 25,000 225,182 Kissei Pharmaceutical Company 3,000 90,654 Kyowa Hakko Kogyo 8,000 75,467 Lion Corporation 30,000 176,949 Ono Pharmaceutical 7,000 269,153 Roche Holdings AG 57 450,910 Sandoz AG 550 503,511 Sanofi 3,805 243,902 Schering AG 1,540 102,019 SmithKline Beecham, Class A 33,000 363,876 Synthelabo 2,955 185,133 ---------- 4,377,948 ELECTRIC UTILITIES - 2.36% Electrabel 1,280 304,451 Empresa Nacional De Electricidad SA 5,400 305,837 Fuerzas Electricas De Catalunal SA 30,600 218,211 Hong Kong Electric 73,000 239,321 RWE AG 300 108,749 Scottish Hydro Electric PLC 29,000 161,912 Shikoku Electric Power 11,700 269,695 Tohoku Electric Power 11,700 282,160 Tokyo Electric Power 6,300 168,407 ---------- 2,058,743 ELECTRICAL EQUIPMENT - 4.63% Alcatel Alsthom Cie Generale D'Electric 3,237 279,081 BBC Brown Boveri AG 90 104,551 BICC Group PLC 25,700 109,761 Fuji Electric Company 60,000 305,085 General Electric Company 49,000 269,390 Hitachi, Ltd. 65,000 654,722 Japan Radio Company 15,000 159,806 Legrand 280 43,226 Mitsubishi Cable Industries 25,000 133,172 Mitsubishi Electric Corporation 35,000 251,864
The accompanying notes are an integral part of the financial statements. 39 127 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- ELECTRICAL EQUIPMENT - CONTINUED NEC Corporation 40,000 $ 488,136 Sanden Corporation 25,000 160,291 Siemens AG 975 533,548 Toenec Corporation 20,000 178,208 Yaskawa Electric Corporation* 50,000 235,835 Yorkshire Electricity Group 12,600 130,716 ---------- 4,037,392 ELECTRONICS - 1.16% Alps Electric Company, Ltd. 20,000 230,508 Kyocera Corporation 2,000 148,571 Kyowa Exeo Corporation, Class A 10,000 89,782 National Grid Group PLC* 9,533 29,463 Nippon Densetsu 15,000 151,090 Racal Electronics 30,100 132,993 Shimadzu Corporation 40,000 232,058 ---------- 1,014,465 FINANCIAL SERVICES - 0.92% Cetelem 1,400 262,732 Daiwa Securities 20,000 306,053 Internationale Nederlanden Groep NV 3,500 233,813 ---------- 802,598 FOOD & BEVERAGES - 3.97% Dalgety 27,000 170,034 Danone 1,981 326,863 Guinness 27,500 202,225 Hillsdown Holdings 84,800 223,886 Itoham Foods, Incorporated 28,000 211,525 Japan Tobacco, Incorporated 15 130,024 Nestle SA 405 448,010 Nippon Flour Mills 20,000 104,600 Orkla 6,000 286,071 Reckitt & Colman PLC 8,500 94,056 Scottish & Newcastle Breweries 18,500 176,122 Snow Brand Milk Products Company, Ltd. 30,000 191,768 Southcorp Holdings, Ltd. 143,600 334,078 Toyo Suisan Kaisha 10,000 123,971 United Biscuits PLC 35,500 140,864 Yamazaki Baking Company 16,000 297,530 ---------- 3,461,627 FOREST PRODUCTS - 0.35% Sumitomo Forestry 20,000 306,053 ---------- GAS & PIPELINE UTILITIES - 0.45% British Gas PLC 43,000 169,623 Osaka Gas Company 65,000 224,746 ---------- 394,369 HOMEBUILDERS - 0.81% Bilfinger & Berger Bauaktiengesellschaft AG 465 176,016 Bouygues 2,305 232,195 Kinden Corporation 6,000 102,276 Sekisui House 15,000 191,768 ---------- 702,255 HOTELS & RESTAURANTS - 0.21% Ladbroke Group 82,000 186,566 ---------- HOUSEHOLD APPLIANCES FURNISHING - 1.73% Matsushita Electric Industrial Company, Ltd. 35,000 569,492 Sony Corporation 10,000 599,516 Thorn Emi PLC 8,000 188,414 Victor Company of Japan, Ltd.* 12,000 152,252 ---------- 1,509,674 HOUSEHOLD PRODUCTS - 0.91% Eridania Beghin-Say SA 700 120,074 Uni Charm Corporation 5,000 125,908 Uniden Corporation 10,000 167,554 Unilever NV 2,700 379,417 ---------- 792,953 INDUSTRIAL MACHINERY - 3.58% Daikin Industries 25,000 244,552 Ebara Corporation 15,000 219,370 Fischer AG 60 78,023 Glynwed International PLC 35,000 173,397 Ishikawajima-Harima Heavy Industries 90,000 379,177 Kawasaki Heavy Industries 15,000 69,007 Kitz Corporation 30,000 122,324 M.A.N. AG 890 240,725 Minebea Company 20,000 167,748 Mitsubishi Kakoki 15,000 141,065 NSK Corporation 20,000 145,278 Okamura Corporation 15,000 114,770 Sembawang Corporation, Ltd. 13,000 72,146 Sidel 800 249,295 Toshiba Corporation 25,000 195,884 Toyo Umpanki Company 5,000 22,518 Tsubakimoto Chain 40,000 240,581 Valeo 2,700 125,048 Vickers 31,000 122,286 ---------- 3,123,194 INSURANCE - 3.88% Aegon NV 3,260 144,239 Allianz Holdings AG 246 479,481 AXA Company 6,030 406,351 Britannic Assurance 15,000 178,910 Chuo Trust & Banking 20,000 193,705 Compagnie Financiere Richemont 100 149,978 Fortis AG 1,100 133,622 Guardian Royal Exchange 63,500 272,185 Koa Fire & Marine 15,000 91,816 Munchener Ruckvers 234 508,944 Tokio Marine & Fire Insurance Company 40,000 523,002 Willis Corroon Group PLC 61,700 135,109 Zurich Versicherung 560 167,490 ---------- 3,384,832
The accompanying notes are an integral part of the financial statements. 40 128 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- INTERNATIONAL OIL - 1.43% The British Petroleum Company 42,000 $ 350,598 Cosmo Oil Company 60,000 327,748 Petrofina SA 520 159,198 Shell Transport & Trading Company 30,800 407,302 ---------- 1,244,846 INVESTMENT COMPANIES - 1.47% Marubeni Corporation 75,000 406,053 Nomura Securities 40,000 871,671 ---------- 1,277,724 LEISURE TIME - 0.51% Forte 28,000 143,718 Granada Group PLC 18,000 180,308 Japan Airport Terminal 10,000 121,065 ---------- 445,091 MINING - 0.67% Dowa Mining Company 30,000 144,697 DSM NV 2,150 176,855 Mitsui Mining & Smelting Company* 65,000 260,630 ---------- 582,182 MISCELLANEOUS - 0.36% Seita 5,000 181,233 SKW Trostberg AG 1,000 21,087 Yuasa Trading Company 20,000 108,475 ---------- 310,795 NON-FERROUS METALS - 0.88% Fuji Denki Reiki 15,000 200,484 Mitsubishi Material 30,000 155,448 RTZ Corporation PLC 10,900 158,447 Western Mining Corporation Holdings 39,500 253,664 ---------- 768,043 PAPER - 0.67% Koninklijke KNP BT NV 4,200 107,833 Nippon Paper Industries 45,000 312,494 Rexam PLC 30,000 164,932 ---------- 585,259 PETROLEUM SERVICES - 3.37% Broken Hill Proprietary Company, Ltd. 24,540 346,559 Norsk Hydro AS 19,900 835,699 Repsol SA 6,610 216,610 Royal Dutch Petroleum Company 7,570 1,057,639 Total SA, "B" Shares 7,100 479,181 ---------- 2,935,688 PUBLISHING - 1.08% Citic Pacific, Ltd. 96,000 328,380 Elsevier NV 13,600 181,367 Lagardere Groupe 6,600 121,299 Reuters Holdings 15,000 137,327 Singapore Press Holdings, Ltd. 10,000 176,741 ---------- 945,114 RAILROADS & EQUIPMENT - 1.31% East Japan Railway Company 75 364,649 Hitachi Transport Systems 20,000 193,705 Nagoya Railroad Company 25,000 125,908 RAILROADS & EQUIPMENT - CONTINUED Tobu Railway Company 40,000 $ 250,266 Zexel Corporation 30,000 203,971 ---------- 1,138,499 REAL ESTATE - 1.62% Cheung Kong Holdings 97,000 590,844 Daiwa Kosho Lease 20,000 199,516 MEPC PLC 26,000 159,295 Mitsui Fudosan Company 15,000 184,504 Tokyu Land Corporation 50,000 217,918 United Overseas Land 33,000 62,757 ---------- 1,414,834 RETAIL GROCERY - 0.89% Izumi Company 13,000 287,070 Maruetsu, Incorporated 30,000 244,068 J Sainsbury PLC 40,000 243,827 ---------- 774,965 RETAIL TRADE - 3.13% Argos 19,000 175,718 Argyll Group 32,800 173,195 Ava Allgemeine Handles-Der Verbr AG 320 108,191 Carrefour 495 300,315 Castorama Dubois 560 91,713 Daiei, Incorporated 25,000 302,663 Douglas Holdings AG 2,300 81,129 Familymart Company 2,000 90,266 Izumiya Company 13,000 207,748 Kingfisher 31,000 260,941 Promodes 1,160 272,649 Sears PLC 142,000 229,352 Takashimaya Company, Ltd. 20,000 319,613 Tokyu Store Chain 15,000 115,061 ---------- 2,728,554 SOFTWARE - 0.11% SAP AG 600 93,064 ---------- STEEL - 2.05% Arbed SA 1,000 113,150 Daido Steel Company 15,000 75,545 Nisshin Steel Company 60,000 242,325 NKK Corporation* 160,000 430,799 Sumitomo Metal Industry 200,000 606,295 Thyssen AG* 980 178,033 Usinor Sacilor* 10,800 142,802 ---------- 1,788,949 TELECOMMUNICATION SERVICES - 0.20% Cable and Wireless 24,000 171,828 ---------- TELEPHONE - 1.66% British Telecommunications 79,000 433,095 Hong Kong Telecommunications, Ltd. 136,000 242,716 Royal PTT Nederland NV 3,300 119,892 Nippon Telegraph & Telephone Corporation 15 121,308
The accompanying notes are an integral part of the fiancial statements. 41 129 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Shares Value ------ ----- TELEPHONE - CONTINUED Telekom Malaysia 34,000 $ 265,071 VodaFone Group 74,000 265,476 ----------- 1,447,558 TIRES & RUBBER - 0.28% Yokohama Rubber Company 40,000 242,131 ----------- TOBACCO - 0.37% B.A.T. Industries 37,000 325,812 ----------- TOYS, AMUSEMENTS & SPORTING GOODS - 0.35% Mizuno Corporation 35,000 303,390 ----------- TRUCKING & FREIGHT - 1.05% Kawasaki Kisen Kaisha, Ltd.* 60,000 190,605 Nippon Express Company 30,000 288,814 Nippon Road Company 30,000 252,785 Peninsular & Oriental Steam Navigation Company 10,000 73,925 TNT, Ltd.* 81,000 107,165 ----------- 913,294 TOTAL COMMON STOCKS (Cost: $70,349,485) $72,633,920 ----------- PREFERRED STOCKS - 0.37% ELECTRICAL EQUIPMENT - 0.09% Legrand 805 80,549 ----------- FOOD & BEVERAGES - 0.22% Henkel Kgaa 500 188,045 ----------- ELECTRIC UTILITIES - 0.06% RWE AG 200 55,769 ----------- TOTAL PREFERRED STOCKS (Cost: $327,210) $ 324,363 ----------- WARRANTS - 0.29%* ELECTRICAL EQUIPMENT - 0.07% Philips Electronics NV (Expiration date 06/30/98; strike price NLG 34) 3,900 61,002 ----------- FINANCIAL SERVICES - 0.22% Veba International Finance BV (Expiration date 04/06/98; strike price DEM 375) 1,200 189,055 ----------- TOTAL WARRANTS (Cost: $232,411) $ 250,057 ----------- Principal Amount Value ------ ----- CONVERTIBLE BONDS - 2.08% Bot Cayman Finance, 4.25% due 03/31/49 $90,000,000 $1,202,906 Daido Hoxan, Incorporated, 1.60% due 03/29/02 10,000,000 110,896 Matsushita Electric Works, 2.70% due 05/31/02 20,000,000 236,707 Sandoz Capital, 1.25% due 10/23/02 265,000 259,601 TOTAL CONVERTIBLE BONDS (Cost: $1,741,695) $1,810,110 ---------- CORPORATE BONDS - 1.11% Swiss Re Finance Bermuda, 2.00% due 07/06/00 $ 180,000 214,200 Treuhandanstalt, 7.75% due 10/01/02 DEM 970,000 753,753 ---------- TOTAL CORPORATE BONDS (Cost: $941,887) $ 967,953 ---------- FOREIGN GOVERNMENT OBLIGATIONS - 6.76% GOVERNMENT OF CANADA - 0.70% 8.75% due 12/01/05 CAD 750,000 613,868 ---------- KINGDOM OF DENMARK - 0.33% 7.00% due 12/15/04 DKK 400,000 71,751 8.00% due 11/15/01 1,100,000 212,076 ---------- 283,827 GOVERNMENT OF FRANCE - 0.83% 6.75% due 10/25/03 FRF 1,500,000 311,364 7.50% due 04/25/05 310,000 67,083 8.50% due 04/25/03 1,500,000 342,455 ---------- 720,902 FEDERAL REPUBLIC OF GERMANY - 0.87% 7.375% due 01/03/05 DEM 1,000,000 761,799 ---------- GOVERNMENT OF GREAT BRITAIN - 1.18% United Kingdom Treasury, [pound 6.75% due 11/26/04 sterling] 200,000 297,309 United Kingdom Treasury, 7.00% due 11/06/01 470,000 730,839 ---------- 1,028,148 GOVERNMENT OF JAPAN - 1.89% 5.70% due 03/20/07 [yen] 138,750,000 1,647,665 ---------- GOVERNMENT OF NETHERLAND - 0.96% 6.75% due 11/15/05 NLG 1,280,000 840,331 ---------- TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost: $5,804,291) $5,896,540 ----------
The accompanying notes are an integral part of the financial statements. 42 130 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- REPURCHASE AGREEMENT - 6.10% $5,316,000 Repurchase Agreement with State Street Bank & Trust Company, dated 12/29/95 at 5.00%, to be repurchased at at $5,318,953 on 01/02/96, collateralized by $4,855,000 U.S. Treasury Notes, 7.50% due 05/15/02 (valued at $5,468,715 including interest) $ 5,316,000 ----------- TOTAL INVESTMENTS (International Growth & Income Trust) (Cost: $84,712,979) $87,198,943 =========== STRATEGIC BOND TRUST Principal Amount Value ------ ----- CORPORATE BONDS - 42.64% BUSINESS SERVICES - 2.18% A Plus Network, Incorporated, 11.875% due 11/01/05 $ 750,000 $ 759,375 Borg-Warner Security Corporation, 9.125% due 05/01/03 1,000,000 900,000 Katz Corporation, 12.75% due 11/15/02 1,000,000 1,070,000 ----------- 2,729,375 COMMUNICATION - 3.10% Adelphia Communications Corporation, 12.50% due 05/15/02 1,250,000 1,225,000 In Flight Phone Corporation, Series B Step up to 14.00% due 05/15/02 1,500,000 472,500 United International Holdings, Incorporated, zero coupon due 11/15/99 2,250,000 1,395,000 Wireless One, Incorporated, 13.00% due 10/15/03 750,000 783,750 ----------- 3,876,250 DRUGS & HEALTH CARE - 0.90% Dade International, Incorporated, 13.00% due 02/01/05 1,000,000 1,120,000 ----------- ENERGY & UTILITIES - 1.80% Petro PSC Properties, 12.50% due 06/01/02 1,500,000 1,410,000 Waters Corporation, Series B, 12.75% due 09/30/04 750,000 843,750 ----------- 2,253,750 FINANCE & BANKING - 8.32% Empress River Casino Finance Corporation, 10.75% due 04/01/02 1,000,000 1,032,500 Foamex Capital Corporation, 11.875% due 10/01/04 1,500,000 1,470,000 Paine Webber Group, Incorporated, 6.30% due 02/15/96 3,600,000 3,602,326 FINANCE & BANKING - CONTINUED Trump Taj Mahal Funding, Incorporated, zero coupon due 11/15/99 $1,029,625 $ 991,014 United States Banknote Corporation, 11.625% due 08/01/02 1,000,000 760,000 United States Leasing International, 8.45% due 01/25/05 1,500,000 1,696,875 Venture Holdings Trust, 9.75% due 04/01/04 1,000,000 835,000 ----------- 10,387,715 FOOD STORES - 1.43% Carr Gottstein Foods Company, 12.00% due 11/15/05 1,000,000 1,010,000 Penn Traffic Company, 9.625% due 04/15/05 1,000,000 780,000 ----------- 1,790,000 HOUSEHOLD APPLIANCE FURNISHING - 1.98% Decorative Home Accents, Incorporated, 13.00% due 06/30/02 1,500,000 1,485,000 Selmer, Incorporated, 11.00% due 05/15/05 1,000,000 985,000 ----------- 2,470,000 INDUSTRIALS - 14.57% American Safety Razor Company, Series B, 9.875% due 08/01/05 1,100,000 1,119,250 Bally's Grand, Incorporated, 10.375% due 12/15/03 1,000,000 1,020,000 Berry Plastics Corporation, 12.25% due 04/15/04 1,150,000 1,236,250 Comcast UK Cable Partners, Ltd., Step up to 11.20% due 11/15/07 1,200,000 708,000 Consolidated Cigar Corporation, 10.50% due 03/01/03 1,000,000 1,025,000 Harris Chemical, Incorporated, Step up to 10.25% due 07/15/01 1,000,000 950,000 International Semi Tech Microelectronic, Step up to 11.50% due 08/15/03 2,000,000 1,072,500 Jordan Industries, Incorporated, Step up to 11.75% due 08/01/05 2,000,000 1,160,000 Jordan Industries, Incorporated, 10.375% due 08/01/03 306,000 272,340 Marcus Cable Company, 14.25% due 12/15/05 1,750,000 1,190,000 Norcal Waste Systems, Incorporated, 12.50% due 11/15/05 1,000,000 1,010,000 Pathmark Stores, Incorporated, 9.625% due 05/01/03 1,500,000 1,458,750 RBX Corporation, 11.25% due 10/15/05 1,500,000 1,485,000 Renco Metals, Incorporated, 12.00% due 07/15/00 1,000,000 1,085,000 Revlon Worldwide Corporation, Series B, zero coupon due 03/15/98 1,000,000 742,500
The accompanying notes are an integral part of the financial statements. 43 131 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- INDUSTRIALS - CONTINUED SC International Services, Incorporated, 13.00% due 10/01/05 $ 1,000,000 $ 1,040,000 Specialty Equipment Companies, Incorporated, 11.375% due 12/01/03 750,000 761,250 Terex Corporation, 13.75% due 05/15/02 1,000,000 867,500 ----------- 18,203,340 LEATHER PRODUCTS - 0.38% Samsonite Corporation, 11.125% due 07/15/05 500,000 480,000 ----------- LEISURE - 1.79% Bally's Park Place Funding, Incorporated, 9.25% due 03/15/04 750,000 763,125 Grand Casino, Incorporated, 10.125% due 12/01/03 750,000 786,560 Hollywood Casino, Incorporated, 12.75% due 11/01/03 750,000 690,000 ----------- 2,239,685 METAL PRODUCTS - 0.80% Cole National Group, Incorporated, 11.25% due 10/01/01 1,000,000 1,002,500 ----------- PRINTING & PUBLISHING - 0.42% Williamhouse Regency, Incorporated, 13.00% due 11/15/05 500,000 518,750 ----------- OTHER - 2.17% Hines Horticulture, Incorporated, 11.75% due 10/05/05 1,000,000 1,037,500 Outdoor Systems, Incorporated, 10.75% due 08/15/03 1,000,000 950,000 Specialty Foods Corporation, 11.125% due 10/01/02 750,000 727,500 ----------- 2,715,000 RESTAURANTS - 0.34% Family Restaurants, Incorporated, 9.75% due 02/01/02 750,000 420,000 ----------- RETAIL TRADE - 2.45% Apparel Retailers, Incorporated, Series B, Step up to 12.75% due 08/15/05 2,000,000 1,220,000 Crown Paper Company, 11.00% due 09/01/05 1,000,000 875,000 Finlay Fine Jewerly Corporation, 10.625% due 05/01/03 1,000,000 970,000 ----------- 3,065,000 TOTAL CORPORATE BONDS (Cost: $53,895,511) $53,271,365 ----------- U.S. TREASURY OBLIGATIONS - 6.38% U.S. TREASURY BONDS - 0.77% 6.875% due 08/15/25 $ 850,000 $ 958,639 ----------- U.S. TREASURY NOTES - 5.61% 5.625% due 11/30/00 2,000,000 2,018,120 6.50% due 08/15/05 1,000,000 1,065,310 6.75% due 04/30/00 500,000 526,170 7.50% due 02/15/05 3,000,000 3,400,320 ----------- 7,009,920 TOTAL U.S. TREASURY OBLIGATIONS (Cost: $7,690,336) $ 7,968,559 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 10.14% FEDERAL HOME LOAN BANK - 0.41% 5.94% due 06/13/00 500,000 507,736 ----------- FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.47% 759.5% due 07/15/06 IO 28,859 396,814 8.00% due 05/01/10 1,846,331 1,913,592 8.50% due 05/01/08 744,924 779,488 ----------- 3,089,894 FEDERAL NATIONAL MORTGAGE ASSOCIATION - 7.26% 6.50% TBA** 2,400,000 2,371,488 6.50% due 11/01/10 - 12/01/10 1,799,999 1,808,999 7.00% TBA** 3,000,000 3,024,360 7.52% due 08/26/05 1,800,000 1,868,035 ----------- 9,072,882 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost: $12,430,625) $12,670,512 ----------- FOREIGN GOVERNMENT OBLIGATIONS - 31.77% REPUBLIC OF ARGENTINA - 3.31% 6.812% due 03/31/05 $5,800,000 4,132,500 ----------- KINGDOM OF BELGIUM - 0.39% 6.50% due 03/31/05 BEF 14,600,000 489,544 ----------- FEDERAL REPUBLIC OF BRAZIL - 6.98% 4.00% due 04/15/14 $ 2,653,025 1,518,857 4.25% due 04/15/24 6,500,000 3,432,819 6.00% due 09/15/13 1,250,000 693,750 6.687% due 01/01/01 2,375,000 2,045,469 6.812% due 04/15/06 1,500,000 1,033,125 ----------- 8,724,020 NATIONAL REPUBLIC OF BULGARIA - 3.22% 2.00% due 07/28/12 $ 4,750,000 1,442,812 6.75% due 07/28/11 3,000,000 1,383,750 6.75% due 07/28/24 2,250,000 1,195,312 ----------- 4,021,874
The accompanying notes are an integral part of the financial statements. 44 132 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- GOVERNMENT OF CANADA - 0.52% 6.25% due 02/01/98 CAD 275,000 $ 202,392 9.00% due 12/01/04 549,000 453,131 ------------ 655,523 GOVERNMENT OF COSTA RICA - 0.31% Series B, 6.25% due 05/21/15 $ 700,000 392,000 ------------ KINGDOM OF DENMARK - 0.26% 7.00% due 12/15/04 DKK 600,000 107,627 9.00% due 11/15/98 1,100,000 215,800 ------------ 323,427 REPUBLIC OF ECUADOR - 1.44% 3.00% due 02/28/15 $ 2,553,715 855,495 3.00% due 02/27/15 2,809,070 941,038 ------------ 1,796,533 FEDERAL REPUBLIC OF GERMANY - 4.08% 7.375% due 01/03/05 DEM 1,550,000 1,180,788 8.375% due 05/21/01 4,900,000 3,910,094 ------------ 5,090,882 REPUBLIC OF ITALY - 1.02% 9.50% due 12/01/97 ITL 1,460,000,000 909,670 9.50% due 01/01/05 610,000,000 359,749 ------------ 1,269,419 GOVERNMENT OF JAPAN - 1.18% 4.20% due 09/21/15 [Yen] 142,000,000 1,469,511 ------------ GOVERNMENT OF MEXICO - 2.74% 6.25% due 12/31/19 $ 4,000,000 2,605,000 6.25% due 12/31/19 1,250,000 814,062 Mexican United States Rights, 0% due 12/31/19 1,250,000 0 ------------ 3,419,062 GOVERNMENT OF NETHERLANDS - 0.80% 6.25% due 07/15/98 NLG 850,000 554,854 7.00% due 06/15/05 660,000 439,877 ------------ 994,731 REPUBLIC OF POLAND - 3.38% 3.25% due 10/27/14 $6,500,000 4,216,876 ------------ GOVERNMENT OF SPAIN - 0.37% 10.00% due 02/28/05 ESP 8,380,000 70,053 11.45% due 08/30/98 45,750,000 396,324 ------------ 466,377 GOVERNMENT OF GREAT BRITIAN - 1.78% United Kingdom Treasury, [Pound 7.00% due 11/06/01 Sterling] 1,430,000 2,223,618 ------------ TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $37,543,142) $ 39,685,897 ------------ Shares Value ------ ----- COMMON STOCK - 0.01% HOUSEHOLD APPLIANCES & FURNISHINGS - 0.01% Decorative Home Accents, Incorporated 1,500 $ 15,000 ------------ TOTAL COMMON STOCK (Cost: $0) $ 15,000 ------------ WARRANTS - 0.01% BPC Holdings Corporation due 04/15/04 1,000 12,500 In Flight Phone Corporation 1,500 0 ------------ TOTAL WARRANTS (Cost: $0) $ 12,500 ------------ REPURCHASE AGREEMENT - 9.05% *** Principal Amount Value ------ ----- $11,301,000 Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95 at 5.75%, to be repurchased at $11,308,220 on 01/02/96, collateralized by $11,465,000 U.S. Treasury Notes, 5.125% due 04/30/98 (valued at $11,629,009 including interest) $ 11,301,000 ------------ TOTAL INVESTMENTS (Strategic Bond Trust) (Cost: $122,860,614) $124,924,833 ============ GLOBAL GOVERNMENT BOND TRUST Principal Amount Value ------ ----- U.S. GOVERNMENT AGENCY OBLIGATIONS - 12.03% FEDERAL HOME LOAN MORTGAGE CORPORATION - 7.55% 6.07% due 11/20/98 $ 5,000,000 $ 5,021,875 6.50% due 06/08/00 12,000,000 12,127,500 ------------ 17,149,375 FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.48% 6.25% due 10/28/98 5,000,000 5,044,550 6.85% due 05/26/00 5,000,000 5,133,600 ------------ 10,178,150 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost: $26,967,610) $ 27,327,525 ------------ FOREIGN GOVERNMENT OBLIGATIONS - 52.65% COMMONWEALTH OF AUSTRALIA - 11.75% New South Wales Treasury, 5.202% due 04/01/04 $ 7,000,000 4,784,079 New South Wales Treasury, 7.00% due 04/01/04 AUD 13,000,000 8,884,718 Queensland Treasury, 6.50% due 06/14/05 20,000,000 13,029,583 ------------ 26,698,380
The accompanying notes are an integral part of the financial statements. 45 133 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- GOVERNMENT OF CANADA - 6.27% 8.00% due 06/01/23 CAD 15,000,000 $ 11,512,256 Province of Ontario, zero coupon due 01/10/40 50,000,000 1,310,875 Province of Ontario, zero coupon due 01/10/35 40,000,000 1,423,654 ------------ 14,246,785 GOVERNMENT OF FRANCE - 2.24% 6.00% due 10/25/25 FRF 30,000,000 5,084,746 ------------ REPUBLIC OF ITALY - 15.59% 5.625% due 06/09/98 $ 12,000,000 12,045,000 8.50% due 08/01/04 ITL 20,000,000,000 11,111,216 10.00% due 08/01/03 20,000,000,000 12,258,481 ------------ 35,414,697 FEDERAL REPUBLIC OF GERMANY - 1.35% 5.625% due 09/20/16 DEM 5,000,000 3,062,042 ------------ GOVERNMENT OF SPAIN - 11.89% 8.00% due 05/30/04 ESP 750,000,000 5,604,905 10.30% due 06/15/02 1,500,000,000 12,785,367 10.50% due 10/30/03 1,000,000,000 8,615,086 ------------ 27,005,358 KINGDOM OF SWEDEN - 3.56% 10.25% due 05/05/00 SEK 50,000,000 8,082,820 ------------ TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost: $111,062,945) $119,594,828 ------------ SUPRANATIONAL ORGANIZATIONS - 8.74% European Investment Bank, 8.00% due 06/10/03 GBP 4,000,000 6,390,744 International Bank for Reconstruction and Development, 5.875% due 11/10/03 DEM 10,000,000 7,001,046 International Bank for Reconstruction and Development, 10.80% due 05/19/03 ITL 10,000,000,000 6,462,023 ------------ 19,853,813 TOTAL SUPRANATIONAL ORGANIZATIONS (Cost: $19,337,635) $ 19,853,813 ------------ CORPORATE BONDS - 15.42% BANKING & FINANCE - 12.02% Credit Local de France, zero coupon due 09/03/02 CAD 10,000,000 4,535,884 LKB Baden Wurtenberg, 6.50% due 09/15/08 DEM 15,000,000 10,399,094 Treuhandanstalt, 7.125% due 01/29/03 10,000,000 7,529,453 BANKING & FINANCE - CONTINUED Unidec, 5.50% due 11/25/02 FRF 25,000,000 $ 4,839,697 ------------ 27,304,128 ELECTRIC SERVICES - 3.40% Hydro-Quebec, zero coupon due 08/15/20 CAD 85,000,000 7,725,009 ------------ TOTAL CORPORATE BONDS (Cost: $32,982,216) $ 35,029,137 ------------ OTHER BONDS (FOREIGN GOVERNMENT - BACKED OR GUARANTEED) - 5.28% ELECTRIC SERVICES - 5.28% Tokyo Gas Company, 5.50% due 07/21/98 $12,000,000 11,985,000 ------------ TOTAL OTHER BONDS (FOREIGN GOVERNMENT-BACKED OR GUARANTEED) (Cost: $11,957,500) $11,985,000 ------------ CONVERTIBLE BONDS - 1.82% Hanson America, Incorporated, 2.39% due 03/01/01 5,000,000 4,137,500 ------------ TOTAL CONVERTIBLE BONDS (Cost: $3,993,750) $ 4,137,500 ------------ REPURCHASE AGREEMENT - 4.06% Principal Amount Value ------ ----- $9,226,000 Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95 at 5.00%, to be repurchased at $9,231,126 on 01/02/96, collateralized by $8,425,000 U.S. Treasury Notes, 7.50% due 05/15/02 (valued at $9,489,994 including interest) $ 9,226,000 ------------ TOTAL INVESTMENTS (Global Government Bond Trust) (Cost: $215,527,656) $227,153,803 ============ INVESTMENT QUALITY BOND TRUST Principal Amount Value ------ ----- CORPORATE BONDS - 32.49% DRUGS & HEALTH CARE - 0.28% OrNda Healthcorp, 11.375% due 08/15/04 $350,000 $ 393,750 ------------
The accompanying notes are an integral part of the financial statements. 46 134 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - -------------------------------------------------------------------------------
Principal Amount Value ------ ----- ELECTRIC UTILITIES - 1.81% Cincinnati Gas & Electric Company, 6.90% due 06/01/25 $1,300,000 $ 1,402,908 Cleveland Electric Illuminating Company, Series B, 9.50% due 05/15/05 125,000 129,375 Duke Power Company, 7.50% due 04/01/99 700,000 732,697 Virginia Electric & Power Company, 9.375% due 06/01/98 300,000 325,068 ----------- 2,590,048 FINANCE & BANKING - 20.36% American General Finance Corporation, 8.00% due 02/15/05 1,270,000 1,367,206 Associates Corporation of North America, 9.125% due 04/01/00 300,000 335,745 Associates Corporation of North America, 6.95% due 08/01/02 2,325,000 2,442,505 BankAmerica Corporation, 9.625% due 02/13/01 1,475,000 1,707,961 Beneficial Corporation, 8.40% due 05/15/08 350,000 413,287 Beneficial Corporation, 8.90% due 06/06/01 470,000 533,276 Comerica, Incorporated, 7.125% due 12/01/13 1,325,000 1,333,454 Commercial Credit Group, Incorporated, 10.00% due 05/01/99 290,000 326,671 Equitable Life Assurance Society of the United States, 6.95% due 12/01/05 1,150,000 1,164,375 Exxon Capital Corporation, 6.625% due 08/15/02 2,000,000 2,074,980 First National Bank of Boston, 8.00% due 09/15/04 1,775,000 1,967,623 First Union Corporation, 7.50% due 04/15/35 2,000,000 2,214,700 General Motors Acceptance Corporation, 7.00% due 09/15/02 1,400,000 1,452,710 General Motors Acceptance Corporation, 6.00% due 01/11/99 950,000 957,220 International Lease Finance Corporation, 7.50% due 03/01/99 1,500,000 1,574,055 National Westminster Bank PLC, 9.45% due 05/01/01 1,000,000 1,158,980 NBD Bancorp, 8.25% due 11/01/24 2,000,000 2,447,540 Norwest Corporation, 6.00% due 03/15/00 900,000 904,329 Sun Canada Financial Company, 7.25% due 12/15/15 1,500,000 1,522,275 Texaco Capital, Incorporated, 8.93% due 07/23/01 940,000 1,072,446 United Bankshares, Incorporated, 8.625% due 04/15/98 1,967,000 2,083,505 ----------- 29,054,843 FOOD STORES - 0.07% Big V Supermarkets, Incorporated, Series B, 11.00% due 02/15/04 $ 125,000 $ 101,875 ----------- FOREST PRODUCTS - 1.33% Boise Cascade Corporation, 9.85% due 06/15/02 1,620,000 1,893,164 ----------- INDUSTRIALS - 3.36% Armco, Incorporated, 9.375% due 11/01/00 450,000 445,500 Cablevision Industries Corporation, Series B, 9.25% due 04/01/08 100,000 107,000 Cablevision Systems Corporation, 9.25% due 11/01/05 200,000 209,000 Cincinnati Milacron, Incorporated, 7.875% due 05/15/00 870,000 888,488 Container Corporation of America, 9.75% due 04/01/03 150,000 146,250 Fort Howard Corporation, 9.25% due 01/03/15 450,000 456,750 Interlake Corporation, 12.00% due 11/15/01 100,000 101,000 K & F Industries, Incorporated, 11.875% due 12/01/03 250,000 268,750 Repap New Brunswick, Incorporated, 9.875% due 07/15/00 250,000 247,500 Tele Communications, Incorporated, 9.80% due 02/01/12 1,600,000 1,918,672 ----------- 4,788,910 INTERNATIONAL OIL - 0.70% Amoco Canada Petroleum Company, 7.95% due 10/01/22 900,000 998,622 ----------- NON-BANK FINANCE - 1.03% KFW International Financial, Incorporated, 8.85% due 06/15/99 1,340,000 1,474,429 ----------- PUBLISHING - 1.58% Time Warner, Incorporated, 9.125% due 01/15/13 2,000,000 2,253,900 ----------- SOCIAL SERVICES - 0.26% Kindercare Learning Centers, Incorporated, 10.375% due 06/01/01 350,000 369,250 ----------- TELECOMMUNICATION SERVICES - 0.26% Comcast Corporation, 9.125% due 10/15/06 50,000 52,125 Heritage Media Services, 11.00% due 06/15/02 150,000 159,375 Videotron, Ltd., 10.25% due 10/15/02 150,000 158,250 ----------- 369,750
The accompanying notes are an integral part of the financial statements. 47 135 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Amount Value ------ ----- TELEPHONE - 1.07% GTE Florida, Incorporated, Series A, 6.31% due 12/15/02 $ 1,400,000 $ 1,421,938 Paging Network, Incorporated, 10.125% due 08/01/07 100,000 108,250 ------------ 1,530,188 TRANSPORTATION - 0.39% Southern Railway Company, 8.75% due 10/15/03 470,000 549,524 ------------ TOTAL CORPORATE BONDS (Cost: $43,205,275) $ 46,368,253 ------------ U.S. TREASURY OBLIGATIONS - 35.36% U.S. TREASURY BONDS - 30.88% 8.875% due 02/15/19 3,800,000 5,122,286 10.75% due 02/15/03 9,400,000 12,265,496 12.00% due 08/15/13 17,320,000 26,686,310 ------------ 44,074,092 U.S. TREASURY NOTES - 4.47% 8.875% due 11/15/97 6,000,000 6,386,220 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost: $46,601,862) $ 50,460,312 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS - 21.49% FEDERAL HOME LOAN MORTGAGE CORPORATION - 12.95% 6.50% due 08/17/11 - 08/1/25 4,472,639 4,436,833 6.50% due 06/25/19, Series I5, Class H - REMIC 900,000 913,779 7.00% due 01/01/99 2,500,000 2,522,650 7.00% due 06/01/23 - 12/01/25 8,441,318 8,518,031 8.00% due 11/15/99, Series CL 2,000,000 2,093,740 ------------ 18,485,033 FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.70% 5.90% due 10/25/19 - REMIC 1,000,000 993,430 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 7.84% 6.50% due 07/15/08 - 05/15/09 242,482 244,679 7.00% due 09/15/23 - 02/15/24 1,636,328 1,655,751 7.50% due 12/15/99 - 10/15/25 4,661,564 4,795,537 8.20% due 12/06/15 50,250 52,103 8.50% due 09/15/16 - 04/15/22 4,206,812 4,434,262 9.50% due 09/10/15 1,746 1,872 ------------ 11,184,204 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost: $29,801,406) $ 30,662,667 ------------ FIXED INCOME - OTHER - 5.36% MISCELLANEOUS ASSET BACKED SECURITIES - 5.36% Advanta Credit Card Master Trust, Series 1994, Class A, 6.217% due 10/01/01 $ 1,450,000 $ 1,453,625 American Express Master Trust, Series 1992, Class A, 6.60% due 05/15/00 1,500,000 1,544,055 Premier Auto Trust, Series 1993, Class A2, 4.65% due 11/02/99 1,550,870 1,535,361 Premier Auto Trust, Series 1994, Class A3, 6.35% due 05/02/00 1,500,000 1,512,180 World Omni Automobile Lease, Series 1995, Class A, 6.05% due 11/25/01 1,600,000 1,609,488 ------------ 7,654,709 TOTAL FIXED INCOME - OTHER (Cost: $7,595,100) $ 7,654,709 ------------ FOREIGN BONDS - 1.99% CANADIAN - 1.76% Hydro-Quebec, 8.05% due 07/07/24 2,200,000 2,511,872 ------------ GOVERNMENT OF NEW ZEALAND - 0.23% 10.625% due 11/15/05 250,000 334,565 ------------ TOTAL FOREIGN BONDS (Cost: $2,679,776) $ 2,846,437 ------------ REPURCHASE AGREEMENT - 3.31% Principal Amount Value - --------- ----- $4,723,000 Repurchase Agreement with Shearson Lehman dated 12/29/95 at 5.93%, to be repurchased at $4,726,112 on 01/02/96, collateralized by $13,700,000 U.S. Treasury Strips, 5.59% due 02/15/13 (valued at $5,027,044 including interest) $ 4,723,000 ------------ TOTAL INVESTMENTS (Investment Quality Bond Trust) (Cost: $134,606,419) $142,715,378 ============ U.S. GOVERNMENT SECURITIES TRUST Principal Amount Value --------- ----- U.S. TREASURY OBLIGATIONS - 31.30% U.S. TREASURY BONDS - 4.71% 8.875% due 08/15/17 $ 9,000,000 $ 12,054,330 ------------
The accompanying notes are an integral part of the financial statements. 48 136 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- U.S. TREASURY NOTES - 26.60% 5.625% due 11/30/00 $10,000,000 $ 10,090,600 5.75% due 10/31/00 2,000,000 2,028,740 6.125% due 05/31/97 6,000,000 6,073,140 6.50% due 08/15/05 7,000,000 7,457,170 6.75% due 04/30/00 10,300,000 10,839,102 7.75% due 01/31/00 29,100,000 31,609,875 ------------ 68,098,627 TOTAL U.S. TREASURY OBLIGATIONS (Cost: $76,918,000) $ 80,152,957 ------------ U.S. GOVERNMENT AGENCY AND MORTGAGE-BACKED OBLIGATIONS - 50.50% FEDERAL HOME LOAN BANK - 6.57% 5.94% due 06/13/00 3,300,000 3,351,051 6.49% due 09/08/97 250,000 254,727 7.81% due 07/17/96 5,000,000 5,064,850 8.25% due 09/25/96 8,000,000 8,161,280 ------------ 16,831,908 FEDERAL HOME LOAN MORTGAGE CORPORATION - 12.83% 6.00% due 09/01/10 - 11/01/10 32,765,674 32,407,218 6.50% due 07/01/06 39,782 39,570 7.00% due 12/01/04 167,992 170,226 8.25% due 07/01/06 224,424 233,587 ------------ 32,850,601 FEDERAL NATIONAL MORTGAGE ASSOCIATION - 19.93% 6.50% TBA** 17,500,000 17,292,100 6.50% due 10/01/05 249,744 251,635 7.00% TBA** 8,125,000 8,190,975 7.52% due 08/26/05 17,000,000 17,642,549 8.00% due 08/01/04-10/01/24 38,361 39,755 8.25% due 09/01/08 380,564 397,945 8.50% due 02/01/09 69,158 74,114 8.75% due 08/01/09 380,295 401,847 10.00% due 04/01/16 5,210 5,736 10.50% due 03/01/16 35,648 39,118 11.50% due 02/01/20 5,865,018 6,682,426 ------------ 51,018,200 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 7.57% 7.00% TBA** 18,000,000 18,213,660 7.50% due 02/15/07 262,873 274,366 8.00% due 10/15/05 15,587 16,401 9.50% due 09/15/20 473,159 510,075 11.00% due 09/15/15 62,583 70,855 12.00% due 03/15/15 - 07/15/15 257,859 299,761 ------------ 19,385,118 STUDENT LOAN MARKETING ASSOCIATION - 1.80% 7.50% due 03/08/00 4,300,000 4,606,375 ------------ OTHER U.S. GOVERNMENT AGENCY OBLIGATIONS - 1.80% Tennessey Valley Authority, 8.25% due 11/15/96 4,500,000 4,604,580 ------------ TOTAL U.S. GOVERNMENT AGENCY AND MORTGAGE- BACKED OBLIGATIONS (Cost: $127,653,887) $129,296,782 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS - 0.82% Drexel Burnham Lambert, 9.30% due 06/01/17, (Collateralized by GNMA 10.00%) $ 61,618 $ 62,735 Goldman Sachs Trust 7, Series C, Class C2, 9.10% due 04/27/17, (Collateralized by FNMA 9.50%) 19,505 19,462 Merrill Lynch Trust XXV, Class B, 8.75% due 03/20/19 (Collateralized by FHLMC 10.00%) 47,341 47,252 Shearson Lehman, Incorporated, 7.50% due 06/01/18, (Collateralized by GNMA 11.50%) 2,017,792 1,980,584 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost: $2,201,204) $ 2,110,033 ------------ REPURCHASE AGREEMENT - 17.38% *** Principal Amount Value ------ ----- $44,490,000 Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95 at 5.75%, to be repurchased at $44,518,424 on 01/02/96, collateralized by $45,120,000 U.S. Treasury Notes, 5.125% due 04/30/98 (valued at $45,765,317 including interest) $ 44,490,000 ------------ TOTAL INVESTMENTS (U.S. Government Securities Trust) (Cost: $251,263,091) $256,049,772 ============ MONEY MARKET TRUST Principal Amount Value ------ ----- U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.92% STUDENT LOAN MARKETING ASSOCIATION - 6.92% 5.24% due 09/28/98 $10,000,000 $ 10,000,000 5.25% due 02/22/99 7,900,000 7,900,807 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $ 17,900,807 ------------ COMMERCIAL PAPER - 92.56% American Express Credit Corporation, 5.61% due 03/15/96 9,000,000 8,896,215 American Home Products Corporation, 5.72% due 02/09/96 2,000,000 1,987,607
The accompanying notes are an integral part of the financial statements. 49 137 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- COMMERCIAL PAPER - CONTINUED Assets Securitization Cooperative Corporation, 5.70% due 01/16/96 $5,500,000 $ 5,486,937 Associates Corporation of North America, 5.68% due 02/09/96 8,000,000 7,950,773 Avco Financial Services, Incorporated, 5.75% due 01/23/96 9,000,000 8,968,375 BankAmerica, 5.74% due 02/16/96 4,000,000 3,999,950 The Bank of New York, 5.52% due 05/22/96 4,000,000 3,998,781 Banque National de Paris, 5.51% due 05/21/96 6,500,000 6,359,725 Bayerische Hypotheken, 6.14% due 10/29/96 7,000,000 7,000,000 BCI Funding Corporation, 5.70% due 02/09/96 5,000,000 4,969,125 BCI Funding Corporation, 5.71% due 02/16/96 5,000,000 4,963,520 Bear Stearns Companies, Incorporated, 5.77% due 01/16/96 8,000,000 7,980,767 Burlington Northern Santa Fe, 5.90% due 02/28/96 2,500,000 2,476,236 Cariplo Finance, Incorporated, 5.61% due 03/04/96 6,500,000 6,436,186 Chase Manhattan Corporation, 5.65% due 02/29/96 1,500,000 1,486,110 Chase Manhattan Corporation, 5.77% due 04/15/96 7,500,000 7,500,000 Chevron Transport Corporation, 5.60% due 03/14/96 1,000,000 988,644 Chevron UK Investment PLC, 5.72% due 01/30/96 8,000,000 7,963,138 CIT Group Holdings, Incorporated, 5.70% due 01/24/96 5,000,000 4,981,792 Corestates Capital Corporation, 5.68% due 02/16/96 3,000,000 2,978,227 Corestates Capital Corporation, 5.86% due 01/05/96 6,000,000 6,000,000 Delaware Funding Corporation, 5.71% due 01/08/96 500,000 499,445 Den Danske Corporation, 5.63% due 03/04/96 7,500,000 7,426,106 Dresdner U.S. Finance, 5.72% due 01/22/96 7,000,000 6,976,643 ESC Securitization, Incorporated, 5.72% due 02/02/96 9,000,000 8,954,240 ESC Securitization, Incorporated, 5.68% due 02/22/96 2,000,000 1,983,591 First Bank System, FRN due 05/06/96 5,000,000 4,999,669 General Electric Capital Corporation, 5.59% due 03/01/96 7,000,000 6,934,783 COMMERCIAL PAPER - CONTINUED General Electric Capital Services, Incorporated, 5.70% due 02/09/96 $2,000,000 $ 1,987,650 General Motors Acceptance Corporation, 5.58% due 04/15/96 8,000,000 7,869,800 Glaxo PLC, 5.57% due 03/11/96 4,000,000 3,956,678 Her Majesty In Right of Canada, 5.50% due 03/22/96 6,680,000 6,597,335 Hitachi America, Ltd., 5.72% due 01/12/96 1,490,000 1,487,396 Household Finance Corporation, 5.70% due 01/31/96 3,000,000 2,985,750 Household International, Incorporated, 5.73% due 02/08/96 3,000,000 2,981,855 Household International, Incorporated, 5.65% due 03/08/96 3,000,000 2,968,454 KFW International Finance, Incorporated, 5.68% due 02/08/96 9,000,000 8,946,040 Kreditbank North America, 5.70% due 03/01/96 7,500,000 7,428,750 National Westminister Bank of Canada, 5.76% due 02/22/96 4,000,000 4,000,000 Norwest Financial, Incorporated, 5.69% due 02/28/96 4,000,000 3,963,331 PNC Funding Corporation, 5.75% due 02/05/96 700,000 696,087 PNC Funding Corporation, 5.76% due 02/05/96 5,965,000 5,931,596 PNC Funding Corporation, 5.77% due 02/05/96 600,000 596,634 Sears Roebuck Acceptance Corporation, 5.70% due 02/22/96 8,000,000 7,934,133 SMM Trust, 5.925% due 11/15/96 8,000,000 8,000,000 Toshiba America, 5.65% due 01/12/96 7,000,000 6,987,915 Zeneca Wilmington Company, 5.70% due 01/19/96 2,875,000 2,866,806 ------------ TOTAL COMMERCIAL PAPER $239,332,795 ------------ REPURCHASE AGREEMENT - 0.52% Principal Amount Value ------ ----- $1,348,000 Repurchase Agreement with Aubrey Lanston dated 12/29/95 at 5.90%, to be repurchased at $1,348,884 on 01/02/96, collateralized by $1,350,000 U.S Treasury Notes, 5.125% due 12/31/98 (valued at $1,372,781 including interest) $ 1,348,000 ------------ TOTAL INVESTMENTS (Money Market Trust) $258,581,602 ============
The accompanying notes are an integral part of the financial statements. 50 138 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - -------------------------------------------------------------------------------- ASSET ALLOCATION TRUSTS
AGGRESSIVE MODERATE CONSERVATIVE ---------------- ----------------- ------------------ Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- COMMON STOCKS: 66.91% 42.99% 25.34% AEROSPACE: 0.76% 0.46% 0.33% Boeing Company -- -- 1,400 $ 109,725 700 $ 54,862 Lockheed Martin Corporation 1,800 $ 142,200 -- -- -- -- McDonnell Douglas Corporation 2,100 193,200 6,300 579,600 1,300 119,600 Northrop Grumman Corporation 3,300 211,200 4,200 268,800 900 57,600 Oerlikon Buhrle AG* 720 58,674 -- -- -- -- Rockwell International Corporation 3,100 163,913 7,500 396,563 2,800 148,050 Thiokol Corporation 3,400 115,175 5,300 179,537 900 30,488 Transtechnology Corporation 4,100 55,350 8,800 118,800 2,300 31,050 TRW, Incorporated 1,000 77,500 -- -- -- -- United Technologies Corporation 6,500 616,687 14,200 1,347,225 2,900 275,137 Watkins Johnson Company -- -- -- -- 700 30,625 ---------- ---------- -------- 1,633,899 3,000,250 747,412 AGRICULTURAL MACHINERY: 0.08% 0.06% 0.03% Deere & Company 5,000 176,250 10,300 363,075 1,800 63,450 ---------- ---------- -------- AIR TRAVEL: 0.74% 0.47% 0.28% AMR Corporation* 1,200 89,100 2,700 200,475 600 44,550 Atlantic Southeast Airlines, Incorporated 2,900 62,350 5,800 124,700 2,100 45,150 British Airways 19,800 143,296 31,000 224,352 5,500 39,804 Delta Air Lines, Incorporated 11,000 812,625 23,400 1,728,675 4,800 354,600 Japan Air Lines Company* 38,000 252,107 62,000 411,332 11,000 72,978 KLM Royal Dutch Airlines* 5,700 200,925 9,700 341,925 1,900 66,975 Northwest Airlines Corporation* 400 20,400 700 35,700 -- -- ---------- ---------- -------- 1,580,803 3,067,159 624,057 ALUMINUM: 0.64% 0.44% 0.28% Aluminum Company of America 26,000 1,374,750 54,000 2,855,250 11,700 618,637 ---------- ---------- -------- APPAREL & TEXTILES: 0.33% 0.24% 0.15% Kellwood Company 3,800 77,425 8,800 179,300 800 16,300 Pacific Sunwear of California* 5,100 45,900 11,600 104,400 2,600 23,400 Talbots, Incorporated 9,900 284,625 21,800 626,750 4,300 123,625 Urban Outfitters, Incorporated* 7,600 176,700 17,500 406,875 4,200 97,650 Warnaco Group, Incorporated, Class A 4,800 120,000 10,600 265,000 3,400 85,000 ---------- ---------- -------- 704,650 1,582,325 345,975 AUTO PARTS: 0.78% 0.57% 0.35% Echlin, Incorporated 18,400 671,600 33,600 1,226,400 7,300 266,450 Gentex Corporation* 1,600 35,200 3,500 77,000 800 17,600 Genuine Parts Company 20,400 836,400 50,300 2,062,300 10,200 418,200 Monro Muffler Brake, Incorporated* 5,365 74,439 11,125 154,359 3,150 43,706 A.O. Smith Corporation 400 8,300 800 16,600 200 4, 150 Spartan Motors, Incorporated* 5,300 58,300 11,900 130,900 2,900 31,900 ---------- ---------- -------- 1,684,239 3,667,559 782,006 AUTOMOBILES: 1.30% 0.74% 0.42% Chrysler Corporation 6,000 332,250 12,500 692,187 2,700 149,513 Ford Motor Company 16,200 469,800 30,700 890,300 6,300 182,700 General Motors Corporation 13,300 703,237 24,000 1,269,000 4,900 259,087
The accompanying notes are an integral part of the financial statements. 51 139 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ------------------ Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- Automobiles - continued Honda Motor Company 18,000 $ 371,332 26,000 $ 536,368 5,000 $103,148 Toyota Motor Corporation 29,000 615,109 47,000 996,901 8,000 169,685 Volvo AB, Series B 14,400 294,953 20,200 413,754 3,700 75,787 2,786,681 4,798,510 939,920 ---------- ---------- -------- BANKING: 6.85% 4.01% 2.21% Asahi Bank 22,000 276,998 26,000 327,361 4,000 50,363 Banc One Corporation 11,500 434,125 21,600 815,400 2,700 101,925 Bank of New York, Incorporated 27,700 1,350,375 62,900 3,066,375 13,500 658,125 Bank of Tokyo 17,000 298,015 26,000 455,787 5,000 87,651 Bank of Yokohama 9,000 73,656 24,000 196,416 -- -- Bankamerica Corporation 4,600 297,850 6,300 407,925 1,000 64,750 Banponce Corporation 12,200 472,750 26,100 1,011,375 6,300 244,125 Banco Bilbao Vizcaya SA 6,250 225,165 9,750 351,257 1,900 68,450 Barclays 2,965 33,978 4,738 54,304 857 9,817 Boatmens Bancshares, Incorporated 2,100 85,838 4,200 171,675 1,000 40,875 Banque National Paris 4,443 200,420 6,866 309,720 1,205 54,357 Chemical Banking Corporation 7,200 423,000 15,200 893,000 2,800 164,500 Christiania Bank O 63,800 149,072 99,900 233,422 20,200 47,199 Citicorp 3,800 255,550 3,300 221,925 600 40,350 Collective Bancorp, Incorporated 3,000 76,125 8,000 203,000 2,300 58,363 Comerica, Incorporated 1,900 76,238 4,000 160,500 800 32,100 Crestar Financial Corporation -- -- 1,300 76,863 300 17,737 CS Holding 3,235 331,633 5,625 576,642 1,200 123,017 Dai Ichi Kangyo Bank, Ltd. 19,000 373,559 32,000 629,153 6,000 117,966 Den Norske Bank 117,800 308,723 188,300 493,484 31,100 81,505 Deutsche Bank AG 8,050 381,428 12,650 599,387 2,300 108,979 Fifth Third Bancorp 1,100 80,575 2,300 168,475 400 29,300 First Bank System, Incorporated 2 900 143,913 -- -- 400 19,850 First Chicago Corporation 12,093 477,674 27,631 1,091,424 3,815 150,693 First Interstate Bancorp 2,900 395,850 6,700 914,550 1,100 150,150 Fokus Bank* 27,800 150,102 35,900 193,837 7,650 41,305 Fuji Bank 22,000 485,811 35,000 772,881 6,000 132,494 Generale De Banque 150 51,988 300 103,976 50 17,329 HSBC Holdings - HKD 6,700 102,285 68,000 1,028,904 1,800 27,479 HSBC Holdings -[pound sterling] 43,400 656,683 10,500 160,297 12,200 184,597 Hubco, Incorporated 12,000 265,500 20,400 451,350 3,800 84,075 Istituto Nazionale delle Assicurazioni -- -- -- -- 16,800 22,268 Industrial Bank of Japan 15,000 454,722 21,000 636,610 5,000 151,574 Lloyds TSB Group, PLC 64,896 334,105 103,293 531,784 18,117 93,271 Mitsubishi Bank 6,000 141,211 9,000 211,816 2,000 47,070 Mitsubishi Trust & Banking Corporation 5,000 83,293 11,000 183,245 1,000 16,659 Mitsui Trust & Banking Corporation 26,000 284,552 35,000 383,051 9,000 98,499 Nationsbank Corporation 848 59,042 1,480 103,045 364 25,344 Overseas Union Bank 27,000 186,108 49,000 337,752 9,000 62,036 Public Bank BHD 36,000 68,890 50,000 95,681 10,000 19,136 Royal Bank of Scotland Group 21,949 199,753 34,321 312,348 6,102 55,533 Sakura Bank* 43,000 545,569 65,000 824,697 12,000 152,252 Schwiez Bankverein 475 193,953 770 314,408 170 69,415 Sparebanken NOR 8,000 206,504 12,600 325,240 2,500 64,532 Standard Chartered -- -- -- -- 106 898 Standard Federal Bancorporation 17,300 861,188 42,500 1,673,437 6,900 271,688 The Sumitomo Bank, Ltd. 23,000 487,845 27,000 572,688 5,000 106,053
The accompanying notes are an integral part of the financial statements. 52 140 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ------------------ Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- Banking - continued Sumitomo Trust & Banking 8,000 $ 113,123 19,000 $ 268,668 4,000 $ 56,562 The Tokai Bank, Ltd. 18,000 251,041 28,000 390,508 5,000 69,734 Unidanmark 4,300 212,967 6,950 344,214 1,175 58,195 United Overseas Bank 37,800 363,436 56,600 544,192 11,200 107,685 Westpac Banking Corporation 78,900 349,520 123,600 547,537 21,800 96,572 Zions Bancorp 7,100 569,775 15,500 1,243,875 3,800 304,950 ---------- ----------- ---------- 14,721,476 25,985,461 4,959,352 BROADCASTING: 1.00% 0.63% 0.36% Canal Plus 1,400 262,446 2,525 473,341 475 89,044 Capital Cities/ABC, Incorporated 400 49,350 700 86,362 200 24,675 Peoples Choice TV Corporation* 7,000 133,000 20,100 381,900 2,100 39,900 TV 4 AB 11,800 204,377 18,500 320,421 3,600 62,352 TV Francaise 5,150 520,574 6,350 641,873 1,100 111,190 Viacom, Incorporated, Class A* -- -- -- -- 272 12,478 Viacom, Incorporated, Class B* 20,800 985,400 46,200 2,188,725 97,600 462,380 ---------- ----------- --------- 2,155,147 4,092,622 802,019 BUILDING CONSTRUCTION: 0.32% 0.21% 0.13% American Buildings Company* 800 18,000 -- -- 200 4,500 Fluor Corporation 5,600 369,600 14,800 976,800 3,400 224,400 Harsco Corporation 5,200 302,250 3,900 226,688 1,200 69,750 Kaneshita Construction -- -- 11,000 148,087 -- -- ---------- ----------- --------- 689,850 1,351,575 298,650 BUSINESS SERVICES: 1.19% 0.84% 0.43% ADVO, Incorporated -- -- 3,800 98,800 800 20,800 America On-Line, Incorporated* 5,500 206,250 11,600 435,000 3,000 112,500 Catalina Marketing Corporation* 3,900 244,729 8,400 527,100 1,900 119,225 EA Engineer Science and Technology, Incorporated* 6,200 25,575 15,400 63,525 2,300 9 488 Eaux (Cie Generale) 1,150 114,812 1,720 171,719 420 41 931 Flightsafety International, Incorporated 4,400 221,100 8,100 407,025 800 40 200 Medaphis Corporation* 1,600 59,200 3,900 144,300 600 22 200 Microage, Incorporated* 9,600 78,000 24,400 198,250 5,500 44 688 North West Water 17,300 165,504 27,000 258,301 4,800 45 920 Ogden Corporation 2,000 42,750 1,600 34,200 500 10 687 Omnicom Group 5,200 193,700 21,800 812,050 2,200 81 950 PHH Corporation -- -- 600 28,050 -- -- Prosegur Compania 4,200 104,221 6,500 161,294 -- -- Securitas AB 2,000 94,884 7,000 332,093 1,300 61,674 Serv-Tech, Incorporated* 6,200 36,425 6,700 39,362 -- -- SunGuard Data Systems* 19,100 544,350 34,900 994,650 7,800 222,300 Syratech Corporation* 3,500 70,438 7,600 152,950 -- -- TETRA Technologies, Incorporated* 7,250 164,938 16,000 364,000 3,625 82,469 Tracor, Incorporated* 2,700 39,150 -- -- -- -- TRC Companies, Incorporated* 4,400 28,600 10,600 68,900 2,500 16,250 Yorkshire Water 12,600 115,648 19,700 180,815 3,500 32,125 --------- ----------- --------- 2,550,274 5,472,384 964,407
The accompanying notes are an integral part of the financial statements. 53 141 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - -------------------------------------------------------------------------------- ASSET ALLOCATION TRUSTS
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ------------------ Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- CHEMICALS: 1.72% 1.10% 0.59% Akzo Nobel NV 2,500 $ 289,151 4,450 $ 514,688 700 $ 80,962 Ciba-Geigy AG 225 197,984 360 316,775 -- -- Cytec Industries, Incorporated* 1,200 74,850 1,900 118,513 600 37,425 E.I.Du Pont De Nemours & Company 16,200 1,131,975 33,700 2,354,788 7,200 503 100 W.R. Grace & Company 1,600 94,600 3,200 189,200 700 41 387 Great Lakes Chemical Corporation 1,800 129,600 2,500 180,000 300 21 600 Martek Biosciences Corporation* 2,700 68,175 14,700 371,175 1,600 40 400 Metacorp BHD 11,000 28,586 17,000 44,178 8,000 20 790 Metallgesellschaft* 6,800 148,846 14,600 319,582 3,000 65 667 Nippon Shokubai Company 30,000 293,462 50,000 489,104 9,000 88 039 Olin Corporation -- -- 800 59,400 200 14,850 Om Group, Incorporated 2,200 72,875 2,900 96,063 -- -- Riken Vinyl Industry Company 29,000 266,828 46,000 423,245 8,000 73,608 Sekisui Chemical 16,000 235,545 25,000 368,039 3,000 44,165 Shin Etsu Chemical Company 12,000 248,717 22,000 455,981 4,000 82,906 Special Devices, Incorporated* 2,100 27,300 -- -- -- -- Union Carbide Corporation 10,400 390,000 22,500 843,750 5,500 206,250 ---------- ----------- ---------- 3,698,494 7,144,481 1,321,149 COMPUTERS & BUSINESS EQUIPMENT: 2.35% 1.61% 1.03% Bay Networks, Incorporated* 1,650 67,856 -- -- -- -- 3Com Corporation -- -- 4,800 223,800 1,100 51,288 Cisco Systems, Incorporated* 11,600 865,650 21,500 1,604,437 4,500 335,813 Compaq Computer Corporation* 26,400 1,267,200 60,400 2,899,200 11,700 561,600 Digital Equipment Corporation* 5,600 359,100 6,300 403,988 2,500 160,313 Fujitsu 8,000 89,104 13,000 144,794 2,000 22,276 Hewlett-Packard Company 4,300 360,125 8,600 720,250 2,000 167,500 Hutchinson Technology, Incorporated* 1,100 46,475 -- -- -- -- International Business Machines Corporation 18,900 1,734,075 41,500 3,807,625 9,500 871,625 International Imaging Materials* 4,500 113,625 9,700 244,925 2,500 63,125 Natural Microsystems Corporation* 5,200 158,600 12,300 375,150 2,200 67,100 Tech Data Corporation* -- -- -- -- 1,000 15,000 ---------- ----------- ---------- 5,061,810 10,424,169 2,315,640 CONGLOMERATES: 1.14% 0.66% 0.34% AlliedSignal, Incorporated 3,200 152,000 13,000 617,500 2,800 133,000 Berjaya Sports 33,000 76,663 83,000 192,818 10,000 23,231 BIC 4,700 477,966 6,975 709,322 1,225 124,576 BTR PLC 55,200 281,187 86,300 439,609 15,200 77,428 Corporacion Financiera Alba 2,500 153,957 3,650 224,777 600 36,950 First Pacific Company 119,089 132,449 189,734 211,020 20,185 22,449 Hutchison Whampoa 71,000 432,473 106,000 645,664 19,000 115,732 Jardine Matheson* 16,000 118,563 31,600 234,156 6,600 48,912 Nokia OY AB, Series A 6,100 239,826 15,350 607,026 1,600 62,905 Nokia OY AB, Series K 6,350 251,115 4,250 167,092 1,850 73,160 Tomkins 32,200 140,772 50,300 219,901 8,900 38,909 ---------- ----------- ---------- 2,456,971 4,268,885 757,252
The accompanying notes are an integral part of the financial statements. 54 142 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ---------------- ----------------- ------------------ Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- CONSTRUCTION MATERIALS: 0.65% 0.42% 0.23% BPB Industries 26,600 $ 123,519 41,700 $ 193,637 7,400 $ 34,362 Lafarge Corporation 15,900 298,125 24,100 451,875 4,000 75,000 Medusa Corporation 6,100 161,650 16,150 427,975 3,800 100,700 RMC Group 4,400 67,719 6,900 106,195 1,200 18,469 Tostem Corporation 10,000 332,203 16,000 531,525 3,000 99,661 Vulcan Materials Company 7,000 403,375 17,700 1,019,962 3,100 178,638 ---------- ---------- ---------- 1,386,591 2,731,169 506,830 CONSTRUCTION & MINING EQUIPMENT: 0.50% 0.36% 0.25% Caterpillar, Incorporated 11,900 699,125 25,500 1,498,125 5,900 346,625 Harnischfeger Industries, Incorporated 10,791 358,801 24,534 815,756 6,691 222,476 Japan Foundation Engineer 700 13,763 -- -- -- -- ---------- ---------- ---------- 1,071,689 2,313,881 569,101 COSMETICS & TOILETRIES: 0.35% 0.28% 0.17% Alberto-Culver Company, Class A 10,900 332,450 26,000 793,000 5,000 152,500 Avon Products, Incorporated 2,200 165,825 7,600 572,850 1,600 120,600 CCA Industries, Incorporated* 12,500 15,625 28,400 35,500 6,300 7,875 Guest Supply, Incorporated* 10,500 237,562 19,050 431,006 4,500 101,813 ---------- ---------- ---------- 751,462 1,832,356 382,788 DOMESTIC OIL: 1.47% 1.10% 0.69% Amerada Hess Corporation 14,500 768,500 33,900 1,796,700 6,200 328,600 Atlantic Richfield Company 6,200 686,650 15,600 1,727,700 3,200 354,400 Exxon Corporation 8,700 697,087 16,100 1,290,013 2,800 224,350 Kerr-McGee Corporation 1,400 88,900 -- -- 900 57,150 Mobil Corporation 500 56,000 400 44,800 100 11,200 Unocal Corporation 29,400 856,275 77,700 2,263,012 19,300 562,113 ---------- ---------- ---------- 3,153,412 7,122,225 1,537,813 DRUGS & HEALTH CARE: 5.75% 3.78% 2.24% Allergan, Incorporated 1,100 35,750 2,200 71,500 500 16,250 American Home Products Corporation 2,900 281,300 5,300 514,100 1,400 135,800 Amgen, Incorporated* 16,200 961,875 38,400 2,280,000 8,200 486,875 Baxter International, Incorporated 22,800 954,750 45,300 1,896,938 11,100 464,812 Biogen, Incorporated 500 30,750 900 55,350 -- -- Bristol-Myers Squibb Company 19,000 1,631,625 29,500 2,533,313 6,300 541,012 Columbia/HCA-Healthcare Corporation 15,900 806,925 39,200 1,989,400 8,000 406,000 Cor Therapeutics, Incorporated* 8,100 67,837 15,600 130,650 4,300 36,012 Gehe AG 750 381,666 1,187 604,050 187 95,162 Genentech, Incorporated* 6,500 344,500 17,900 948,700 3,900 206,700 Glaxo Wellcome PLC, ADR 21,400 304,100 33,445 475,263 6,077 86,356 Health Management Association, Class A* 750 19,594 1,600 41,800 550 14,369 Integrated Health Services, Incorporated 2,700 67,500 3,700 92,500 1,300 32,500 Johnson & Johnson 10,500 899,063 22,000 1,883,750 4,700 402,437 Merck & Company, Incorporated 30,000 1,972,500 57,900 3,806,925 11,600 762,700 Pfizer, Incorporated 5,100 321,300 11,000 693,000 2,400 151,200 Pharmacia & Upjohn, Incorporated* 10,320 399,900 22,600 875,750 4,455 172,631 Protein Design Laboratories, Incorporated* 7,900 182,687 15,700 363,063 3,200 74,000 Sankyo Company 7,000 157,288 11,000 247,167 2,000 44,939 Schering AG 4,650 308,044 7,650 506,783 1,300 86,120 Schering-Plough Corporation 6,100 333,975 12,700 695,325 2,700 147,825
The accompanying notes are an integral part of the financial statements. 55 143 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ----------------- Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- DRUGS & HEALTH CARE - CONTINUED SmithKline Beecham 24,000 $ 264,637 38,100 $ 420,112 6,700 $ 73,878 SmithKline Beecham PLC, ADR 600 33,300 4,000 222,000 -- -- SmithKline BCH/BEC 29,400 320,528 45,900 500,416 8,100 88,309 Spacelabs, Incorporated* 2,800 80,500 6,100 175,375 1,900 54,625 St. Jude Medical, Incorporated 1,950 83,850 15,200 653,600 -- -- Takeda Chemical Industries 18,000 296,368 28,000 461,017 5,000 82,324 Thermedics, Incorporated* 8,100 224,775 15,300 424,575 3,900 108,225 Universal Health Services, Incorporated* 4,300 190,813 7,900 350,562 3,400 150,875 Yamanouchi Pharmaceutical 19,000 408,523 29,000 623,535 5,000 107,506 ---------- ----------- ---------- 12,366,223 24,536,519 5,029,442 ELECTRICAL EQUIPMENT: 1.76% 1.18% 0.68% Alliance Semiconductor Corporation* -- -- 1,200 13,950 -- -- Austria Mikro Systeme International AG 360 58,402 672 109,016 156 25,307 Boston Scientific Corporation* 2,600 127,400 5,200 254,800 1,600 78,400 CAI Wireless Systems, Incorporated* 14,025 134,991 32,670 314,449 7,095 68,289 Exide Corporation 7,700 353,237 13,800 633,075 1,900 87,162 General Electric Company 20,000 1,440,000 51,100 3,679,200 10,700 770,400 Hitachi 28,000 282,034 44,000 443,196 8,000 80,581 Mitsubishi Electric Company 26,000 187,099 43,000 309,433 5,000 35,981 NEC Corporation 12,000 146,441 19,000 231,864 4,000 48,814 NTT Data Communications System 8 268,862 11 369,685 2 67,215 Omron Corporation 11,000 253,559 17,000 391,864 20,000 46,102 Sanmina Corporation* 4,300 223,063 8,200 425,375 2,100 108,937 Sumitomo Electric Industries 23,000 276,223 30,000 360,291 7,000 84,069 Thermo Voltek Corporation* 1,900 28,975 9,700 147,925 1,500 22,875 ---------- ----------- ---------- 3,780,286 7,684,123 1,524,132 ELECTRIC UTILITIES: 1.02% 0.65% 0.36% Eastern Utilities Associates 10,500 248,063 21,800 515,025 4,700 111,037 Entergy Corporation 10,100 295,425 22,700 663,975 4,700 137,475 Hong Kong Electric Holdings, Ltd. 58,000 190,145 85,000 278,661 15,500 50,815 Kansai Electric Power -- -- 9,000 217,918 20,000 48,426 Nipsco Industries, Incorporated 7,600 290,700 16,100 615,825 3,500 133,875 Pinnacle West Capital Corporation 9,800 281,750 21,200 609,500 4,500 129,375 Scottish Power 38,800 222,954 60,500 347,647 7,800 44,821 Tohoku Electric Power, Incorporated 5,500 132,639 -- -- -- -- Tokyo Electric Power, Incorporated 10,100 269,985 20,700 553,337 2,900 77,521 VEBAAG 6,150 261,091 9,750 413,925 2,000 84,908 ---------- ----------- ---------- 2,192,752 4,215,813 818,253 ELECTRONICS: 2.05% 1.36% 0.77% Adaptec, Incorporated* 5,700 233,700 5,200 213,200 -- -- Adflex Solutions, Incorporated* 2,100 56,175 4,800 128,400 2,200 58,850 AMP, Incorporated 3,000 115,125 8,000 307,000 3,000 115,125 Analog Devices, Incorporated* 10,300 364,363 26,700 944,512 2,000 70,750 DSC Communications Corporation* 8,000 295,000 17,000 626,875 3,700 136,438 L.M. Ericsson Telephone Company, Class B, ADR 18,300 356,850 32,500 633,750 8,400 163,800 Fanuc 5,400 233,782 10,900 471,893 2,000 86,586 Glenayre Technologies, Incorporated* 8,400 522,900 10,300 641,175 4,100 255,225 Harris Corporation 1,200 65,550 3,400 185,725 -- --
The accompanying notes are an integral part of the financial statements. 56 144 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - -------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ----------------- Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- ELECTRONICS - CONTINUED Intel Corporation 13,200 $749,100 27,600 $1,566,300 5,900 $334,825 Kyocera Corporation 1,000 74,286 -- -- -- -- Liberty Technologies, Incorporated* -- -- 17,500 87,500 3,900 19,500 Linear Technology Corporation -- -- 17,500 686,875 -- -- Maxim Integrated Products, Incorporated* 2,200 84,700 4,700 180,950 1,000 38,500 Motorola, Incorporated 5,300 302,100 11,000 627,000 2,400 136,800 Murata Manufacting Company, Ltd -- -- 3,000 110,412 1,000 36,804 National Grid Group* 23,500 72,628 36,800 113,732 6,500 20,089 National Semiconductor Corporation* 2,000 44,500 4,100 91,225 1,000 22,250 Raytheon Company 3,400 160,650 10,200 481,950 -- -- Richey Electronics, Incorporated* 4,000 52,000 2,900 37,700 1,100 14,300 Rohm Company 3,000 169,395 5,000 282,324 1,000 56,465 Scientific-Atlanta, Incorporated 7,700 115,500 2,600 39,000 600 9,000 Sequa Corporation, Class A* 2,200 67,100 -- -- 1,300 39,650 SGS Thomson Microelectronics NV 2,800 107,208 5,100 195,273 900 34,460 SGS Thomson Microelectronics NV FRF 1,000 40,250 -- -- 1,000 40,250 Unitrode Corporation* 3,300 93,225 4,500 127,125 1,100 31,075 Xilinx, Incorporated* 1,100 33,550 2,300 70, 150 500 15,250 --------- --------- --------- 4,409,637 8,850,046 1,735,992 FINANCIAL SERVICES: 4.06% 2.61% 1.62% Acom Company 5,700 238,489 8,000 334,722 1,400 58,576 Allstate Corporation 37,842 1,556,252 73,544 3,024,497 15,762 648,212 American Express Company 20,400 844,050 43,400 1,795,675 8,800 364,100 Astoria Financial Corporation* 7,200 328,500 16,500 752,813 4,200 191,625 Beneficial Corporation 5,500 256,438 5,300 247,113 900 41,962 BHC Financial, Incorporated 2,900 52,200 8,600 154,800 1,000 18,000 Daiwa Securities 23,000 351,961 36,000 550,896 6,000 91,816 Equitable Companies, Incorporated -- -- -- -- 1,000 24,000 Federal Home Loan Mortgage Corporation 11,800 985,300 26,400 2,204,400 5,500 459,250 Federal National Mortgage Association 17,000 2,110,125 35,800 4,443,675 8,000 993,000 Fleet Financial Group, Incorporated 10,398 423,719 21,545 877,959 5,060 206,189 Internationale Nederlanden Groep NV 2,967 198,198 6,169 412,112 828 55,314 Japan Associated Finance Company* 2,000 211,138 3,000 316,707 1,000 105,569 Jefferies Group, Incorporated 2,400 113,400 4,300 203,175 1,100 51,975 Legg Mason, Incorporated 10,700 294,250 16,200 445,500 3,000 82,500 Long Island Bancorp, Incorporated 3,000 79,125 500 13,187 300 7,912 Nikko Securities 21,000 270,508 29,000 373,559 4,000 51,525 Security Services 1,900 26,380 3,000 41,652 500 6,942 Tab Corporation Holdings, Ltd. 29,200 82,474 23,100 65,245 8,100 22,879 Travelers Group, Incorporated 4,933 310,162 10,733 674,837 2,233 140,400 --------- ---------- --------- 8,732,669 16,932,524 3,621,746 FOOD & BEVERAGES: 3.89% 2.48% 1.63% Anheuser-Busch Companies, Incorporated 900 60,187 -- -- 1,300 86,938 Archer-Daniels-Midland Company 4,017 72,306 18,230 328,140 3,882 69,876 Bass 19,100 213,129 30,000 334,757 5,300 59,140 Cadbury Schweppes PLC 21,090 174,086 32,943 271,923 8,418 69,487 The Coca Cola Company 5,800 430,650 10,800 801,900 2,700 200,475 Dean Foods Company 10,800 297,000 20,300 558,250 4,700 129,250 Dekalb Genetics Corporation, Class B 6,300 284,287 12,700 573,087 2,500 112,813 Dole Food Company, Incorporated 7,500 262,500 12,800 448,000 2,900 101,500 General Mills, Incorporated 2,400 138,600 -- -- -- --
The accompanying notes are an integral part of the financial statements. 57 145 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ----------------- Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- FOOD & BEVERAGES - CONTINUED Goodmark Foods, Incorporated 4,600 $ 81,650 10,800 $ 191,700 2,600 $ 46,150 Kellogg Company 10,400 803,400 20,700 1,599,075 4,600 355,350 Nabisco Holdings Corporation, Class A 5,800 189,225 6,000 195,750 6,100 199,013 Nestle SA 192 212,390 340 376,108 61 67,478 Nippon Meat Packer 10,000 145,278 15,000 217,918 3,000 43,584 PepsiCo, Incorporated 43,600 2,436,150 91,300 5,101,387 19,600 1,095,150 Pioneer Hi Bred International, Incorporated 3,700 205,812 6,800 378,250 1,600 89,000 Ralcorp Holdings, Incorporated* 15,266 370,200 34,100 826,925 7,800 189,150 Ralston Purina Company 16,500 1,029,188 36,600 2,282,925 7,200 449,100 Southcorp Holdings, Ltd. 98,300 228,690 154,500 359,436 28,000 65,140 Tabacalera SA 7,550 286,315 10,800 409,563 2,350 89,118 Tate & Lyle 20,700 151,738 32,400 237,503 5,700 41,783 Tyson Foods, Incorporated, Class A 11,300 295,212 22,000 574,750 3,300 86,212 ---------- ----------- ---------- 8,367,993 16,067,347 3,645,707 FOREST PRODUCTS: 0.08% 0.04% 0.03% Georgia-Pacific Corporation 1,400 96,075 3,100 212,738 700 48,037 Weyerhaeuser Company 1,200 51,900 -- -- -- -- Wickes Lumber Company* 4,600 23,000 7,300 36,500 1,800 9,000 ---------- ----------- ---------- 170,975 249,238 57,037 GAS & PIPELINE UTILITIES: 0.91% 0.65% 0.38% Eastern Enterprises 4,300 151,575 15,900 560,475 2,900 102,225 Enron Corporation 16,700 636,687 35,200 1,342,000 8,000 305,000 MCN Corporation 8,800 204,600 16,000 372,000 4,600 106,950 Pacific Enterprises 13,800 389,850 34,700 980,275 5,900 166,675 Piedmont National Gas, Incorporated 7,900 183,675 14,200 330,150 3,200 74,400 Questar Corporation 4,100 137,350 9,300 311,550 1,700 56,950 UGI Corporation 11,800 244,850 16,700 346,525 2,400 49,800 ---------- ----------- ---------- 1,948,587 4,242,975 862,000 GOLD: 0.56% 0.47% 0.23% Barrick Gold Corporation 21,500 567,062 54,300 1,432,163 7,800 205,725 Newmont Mining Corporation 14,000 633,500 36,300 1,642,575 6,700 303,175 ---------- ----------- ---------- 1,200,562 3,074,738 508,900 HOMEBUILDERS: 0.20% 0.13% 0.09% Beazer Homes USA, Incorporated* 3,500 72,187 -- -- -- -- Castle & Cooke, Incorporated * 2,500 41,875 4,267 71,467 967 16,192 Lennar Corporation 3,700 92,963 10,100 253,762 2,600 65,325 Pulte Corporation 6,700 225,287 14,500 487,562 3,800 127,775 ---------- ----------- ---------- 432,312 812,791 209,292 HOTELS & RESTAURANTS: 0.56% 0.31% 0.21% La Quinta Inns, Incorporated 4,950 135,506 9,900 271,013 2,850 78,019 Marriot International, Incorporated 8,400 321,300 19,100 730,575 2,600 99,450 McDonald's Corporation 6,800 306,850 15,700 708,462 3,900 175,987 Mirage Resorts, Incorporated* 1,400 48,300 3,100 106,950 700 24,150 Promus Hotel Corporation* -- -- 1,550 34,487 350 7,788 Quick Restaurants 2,200 205,946 1,900 177,863 500 46,806 Yoshinoya D&C Company, Ltd. 11 191,768 -- -- 2 34,867 ---------- ----------- ---------- 1,209,670 2,029,350 467,067
The accompanying notes are an integral part of the financial statements. 58 146 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ----------------- Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- HOUSEHOLD APPLIANCES FURNISHING: 0.87% 0.47% 0.24% Fedders USA, Incorporated 10,000 $ 57,500 23,800 $136,850 -- -- Industrie Natuzzi SPA, ADR 2,600 117,975 5,300 240,487 500 $ 22,687 Matsushita Electronic Industries 31,000 504,407 51,000 829,831 10,000 162,712 Philips Electronics 13,900 502,399 21,100 762,635 4,400 159,033 Sony Corporation 8,100 485,608 12,700 761,385 2,200 131,893 Thorn EMI PLC 8,900 209,611 14,000 329,725 2,500 58,879 --------- --------- ------- 1,877,500 3,060,913 535,204 HOUSEHOLD PRODUCTS: 0.34% 0.20% 0.11% Procter & Gamble Company 2,900 240,700 2,700 224,100 500 41,500 Stanhome, Incorporated 2,500 72,812 7,100 206,787 2,600 75,725 Unilever NV 2,000 281,049 4,550 639,387 700 98,367 Wickes 67,700 130,374 106,000 204,131 18,700 36,012 ------- --------- ------- 724,935 1,274,405 251,604 INDUSTRIAL MACHINERY: 1.27% 0.82% 0.50% AES Corporation* 44,500 1,062,437 91,900 2,194,112 19,600 467,950 Autoliv AB 1,500 87,655 2,700 157,778 500 29,218 Bearings, Incorporated -- -- -- -- 150 4,387 Bekaert SA 200 164,798 300 247,197 50 41,199 Goulds Pumps, Incorporated 6,500 162,500 13,700 342,500 3,600 90,000 Ingersoll Rand Company 6,000 210,750 13,400 470,675 3,100 108,887 Mannesmann AG 800 254,695 1,350 429,798 200 63,674 Memtec, Ltd., ADR* 4,000 66,500 3,400 56,525 1,400 23,275 Nacco Industries, Incorporated 3,200 177,600 8,600 477,300 1,600 88,800 NGK Spark Plug Company 11,000 138,499 18,000 226,634 6,000 37,772 Park Ohio Industries, Incorporated 3,600 58,050 5,600 90,300 1,000 16,125 T & N PLC 52,600 132,337 82,400 207,312 14,500 36,481 Tan Chong Motor Holdings BHD 74,000 73,135 108,000 106,737 22,000 21,743 Thermo Electron Corporation* 2,550 132,600 4,650 241,800 1,300 67,600 TSI, Incorporated -- -- 7,200 100,800 1,200 16,800 --------- --------- --------- 2,721,556 5,349,468 1,113,911 INSURANCE: 2.40% 1.50% 0.87% Alexander & Alexander Services, Incorporated -- -- 7,100 134,900 -- -- AXA 5,500 370,635 8,600 579,538 1,500 101,082 Baloise Holdings 80 166,450 125 260,078 35 72,822 W.R. Berkley Corporation 6,000 322,500 15,800 849,250 1,700 91,375 Chubb Corporation 4,300 416,025 9,200 890,100 2,600 251,550 Cincinnati Financial Corporation 855 55,789 1,825 119,081 420 27,405 Corporacion Mapfre 3,700 207,115 5,650 316,270 950 53,178 Dai Tokyo Fire & Marine 23,000 175,535 37,000 282,383 7,000 53,424 Equitable of Iowa Companies, Incorporated 2,500 80,313 -- -- -- -- Frontier Insurance Group, Incorporated 3,900 124,800 10,400 332,800 1,900 60,800 General Re Corporation 1,900 294,500 4,500 697,500 1,500 232,500 Gryphon Holdings, Incorporated* 3,300 63,525 7,100 136,675 1,500 28,875 Harleysville Group, Incorporated 3,500 113,313 7,300 236,337 2,000 64,750 Horace Mann Educators Corporation 8,700 271,875 18,300 571,875 3,900 121,875 MBIA, Incorporated 3,700 277,500 7,300 547,500 1,900 142,500 Mitsui Marine & Fire Insurance Company, Ltd. 18,000 128,310 -- -- -- -- Providian Corporation 7,400 301,550 15,400 627,550 3,300 134,475 Prudential Corporation 40,577 261,208 65,532 421,851 11,900 76,604
The accompanying notes are an integral part of the financial statements. 59 147 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ----------------- Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- INSURANCE - CONTINUED Royal Insurance 28,083 $ 166,386 44,039 $ 260,923 7,831 $ 46,399 Schweiz Ruckversicherungs 100 116,342 140 162,878 -- -- Selective Insurance Group, Incorporated 6,700 237,850 14,000 497,000 3,100 110,050 Skandia Foersaekrings AB 12,600 340,633 19,700 532,577 3,100 83,807 Sumitomo Marine & Fire 41,000 336,736 64,000 525,637 7,000 57,491 Tokio Marine & Fire 11,000 143,826 19,000 248,426 3,000 39,225 Triad Guaranty, Incorporated* 7,200 190,800 18,300 484,950 3,700 98,050 --------- --------- --------- 5,163,516 9,716,079 1,948,237 INTERNATIONAL OIL: 0.45% 0.23% 0.13% British Petroleum 61,500 513,376 96,100 802,201 17,000 141,909 British Petroleum Company PLC, ADR 4,500 459,563 6,800 694,450 1,400 142,975 --------- --------- --------- 972,939 1,496,651 284,884 INVESTMENT COMPANIES: 0.49% 0.33% 0.17% Brierley Investment, Ltd. 42,500 33,620 70,000 55,374 13,000 10,284 Inter-Regional Financial Group, Incorporated 5,400 136,350 8,100 204,525 1,950 49,238 McDonald Company Investments, Incorporated 2,400 43,200 5,400 97,200 800 14,400 Morgan Keegan, Incorporated -- -- 17,050 215,256 1,800 22,725 Morgan Stanley Group, Incorporated 600 48,375 2,700 217,687 600 48,375 Nomura Securities Company, Ltd. 24,000 523,002 31,000 675,545 5,000 108,959 Piper Jaffray Companies, Incorporated 10,000 137,500 22,500 309,375 4,800 66,000 Waterhouse Investors Services, Incorporated 4,875 120,656 13,875 343,406 2,625 64,969 --------- --------- --------- 1,042,703 2,118,368 384,950 LEISURE TIME: 0.57% 0.33% 0.18% Children's Discovery Centers of America, Incorporated* 3,700 18,962 9,200 47, 150 2, 100 10,762 The Walt Disney Company 7,300 430,700 9,800 578,200 2,600 153,400 Donnelly Corporation -- -- 3,700 54,575 700 10,325 Genting BHD 20,000 166,949 24,000 200,339 5,000 41,737 Kuoni Reisen Holding, Series B 220 352,839 340 545,297 75 120,286 Movie Gallery, Incorporated* 2,800 85,400 10,200 311,100 -- -- Resorts World BHD 13,000 69,615 37,000 198,134 6,000 32,130 Sodak Gaming, Incorporated* 4,800 99,000 9,400 193,875 2,100 43,312 --------- --------- ------- 1,223,465 2,128,670 411,952 MINING: 0.11% 0.05% 0.03% Addington Resource, Incorporated* 8,600 125,775 9,200 134,550 1,900 27,788 Cookson Group 23,700 112,261 37,000 175,260 6,500 30,789 ------- ------- ------ 238,036 309,810 58,577 NEWSPAPERS: 0.26% 0.13% 0.07% Independent News 53,444 330,345 83,737 517,584 14,795 91,448 The E.W. Scripps Company, Class A 5,700 224,437 8,500 334,687 1,600 63,000 ------- ------- ------- 554,782 852,271 154,448 NON-FERROUS METALS: 0.26% 0.14% 0.07% Imco Recycling, Incorporated 7,100 173,950 10,200 249,900 2,000 49,000 IMI PLC 38,100 194,376 59,700 304,573 10,500 53,568 Inco, Ltd -- -- 100 3,325 -- -- Sumitomo Sitix 10,000 182,082 18,000 327,748 3,000 54,625 ------- ------- ------- 550,408 885,546 157,193
The accompanying notes are an integral part of the financial statements. 60 148 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ----------------- Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- OFFICE FURNISHINGS & SUPPLIES: 0.12% 0.08% 0.05% Miller Herman, Incorporated 8,300 $249,000 17,300 $ 519,000 3,700 $ 111,000 -------- --------- --------- PAPER: 0.92% 0.64% 0.38% Alco Standard Corporation 900 41,063 1,900 86,688 400 18,250 Champion International Corporation 1,500 63,000 3,100 130,200 700 29,400 Fort Howard Corporation -- -- 1,300 29,250 -- -- James River Corporation of Virginia 2,700 65,138 2,200 53,075 -- -- Kimberly Clark Corporation 21,400 1,770,850 44,900 3,715,475 9,500 786,125 Mosinee Paper Corporation -- -- 1,600 41,200 -- -- Wausau Paper Mills Company 1,600 43,600 -- -- -- -- Westvaco Corporation -- -- 2,350 65,213 -- -- Willamette Industries, Incorporated -- -- -- -- 400 22,500 --------- --------- ------- 1,983,651 4,121,101 856,275 PETROLEUM AND NATURAL GAS: 0.37% 0.16% 0.12% Ampolex, Ltd.* 37,944 82,916 82,399 180,060 10,167 22,217 Anadarko Petroleum Corporation 9,800 530,425 5,200 281,450 1,100 59,537 Burlington Resources, Incorporated 2,300 90,275 6,300 247,275 1,200 47, 100 Chesapeake Energy Corporation* 2,700 89,775 5,700 189,525 1,200 39,900 Newfield Exploration Company -- -- 600 16,200 -- -- Occidental Petroleum Corporation -- -- 7,000 149,625 4,900 104,738 ------- --------- ------- 793,391 1,064,135 273,492 PETROLEUM SERVICES: 1.42% 0.93% 0.57% Broken Hill Propriertary Company, Ltd. 8,140 114,955 13,991 197,584 2,266 32,001 Camco International, Incorporated 2,500 70,000 5,600 156,800 1,400 39,200 Halliburton Company 7,800 394,875 17,900 906,187 4,400 222,750 Schlumberger. Ltd. 21,900 1,516,575 45,300 3,137,025 9,800 678,650 Total SA 'B' Shares 3,528 238,079 5,840 394,143 1,050 70,865 Total SA, ADR 9,100 309,400 25,500 867,000 4,900 166,600 Western Atlas, Incorporated* 7,000 353,500 7,900 398,950 1,500 75,750 --------- --------- --------- 2,997,384 6,057,689 1,285,816 PHOTOGRAPHY: 0.45% 0.22% 0.12% Canon, Incorporated 14,000 253,559 22,000 398,450 4,000 72,446 Fuji Photo Film Company 11,000 317,482 16,000 461,792 3,000 86,586 Konica Corporation 54,000 391,206 81,000 586,809 15,000 108,668 ------- --------- ------- 962,247 1,447,051 267,700 POLLUTION CONTROL: 0.26% 0.22% 0.13% Continental Waste Industries, Incorporated 20,167 234,438 24,000 279,000 4,333 50,375 Sanifill, Incorporated* 2,500 83,437 4,500 150,187 1,400 46,725 TETRA Technologies, Incorporated* 14,300 248,463 33,100 575,113 8,100 140,737 United Waste Systems, Incorporated* -- -- 10,800 402,300 1,300 48,425 ------- --------- ------- 566,338 1,406,600 286,262 PUBLISHING: 0.55% 0.35% 0.20% Meredith Corporation 13,700 573,687 28,600 1,197,625 5,600 234,500 Pulitzer Publishing Company 3,125 149,219 7,125 340,219 1,750 83,562 Reuters Holdings 26,400 241,696 41,400 379,023 7,300 66,833 Ver Ned Uitgevers 1,650 226,519 2,650 363,803 500 68,642 --------- --------- ------- 1,191,121 2,280,670 453,537
The accompanying notes are an integral part of the financial statements. 61 149 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ----------------- Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- RAILROADS & EQUIPMENT: 0.67% 0.48% 0.33% Burlington Northern Santa Fe 8,200 $ 639,600 15,200 $1,185,600 3,800 $ 296,400 CSX Corporation 17,600 803,000 39,600 1,806,750 9,800 447,125 Wisconsin Central Transportation Corporation -- -- 1,500 98,625 -- -- --------- --------- ------- 1,442,600 3,090,975 743,525 REAL ESTATE: 0.36% 0.18% 0.09% Cheung Kong Holdings 24,000 146,188 41,000 249,738 8,000 48,729 Lion Land BHD 90,000 89,302 98,000 97,240 14,000 13,891 Mitsubishi Estate 10,000 124,939 16,000 199,903 3,000 37,482 New World Development Company 40,000 174,329 65,000 283,285 7,000 30,508 Sun Hung Kai Properties 30,000 245,393 44,000 359,909 8,000 65,438 ------- --------- ------- 780,151 1,190,075 196,048 RETAIL GROCERY: 0.20% 0.15% 0.07% Giant Foods, Incorporated, Class A 6,900 217,350 20,500 645,750 2,900 91,350 Tesco 46,749 215,630 73,086 337,110 12,916 59,575 ------- ------- ------- 432,980 982,860 150,925 RETAIL TRADE: 2.54% 1.66% 0.83% Amway Japan, Ltd. 7,000 295,593 11,000 464,504 2,000 84,455 Argyll Group 32,800 173,195 51,300 270,881 9,100 48,051 Boots Company 21,900 198,287 34,200 309,654 6,000 54,325 Burton Group* 66,300 138,490 103,700 216,612 18,300 38,226 Chiyoda Company 8,000 185,956 12,500 290,557 2,200 51,138 Consolidated Stores Corporation* 7,400 160,950 16,000 348,000 4,400 95,700 Cygne Designs, Incorporated -- -- -- -- 900 844 D leteren Trading 1,400 118,213 3,400 287,088 400 33,775 Federated Department Stores, Incorporated* 4,200 115,500 7,300 200,750 800 22,000 Friedman's, Incorporated* 5,500 105,875 16,900 325,325 3,200 61,600 Haverty Furniture Companies, Incorporated 5,600 77,700 -- -- -- -- Home Depot, Incorporated 15,300 732,487 26,300 1,259,113 4,200 201,075 Ito Yokado Company 4,000 246,392 7,000 431,186 1,000 61,598 Karstadt AG 250 101,952 -- -- 50 20,390 Leslie's Poolmart 9,450 132,300 21,315 298,410 5,250 73,500 Lillian Vernon Corporation 4,500 60,187 10,500 140,438 2,500 33,438 Lowes Companies, Incorporated 15,900 532,650 32,700 1,095,450 8,300 278,050 Marks & Spencer 23,900 167,029 37,500 262,075 6,600 46,125 Marui Company 12,000 249,879 21,000 437,288 3,000 62,470 Mitsubishi Corporation 13,000 159,903 33,000 405,908 4,000 49,201 Nine West Group, Incorporated* 12,400 465,000 30,300 1,136,250 4,200 157,500 Old American Stores, Incorporated* 5,600 45,500 12,300 99,937 3,400 27,625 Sears Roebuck & Company 7,500 292,500 34,800 1,357,200 4,200 163,800 Shimachu Company 6,000 192,349 10,000 320,581 2,000 64,116 Storehouse 21,500 111,524 33,600 174,288 5,900 30,604 Strawbridge & Clothier 2,500 60,000 5,100 122,400 1,200 28,800 Takashimaya Company 15,000 239,709 23,000 367,554 4,000 63,922 Younkers, Incorporated* 3,700 93,887 5,500 139,563 500 12,688 --------- ---------- --------- 5,453,007 10,761,012 1,865,016 SAVINGS AND LOAN: 0.09% 0.10% 0.07% Commercial Federal Corporation* 5,300 200,075 10,600 400,150 2,600 98,150 Peoples Heritage Financial Group -- -- 12,200 277,550 2,100 47,775 ------- ------- ------- 200,075 677,700 145,925
The accompanying notes are an integral part of the financial statements. 62 150 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ----------------- Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- SHIPBUILDING: 0.08% 0.03% 0.03% Anangel American Shipholdings, Ltd., ADR 5,000 $55,625 7,700 $85,662 2,700 $30,038 West Marine, Incorporated* 3,500 109,375 3,200 100,000 1,000 31,250 ------- ------- ------ 165,000 185,662 61,288 SOFTWARE: 1.21% 0.74% 0.53% FTP Software, Incorporated* 900 26,100 1,400 40,600 2,100 60,900 Mercury Interactive Corporation* 8,100 147,825 13,500 246,375 3,100 56,575 Micro Focus Group, Incorporated, ADR* 4,300 36,012 -- -- 10,400 87,100 Microsoft Corporation* 16,000 1,404,000 32,600 2,860,650 7,100 623,025 Oracle Systems Corporation* 20,000 847,500 39,700 1,682,288 8,650 366,544 Policy Management Systems Corporation* 3,100 147,637 -- -- -- -- --------- --------- --------- 2,609,074 4,829,913 1,194,144 STEEL: 0.49% 0.27% 0.13% Huntco, Incorporated, Class A 3,700 56,888 7,400 113,775 500 7,688 Kawasaki Steel Corporation 68,000 237,094 115,000 400,969 20,000 69,734 Kobe Steel* 68,000 210,092 107,000 330,586 20,000 61,792 Kurimoto 13,000 132,203 24,000 244,068 4,000 40,678 Nippon Steel Corporation 44,000 150,857 70,000 240,000 14,000 48,000 Sumitomo Metal Industry 86,000 260,707 140,000 424,407 24,000 72,755 --------- --------- ------- 1,047,841 1,753,805 300,647 TELECOMMUNICATION SERVICES: 1.00% 0.76% 0.45% Echostar Communications Corporation* 2,925 70,931 8,910 216,067 -- -- L.M. Ericsson Telephone Company 11,440 223,986 16,280 318,749 2,640 51,689 Micom Communications* -- -- 7,900 60,238 1,800 13,725 SBC Communications, Incorporated 30,300 1,742,250 67,800 3,898,500 14,200 816,500 Tele-Communications, Incorporated, Series A* 5,700 113,288 23,500 467,062 6,500 129,188 --------- --------- --------- 2,150,455 4,960,616 1,011,102 TELEPHONE: 4.14% 2.63% 1.58% AirTouch Communications, Incorporated* 39,200 1,107,400 67,100 1,895,575 16,100 454,825 Ameritech Corporation 25,600 1,510,400 57,500 3,392,500 10,900 643,100 American Telephone & Telegraph Corporation 18,500 1,197,875 38,000 2,460,500 8,000 518,000 Bell Atlantic Corporation 7,900 528,313 12,400 829,250 2,900 193,938 Bellsouth Corporation 16,700 726,450 41,500 1,805,250 9,800 426,300 British Telecommunication 32,500 178,172 50,900 279,045 9,000 49,340 DDI Corporation 30 232,445 40 309,927 10 77,482 Koninklijke PTT Nederland NV 5,600 203,452 -- -- -- -- NYNEX Corporation 36,100 1,949,400 75,700 4,087,800 16,200 874,800 Pacific Telesis Group 1,700 57,163 4,100 137,862 -- -- STET 150,000 306,021 203,000 414,149 34,000 69,365 Tele Danmark AS, Series B 2,875 156,889 5,000 272,850 725 39,563 Telecom Italia SPA 133,000 162,636 217,500 265,965 38,000 46,467 Telecom Italia Mobile SPA 91,000 95,691 137,500 144,589 1,800 18,928 Telefonica de Espana SA 12,600 174,509 19,700 272,844 3,150 43,627 Telekom Malaysia 6,000 46,777 11,000 85,758 2,000 15,592 U.S. West, Incorporated 500 9 500 -- -- -- -- VodaFone Group 68,519 245,811 107,234 384,703 18,945 67,965 --------- ---------- --------- 8,888,904 17,038,567 3,539,292
The accompanying notes are an integral part of the financial statements. 63 151 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ----------------- ----------------- ----------------- Shares Value Shares Value Shares Value ------ ----- ------ ----- ------ ----- TIRES AND RUBBER: 0.19% 0.10% 0.05% Bandag, Incorporated 400 $ 21,650 900 $48,713 -- -- Bridgestone Corporation 25,000 397,094 39,000 619,467 7,000 $ 111,186 ------- ------- ------- 418,744 668,180 111,186 TOBACCO: 1.43% 0.99% 0.60% B.A.T. Industries PLC 10,600 93,341 16,600 146,175 2,900 25,537 Philip Morris Companies, Incorporated 32,200 2,914,100 67,300 6,090,650 14,400 1,303,200 RJR Nabisco Holdings Corporation 2,500 77,188 6,500 200,688 700 21,612 --------- --------- --------- 3,084,629 6,437,513 1,350,349 TRUCKING & FREIGHT: 0.42% 0.23% 0.13% Bergesen DY AS 12,300 244,676 12,700 252,633 2,600 51,720 Fukuyama Transport 19,000 178,499 30,000 281,840 5,000 46,973 J.B. Hunt Transport Services, Incorporated 5,400 90,450 20,000 335,000 2,100 35,175 ICB Shipping 24,000 206,033 30,800 264,410 4,500 38,631 Landstar Systems, Incorporated* 5,200 139,100 7,900 211,325 2,500 66,875 New World Infrastructure, Ltd.* 66 126 108 207 11 21 Pittston Services Group -- -- 3,000 94,125 1,800 56,475 TNT Freightways Corporation 2,000 40,250 3,000 60,375 -- -- ------- --------- ------- 899,134 1,499,915 295,870 TOTAL COMMON STOCK (COST: $120,484,430, $231,908,014 and $47,115,143, respectively) $143,835,680 $278,934,020 $56,816,385 ------------ ------------ ----------- PREFERRED STOCK: 0.28% 0.24% 0.01% BANKING: 0.02% 0.01% 0.01% Creditanstalt Bank 800 41,117 1,340 68,871 230 11,821 ------ ------ ------ BROADCASTING: 0.11% 0.11% Cablevision Systems Corporation 2,200 227,700 6,600 683,100 -- -- ------- ------- FINANCIAL SERVICES: 0.00% 0.00% S D Warren Company 169 5,324 558 17,577 -- -- ----- ------ TELECOMMUNICATION SERVICES: 0.15% 0.12% Panamsat Corporation* 291 326,010 700 784,000 -- -- ------- ------- TOTAL PREFERRED STOCK (COST: $564,068, $1,457,480 and $12,712, respectively) $600,151 $1,553,548 $11,821 -------- ---------- ------- WARRANTS: 0.00% 0.00% 0.00% BUSINESS SERVICES: 0.00% 0.00% 0.00% Protection One, Incorporated* 960 5,280 3,200 17,600 -- -- ----- ------ INDUSTRIAL MACHINERY: 0.00% 0.00% MVE Holding, Incorporated* 80 1,200 80 1,200 -- -- ----- ----- MISCELLANEOUS: 0.00% 0.00% SDW Holdings Corporation* 169 845 558 2,790 -- -- --- ----- TOTAL WARRANTS (COST: $1,726 and $4,352, respectively) $7,325 $21,590 ------ -------
The accompanying notes are an integral part of the financial statements. 64 152 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ---------------------- -------------------- --------------------- Principal Principal Principal Amount Value Amount Value Amount Value --------- ----- --------- ----- --------- ----- U.S GOVERNMENT AGENCY AND MORTGAGE-BACKED OBLIGATIONS: 6.15% 16.35% 7.04% FEDERAL FARM CREDIT BANKS: 0.05% 0.22% 0.27% 6.20% due 09/23/02 $ 100,000 $ 102,859 $ 720,000 $ 740,585 $ 300,000 $ 308,577 6.40% due 10/03/02 -- -- 230,000 237,190 100,000 103,126 6.56% due 08/05/02 -- -- 440,000 457,613 190,000 197,606 ------- --------- ------- 102,859 1,435,388 609,309 FEDERAL HOME LOAN BANKS: 0.11% 0.21% 0.24% 5.40% due 08/03/98 230,000 228,533 1,400,000 1,391,068 540,000 536,555 FEDERAL HOME LOAN MORTGAGE CORPORATION: 0.08% 1.58% 2.52% 4.78% due 02/10/97 60,000 59,644 360,000 357,862 140,000 139,168 6.50% due 07/01/06 -- -- -- -- 91,179 90,692 7.50% due 06/01/07 55,431 56,152 -- -- -- -- 8.00% due 04/01/23 - 08/01/24 -- -- 3,320,396 3,440,783 1,671,921 1,733,483 9.50% due 12/01/19 - 12/01/22 44,539 47,716 5,978,812 6,432,177 3,418,177 3,679,071 ------- ---------- --------- 163,512 10,230,822 5,642,414 FEDERAL NATIONAL MORTGAGE ASSOCIATION: 3.32% 8.14% 10.34% 5.45% due 10/10/03 165,000 161,365 1,110,000 1,085,547 560,000 547,663 6.00% TBA** 450,000 445,356 4,390,000 4,344,695 2,170,000 2,147,606 6.50% due 09/01/07 - 09/01/10 2,329,304 2,340,951 7,871,441 7,910,798 4,804,847 4,828,871 7.00% due 05/01/24 - 12/01/25 1,287,000 1,297,450 10,199,921 10,282,747 4,455,001 4,491,175 7.40% due 07/01/04 130,000 142,939 1,060,000 1,165,502 470,000 516,779 7.50% due 11/01/06 - 08/01/25 934,739 957,808 19,859,927 20,352,350 6,366,321 6,523,587 7.71% due 04/25/06 - REMIC 442,223 460,741 3,046,426 3,173,995 1,228,397 1,279,837 8.00% due 12/01/19 - 12/01/25 997,227 1,033,002 3,294,067 3,411,784 1,633,501 1,691,687 8.50% due 05/01/17 - 06/01/24 -- -- 1,054,968 1,107,801 1,102,888 1,154,618 8.75% due 08/01/09 270,210 285,523 -- -- -- -- 9.00% due 10/01/05 2,795 2,943 -- -- -- -- --------- ---------- ---------- 7,128,078 52,835,219 23,181,823 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 1.57% 3.85% 4.07% 6.50% due 11/15/23 - 12/15/23 794,210 787,753 5,158,557 5,116,618 899,563 892,250 7.50% due 10/15/22 - 10/15/23 1,514,615 1,559,979 5,215,569 5,371,840 2,545,939 2,622,673 8.50% due 06/15/16 - 12/15/21 177,922 188,280 1,823,638 1,918,841 582,652 617,303 9.00% due 12/15/99 - 10/15/25 451,685 478,896 10,549,870 11,191,591 4,716,311 5,003,461 9.50% due 07/15/17 - 09/15/21 324,229 349,674 1,261,292 1,361,303 -- -- --------- ---------- --------- 3,364,582 24,960,193 9,135,687 RESOLUTION TRUST CORPORATION: 0.05% 0.14% 0.18% 6.90% due 02/25/27, Class C 100,000 99,219 900,000 892,969 400,000 396,875 ------ ------- ------- GUARANTEED: 1.00% 2.20% 2.76% Financing Corporations, 8.60% due 09/26/19 80,000 101,300 600,000 759,750 260,000 329,225 Financing Corporations, 10.70% due 10/06/17 110,000 165,103 930,000 1,395,874 400,000 600,376 Government Backed Trust, 9.625% due 05/15/02 40,000 44,498 240,000 266,988 100,000 111,245 Government Loan Trust, 7.75% due 04/01/98 36,912 37,794 229,859 235,357 88,923 91,051
The accompanying notes are an integral pad of the financial statements. 65 153 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ---------------------- -------------------- --------------------- Principal Principal Principal Amount Value Amount Value Amount Value --------- ----- --------- ----- --------- ----- GUARANTEED - CONTINUED Government Loan Trust, 8.50% due 04/01/06 $ 310,000 $ 354,445 $ 1,810,000 $ 2,069,500 $ 720,000 $ 823,226 Government Trust Certificates, 9.25% due 11/15/01 296,000 328,826 1,973,000 2,191,806 945,000 1,049,800 Government Trust Certificates, 9.40% due 05/15/02 310,000 345,858 1,940,000 2,164,400 860,000 959,476 Guaranteed Export Trust, 5.20% due 10/15/04 28,000 27,421 254,400 249,138 112,800 110,467 Guaranteed Export Trust, 5.23% due 05/15/05 48,511 47,646 436,596 428,811 194,043 190,583 Guaranteed Export Trust, 6.28% due 06/15/04 110,000 111,917 930,000 946,210 410,000 417,146 Guaranteed Export Trust, 6.61% due 09/15/99 22,124 22,588 162,245 165,646 66,373 67,764 Guaranteed Export Trust, 8.187% due 12/15/04 424,106 460,210 2,629,458 2,853,301 1,102,676 1,196,546 Guaranteed Trade Trust, 7.02% due 09/01/04 72,000 74,515 423,000 437,778 171,000 176,974 Guaranteed Trade Trust, 7.39% due 06/26/06 17,500 19,451 122,500 136,158 52,500 58,353 --------- ---------- --------- 2,141,572 14,300,717 6,182,232 TOTAL U.S. GOVERNMENT AND MORTGAGE-BACKED OBLIGATIONS (Cost: $12,700,749, $98,990,064 and $44,247,186, respectively) $13,228,355 $106,046,376 $45,684.895 ----------- ------------ ----------- U.S. TREASURY OBLIGATIONS: 4.40% 12.78% 24.77% U.S. TREASURY BONDS: 2.96% 8.66% 11.28% 8.125% due 08/15/19 480,000 603,523 4,430,000 5,570,016 3,010,000 3,784,593 8.75% due 05/15/20 340,000 455,386 4,300,000 5,759,291 1,330,000 1,781,362 8.875% due 02/15/19 1,660,000 2,237,630 10,200,000 13,749,294 4,540,000 6,119,784 9.00% due 11/15/18 930,000 1,266,688 6,490,000 8,839,575 2,870,000 3,909,026 11.75% due 02/15/10 540,000 770,008 4,630,000 6,602,102 2,140,000 3,051,512 12.00% due 08/15/13 640,000 986,099 7,850,000 12,095,123 2,770,000 4,267,961 12.75% due 11/15/10 -- -- -- -- 1,040,000 1,584,045 13.875% due 05/15/11 30,000 48,830 2,210,000 3,597,128 490,000 797,553 --------- ---------- ---------- 6,368,164 56,212,529 25,295,836 U.S. TREASURY NOTES: 1.44% 4.12% 13.49% 5.875% due 11/15/05 30,000 30,675 230,000 235,175 100,000 102,250 6.25% due 08/31/96 **** 2,300,000 2,313,294 16,500,000 16,595,370 25,000,000 25,144,500 6.25% due 02/15/03 280,000 292,118 2,000,000 2,086,560 460,000 479,910 7.75% due 12/31/99 -- -- 1,110,000 1,204,527 480,000 520,877 8.50% due 05/15/97 270,000 281,559 1,200,000 1,251,372 90,000 93,853 9.125% due 05/15/99 64,000 71,420 707,000 788,969 345,000 384,999 9.25% due 01/15/96 -- -- 1,000,000 1,001,410 2,000,000 2,002,820 9.25% due 08/15/98 100,000 109,687 3,230,000 3,542,890 1,390,000 1,524,649 --------- ---------- ---------- 3,098,753 26,706,273 30,253,858 TOTAL U.S. TREASURY OBLIGATIONS (Cost: $8,814,336, $76,829,594 and $52,615,596, respectively) $ 9,466,917 $82,918,802 $55,549,694 ----------- ----------- -----------
The accompanying notes are an integral part of the financial statements. 66 154 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ---------------------- -------------------- --------------------- Principal Principal Principal Amount Value Amount Value Amount Value --------- ----- --------- ----- --------- ----- CORPORATE BONDS: 9.31% 13.61% 8.49% AEROSPACE: 0.26% 0.21% 0.00% Alliant Techsystems, Incorporated, 11.75% due 03/01/03 $ 300,000 $ 330,750 $ 760,000 $ 837,900 -- -- Rohr, Incorporated, 11.625% due 05/15/03 100,000 107,250 100,000 107,250 -- -- Tracor, Incorporated, 10.875% due 08/15/01 120,000 124,200 380,000 393,300 -- -- ------- --------- 562,200 1,338,450 APPAREL & ACCESSORY STORE: 0.05% 0.06% 0.00% Mothers Work, Incorporated, 12.625% due 08/01/05 120,000 117,900 380,000 373,350 -- -- ------- ------- BUSINESS SERVICES: 0.37% 0.62% 0.46% Bell & Howell Holdings Company, Series B, Step up to 11.50% due 03/01/05 430,000 283,800 1,420,000 937,200 -- -- Comdisco, Incorporated, 6.50% due 06/15/00 200,000 203,590 1,700,000 1,730,515 $ 750,000 $ 763,462 Comdisco, Incorporated, 7.25% due 04/15/98 60,000 61,781 540,000 556,027 270,000 278,014 Protection One Alarm, Incorporated, Step up to 13.625% due 06/30/05 300,000 235,500 1,000,000 785,000 -- -- ------- --------- --------- 784,671 4,008,742 1,041,476 CHEMICAL PRODUCTS: 0.67% 0.85% 0.38% Methanex Corporation, 8.875% due 11/15/01 240,000 266,002 1,780,000 1,972,845 760,000 842,338 NL Industries, Incorporated, Step up to 13.00% due 10/15/05 130,000 99,775 400,000 307,000 -- -- NL Industries, Incorporated, 11.75% due 10/15/03 220,000 234,850 740,000 789,950 -- -- Revlon Consumer Products Corporation, 10.50% due 02/15/03 460,000 469,200 1,540,000 1,570,800 -- -- Revlon Worldwide Corporation, zero coupon due 03/15/98 490,000 363,825 1,210,000 898,425 -- -- --------- --------- ------- 1,433,652 5,539,020 842,338 CONSTRUCTION AND BUILDING MATERIALS: 0.86% 1.00% 0.18% Building Material Corporation of America, Series B, Step up to 11.75% due 07/01/04 470,000 324,300 1,190,000 821,100 -- -- Crown Packaging Holdings, Step up to 12.25% due 11/01/03 490,000 218,050 1,510,000 671,950 -- -- G-I Holdings, Incorporated, zero coupon due 10/01/98 405,000 313,875 1,165,000 902,875 -- -- Georgia-Pacific Corporation, 9.85% due 06/15/97 110,000 115,974 890,000 938,336 380,000 400,638 Greystone Homes, Incorporated, 10.75% due 03/01/04 230,000 212,750 770,000 712,250 -- -- Harvard Industries, Incorporated, 11.125% due 08/01/05 470,000 470,000 1,530,000 1,530,000 -- -- Stratosphere Corporation, 14.25% due 05/15/02 180,000 203,625 820,000 927,625 -- -- --------- --------- ------- 1,858,574 6,504,136 400,638
The accompanying notes are an integral part of the financial statements. 67 155 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE ---------------------- -------------------- --------------------- Principal Principal Principal Amount Value Amount Value Amount Value --------- ----- --------- ----- --------- ----- ELECTRICAL EQUIPMENT: 0.20% 0.18% 0.00% Dictaphone Corporation, 11.75% due 08/01/05 $110,000 $ 108,900 $ 330,000 $ 326,700 -- -- S C International Services, Incorporated, 13.00% due 10/01/05 300,000 310,500 800,000 832,000 -- -- ------- --------- 419,400 1,158,700 ELECTRIC UTILITIES: 0.56% 1.05% 1.20% Berg Electrics, Incorporated, 11.375% due 05/01/03 230,000 258,750 770,000 866,250 -- -- Gulf States Utilities Company, 9.72% due 07/01/98 300,000 312,879 1,583,000 1,650,958 $652,000 $ 679,990 Long Island Lighting Company, 7.30% due 07/15/99 155,000 156,358 1,170,000 1,180,249 625,000 630,475 Long Island Lighting Company, 8.75% due 05/01/96 300,000 303,687 1,900,000 1,923,351 800,000 809,832 Public Service Company of New Hampshire, 8.875% due 05/15/96 170,000 171,858 1,150,000 1,162,569 560,000 566,121 --------- --------- --------- 1,203,532 6,783,377 2,686,418 ELECTRONICS: 0.12% 0.12% 0.00% Ivac Corporation, 9.25% due 12/01/02 250,000 258,750 750,000 776,250 -- -- ENERGY: 0.64% 0.93% 0.61% Chesapeake Energy Corporation, 10.50% due 06/01/02 240,000 252,600 760,000 799,900 -- -- Clark USA, Incorporated, 10.875% due 12/01/05 100,000 105,000 310,000 325,500 -- -- Enron Corporation, 10.00% due 06/01/98 60,000 65,625 300,000 328,128 150,000 164,064 Enron Corporation, 8.50% due 02/01/00 40,000 41,116 290,000 298,091 130,000 133,627 Occidental Petroleum Corporation, 5.85% due 11/09/98 50,000 50,123 300,000 300,738 130,000 130,320 Occidental Petroleum Corporation, 5.93% due 11/09/98 60,000 60,272 470,000 472,129 210,000 210,951 Plains Resources, Incorporated, 12.00% due 10/01/99 10,000 10,375 20,000 20,750 -- -- Southwest Gas Corporation, 9.75% due 06/15/02 40,000 46,996 290,000 340,724 130,000 152,738 Tenneco, Incorporated, 10.00% due 08/01/98 150,000 164,895 1,210,000 1,330,153 530,000 582,630 Transtexas Gas Corporation, 11.50% due 06/15/02 230,000 237,475 770,000 795,025 -- -- Transamerican Refining Corporation, zero coupon due 02/15/02 380,000 239,400 1,180,000 743,400 -- -- Vintage Petroleum, Incorporated, 9.00% due 12/15/05 100,000 100,750 250,000 251,875 -- -- --------- --------- --------- 1,374,627 6,006,413 1,374,330 FINANCE & BANKING: 1.20% 2.93% 3.63% Beal Financial Corporation, 12.75% due 08/15/00 120,000 121,200 380,000 383,800 -- -- Citicorp Bank Corporation, 6.062% due 01/30/97 140,000 139,699 950,000 947,957 510,000 508,903 Citicorp Bank Corporation, 8.80% due 02/01/00 80,000 82,588 580,000 598,763 240,000 247,764
The accompanying notes are an integral part of the financial statements. 68 156 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE --------------------- ---------------------- --------------------- Principal Principal Principal Amount Value Amount Value Amount Value --------- --------- --------- --------- --------- --------- FINANCE & BANKING - CONTINUED Federal Agricultural Mortgage Corporation, 7.04% due 08/10/05 $100,000 $ 107,391 $ 700,000 $ 751,737 $ 300,000 $ 322,173 First Fidelity Bancorporation, 9.625% due 08/15/99 30,000 33,709 160,000 179,784 70,000 78,655 First Tennessee National Corporation, 6.75% due 11/15/05 40,000 40,818 350,000 357,161 150,000 153,069 First USA Bank, 5.75% due 01/15/99 180,000 179,473 1,240,000 1,236,367 660,000 658,066 Firstar Corporation, 7.15% due 09/01/00 100,000 102,918 820,000 843,928 360,000 370,505 Fleet Financial Group, Incorporated, 7.625% due 12/01/99 20,000 21,118 150,000 158,383 60,000 63,353 General Motors Acceptance Corporation, 8.375% due 01/19/99 230,000 246,790 1,730,000 1,856,290 1,000,000 1,073,000 Household Finance Corporation, 7.625% due 12/15/96 280,000 284,903 1,340,000 1,363,463 780,000 793,658 Manufacturers Hanover Corporation, 8.50% due 02/15/99 320,000 344,627 2,220,000 2,390,851 210,000 226,162 Private Export Funding Corporation, 5.80% due 02/01/04 20,000 20,100 120,000 120,598 50,000 50,249 Private Export Funding Corporation, 6.90% due 01/31/03 20,000 21,330 120,000 127,978 50,000 53,324 Private Export Funding Corporation, 8.75% due 06/30/03 180,000 211,397 1,280,000 1,503,270 540,000 634,192 Private Export Funding Corporation, 9.50% due 03/31/99 50,000 55,917 400,000 447,336 170,000 190,118 Provident Bank, 6.125% due 12/15/00 130,000 130,628 1,000,000 1,004,829 440,000 442,125 Secured Finance, 9.05% due 12/15/04 180,000 212,447 2,500,000 2,950,650 1,300,000 1,534,338 Shawmut National Corporation, 8.625% due 12/15/99 110,000 120,343 840,000 918,985 360,000 393,851 Union Planters Corporation, 6.75% due 11/01/05 100,000 101,752 850,000 864,892 350,000 356,132 ---------- ---------- --------- 2,579, 148 19,007,022 8,149,637 FOOD PRODUCTS: 0.33% 0.55% 0.18% Chiquita Brands International, Incorporated, 11.50% due 06/01/01 110,000 113,850 390,000 403,650 ---- ---- Quaker Oats Company, 7.30% due 08/29/05 40,000 42,634 300,000 319,755 130,000 138,560 Foodmaker, Incorporated, 9.25% due 03/01/99 130,000 124,800 1,370,000 1,315,200 ---- ---- RJR Nabisco, Incorporated, 6.25% due 01/31/97 110,000 108,780 680,000 672,459 270,000 267,006 Specialty Foods Corporation, Series B, 11.125% due 10/01/02 240,000 232,800 760,000 737,200 ---- ---- Specialty Foods Corporation, Series B, 11.25% due 08/15/03 100,000 90,000 100,000 90,000 ---- ---- ---------- ---------- --------- 712,864 3,538,264 405,566 INDUSTRIALS: 0.96% 0.98% 0.00% Harris Chemical North America, Incorporated, step up to 10.25% due 07/15/01 320,000 304,000 1,070,000 1,016,500 ---- ----
The accompanying notes are an integral part of the financial statements. 69 157 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE --------------------- --------------------- --------------------- Principal Principal Principal Amount Value Amount Value Amount Value ---------- --------- --------- --------- --------- --------- INDUSTRIALS - CONTINUED International Wire Group, Incorporated, 11.75% due 06/01/05 $230,000 $ 219,650 $ 770,000 $ 735,350 ---- ---- MVE, Incorporated, 12.50% due 02/15/02 80,000 79,200 80,000 79,200 ---- ---- Pioneer Americans Acquisition Corporation, 13.625% due 04/01/05 490,000 514,500 1,510,000 1,585,500 ---- ---- RBX Corporation, 11.25% due 10/15/05 250,000 247,500 750,000 742,500 ---- ---- S D Warren Company, 12.00% due 12/15/04 350,000 385,875 1,150,000 1,267,875 ---- ---- Williamhouse-Regency, Incorporated, 13.00% due 11/15/05 150,000 155,625 440,000 456,500 ---- ---- UCAR Global Enterprises, Incorporated, 12.00% due 01/15/05 65,000 75,075 200,000 231,000 ---- ---- Venture Holdings Trust, 9.75% due 04/01/04 110,000 91,850 290,000 242,150 ---- ---- ---------- ---------- 2,073,275 6,356,575 INSURANCE: 0.52% 1.21% 1.33% American Financial Corporation, 9.75% due 04/20/04 350,000 357,000 1,150,000 1,173,000 ---- ---- Metropolitan Life Insurance Company, 6.30% due 11/03/03 320,000 316,019 2,660,000 2,626,910 $1,025,000 $1,012,249 Nationwide Life Insurance Company, 6.50% due 02/15/04 350,000 348,999 3,410,000 3,400,247 1,630,000 1,625,338 New York Life Insurance Company, 6.40% due 12/15/03 90,000 90,772 650,000 655,577 340,000 342,917 ---------- ---------- ---------- 1,112,790 7,855,734 2,980,504 MEDIA & LEISURE: 0.44% 0.38% 0.00% Casino America, Incorporated, 11.50% due 11/15/01 20,000 18,500 40,000 37,000 ---- ---- Grand Casino, Incorporated, 10.125% due 12/01/03 230,000 241,212 700,000 734,125 ---- ---- HMH Properties, Incorporated, Series B, 9.50% due 05/15/05 230,000 235,175 770,000 787,325 ---- ---- Marvel Parent Holdings, Incorporated, zero coupon due 04/15/98 160,000 114,000 480,000 342,000 ---- ---- Players International, Incorporated, 10.875% due 04/15/05 240,000 225,600 470,000 441,800 ---- ---- President Riverboat Casinos, Incorporated, 13.00% due 09/15/01 140,000 117,600 180,000 151,200 ---- ---- ---------- ---------- 952,087 2,493,450 METAL PRODUCTS: 0.17% 0.13% 0.00% Howmet Corporation, 10.00% due 12/01/03 20,000 21,100 50,000 52,750 ---- ---- Republic Engineered Steels, Incorporated, 9.875% due 12/15/01 300,000 270,000 680,000 612,000 ---- ---- Wyman Gordon Company, 10.75% due 03/15/03 70,000 73,850 200,000 211,000 ---- ---- ---------- ---------- 364,950 875,750
The accompanying notes are an integral part of the financial statements. 70 158 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE -------------------- ------------------------ ---------------------- Principal Principal Principal Amount Value Amount Value Amount Value --------- --------- ---------- ---------- --------- ----------- MISCELLANEOUS: 0.31% 0.28% 0.00% Mohegan Tribal Gaming Authority, 13.50% due 11/15/02 $400,000 $434,000 $1,100,000 $1,193,500 ---- ---- HMC Acquisition Properties, Incorporated, 9.00% due 12/15/07 220,000 222,200 600,000 606,000 ---- ---- -------- ---------- 656,200 1,799,500 NON-BANK FINANCE: 0.02% 0.20% 0.25% Ford Capital BV, 9.00% due 08/15/98 ---- ---- 920,000 992,910 $400,000 $ 431,700 Ford Capital BV, 9.375% due 01/01/98 40,000 42,838 300,000 321,288 130,000 139,225 -------- ---------- --------- 42,838 1,314,198 570,925 PAPER PRODUCTS: 0.18% 0.15% 0.00% Stone Container Corporation, 10.75% due 04/01/02 40,000 39,200 120,000 117,600 ---- ---- Stone Container Corporation, 10.75% due 10/01/02 60,000 61,950 140,000 144,550 ---- ---- Stone Container Corporation, 11.00% due 08/15/99 140,000 138,600 460,000 455,400 ---- ---- Stone Container Corporation, 11.50% due 09/01/99 100,000 100,500 200,000 201,000 ---- ---- Stone Container Corporation, 11.50% due 10/01/04 40,000 39,800 80,000 79,600 ---- ---- -------- ---------- 380,050 998,150 PRINTING, PUBLISHING: 0.22% 0.36% 0.27% News America Holdings, Incorporated, 8.625% due 02/01/03 80,000 89,878 1,030,000 1,157,184 530,000 595,444 Sullivan Graphics, Incorporated, 12.75% due 08/01/05 370,000 377,400 1,130,000 1,152,600 ---- ---- -------- ---------- --------- 467,278 2,309,784 595,444 RETAIL AND WHOLESALE: 0.26% 0.25% 0.00% Alliance Entertainment Corporation, 11.25% due 07/15/05 360,000 361,800 1,140,000 1,145,700 ---- ---- Pathmark Stores, Incorporated, Step up to 10.75% due 11/01/03* 330,000 202,125 810,000 496,125 ---- ---- -------- ---------- 563,925 1,641,825 TELEPHONE: 0.12% 0.28% 0.00% Paging Network, Incorporated, 10.125% due 08/01/07 230,000 248,975 770,000 833,525 ---- ---- USA Mobil Communication, Incorporated 9.50% due 02/01/04 10,000 9,900 1,020,000 1,009,800 ---- ---- -------- ---------- 258,875 1,843,325 TELEVISION SERVICES: 0.30% 0.35% 0.00% Echostar Communications Corporation, Step up to 12.875% due 06/01/04 650,000 422,500 1,980,000 1,287,000 ---- ---- People's Choice TV Corporation, Step up to 13.125% due 06/01/04 220,000 128,150 1,570,000 914,525 ---- ---- Telemundo Group, Incorporated, 10.25% due 12/30/01 100.000 99,500 100,000 99,500 ---- ---- -------- ---------- 650,150 2,301,025 TEXTILE MILL PRODUCTS: 0.03% 0.03% 0.00% Interface, Incorporated, 9.50% due 11/15/05 70,000 71,750 190,000 194,750 ---- ---- -------- ----------
The accompanying notes are an integral part of the financial statements. 71 159 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE --------------------- ------------------------- --------------------- Principal Principal Principal Amount Value Amount Value Amount Value --------- ----------- ----------- ----------- --------- ----------- TRANSPORTATION: 0.29% 0.25% 0.00% Transtar Holdings L.P., Step up to 13.375% due 12/15/03 $ 400,000 $ 266,000 $1,100,000 $ 731,500 ---- ---- U.S. Air, Incorporated, 9.625% due 02/01/01 190,000 165,300 490,000 426,300 ---- ---- U.S. Air, Incorporated, 10.00% due 07/01/03 210,000 182,700 555,000 482,850 ---- ---- ----------- ----------- 614,000 1,640,650 TRANSPORTATION EQUIPMENT: 0.23% 0.25% 0.00% Aftermarket Technology Corporation, Series B, 12.00% due 08/01/04 470,000 500,550 1,530,000 1,629,450 ---- ---- ----------- ----------- TOTAL CORPORATE BONDS (Cost: $19,651,016, $87,267,870 and $18,901,978, respectively) $20,014,036 $88,287,890 $19,047,276 ----------- ----------- ----------- FIXED INCOME - OTHER: 3.89% 4.94% 6.23% MISCELLANEOUS ASSET BACKED SECURITIES: 2.93% 2.98% 3.81% Discover Card Master Trust, Series 1993 2, Class A, 5.40% due 11/16/01 1,000,000 996,870 ---- ---- ---- ---- Discover Card Trust, Series 1992, Class B, 6.125% due 05/15/98 260,000 259,917 1,515,000 1,514,515 $ 600,000 $ 599,808 Discover Card Trust, 1992 B B, 7.50% due 06/16/00 150,000 155,625 1,330,000 1,379,875 580,000 601,750 Ford Credit Auto Loan Master Trust, Series 92 2, 7.375% due 04/15/99 ---- ---- 650,000 664,826 775,000 792,678 Ford Credit Grantor Trust, 1995 B Certificates, Class A, 5.90% due 10/15/00 ---- ---- 2,674,916 2,687,434 1,167,236 1,172,699 MBNA Master Card, Series 1992 1A, 7.25% due 06/15/99 ---- ---- ---- ---- 650,000 665,028 Premier Auto Trust, Series 933, Class A3, 4.90% due 12/15/98 227,162 225,813 1,436,468 1,427,935 574,587 571,174 Railcar Trust, 7.75% due 06/01/04 171,538 184,850 1,663,918 1,793,043 898,859 968,613 Standard Credit Card Master Trust, 5.50% due 09/07/98 140,000 139,562 990,000 986,901 525,000 523,357 Standard Credit Card Master Trust, 9.00% due 08/07/97 210,000 214,003 1,270,000 1,294,206 520,000 529,911 Standard Credit Card Master Trust, Series 1991 3 Certificates, Class B, 9.25% due 09/07/99 380,000 411,586 2,260,000 2,447,851 920,000 996,470 Standard Credit Card Master Trust, Series 1992 1 Certificates, Class B, 6.25% due 09/07/98 ---- ---- 5,075,000 5,113,063 1,120,000 1,128,400 ---------- ----------- ----------- 2,588,226 19,309,649 8,549,888 OTHER COLLATERIZED MORTGAGE OBLIGATIONS: 0.96% 1.96% 2.42% American Housing Trust, Series IV, 9.552% due 09/25/20 700,000 721,000 4,300,000 4,429,000 1,740,000 1,792,200 Green Tree Securitized Net, Series 1994 A Certificates, Series A, 6.90% due 02/15/04 140,696 141,291 1,025,072 1,029,404 535,985 538,251 Kearny Real Estate L.P.,Series 95-1, Class B, 6.60% due 10/15/02 100,000 100,674 500,000 503,370 200,000 201,348
The accompanying notes are an integral part of the financial statements. 72 160 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE --------------------- ------------------------- ---------------------- Principal Principal Principal Amount Value Amount Value Amount Value --------- --------- ----------- ---------- --------- --------- OTHER COLLATERIZED MORTGAGE OBLIGATIONS - CONTINUED Lennar Partners, L.P., Series 1994 1, Class C, 8.12% due 09/15/02 $197,000 $ 198,612 $1,100,000 $ 1,109,001 $ 450,000 $ 453,682 Meritor Mortgage Securities Corporation, 9.40% due 06/01/99 64,121 64,602 406,099 409,145 149,616 150,738 Nomura Asset Securities Corporation, Series 1994, 7.240% due 07/07/03 156,067 155,067 1,092,469 1,085,471 546,235 542,735 Overseas Private Investment Corporation, Series 1995, 6.08% due 08/15/04 100,000 101,278 830,000 840,607 360,000 364,601 Structured Asset Securities Corporation, Series 95 C4, Class A 1A, 6.90% due 06/25/26 100,000 100,550 690,000 693,792 300,000 301,649 Structured Asset Securities Corporation, Series 95 C1, Class D, 7.375% due 09/25/24 500,000 487,344 2,700,000 2,631,656 1,100,000 1,072,156 ---------- ----------- ----------- 2,070,418 12,731,446 5,417,360 TOTAL FIXED INCOME - OTHER (Cost: $4,532,284, $34,687,639 and $13,689,815, respectively) $4,658,644 $32,041,095 $13,967,248 ---------- ----------- ----------- FOREIGN BOND OBLIGATIONS: 0.90% 1.81% 2.18% FOREIGN CORPORATE BONDS: 0.26% 0.40% 0.25% Acetex Corporation, 9.75% due 10/01/03 60,000 62,700 180,000 188,100 ---- ---- British Columbia Hydro & Power, 12.50% due 01/15/14 60,000 73,256 460,000 561,632 200,000 244,188 Korea Development Bank, 9.29% due 03/13/98 50,000 53,664 430,000 461,515 190,000 203,925 Korea Development Bank, 9.48% due 04/02/01 30,000 34,568 220,000 253,497 90,000 103,703 Repap New Brunswick, Incorporated, 10.625% due 04/15/05 350,000 343,000 1,150,000 1,127,000 ---- ---- ---------- ----------- ----------- 567,188 2,591,744 551,816 FOREIGN GOVERNMENT BONDS: 0.63% 1.41% 1.93% Israel State, Class 1C, 5.75% due 03/15/00 130,000 131,094 780,000 786,566 300,000 302,525 Israel Export Trust, Series 1994-1 Certificates, 6.88% due 01/26/03 61,765 63,926 494,118 511,412 211,765 219,176 Israel State, U.S. Government GTD Notes, Class 3A, 6.00% due 02/15/99 ---- ---- ---- ---- 570,000 573,745 Israel State, U.S. Government GTD Notes, Class 1D, 6.125% due 03/15/03 100,000 101,443 600,000 608,658 250,000 253,608 Israel State, U.S. Government GTD Notes, Class 6B, 6.25% due 08/15/02 290,000 298,999 2,240,000 2,309,507 960,000 989,789 Israel State, U.S. Government GTD Notes, 7.125% due 08/15/99 110,000 115,131 900,000 941,985 390,000 408,193 Israel State, U.S. Government GTD Notes, Class 5B, 8.00% due 11/15/01 580,000 646,362 3,570,000 3,978,476 1,420,000 1,582,475 ---------- ----------- ----------- 1,356,955 9,136,604 4,329,511 TOTAL FOREIGN BOND OBLIGATIONS (Cost: $1,852,334, $11,249,101 and $4,652,048, respectively) $1,924,143 $11,728,348 $ 4,881,327 ---------- ----------- -----------
The accompanying notes are an integral part of the financial statements. 73 161 NASL SERIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) - --------------------------------------------------------------------------------
AGGRESSIVE MODERATE CONSERVATIVE -------------- ------------ -------------- Value Value Value --------- ---------- ---------- REPURCHASE AGREEMENTS: *** 8.15% 7.28% 12.62% Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95 at 5.00%, to be repurchased at $17,529,733 on 01/02/96, collateralized by $15,575,000 U.S. Treasury Bonds, 7.25% due 05/15/16 (valued at $18,013,674 including interest) $ 17,520,000 ------------ Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95 at 5.00%, to be repurchased at $47,267,245 on 01/02/96, collateralized by $41,995,000 U.S. Treasury Bonds, 7.25% due 05/15/16 (valued at $48,570,219 including interest) $ 47,241,000 ------------ Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95 at 5.00%, to be repurchased at $28,304,716 on 01/02/96, collateralized by $25,150,000 U.S. Treasury Bonds, 7.25% due 05/15/16 (valued at $29,087,891 including interest) $ 28,289,000 ------------ TOTAL INVESTMENTS (Aggressive, Moderate and Conservative Asset Allocation Trusts) (Cost: $186,120,943, $589,635,114 and $209,523,478, respectively) $211,255,251 $648,772,669 $224,247,646 ============ ============ ============ Key to Currency Abbreviations - ----------------------------- AUD - Australian Dollar BEF - Belgian Franc CAD - Canadian Dollar DKK - Danish Krone FRF - French Franc DEM - German Deustche Mark [Pound] - Great British Pound ITL - Italian Lira [Yen] - Japanese Yen MYR - Malaysian Ringgit NLG - Netherland Guilder ESP - Spanish Peseta SEK - Swedish Krone CHF - Swiss Franc Key to Security Abbreviations - ----------------------------- ADR - American Depository Receipt FRN - Floating Rate Note GTD - Guaranteed IO - Interest Only (Carries notional principal amount) REMIC - Real Estate Mortgage Investment Conduit TBA - To Be Announced * - Non-Income producing ** - Purchased on a forward commitment (Note 2) *** - At December 31, 1995 a portion of this security was pledged to cover forward commitments purchased. **** - At December 31, 1995 a portion of this security was pledged to cover margin requirements for open futures contracts.
The accompanying notes are an integral pad of the financial statements. 74 162 NASL SERIES TRUST NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. ORGANIZATION OF THE TRUST. The NASL Series Trust (the "Trust") is a no-load, open-end management investment company organized as a Massachusetts business trust. It is a series company, which means that it has several portfolios, each with a stated investment objective which it pursues through separate investment policies. The Trust currently offers the following fourteen portfolios: The Global Equity Trust ("Global Equity"), the Pasadena Growth Trust ("Pasadena Growth"), the Equity Trust ("Equity"), the Value Equity Trust ("Value Equity"), the Growth and Income Trust ("Growth and Income"), the International Growth and Income Trust ("International Growth and Income"), the Strategic Bond Trust ("Strategic Bond"), the Global Government Bond Trust ("Global Government Bond"), the Investment Quality Bond Trust ("Investment Quality Bond"), the U.S. Government Securities Trust ("U.S. Government Securities"), the Money Market Trust ("Money Market"), the Aggressive Asset Allocation Trust ("Aggressive Asset Allocation"), the Moderate Asset Allocation Trust ("Moderate Asset Allocation") and the Conservative Asset Allocation Trust ("Conservative Asset Allocation"). Each of the Trusts with the exception of Global Government Bond is diversified for purposes of the Investment Company Act of 1940. Shares of the Trust are presently offered only to the NASL Variable Account, the NASL Group Variable Account and the NASL Variable Life Variable Account, separate accounts of North American Security Life Insurance Company ("Security Life") and to the FNAL Variable Account, a separate account of First North American Life Assurance Company ("First North American"), which are available for funding certain variable contracts issued by them. Security Life, a Delaware corporation, is a wholly-owned subsidiary of North American Life Assurance Company ("North American Life"), a mutual insurance company based in North York, Canada. First North American, a New York corporation, is a wholly-owned subsidiary of Security Life. At December 31, 1995, Security Life owned seed money shares in Growth and Income. NASL Financial Services, Inc. ("NASL Financial"), a wholly-owned subsidiary of Security Life, serves as investment adviser for the Trust (Note 6). NASL Financial is also the principal underwriter of the variable contracts issued by Security Life and First North American. NEW PORTFOLIO. On January 9, 1995, International Growth and Income commenced operations. The subadviser to this portfolio is J.P. Morgan Investment Management Inc. Deferred organization costs of $12,631 were incurred and are being amortized over five years. 2. SIGNIFICANT ACCOUNTING POLICIES. The policies described below are followed by the Trust in the preparation of the financial statements for its portfolios in conformity with generally accepted accounting principles ("GAAP"). SECURITY VALUATION. Securities held by Money Market and short term instruments with remaining maturities of 60 days or less held by the other portfolios of the Trust are valued on an amortized cost basis or at original cost plus accrued interest, both of which approximate current market value. All other securities held by the Trust are valued at the last sale price as of the close of business on a principal securities exchange (domestic or foreign) or, lacking any sales, at the closing bid prices. Securities traded only in the over-the-counter market are valued at the last bid prices quoted by brokers making markets in the securities at the close of trading on the Exchange. Trust securities for which there are no such quotations, principally debt securities, are valued on the basis of the valuation provided by a pricing service which utilizes both dealer-supplied and electronic data processing techniques. Other assets and securities for which no such quotations are readily available are valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. FOREIGN CURRENCY TRANSLATIONS. The accounting records of the Trust are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis: (i) market value of securities, other assets and other liabilities at the current rate of exchange of such currencies against U.S. dollars; (ii) purchases and sales of securities, income and expenses at the rate of exchange quoted on the respective dates of such transactions. Gains and losses that arise from changes in foreign exchange rates have been segregated from gains and losses that arise from changes in the market prices of investments. These gains and losses are included with gains and losses on foreign currency and forward foreign currency contracts in the Statements of Operations. 75 163 NASL SERIES TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED - ------------------------------------------------------------------------------- SIGNIFICANT ACCOUNTING POLICIES, CONTINUED FORWARD FOREIGN CURRENCY CONTRACTS. All portfolios with the exception of Investment Quality Bond, U.S. Government Securities and Money Market may purchase and sell forward foreign currency contracts in order to hedge a specific transaction or portfolio position. The net U.S. dollar value of foreign currency underlying all contractual commitments held at the end of the period and the resulting net unrealized appreciation (depreciation) and related net receivable or payable amount are determined using forward foreign currency exchange rates supplied by a quotation service. The Trust could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. Net realized gains (losses) on foreign currency and forward foreign currency contracts shown in the Statements of Operations, include net gains or losses realized by a portfolio on contracts which have matured or which the portfolio has terminated by entering into an offsetting commitment with the same broker. FUTURES. All portfolios other than Investment Quality Bond and Money Market may purchase and sell financial futures contracts and options on those contracts. The portfolios invest in contracts based on financial instruments such as U.S. Treasury bonds or notes or on securities indices such as the S&P 500 Index, in order to hedge against a decline in the value of securities owned by the portfolios. When a portfolio sells a futures contract based on a financial instrument, the portfolio becomes obligated to deliver that kind of instrument at an agreed upon date for a specified price. The portfolio realizes a gain or loss depending on whether the price of an offsetting purchase is less or more than the price of the initial sale or on whether the price of an offsetting sale is more or less than the price of the initial purchase . The Trust could be exposed to risks if it could not close out futures positions because of an illiquid secondary market or the inability of counterparties to meet the terms of their contracts. Upon entering into futures contracts, the Trust is required to deposit with a broker an amount, initial margin, which represents 5% of the purchase price indicated in the futures contract. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates, making the long or short positions in the contract more or less valuable. If the position is closed out by taking an opposite position prior to the settlement date of the futures contract, a final determination of variation margin is made, cash is required to be paid to or released by the broker, and the portfolio realizes a gain or loss. FORWARD COMMITMENTS. The portfolios of the Trust may purchase debt securities on a when issued or forward delivery basis, which means that the obligations will be delivered to the portfolios of the Trust at a future date, which may be a month or more after the date of commitment. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the securities underlying a forward commitment to purchase securities, and the subsequent fluctuations in their value, is taken into account when determining the Trust's net asset value starting on the day the Trust agrees to purchase the securities. At December 31, 1995 forward commitments in Strategic Bond, U.S. Government Securities, and Aggressive, Moderate and Conservative Asset Allocation were valued at $5,395,848, $43,696,735, $445,356, $4,344,695 and $2,147,606, respectively. MORTGAGE DOLLAR ROLLS. Strategic Bond and U.S. Government Securities may enter into mortgage dollar rolls in which they sell mortgage securities for delivery in the current month and simultaneously contract to repurchase similar, but not identical, securities at the same price on an agreed upon date. The Trusts receive compensation as consideration for entering into the commitment to repurchase. The compensation is recorded as deferred income and amortized to income over the roll period. As the holder, the counterparty receives all principal and interest payments, including prepayments, made with respect to the similar security. Mortgage dollar rolls may be renewed with a new sale and repurchase price with a cash settlement made at renewal without physical delivery of the securities subject to the contract. ORGANIZATION COSTS. Costs incurred by a portfolio in connection with its organization, initial registration and public offering of shares are being amortized on a straight-line basis for Pasadena Growth, Value Equity, Growth and Income, International Growth and Income and Strategic Bond over a five-year period beginning with the commencement of operations of each portfolio. FEDERAL INCOME TAXES. The Trust's policy is to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and to distribute all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. Each portfolio of the Trust is treated as a separate taxpayer for federal income tax purposes. 76 164 NASL SERIES TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED - -------------------------------------------------------------------------------- SIGNIFICANT ACCOUNTING POLICIES, CONTINUED DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of Money Market is declared as a dividend to shareholders of record as of the close of business each day and is reinvested daily. During any particular year, net realized gains from investment transactions of each portfolio, in excess of available capital loss carryforwards of each portfolio would be taxable to such portfolio if not distributed. Therefore, each portfolio of the Trust intends to distribute all of its investment company taxable income and any net realized capital gains in order to avoid federal income tax. Each portfolio of the Trust is exempt from federal excise tax. Net investment income is reported in the accompanying statements under GAAP. The Trust's distributions are based on income amounts determined in accordance with federal income tax regulations. Overdistributions of net investment income as determined in accordance with GAAP have been presented in the financial statements as distributions in excess of net investment income. Net investment income and net realized gains differ for financial statement and tax purposes due to distributions in accordance with income tax regulations which may differ from GAAP: marking-to-market of certain financial instruments, the deferral of certain losses for tax purposes and the treatment of currency gains or losses. As a result, the character of distributions made during the year from net investment income may differ from its ultimate characterization for tax purposes. EXPENSE ALLOCATION. Expenses not directly attributable to a particular portfolio are allocated based on the relative share of net assets of each portfolio for the time during which the expense was incurred. REPURCHASE AGREEMENTS. Each portfolio of the Trust may enter into repurchase agreements. When a portfolio enters into a repurchase agreement through its custodian, it receives delivery of the underlying securities, the amount of which at the time of purchase and each subsequent business day is required to be maintained at such a level that the market value is 102% of the repurchase amount. Each portfolio will take constructive receipt of all securities underlying the repurchase agreements it has entered into until such agreements expire. If the seller defaults, a portfolio would suffer a loss to the extent that proceeds from the sale of underlying securities were less than the repurchase amount. CAPITAL ACCOUNTS. The Trust reports the accumulated undistributed net investment income (loss) and accumulated undistributed net realized gain (loss) accounts on a basis approximating amounts available for future tax distributions (or to offset future taxable realized gains when a capital loss carryforward is available). Accordingly, each portfolio of the Trust may periodically make reclassifications among certain capital accounts without impacting the net asset value. OTHER. Investment security transactions are accounted for on a trade date plus one basis. Interest income is accrued as earned. Dividend income and distributions to shareholders are recorded on the ex-dividend date. All original issue discounts are accreted for financial and tax reporting purposes. The Trust uses the First In, First Out method for determining realized gain or loss on investments for both financial and federal income tax reporting purposes. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities. Actual results may differ from these estimates. 3. CAPITAL LOSS CARRYFORWARDS. At December 31, 1995, capital loss carryforwards available to offset future realized gains were approximately:
CAPITAL LOSS CARRYFORWARD EXPIRATION YEAR --------------------------------------------------- PORTFOLIO 1999 2000 2001 2002 2003 - --------- ---- ---- -------- ---------- ----------- Global Equity ............... ----- ----- ----- ----- $17,415,000 Pasadena Growth ............. ----- ----- $1,981,000 $6,191,000 2,371,000 Strategic Bond .............. ----- ----- ----- 2,962,000 656,000 Global Government Bond ...... ----- ----- ----- 7,553,000 ----- Investment Quality Bond ..... $60,000 ----- ----- 4,412,000 ----- U.S. Government Securities .. ----- ----- ----- 2,625,000 -----
4. CAPITAL SHARES. Share activity for the Trust for the year ended December 31, 1995, was as follows:
ADDITIONAL PAR PAID-IN SHARES VALUE CAPITAL ----------- --------- --------------- GLOBAL EQUITY Outstanding at December 31, 1994 .. 39,140,838 $391,408 $ 577,113,212 Sold ............................. 6,207,847 62,079 95,785,329 Reinvestment of distributions .... 2,048,016 20,480 29,962,469 Redeemed ......................... (7,147,089) (71,471) (109,106,453) ---------- -------- ------------- Net increase .................... 1,108,774 11,088 16,641,345 ---------- -------- ------------- Outstanding at December 31, 1995 .. 40,249,612 $402,496 $ 593,754,557 ========== ======== =============
77 165 NASL SERIES TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED - -------------------------------------------------------------------------------- CAPITAL SHARES, CONTINUED
ADDITIONAL PAID-IN SHARES VALUE CAPITAL ----------- -------- ------------- PASADENA GROWTH Outstanding at December 31, 1994 ........... 16,757,839 $167,578 $157,798,853 Sold ...................................... 10,076,574 100,766 103,544,741 Reinvestment of distributions ............. 85,550 856 833,257 Redeemed .................................. (2,556,755) (25,567) (25,527,910) ---------- -------- ------------ Net increase ............................ 7,605,369 76,055 78,850,088 ---------- -------- ------------ Outstanding at December 31, 1995 ........... 24,363,208 $243,632 $236,648,941 ========== ======== ============ EQUITY Outstanding at December 31, 1994 ........... 36,452,063 $364,521 $514,217,981 Sold ...................................... 15,461,830 154,618 287,151,438 Reinvestment of distributions ............. 261,859 2,618 4,090,234 Redeemed .................................. (4,613,712) (46,137) (83,341,209) ---------- -------- ------------ Net increase ............................ 11,109,977 111,099 207,900,463 ---------- -------- ------------ Outstanding at December 31, 1995 ........... 47,562,040 $475,620 $722,118,444 ========== ======== ============ VALUE EQUITY Outstanding at December 31, 1994 ........... 19,575,533 $195,755 $217,879,647 Sold ...................................... 10,319,618 103,196 132,779,380 Reinvestment of distributions ............. 314,376 3,144 3,810,235 Redeemed .................................. (1,475,942) (14,759) (18,695,131) ---------- -------- ------------ Net increase ............................ 9,158,052 91,581 117,894,484 ---------- -------- ------------ Outstanding at December 31, 1995 ........... 28,733,585 $287,336 $335,774,131 ========== ======== ============ GROWTH AND INCOME Outstanding at December 31, 1994 ........... 31,409,684 $314,097 $379,169,167 Sold ...................................... 10,336,698 103,367 154,483,408 Reinvestment of distributions ............. 945,795 9,458 12,853,356 Redeemed .................................. (1,799,079) (17,991) (26,014,630) ---------- -------- ------------ Net increase ............................ 9,483,414 94,834 141,322,134 ---------- -------- ------------ Outstanding at December 31, 1995 ........... 40,893,098 $408,931 $520,491,301 ========== ======== ============ INTERNATIONAL GROWTH AND INCOME Outstanding at January 9, 1995 (commencement of operations) ............................. ----- ----- ----- Sold ...................................... 12,066,223 $120,662 $122,853,036 Reinvestment of distributions ............. 179,396 1,794 1,872,895 Redeemed .................................. (3,783,494) (37,835) (38,622,070) ---------- -------- ------------ Net increase ............................ 8,462,125 84,621 86,103,861 ---------- -------- ------------ Outstanding at December 31, 1995 ........... 8,462,125 $84,621 $ 86,103,861 ========== ======== ============ STRATEGIC BOND Outstanding at December 31, 1994 ........... 8,519,256 $85,193 $ 88,840,442 Sold ...................................... 3,611,326 36,113 37,537,011 Reinvestment of distributions ............. 431,080 4,311 4,121,123 Redeemed .................................. (1,663,147) (16,632) (16,875,286) ---------- -------- ------------ Net increase ............................ 2,379,259 23,792 24,782,848 ---------- -------- ------------ Outstanding at December 31, 1995 ........... 10,898,515 $108,985 $113,623,290 ========== ======== ============ GLOBAL GOVERNMENT BOND Outstanding at December 31, 1994 ........... 16,716,312 $167,163 $217,539,724 Sold ...................................... 3,271,665 32,716 43,618,334 Reinvestment of distributions ............. 914,987 9,150 11,473,943 Redeemed .................................. (4,742,839) (47,428) (62,621,464) ---------- -------- ------------ Net decrease ............................ (556,187) (5,562) (7,529,187) ---------- -------- ------------ Outstanding at December 31, 1995 ........... 16,160,125 $161,601 $210,010,541 ========== ======== ============ INVESTMENT QUALITY BOND Outstanding at December 31, 1994 ........... 10,123,550 $101,235 $114,181,920 Sold ...................................... 4,829,840 48,298 55,677,616 Reinvestment of distributions ............. 651,687 6,517 7,070,803 Redeemed .................................. (3,987,022) (39,870) (45,870,415) ---------- -------- ------------ Net increase ............................ 1,494,505 14,945 16,878,004 ---------- -------- ------------ Outstanding at December 31, 1995 ........... 11,618,055 $116,180 $131,059,924 ========== ======== ============
78 166 NASL SERIES TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARES, CONTINUED
ADDITIONAL SHARES PAR VALUE PAID-IN CAPITAL --------- --------- --------------- U.S. GOVERNMENT SECURITIES Outstanding at December 31,1994 ... 14,941,588 $ 149,416 $ 190,375,496 Sold ............................. 5,766,460 57,665 75,165,041 Reinvestment of distributions .... 956,919 9,569 11,846,657 Redeemed ......................... (5,784,342) (57,844) (75,702,793) ---------- --------- ------------- Net increase ................... 939,037 9,390 11,308,905 ---------- --------- ------------- Outstanding at December 31, 1995 .. 15,880,625 $ 158,806 $ 201,684,401 ========== ========= ============= MONEY MARKET Outstanding at December 31, 1994 .. 27,667,381 $ 276,674 $ 276,397,132 Sold ............................. 31,669,307 316,693 316,376,373 Reinvestment of distributions .... 1,443,847 14,438 14,424,031 Redeemed ......................... (34,968,839) (349,688) (349,338,690) ---------- --------- ------------- Net decrease ................... (1,855,685) (18,557) (18,538,286) ---------- --------- ------------- Outstanding at December 31, 1995 .. 25,811,696 $ 258,117 $ 257,858,846 ========== ========= ============= AGGRESSIVE ASSET ALLOCATION Outstanding at December 31, 1994 .. 16,525,699 $ 165,257 $ 171,389,298 Sold ............................. 2,106,928 21,069 25,086,648 Reinvestment of distributions .... 1,046,144 10,461 11,455,275 Redeemed ......................... (3,194,369) (31,944) (37,535,154) ---------- --------- ------------- Net decrease ................... (41,297) (413) (993,232) ---------- --------- ------------- Outstanding at December 31, 1995 .. 16,484,402 $ 164,844 $ 170,396,066 ========== ========= ============= MODERATE ASSET ALLOCATION Outstanding at December 31, 1994 .. 56,010,309 $ 560,103 $ 579,183,287 Sold ............................. 1,091,213 10,912 12,744,722 Reinvestment of distributions .... 2,735,328 27,353 29,377,424 Redeemed ......................... (7,375,131) (73,751) (83,793,811) ---------- --------- ------------- Net decrease ................... (3,548,590) (35,486) (41,671,665) ---------- --------- ------------- Outstanding at December 31, 1995 .. 52,461,719 $ 524,617 $ 537,511,622 ========== ========= ============= CONSERVATIVE ASSET ALLOCATION Outstanding at December 31, 1994 .. 20,956,187 $ 209,562 $ 213,562,834 Sold ............................. 773,201 7,732 8,397,679 Reinvestment of distributions .... 1,060,630 10,606 10,850,241 Redeemed ......................... (3,426,820) (34,268) (36,946,840) ---------- --------- ------------- Net decrease ................... (1,592,989) (15,930) (17,698,920) ---------- --------- ------------- Outstanding at December 31, 1995 .. 19,363,198 $ 193,632 $ 195,863,914 ========== ========= =============
5. PURCHASES AND SALES OF SECURITIES. The following summarizes the securities transactions (except for short-term investments) for the portfolios (with the exception of Money Market) for the year ended December 31, 1995:
PURCHASES SALES ------------------------------------- ------------------------------------- PORTFOLIO U.S. GOVERNMENT OTHER ISSUES U.S. GOVERNMENT OTHER ISSUES --------------- ------------ --------------- ------------ Global Equity ..................... ----- $379,584,413 ----- $377,046,540 Pasadena Growth ................... ----- 186,751,186 ----- 116,996,713 Equity ............................ ----- 749,746,383 ----- 622,889,562 Value Equity ...................... ----- 258,556,259 ----- 133,640,524 Growth and Income ................. ----- 350,418,269 ----- 199,814,869 International Growth and Income* .. ----- 126,281,059 ----- 47,275,357 Strategic Bond .................... $ 83,632,008 142,505,422 $ 84,927,592 117,983,453 Global Government Bond ............ 43,927,820 305,566,986 24,487,366 335,144,653 Investment Quality Bond ........... 137,842,069 43,382,904 131,107,656 33,131,331 U.S. Government Securities ........ 908,829,476 ----- 885,115,803 9,922,983 Aggressive Asset Allocation ....... 69,569,151 130,687,830 82,311,958 133,626,087 Moderate Asset Allocation ......... 432,659,879 326,832,997 466,386,128 376,597,180 Conservative Asset Allocation ..... 168,207,799 57,717,939 194,002,297 74,266,633 * For the period January 9, 1995 (commencement of operations) to December 31, 1995.
79 167 NASL SERIES TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED - -------------------------------------------------------------------------------- PURCHASES AND SALES OF SECURITIES, CONTINUED Purchases and sales (including maturities) for Money Market for the year ended December 31, 1995 were $2,322,303,562 and $2,351,015,623, respectively. At December 31, 1995, tax basis net unrealized appreciation (depreciation) was equal to the aggregate gross unrealized appreciation for all securities in which there was an excess of market value over tax cost and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value as follows:
TAX BASIS NET UNREALIZED TAX BASIS TAX BASIS TAX BASIS APPRECIATION UNREALIZED UNREALIZED PORTFOLIO COST (DEPRECIATION) APPRECIATION DEPRECIATION - --------- --------- --------------- ------------ ------------ Global Equity ................................ $581,493,444 $ 59,887,420 $ 82,381,252 $22,493,832 Pasadena Growth .............................. 226,921,177 50,415,110 59,089,133 8,674,023 Equity ....................................... 812,924,416 163,140,832 176,943,455 13,802,623 Value Equity ................................. 365,220,110 29,851,922 46,173,302 16,321,380 Growth and Income ............................ 550,600,569 121,037,410 126,549,451 5,512,041 International Growth and Income............... 84,946,812 2,252,131 4,396,761 2,144,630 Strategic Bond ............................... 122,876,684 2,048,149 5,221,879 3,173,730 Global Government Bond ....................... 215,615,785 11,538,018 11,538,018 ----- Investment Quality Bond ...................... 134,795,576 7,919,802 7,977,989 58,187 U.S. Government Securities ................... 251,307,678 4,742,094 5,292,053 549,959 Aggressive Asset Allocation .................. 186,269,731 24,985,520 27,144,161 2,158,641 Moderate Asset Allocation .................... 589,957,010 58,815,659 63,150,948 4,335,289 Conservative Asset Allocation ................ 209,617,332 14,630,314 15,826,122 1,195,808
The following is a summary of futures contracts activity during the year ended December 31, 1995: SALES OF FUTURES CONTRACTS PURCHASES OF FUTURES CONTRACTS ------------------------------------------ ----------------------------------------------- NUMBER OF AGGREGATE FACE UNREALIZED NUMBER OF AGGREGATE FACE UNREALIZED CONTRACTS VALUE OF CONTRACTS GAIN CONTRACTS VALUE OF CONTRACTS GAIN (LOSS) --------- ----------------- ---------- -------------------------------- ----------- AGGRESSIVE ASSET ALLOCATION: US TREASURY BOND FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ............... --- ---- 25 $ 2,500,000 Contracts closed ............... --- ---- (25) (2,500,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- --- ---- === ============ === =========== S&P 500 FUTURES: Outstanding, December 31, 1994 .. 51 $ 12,750,000 --- ---- Contracts opened ............... 166 41,500,000 --- ---- Contracts closed ............... (198) (49,500,000) --- ---- --- ------------ Outstanding, December 31, 1995 .. 19 $ 4,750,000 $11,210 --- ---- === ============ ======= === =========== CAC 40 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 38 FRF 304,000 Contracts closed ................ --- ---- (25) (200,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- 13 FRF 104,000 $ 18,523 === ============ === =========== ======== DAX 30 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 21 DEM 63,000 Contracts closed ................ --- ---- (13) (39,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- 8 DEM 24,000 ($ 12,130) === ============ === =========== ======== FTSE 100 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 25 [Pounds] 62,500 Contracts closed ................ --- ---- (16) (40,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- 9 [Pounds] 22,500 $ 6,635 === ============ === =========== ======== NIKKEI 300 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 365 [Yen] 3,650,000 Contracts closed ................ --- ---- (262) (2,620,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- 103 [Yen] 1,030,000 $157,949 === ============ === =========== ========
80 168 NASL SERIES TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED - -------------------------------------------------------------------------------- PURCHASES AND SALES OF SECURITIES, CONTINUED
SALES OF FUTURES CONTRACTS PURCHASES OF FUTURES CONTRACTS -------------------------------------------- ----------------------------------------------- NUMBER OF AGGREGATE FACE UNREALIZED NUMBER OF AGGREGATE FACE UNREALIZED CONTRACTS VALUE OF CONTRACTS GAIN CONTRACTS VALUE OF CONTRACTS GAIN (LOSS) --------- ------------------ ---------- ------------------------------- ----------- MODERATE ASSET ALLOCATION: US TREASURY BOND FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 48 $ 4,800,000 Contracts closed ................ --- ---- (48) (4,800,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- --- ---- === ============= === =========== S&P 500 FUTURES: Outstanding, December 31, 1994 .. 107 $ 26,750,000 --- ---- Contracts opened ................ 363 90,750,000 --- ---- Contracts closed ................ (429) (107,250,000) --- ---- --- ------------- Outstanding, December 31, 1995 .. 41 $ 10,250,000 $24,190 --- ---- === ============= ======= === =========== CAC 40 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 75 FRF 600,000 Contracts closed ................ --- ---- (47) (376,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- 28 FRF 224,000 $ 39,992 === ============= === =========== ======== DAX 30 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 41 DEM 123,000 Contracts closed ................ --- ---- (25) (75,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- 16 DEM 48,000 ($ 24,248) === ============= === =========== ======== FTSE 100 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 45 [P] 112,500 Contracts closed ................ --- ---- (28) (70,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- 17 [P] 42,500 $ 12,549 === ============= === =========== ======== NIKKEI 300 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 651 [Yen] 6,510,000 Contracts closed ................ --- ---- (442) (4,420,000) --- ------------ Outstanding, December 31, 1995 .. --- ---- 209 [Yen] 2,090,000 $316,735 === ============= === =========== ======== CONSERVATIVE ASSET ALLOCATION: US TREASURY BOND FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 6 $600,000 Contracts closed ................ --- ---- (6) (600,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- --- ---- === ============= === =========== S&P 500 FUTURES: Outstanding, December 31, 1994 .. 19 $4,750,000 --- ---- Contracts opened ................ 65 16,250,000 --- ---- Contracts closed ................ (78) (19,500,000) --- ---- --- ------------- Outstanding, December 31, 1995 .. 6 $ 1,500,000 $ 3,540 --- ---- === ============= ======= === =========== CAC 40 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 11 FRF 88,000 Contracts closed ................ --- ---- (7) (56,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- 4 FRF 32,000 $ 2,450 === ============= === =========== ======== DAX 30 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 6 DEM 18,000 Contracts closed ................ --- ---- (4) (12,000) --- ----------- Outstanding, December 31, 1995 .. --- ---- 2 DEM 6,000 ($ 3,043) === ============= === =========== ========= FTSE 100 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 8 [Pounds] 20,000 Contracts closed ................ --- ---- (5) (12,500) --- ----------- Outstanding, December 31, 1995 .. --- ---- 3 [Pounds] 7,500 $ 2,214 === ============= === =========== ======== NIKKEI 300 FUTURES: Outstanding, December 31, 1994 .. --- ---- --- ---- Contracts opened ................ --- ---- 109 [Yen] 1,090,000 Contracts closed ................ --- ---- (72) (720,000) --- --------- Outstanding, December 31, 1995 .. --- ---- 37 [Yen] 370,000 $ 56,835 === ============= === =========== ========
81 169 NASL SERIES TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED - -------------------------------------------------------------------------------- 6. INVESTMENT ADVISORY AGREEMENTS. Effective March 20, 1987, the Trust entered into an Investment Advisory Agreement with NASL Financial (the "Adviser"), a wholly-owned subsidiary of Security Life and the principal underwriter of the variable annuity contracts issued by Security Life and First North American. The Adviser is responsible for managing the corporate and business affairs of the Trust and for selecting and compensating subadvisers to handle the investment and reinvestment of the assets of each portfolio of the Trust, subject to the supervision of the Trust's Board of Trustees. As compensation for its services, NASL Financial receives an advisory fee from the Trust based on the average annual net assets of each particular portfolio. Advisory fees charged to each portfolio were as follows for the year ended December 31, 1995:
PORTFOLIO FEE ---------- ---- Global Equity .................... .90% Pasadena Growth .................. .975% Equity ........................... .75% Value Equity ..................... .80% Growth and Income ................ .75% International Growth and Income .. .95% Strategic Bond ................... .775% Global Government Bond ........... .80% Investment Quality Bond .......... .65% U.S. Government Securities ....... .65% Money Market ..................... .50% Aggressive Asset Allocation ...... .75% Moderate Asset Allocation ........ .75% Conservative Asset Allocation .... .75%
EXPENSE REIMBURSEMENT. Pursuant to the Advisory Agreement, NASL Financial reimburses the Trust for expenses (excluding advisory fees, taxes, portfolio brokerage commissions and interest) incurred in excess of 0.50% of the average annual net assets of each portfolio, respectively, on an annualized basis in Pasadena Growth, Equity, Value Equity, Growth and Income, Strategic Bond, Investment Quality Bond, U.S. Government Securities, Money Market and Aggressive, Moderate and Conservative Asset Allocation and 0.75% in Global Equity, International Growth and Income and Global Government Bond. There were no expenses reimbursed by NASL Financial for the year ended December 31, 1995. The Subadviser to Pasadena Growth, Roger Engemann Management Co., Inc. has agreed to reimburse "other expenses" of Pasadena Growth up to a maximum on an annual basis of .15% of average annual net assets. For the year ended December 31, 1995, all "other expenses", .06%, were reimbursed by them. 7. TRUSTEES' FEES. The Trust pays each Trustee who is not an employee or a director of the Adviser or its affiliates a fee of $4,750 plus travel expenses for each Board of Trustees meeting attended. The Trust also pays each Trustee who is not an employee of the Adviser or its affiliates an annual retainer of $18,000. 8. COMMITMENTS. At December 31, 1995, Global Equity, Equity, International Growth and Income, Strategic Bond and Global Government Bond had entered into forward foreign currency contracts which contractually obligate the portfolio to deliver currencies at future dates. Open sale and purchase contracts at December 31, 1995 were as follows: NET UNREALIZED CONTRACTS IN EXCHANGE SETTLEMENT APPRECIATION TO DELIVER FOR DATE VALUE (DEPRECIATION) ---------- ----------- ---------- ----- -------------- GLOBAL EQUITY: SALES German Deutschemark .. 26,708,000 $18,786,753 3/21/96 $18,694,362 $ 92,391 French Franc ......... 155,670,000 31,659,549 3/21/96 31,831,330 (171,781) Japanese Yen ......... 1,104,000,000 11,022,914 3/21/96 10,817,378 205,536 ----------- ----------- --------- $61,469,216 $61,343,070 $ 126,146 =========== =========== --------- PURCHASES $ 403,389 [Yen] 41,432,050 1/04/96 $ 401,279 $ (2,110) 120,084 [Yen] 12,306,238 1/05/96 119,189 (895) 171,562 [Yen] 17,703,483 1/08/96 171,462 (100) -------------- ----------- --------- $ 695,035 $ 691,930 (3,105) ============== =========== --------- $ 123,041 =========
82 170 NASL SERIES TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED - -------------------------------------------------------------------------------- COMMITMENTS, CONTINUED NET UNREALIZED CONTRACTS IN EXCHANGE SETTLEMENT APPRECIATION TO DELIVER FOR DATE VALUE (DEPRECIATION) --------- ----------- ---------- ------ -------------- EQUITY: PURCHASES $ 543,211 [Yen] 55,744,977 1/04/96 $539,903 $ (3,308) 210,887 [Yen] 21,693,396 1/05/96 210,105 (782) -------------- ----------- --------- $ 754,098 $ 750,008 $ (4,090) ============== =========== ========= INTERNATIONAL GROWTH AND INCOME: SALES Japanese Yen .................. 1,739,182,683 $ 17,319,495 2/16/96 $16,962,456 $ 357,039 Norwegian Krone ............... 900,193 145,240 2/16/96 142,189 3,051 -------------- ----------- --------- $ 17,464,735 $17,104,645 $ 360,090 ============== =========== --------- PURCHASES $ 3,978,000 [Yen] 399,315,618 2/16/96 $ 3,894,573 $ (83,427) ============== =========== --------- $ 276,663 ========= STRATEGIC BOND: SALES Belgian Franc ................. 16,823,675 $ 564,584 1/22/96 $ 572,452 $ (7,868) Canadian Dollar ............... 851,000 621,713 1/22/96 623,188 (1,475) German Deutschemark ........... 17,315,606 12,047,535 1/22/96 12,087,076 (39,541) Danish Krone .................. 1,862,047 333,781 1/22/96 335,559 (1,778) Spanish Peseta ................ 82,817,833 664,803 1/22/96 680,978 (16,175) French Franc .................. 15,257,098 3,043,281 1/22/96 3,117,230 (73,949) Great British Pound Sterling .. 2,076,583 3,238,413 1/22/96 3,223,092 15,321 Italian Lira .................. 3,478,951,297 2,132,523 1/22/96 2,183,070 (50,547) Japanese Yen .................. 157,884,383 1,567,868 1/22/96 1,534,682 33,186 Netherland Guilder ............ 1,594,191 975,929 1/22/96 994,951 (19,022) -------------- ----------- --------- $ 25,190,430 $25,352,278 $(161,848) ============== =========== --------- PURCHASES $ 6,909,376 DEM 9,915,996 1/22/96 $ 6,921,813 $ 12,437 197,368 ESP 25,259,150 1/22/96 207,696 10,328 1,414,177 FRF 6,906,217 1/22/96 1,411,033 (3,144) 1,039,378 [P] 678,445 1/22/96 1,053,024 13,646 865,174 ITL 1,396,132,106 1/22/96 876,084 10,910 1,751,454 FRF 8,666,196 1/24/96 1,770,698 19,244 -------------- ----------- --------- $ 12,176,927 $12,240,348 $ 63,421 ============== =========== ---------- $ (98,427) ========= GLOBAL GOVERNMENT BOND: SALES German Deutschemark ........... 32,399,187 $ 22,531,659 2/09/96 $22,635,216 $(103,557) Japanese Yen .................. 432,900,000 5,000,000 8/09/96 4,319,907 680,093 German Deutschemark ........... 14,099,500 10,000,000 8/29/96 9,943,904 56,096 -------------- ----------- --------- $ 37,531,659 $36,899,027 $ 632,632 ============== =========== --------- PURCHASES $ 22,140,211 DEM 32,399,187 2/09/96 $22,635,216 $ 495,005 4,881,597 [Yen] 432,900,000 8/09/96 4,319,907 (561,690) -------------- ----------- --------- $ 27,021,808 $26,955,123 $ (66,685) ============== =========== --------- $ 565,947 =========
83 171 NASL SERIES TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED - -------------------------------------------------------------------------------- 9. SUBSEQUENT EVENT. On September 7, 1995, North American Life announced plans to "amalgamate" with The Manufacturers Life Insurance Company ("MLI"). An amalgamation is the exclusive method of combining federally chartered mutual life insurers under the applicable Insurance Companies Act (Canada). The amalgamation required and received the approval of the Superintendent of Financial Institutions in Canada, certain US regulatory approvals and the approval of the policyholders of both mutual companies. The amalgamation of North American Life and MLI became effective as of January 1, 1996. MLI is a Canadian federally chartered mutual life insurance company with $29.9 billion (US) in consolidated assets and $2.4 billion (US) in policyholder surplus as of June 30, 1995. North American Life, also a Canadian federally chartered mutual life insurance company, had $4.5 billion (US) in assets and $0.6 billion (US) in policyholders surplus as of June 30, 1995. The surviving company will conduct business under the name "The Manufacturers Life Insurance Company". Effective January 1, 1996, immediately following the amalgamation, Security Life experienced a corporate restructuring which resulted in the formation of a newly organized holding corporation, NAWL Holding Company, Inc. ("NAWL"). NAWL holds all of the outstanding shares of Security Life and Wood Logan Associates, Inc. ("WLA"). WLA is a broker-dealer registered with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers, Inc. WLA acts as the promotional agent for distribution of the Trust. MLI owns all of the class A shares of NAWL, representing 85% of the voting shares of NAWL. Certain employees of WLA own all of the class B shares, which represent the remaining 15% voting interest in NAWL. 84 172 PART C. OTHER INFORMATION 173 ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements: --------- ---------- (1) Audited Financials at December 31, 1995 - Parts A and B. (2) Audited Financials Report of Independent Accountants, February 15, 1996 -- Part B Statements of Assets and Liabilities, December 31, 1995 -- Part B Statements of Operations for the year ended December 31, 1995 -- Part B Statements of Changes in Net Assets for the years ended December 31, 1995 and December 31, 1994 -- Part B Notes to Financial Statements, December 31, 1995 -- Part B Portfolios of Investments, December 31, 1995 -- Part B - Financial Highlights -- Parts A and B (b) Exhibits: --------- (1)(a) Agreement and Declaration of Trust dated September 29, 1988 - Filed herewith. (1)(b) Establishment and Designation of Additional Series of Shares of Beneficial Interest - Redesignation of the Series of Shares known as the "Convertible Securities Trust" to the "U.S. Government Bond Trust" dated May 1, 1989 - Filed herewith. (1)(c) Establishment and Designation of Additional Series of Shares of Beneficial Interest - Conservative, Moderate and Aggressive Asset Allocation Trusts dated May 1, 1989 - Filed herewith. (1)(d) Establishment and Designation of Additional Series of Shares of Beneficial Interest - Growth & Income Trust dated February 1, 1991 - Filed herewith. (1)(e) Establishment and Designation of Additional Series of Shares of Beneficial Interest - Redesignation of the Series of Shares known as the "Bond Trust" to the "Investment Quality Bond Trust" dated April 16, 1991 - Filed herewith. (1)(f) Establishment and Designation of Additional Series of Shares of Beneficial Interest - Redesignation of the Series of Shares known as the "U.S. 174 Government Bond Trust" to the "U.S. Government Securities Trust" dated June 14, 1991 - Filed herewith. (1)(g) Establishment and Designation of Additional Series of Shares of Beneficial Interest - Pasadena Growth Trust, Growth Trust and Strategic Income Trust dated August 7, 1992 - Filed herewith. (1)(h) Establishment and Designation of Additional Series of Shares of Beneficial Interest - Redesignation of the Series of Shares known as the "Strategic Income Trust" to the "Strategic Bond Trust" and the Series of Shares known as the "Growth Trust" to the "Value Equity Trust" dated April 4,1993 - Filed herewith. (1)(i) Establishment and Designation of Additional Series of Shares of Beneficial Interest - International Growth and Income Trust dated December 28, 1994 - Filed herewith. (2) By-laws of NASL Series Trust -- previously filed as exhibit (2) to post-effective amendment no. 7 filed on October 31, 1988. (4)(a) Specimen Share Certificate for Equity Trust -- previously filed as exhibit (4)(a) to post-effective amendment no. 7 filed on October 31, 1988. (4)(b) Specimen Share Certificate for Growth and Income Trust -- previously filed as exhibit (4)(b) to post-effective amendment no. 13 filed on February 15, 1991. (4)(c) Specimen Share Certificate for Investment Quality Bond Trust -- previously filed as exhibit (4)(c) to post-effective amendment no. 14 filed on April 15, 1991. (4)(d) Specimen Share Certificate for Money Market Trust -- previously filed as exhibit (4)(c) to post-effective amendment no. 7 filed on October 31, 1988. (4)(e) Specimen Share Certificate for Global Equity Trust -- previously filed as exhibit (4)(d) to post-effective amendment no. 7 filed on October 31, 1988. (4)(f) Specimen Share Certificate for Global Government Bond Trust -- previously filed as exhibit (4)(e) to post-effective amendment no. 7 filed on October 31, 1988. (4)(g) Specimen Share Certificate for U.S. Government Securities Trust -- previously filed as exhibit (4)(g) to post-effective amendment no. 14 filed on April 15, 1991. 175 (4)(h) Specimen Share Certificate for Conservative Asset Allocation Trust -- previously filed as exhibit (4)(g) to post-effective amendment no. 10 filed on May 19, 1989. (4)(i) Specimen Share Certificate for Moderate Asset Allocation Trust -- previously filed as exhibit (4)(h) to post-effective amendment no. 10 filed on May 19, 1989. (4)(j) Specimen Share Certificate for Aggressive Asset Allocation Trust -- previously filed as exhibit (4)(i) to post-effective amendment no. 10 filed on May 19, 1989. (4)(k) Specimen Share Certificate for Value Equity Trust -- previously filed as exhibit (4)(k) to post-e ffective amendment no. 21 filed on August 24, 1992. (4)(l) Specimen Share Certificate for Strategic Bond Trust -- previously filed as exhibit (4)(l) to post-effective amendment no. 21 filed on August 24, 1992. (4)(m) Specimen Share Certificate for Pasadena Growth Trust -- previously filed as exhibit (4)(m) to post-effective amendment no. 21 filed on August 24, 1992. (4)(n) Specimen Share Certificate for International Growth and Income Trust -- previously filed as exhibit (4) (n) to post-effective amendment no. 27 filed October 20, 1994. (4)(o) Specimen Share Certificate for the Small/Mid Cap Trust - Previously filed as exhibit (4)(o) to post effective amendment no. 30 filed December 14, 1995. (4)(p) Specimen Share Certificate for the International Small Cap Trust - Previously filed as exhibit (4)(p) to post effective amendment no. 30 filed December 14, 1995. (5)(a)(1) Advisory Agreement Between NASL Series Trust and NASL Financial Services, Inc. - Previously filed as exhibit (5)(a)(1) to post effective amendment no. 30 filed December 14, 1995. (5)(b)(i) Restated Subadvisory Agreement Between NASL Financial Services, Inc. and Oechsle International Advisors, L.P., previously filed as exhibit (5) (b) (ii) to post-effective amendment no. 16 on October 23, 1991. (5)(b)(ii) Subadvisory Agreement Between NASL Financial Services, Inc. and Wellington Management Company, previously filed as exhibit (5)(b) (iii) to post-effective amendment no. 16 on October 23, 1991. 176 (5)(b)(iii) Amendment to Subadvisory Agreement Between NASL Financial Services, Inc. and Wellington Management Company dated December 13, 1991, previously filed as exhibit (5)(b)(iii) to post- effective amendment no. 18 on December 19, 1991. (5)(b)(iv) Subadvisory Agreement Between NASL Financial and Fidelity Management Trust Company dated December 6, 1991, previously filed as exhibit (5)(b)(iv) to post-effective amendment no. 18 on December 19, 1991. (5)(b)(v) Subadvisory Agreement Between NASL Financial and Salomon Brothers Asset Management Inc dated December 6, 1991, previously filed as exhibit (5)(b)(v) to post-effective amendment no. 18 on December 19, 1991. (5)(b)(vi) Amendment to Subadvisory Agreement Between NASL Financial and Salomon Brothers Asset Management Inc dated August 20, 1992 -- previously filed as exhibit no. (5)(a)(3) to post-effective amendment no. 22 filed on October 30, 1992. (5)(b)(vii) Subadvisory Agreement Between NASL Financial and Goldman Sachs Asset Management dated December 3, 1992 -- previously filed as exhibit no. (5)(b)(vii) to post-effective amendment no. 23 filed on February 2, 1993. (5)(b)(viii) Subadvisory Agreement Between NASL Financial and Roger Engemann Management Co., Inc. dated August 31, 1992 - previously filed as exhibit (5)(b)(v) to post-effective amendment no. 18 on December 19, 1991. (5)(b)(ix) Subadvisory Consulting Agreement Between Salomon Brothers Asset Management Inc and Salomon Brothers Asset Management Limited dated February 19, 1993. -- previously filed as exhibit (5)(b)(ix) to post effective amendment 24 on April 2, 1993. (5)(b)(x) Subadvisory Agreement between NASL Financial Services, Inc. and J.P. Morgan Investment Management Inc. dated December 1, 1994 -- previously filed as exhibit (5)(b)(xi) to post-effective amendment no. 28 on March 2, 1995. (5)(b)(xi) Form of Subadvisory Agreement between NASL Financial Services, Inc. and Fred Alger Management, Inc. - Previously filed as exhibit (5)(b)(xi) to post effective amendment no. 30 filed December 14, 1995. 177 (5)(b)(xii) Form of Subadvisory Agreement between NASL Financial Services, Inc. and Founders Asset Management, Inc. -- Previously filed as exhibit (5)(b)(xii) to post effective amendment no. 30 filed December 14, 1995. (8)(a) Custodian Agreement Between NASL Series Trust and Boston Safe Deposit and Trust Company, previously filed as exhibit (8)(a) to post effective amendment no. 16 filed on October 23, 1991. (8)(b) Custodian Agreement Between NASL Series Fund, Inc. and State Street Bank and Trust Company -- previously filed as exhibit (8)(b) to post-effective amendment no. 6 filed on March 14, 1988. (10)(a)(i) Opinion and Consent of Ropes & Gray -- previously filed as exhibit (10)(a) to post- effective amendment no. 7 filed on October 31, 1988. (10)(a)(ii) Opinion and Consent of Tina M. Perrino, Esq. -- previously filed as exhibit (10)(a)(ii) to post-effective amendment no. 14 filed on April 15, 1991. (10)(a)(iii) Opinion and Consent of Tina M. Perrino, Esq. -- previously filed as exhibit (10)(a)(iii) to post-effective amendment no. 22 filed October 30, 1992. (10)(a)(iv) Opinion and Consent of Betsy A. Seel, Esq.-- previously filed as exhibit (10)(a)(iv) to post-effective amendment no. 27 filed October 20, 1994. (10)(a)(v) Opinion and Consent of Betsy A. Seel, Esq. - Previously filed as exhibit (10)(a)(v) to post effective amendment no. 30 filed December 14, 1995. (10)(b) Consent of Jones & Blouch -Filed herewith (11) Consent of Coopers & Lybrand - Filed herewith (13) Letter Containing Investment Undertaking of North American Life Assurance Company -- previously filed as exhibit 13 to post-effective amendment no. 4 filed on December 24, 1987. (16)(a) Schedule of computations of Total Return Figures for the U.S. Government Securities, Growth and Income and Investment Quality Bond Trusts, previously filed as exhibit (16) (a) to post-effective amendment no. 16 filed on October 23, 1991. 178 (16)(b) Schedule of Computations of Total Return Figures for the Equity, Global Equity and Global Government Bond -- previously filed as exhibit 16 to post-effective amendment no. 10 filed on May 19, 1989. (16)(c) Schedule of Computations of Total Return Figures for the Asset Allocation Trusts, Value Equity Trust, Pasadena Growth Trust and the Strategic Bond Trust -- previously filed as exhibit 16(c) to post-effec tive amendment no. 25 filed on March 2, 1994. (16)(d) Schedule of Computations of Total Return Figures for the International Growth & Income Trust. - previously filed as Exhibit 16(d) to post-effective amendment no. 29 on June 29, 1995. (16)(e) Additional Schedule of Computations - general formula - Filed herewith. (17) Financial Data Schedule for financial statements for the period ended December 31, 1995 - filed herewith. (18)(a) Power of Attorney - Trustees, previously filed as Exhibit (17) to post- effective amendment no. 23 filed on February 2, 1993. (18)(b) Power of Attorney - Richard C. Hirtle, Vice President and Treasurer (Principal Financial and Accounting Officer) -- previously filed as exhibit 17(b) to post effective amendment no. 24 filed April 2, 1993. (18)(c) Power of Attorney - Frederick W. Gorbet -- previously filed as exhibit 17(c) to post-effective amendment no. 25 filed on March 2, 1994. (18)(d) Powers of Attorney -- previously filed as exhibit 17(d) to post effective amendment no. 27 filed October 20, 1994. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT The Trust has three shareholders: (i) North American Security Life Insurance Company ("Security Life"), (ii) its wholly-owned subsidiary, First North American Life Assurance Company ("FNAL") and (iii) The Manufacturers Life Insurance Company of America ("Manulife America"). Security Life, FNAL and Manulife America hold Trust shares attributable to variable contracts in their respective separate accounts registered under the Investment Company Act of 1940 and will solicit voting instructions from variable contract owners and vote all shares held in proportion to the instructions received. 179 THE MANUFACTURERS LIFE INSURANCE COMPANY (Subsidiaries Organization Chart - Including Certain Significant Investments) The Manufacturers Life Insurance Company (Canada) 1. ManuLife Holdings (Hong Kong) Limited - H.K. (100%) 2. ManuLife Financial Systems (Hong Kong) Limited - H.K. (100%) 3. P.T. Asuransi Jiwa Dharmala Manulife - Indonesia (51%) 4. ManuLife (International) Limited - Bermuda (100%) 5. OUB Manulife Pte. Ltd. - Singapore (50%) 6. Manulife (Malaysia) SDN. BHD. - Malaysia (100%) 7. Manulife (Thailand) Ltd. - Thailand (100%) 8. Young Poong Manulife Insurance Company - Korea (50%) 9. Ennal, Inc. - Ohio (100%) 10. 495603 Ontario Limited - Ontario (100%) 11. 994744 Ontario Inc. - Ontario (100%) 12. 1056416 Ontario Limited - Ontario (100%) 13. 484551 Ontario Limited - Ontario (100%) (a) 911164 Ontario Limited - Ontario (100%) 14. NAWL (North American Wood Logan Holding Company) - Delaware (100%) (a) Wood Logan Associate Inc. - Connecticut (85%) (b) North American Security Life Insurance Company - Delaware (100%) (i) NASL Financial Services, Inc. - Massachusetts (100%) (ii) First North American Life Assurance Company - New York (100%) (iii) North American Funds - Massachusetts (100%) (iv) NASL Series Trust - Massachusetts (100%) 15. Domlife Realty Limited - Canada (100%) 16. Balmoral Developments Inc. - Canada (100%) 180 17. Cantay Holdings Inc. - Ontario (100%) 18. 576986 Ontario Inc. - Ontario (100%) 19. KY Holding Corporation - Canada (100%) 20. 172846 Canada Limited - Canada (100%) 21. First North American Realty, Inc. - Minnesota (100%) 22. North American Capital Corporation - Ontario (100%) 23. Elliott & Page Mutual Fund Corporation - Ontario (100%) 24. TBD Life Insurance Company - Canada (100%) 25. The North American Group Inc. - Canada (100%) 26. Capitol Bankers Life Insurance Company - Minnesota (100%) 27. Manulife Investment Management Corporation - Canada (100%) (a) 159139 Canada Inc. - Canada (50%) i. Altamira Management Ltd. - Canada (60.96%) A. ACI2 Limited - Cayman (100%) a/ Regent Pacific Group Limited-Cayman (63.8%) a.1 Manulife Regent Investment Corporation - Barbados (100%) (50% by Regent Pacific Group Limited and 50% by Manulife Data Services Inc.) b.1 Manulife Regent Investment Asia Limited - Hong Kong (100%) B. Altamira Financial Services Inc. - Ontario (100%) a/ AIS Securities (Partnership) - Ontario (100%) (5% by Altamira Financial Services, Inc. and 95% by Altamira Investment Services Inc.) b/ Altamira Investment Services Inc. - Ontario (100%) (a) AIS Securities (Partnership) - Ontario (100%)(95% by Altamir Investments Services Inc. and 5% by Altamira Financial Services Inc.) (b) Altamira (Alberta) Ltd. - Alberta (100%) (c) Capital Growth Financial Services Inc. - Ontario (100%) 28. Manulife International Investment Management Limited - U.K. (100%) (a) Manulife International Fund Management Limited - U.K. (100%) 29. ManuCab Ltd. - Canada (100%) 181 (a) Plazcab Service Limited - Canada (100%) 30. Manulife Data Services Inc.- Barbados (100%) (a) Manulife Regent Investment Corporation - Barbados - (100%) (50% by Manulife Data Services Inc. and 50% by Regent Pacific Group Limited) (b) Manulife Regent Investment Asia Limited - Hong Kong (100%) 31. 16351 Canada Limited - Canada (100%) 32. Manufacturers Life Capital Corporation Inc. - Canada (100%) 33. Townvest Inc. - Ontario (100%) 34. Manulife Financial Holdings Limited - Ontario (100%) (a) Family Financial Services Limited - Ontario (100%) i. 742166 Ontario Inc. - Ontario (100%) ii. Family Trust Corporation - Ontario (100%) A. Family Financial Mortgage Corporation - Ontario (100%) B. Family Realty Firstcorp Limited - Ontario (100%) C. Thos. N. Shea Investment Corporation Limited - Ontario (100%) (b) Manulife Bank of Canada - Canada (100%) i. Manulife Securities International Ltd. - Canada (100%) ii. Cabot Financial Services Corporation - Ontario (100%) iii.Cabot Investments Limited - Ontario (100%) 35. NALACO Mortgage Corporation - Ontario (100%) (a) Underwater Gas Developers Limited - Ontario (100%) 36. Manulife (International) Reinsurance Limited - Bermuda (100%) (a) Manulife (International) P&C Limited - Bermuda (100%) (b) Manufacturers P&C Limited - Bermuda (100%) 37. FNA Financial Inc. - Canada (100%) (a) NAL Resources Management Limited - Canada (100%) (b) First North America Insurance Company - Canada (100%) (c) NAL Trustco Inc. - Ontario (100%) (d) North American Life Financial Services Inc. - Ontario (100%) (e) Nalafund Investors Limited - Canada - (100%) (f) Seamark Asset Management Ltd. - Canada (69.175%) (g) Elliott & Page Limited - Ontario (100%) 38. NAL Resources Limited - Alberta (100%) 39. Manulife Reinsurance Corporation (U.S.A.) - Michigan (100%) (a) Manulife Reinsurance Limited - Bermuda (100%) 182 (b) Manulife Holding Corporation - Delaware (100%) i. Manufacturers Life Mortgage Securities Corporation - Delaware (100%) ii. Underwriters International Inc. - Delaware (50%) iii. Capital Design Corporation - California - (100%) iv. ManEquity, Inc. - Colorado (100%) v. Manulife Service Corporation - Colorado (100%) (c) The Manufacturers Life Insurance Company (U.S.A.) - Michigan (100%) (d) The Manufacturers Life Insurance Company of America - Michigan (100%) i. Manulife Series Fund, Inc. - Maryland (100%) ii. Manufacturers Adviser Corporation - Colorado (100%) 40. The Manufacturers Investment Corporation - Michigan (100%) 41. The Manulife Property Management of Washington, D.C., Inc. - Washington, D.C. (100%) ITEM 26. NUMBER OF HOLDERS OF SECURITIES As of April 15, 1996 the number of holders of the shares of beneficial interest of each series of shares of the Registrant is as follows:
Title of Series Number of Record Holders - ------------------------------------- ------------------------ Global Equity Trust Shares of Beneficial Interest 2 Pasadena Growth Trust Shares of Beneficial Interest 2 Equity Trust Shares of Beneficial Interest 3 Value Equity Trust Shares of Beneficial Interest 3 Growth and Income Trust Shares of Beneficial Interest 3 Strategic Bond Trust Shares of Beneficial Interest 2 Global Government Bond Trust Shares of Beneficial Interest 2 Investment Quality Bond Trust Shares of Beneficial Interest 2 U.S. Government Securities Trust Shares of Beneficial Interest 3 Money Market Trust Shares of Beneficial Interest 2 Conservative Asset Allocation Trust
183 Shares of Beneficial Interest 3 Moderate Asset Allocation Trust Shares of Beneficial Interest 3 Aggressive Asset Allocation Trust Shares of Beneficial Interest 3 International Growth and Income Trust Shares of Beneficial Interest 2 Small/Mid Cap Trust Shares of Beneficial Interest 2 International Small Cap Trust Shares of Beneficial Interest 2
ITEM 27. INDEMNIFICATION Sections 6.4 and 6.5 of the Agreement and Declaration of Trust of the Registrant provide that the Registrant shall indemnify each of its Trustees and officers against all liabilities, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and against all expenses, including but not limited to accountants and counsel fees, reasonably incurred in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such Trustee or officer may be or may have been involved as a party or otherwise or with which such person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Trustee or officer, except that indemnification shall not be provided if it shall have been finally adjudicated in a decision on the merits by the court or other body before which the proceeding was brought that such Trustee or officer (i) did not act in good faith in the reasonable belief that his or her action was in the best interests of the Registrant or (ii) is liable to the Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person's office. ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER See "Management of the Trust" in the Prospectus and "Investment Management Arrangements" in the Statement of Additional Information for information regarding the business of the Adviser and each of the Subadvisers. For information as to the business, profession, vocation or employment of a substantial nature of each director, officer or partner of the Adviser and each of the Subadvisers, reference is made to the respective Form ADV, as amended, filed under the Investment Advisers Act of 1940, each of which is herein incorporated by reference. ITEM 29. PRINCIPAL UNDERWRITERS Not applicable. 184 ITEM 30. LOCATION OF ACCOUNTS AND RECORDS All accounts, books and other documents required to be maintained under Section 31(a) of the Investment Company Act of 1940 are kept by NASL Financial Services, Inc., the Registrant's investment adviser, at its offices at 116 Huntington Avenue, Boston, Massachusetts 02116, by Fidelity Management Trust Company, the investment subadviser to the Equity, Conservative Asset Allocation, Moderate Asset Allocation and Aggressive Asset Allocation Trusts, at its offices at 82 Devonshire Street, Boston, MA 02109, by Oechsle International Advisors, L.P., the investment subadviser to the Global Equity and Global Government Bond Trusts, at its offices at One International Place, Boston, Massachusetts 02110, by Wellington Management Company, the investment subadviser to the Growth and Income , Money Market and Investment Quality Bond Trusts, at its offices at 75 State Street, Boston, Massachusetts 02109, by Salomon Brothers Asset Management Inc, the investment subadviser to the U.S. Government Securities and Strategic Bond Trusts, at its offices at 7 World Trade Center, New York, New York 10048, by Goldman Sachs Asset Management, the investment subadviser for the Value Equity Trust, at 32 Old Slip, New York, New York 10005, by Roger Engemann Management Co., Inc., the investment subadviser for the Pasadena Growth Trust, at 600 North Rosemead Boulevard, Pasadena, California 91107, by Fred Alger Management, Inc., the investment subadviser for the Small/Mid Cap Trust, at 30 Montgomery Street, Jersey City, New Jersey, by Founders Asset Management, Inc., the investment subadviser for the International Small Cap Trust, at 2930 East Third Avenue, Denver, Colorado, by J.P.Morgan Investment Management Inc., the investment subadviser to the International Growth and Income Trust at its offices at 522 5th Avenue, New York, New York, 10036, by the Registrant at its principal business office located at 116 Huntington Avenue, Boston, Massachusetts 02116, by Boston Safe Deposit and Trust Company, One Boston Place, Boston, Massachusetts 02108, custodian for the Global Equity and Global Government Bond Trusts' assets, or by State Street Bank and Trust Company, the custodian and transfer agent for all the other portfolio's of the Trust, at its offices at 225 Franklin Street, Boston, Massachusetts 02110. ITEM 31. MANAGEMENT SERVICES Not applicable. ITEM 32. UNDERTAKINGS previously supplied 185 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 the Registrant, NASL Series Trust certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, and Commonwealth of Massachusetts, on the 24th day of April, 1996. NASL SERIES TRUST (Registrant) By: /s/ William J. Atherton ------------------------------ William J. Atherton, President Attest: /s/ Kimberly Skidmore -------------------------------------- Kimberly Skidmore, Assistant Secretary 186 Pursuant to the requirements of the Securities Act of 1933, this amended Registration Statement has been signed by the following persons in the capacities and on the date indicated. * Trustee April 24, 1996 --------------------- -------------- Don B. Allen (Date) * President- April 24, 1996 --------------------- (Chief Executive Officer) -------------- William J. Atherton (Date) * Trustee April 24, 1996 --------------------- -------------- Charles L. Bardelis (Date) * Trustee April 24, 1996 --------------------- -------------- Samuel Hoar (Date) * Trustee April 24, 1996 --------------------- -------------- Brian L. Moore (Date) * Trustee April 24, 1996 --------------------- -------------- Robert J. Myers (Date) * Vice President and April 24, 1996 --------------------- Treasurer (Prin- -------------- Richard C. Hirtle cipal Financial and (Date) Accounting Officer) *By: /s/ James D. Gallagher April 24, 1996 - --------------------------- -------------- James D. Gallagher (Date) Attorney-in-Fact Pursuant to Powers of Attorney
187 EXHIBITS 188 EXHIBIT INDEX
NO. DESCRIPTION - --- ----------- (1)(a) Declaration of Trust (1)(b) Establishment and Designation of Additional Series of Shares (1)(c) Establishment and Designation of Additional Series of Shares (1)(d) Establishment and Designation of Additional Series of Shares (1)(e) Establishment and Designation of Additional Series of Shares (1)(f) Establishment and Designation of Additional Series of Shares (1)(g) Establishment and Designation of Additional Series of Shares (1)(h) Establishment and Designation of Additional Series of Shares (1)(i) Establishment and Designation of Additional Series of Shares (b)(10)(b) Consent of Jones and Blouch (b)(11) Consent of Coopers & Lybrand (b)(13) Schedule of Computation (b)(17) Financial Data Schedule
EX-99.B1A 2 DECLARATION OF TRUST 1 Exhibit (1)(a) 2 NASL SERIES TRUST AGREEMENT AND DECLARATION OF TRUST 3 NASL SERIES TRUST AGREEMENT AND DECLARATION OF TRUST Table of Contents ----------------- ARTICLE I Name and Definitions 1.1 Name...................................... 1 1.2 Definitions............................... 1 ARTICLE II Purpose of Trust................................ 2 ARTICLE III The Trustees 3.1 Number, Designation, Election, Term, etc. ............................... 3 (a) Initial Trustee (b) Number (c) Election and Term (d) Resignation and Retirement (e) Removal (f) Vacancies (g) Effect of Death, Resignation, etc. (h) No Accounting (i) Meetings 3.2 Powers of Trustees......................... 5 (a) By-Laws (b) Series of Shares (c) Officers, Agents, etc. (d) Committees (e) Advisory Boards (f) Advice and Custody (g) Transfer and Dividend Agents (h) Distribution (i) Record Dates (j) Compensation (k) Delegation (l) Investments (m) Disposition of Assets (n) Ownership Powers (o) Subscription (p) Form of Holding
4 ii (q) Reorganization (r) Voting Trusts, etc. (s) Compromise (t) Partnerships (u) Borrowing and Security (v) Guarantees, etc. (w) Indemnification (x) Insurance (y) Pensions, etc. (z) Minimum Total Investment 3.3 Certain Contracts............................ 8 (a) Advisory (b) Administration (c) Distribution (d) Custodian and Depository (e) Transfer and Dividend Disbursing Agency (f) Shareholder Servicing (g) Accounting 3.4 Parties to Contracts....................... 10 3.5 Payment of Trust Expenses and Compensation of Trustees................... 11 3.6 Ownership of Assets of the Trust........... 11 ARTICLE IV Shares 4.1 Description of Shares...................... 11 (a) Series of Shares (b) Classes of Shares (c) Number and Issuance of Shares 4.2 Establishment and Designation of Series of Shares........................... 13 (a) Assets Belonging to Series of Shares (b) Liabilities Belonging to Series of Shares (c) Income and Capital (d) Dividends and Distributions (e) Liquidation (f) Voting (g) Redemption by Shareholder (h) Redemption by Trust (i) Net Asset Value (j) Transfer
5 iii (k) Equality (l) Fractions (m) Conversion and Exchange Rights 4.3 Ownership of Shares..................... 18 4.4 Investments in the Trust................ 19 4.5 No Preemptive Rights.................... 19 4.6 Trust Only.............................. 19 4.7 Status of Shares and Limitation of Personal Liability...................... 19 ARTICLE V Shareholders' Voting Powers and Meetings 5.1 Voting Powers........................... 20 5.2 Proxies................................. 20 5.3 Meetings................................ 21 5.4 Place of Meetings....................... 21 5.5 Record Dates............................ 21 5.6 Quorum and Required Vote................ 22 5.7 Action by Written Consent............... 22 5.8 Additional Provisions................... 22 ARTICLE VI Limitation of Liability; Indemnification 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice............... 22 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety............... 23 6.3 Indemnification of Shareholders......... 23 6.4 Indemnification of Trustees, Officers, etc. ......................... 24
6 iv 6.5 Exceptions to Indemnification............. 24 6.6 Indemnification Not Exclusive, etc. ...... 25 6.7 Liability of Third Persons Dealing with Trustee.............................. 25 ARTICLE VII Miscellaneous 7.1 Duration and Termination of Trust......... 25 7.2 Reorganization............................ 25 7.3 Amendments................................ 26 7.4 Resident Agent............................ 27 7.5 Filing of Copies; References; Headings.... 27 7.6 Applicable Law............................ 28 7.7 Reliance by Third Parties................. 28 7.8 Provisions in Conflict with Law or Regulations............................ 28
7 NASL SERIES TRUST _______________________ AGREEMENT AND DECLARATION OF TRUST _______________________ AGREEMENT AND DECLARATION OF TRUST, made at Boston, Massachusetts, this 29th day of September, 1988, by the Trustees hereunder and by the holders of shares of beneficial interest to be issued hereunder as hereinafter provided. W I T N E S S E T H WHEREAS, this Trust has been formed to carry on the business of an investment company and exercise all powers necessary and appropriate to the conduct of such operations; WHEREAS, this Trust is authorized to issue its shares of beneficial interest in separate series, all in accordance with the provisions hereinafter set forth; and WHEREAS, the Trustees have agreed to manage all property coming into their hands as trustees of a Massachusetts voluntary association with transferable shares, in accordance with the provisions hereinafter set forth; NOW, THEREFORE, the Trustees hereby declare that they will hold all cash, securities and other assets which they may from time to time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the following terms and conditions for the benefit of the holders from time to time of shares of beneficial interest in this Trust or in the separate series of shares created hereunder as hereinafter set forth. ARTICLE I NAME AND DEFINITIONS Section 1.1 NAME. This Trust shall be known as "NASL Series Trust," and the Trustees shall conduct the business of the Trust, have all documents executed and sue or be sued under that name or any other name or names as they may from time to time determine. Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise required by the context or specifically provided: (a) The "Trust" refers to the Massachusetts business trust established by this Declaration of Trust, as amended from time to time, inclusive of each and every Series of Shares established and designated hereunder. (b) "Trustees" refers to the Trustees of the Trust named herein so long as they shall continue in office and to all other individuals who may from time to time be duly appointed or elected, qualified and 8 2 serving as Trustees in accordance with the provisions hereof, and reference herein to a Trustee or the Trustees shall refer to each such individual in his or her capacity as a trustee hereunder. (c) "Shares" refers to the transferable units of interest into which the beneficial interest in the Trust and each Series of Shares (as the context may require) shall be divided from time to time, and includes (i) fractions of Shares as well as whole Shares and (ii) each separate class of Shares into which each Series of Shares shall be divided from time to time. (d) "Series of Shares" refers to series of Shares established and designated under or in accordance with the provisions of Article IV. (e) "Shareholder" means a record owner of Shares. (f) The "1940 Act" refers to the Investment Company Act of 1940 and the Rules and Regulations thereunder, all as amended from time to time. (g) "Declaration of Trust" shall mean this Agreement and Declaration of Trust as amended or restated from time to time. (h) "By-Laws" shall mean the By-Laws of the Trust as amended or restated from time to time. (i) "Affiliated Person," "Assignment," "Commission," "Interested Person," "Majority Shareholder Vote" (the 67% or 50% requirement of the third sentence of Section 2(a) (42) of the 1940 Act, whichever may be applicable) and "Principal Underwriter" shall have the meanings given them in the 1940 Act. (j) "Trust Property" shall mean as of any particular time any and all property, real or personal, tangible or intangible, which at such time is owned or held by or for the account of the Trust or the Trustees. ARTICLE II PURPOSE OF TRUST The purpose of the Trust is to operate as an investment company and to offer Shareholders one or more investment programs primarily in securities, debt instruments and other instruments and rights of a financial character. ARTICLE III THE TRUSTEES Section 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC. (a) INITIAL TRUSTEE. Upon the execution by him of this Declaration of Trust or a counterpart hereof or some other writing in which he accepts such Trusteeship and agrees to the provisions hereof, J. Jacques 9 3 Deschenes, whose address is 116 Huntington Avenue, Boston, Massachusetts 02116, shall become a Trustee of the Trust. (b) NUMBER. The Trustees serving as such, whether named above or hereafter becoming a Trustee, may increase or decrease the number of Trustees to a number other than the number theretofore determined; provided that after the initial meeting of Trustees, the number may not be decreased to less than three. No decrease in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term, but the number of Trustees may be decreased in conjunction with the removal of a Trustee pursuant to subsection (e) of this Section 3.1. (c) ELECTION AND TERM. The Trustees shall be elected by the Shareholders of the Trust at the first meeting of Shareholders. Each Trustee, whether named above or hereafter becoming a Trustee, shall serve as a Trustee of the Trust during the lifetime of this Trust and until its termination as hereinafter provided except as such Trustee sooner dies, resigns, retires or is removed. The Trustees may elect successor Trustees and may, pursuant to Section 3.1(f) hereof, appoint Trustees to fill vacancies. Trustees need not own Shares. (d) RESIGNATION AND RETIREMENT. Any Trustee may resign his or her trust or retire as a Trustee, by written instrument signed by him or her and delivered to the other Trustees or to the Chairman, if any, the President or the Secretary of the Trust, and such resignation or retirement shall take effect upon such delivery or upon such later date as is specified in such instrument. (e) REMOVAL. Any Trustee may be removed with or without cause at any time: (i) by action of two-thirds of the Trustees prior to such removal; or (ii) by vote of Shareholders holding not less than two-thirds of the Shares then outstanding, cast in person or by proxy at any meeting called for the purpose. Any such removal shall be effective as of the date of such action or such later date as may be specified in such action. (f) VACANCIES. Any vacancy or anticipated vacancy resulting from any reason, including without limitation the death, resignation, retirement or removal of any of the Trustees, or resulting from an increase in the number of Trustees by the other Trustees may be filled by action of a majority of the remaining Trustees through the appointment in writing of such other person as such remaining Trustees in their discretion shall determine. Until a vacancy is filled, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed on the Trustees by this Declaration of Trust. An appointment as Trustee shall be effective upon the written acceptance of the person named therein to serve as a Trustee and agreement by such person to be bound by the provisions of this Declaration of Trust, except that any such appointment in anticipation of a vacancy to occur by reason of retirement, resignation, or increase in number of Trustees to be effective at a later date shall become effective only at or after the effective date of said retirement, resignation or increase in number of Trustees. As soon as any Trustee so appointed shall have accepted such appointment and shall have agreed in writing to be bound by this Declaration of Trust and the appointment is effective, the Trust estate shall vest in the new Trustee, together with the continuing Trustees, without any further act or conveyance. (g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation, retirement, removal, or incapacity of the Trustees, or any one of them, shall not operate to annul or terminate the Trust or to revoke or terminate any existing agency or contract created or entered into pursuant to the terms of this Declaration of Trust. When a Trustee ceases to be a Trustee, his right, title and interest in the assets of the Trust shall automatically cease and vest in the remaining Trustees. Such cessation and vesting shall be effective whether or not conveyancing documents have been executed and delivered, but the individual (or his legal representative) shall execute and deliver such documents as the remaining Trustees shall require for the purpose of recording the conveyance to the remaining Trustees or the Trust of any Trust Property held in the name of that individual. 10 4 (h) NO ACCOUNTING. Except to the extent required by law or under circumstances which would justify his removal for cause, no person ceasing to be a Trustee as a result of his death, resignation, retirement, removal or incapacity (nor the estate of any such person) shall be required to make an accounting to the Shareholders or remaining Trustees upon such cessation. (i) MEETINGS. Regular meetings of the Trustees may be held without call or notice at a time and place fixed by the By-Laws or by resolution of the Trustees. Special meetings of the Trustees shall be held from time to time upon the call of the Chairman, if any, the President, the Secretary or any two Trustees. Notice of any special meeting shall be mailed or otherwise given as specified in the By-Laws. A quorum for all meetings of the Trustees shall be a majority of the Trustees then in office. Unless provided otherwise in this Declaration of Trust or the By-Laws, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present). All or any one or more Trustees may participate in a meeting of the Trustees by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting pursuant to such communications systems shall constitute presence in person at such meeting. Unless provided otherwise in this Declaration of Trust, any action that may be taken at a meeting by the Trustees may be taken without a meeting by written consents of a majority of the Trustees then in office. Section 3.2 POWERS OF TRUSTEES. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Trustees, and they shall have all powers necessary or convenient to carry out that responsibility and the purpose of the Trust. 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 offices both within and without The Commonwealth of Massachusetts, in any and all states of the United States of America, in the District of Columbia, in any and all foreign countries 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. The Trustees shall not in any way be bound or limited by any present or future law or custom in regard to investments by trustees. 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 of Trust, the presumption shall be in favor of a grant of power to the Trustees. The Trustees will not be required to obtain any court order to deal with trust property. Without limiting the foregoing, the Trustees may: (a) BY-LAWS. Adopt By-Laws, not inconsistent with this Declaration of Trust, providing for the conduct of the business and affairs of the Trust and may amend and repeal them to the extent that such By-Laws do not reserve that right to the Shareholders; (b) SERIES OF SHARES. From time to time in accordance with the provisions hereof establish Series of Shares, each such Series of Shares to operate as a separate investment medium; allocate assets, liabilities and expenses of the Trust to a particular Series of Shares or apportion the same among two or more Series of Shares provided that any liabilities or expenses incurred or arising in connection with a particular Series of Shares, as determined by the Trustees, shall be payable solely out of the assets of that Series of Shares; 11 5 (c) OFFICERS, AGENTS, ETC. As they consider appropriate, elect and remove officers and appoint and terminate agents and consultants and hire and terminate employees, any one or more of the foregoing of whom may be a Trustee, and may provide for the compensation of all of the foregoing; (d) COMMITTEES. Appoint from their own number, and terminate, any one or more committees consisting of two or more Trustees, including without implied limitation an executive committee, which may, when the Trustees are not in session, exercise some or all of the power and authority of the Trustees as the Trustees may determine; notice, quorum, voting and other procedures for each committee shall be as determined by the Trustees or, in the absence of such determination, shall be the same as the procedures that apply to meetings and other proceedings of the Trustees; (e) ADVISORY BOARDS. Appoint one or more advisory boards for the Trust or for one or more Series of Shares, the members of each of which shall not be Trustees and need not be Shareholders; (f) ADVICE AND CUSTODY. Employ one or more advisers, administrators, depositories and custodians and may authorize any depository or custodian to employ domestic and foreign subcustodians or agents and to deposit all or any part of such assets in one or more domestic and foreign systems for the central handling of securities; (g) TRANSFER AND DIVIDEND AGENTS. Retain transfer, dividend, accounting or Shareholder servicing agents or any of the foregoing; (h) DISTRIBUTION. Provide for the distribution of Shares by the Trust through one or more distributors, principal underwriters or otherwise; (i) RECORD DATES. Set record dates or times for the determination of Shareholders or various of them with respect to various matters; (j) COMPENSATION. Compensate or provide for the compensation of the Trustees, officers, advisers, administrators, custodians, other agents, consultants and employees of the Trust or the Trustees on such terms as they may deem appropriate; (k) DELEGATION. In general, delegate to any officer of the Trust, to any committee of the Trustees and to any employee, adviser, administrator, distributor, depository, custodian, transfer and dividend disbursing agent, or any other agent or consultant of the Trust such authority, powers, functions and duties as they consider desirable or appropriate for the conduct of the business and affairs of the Trust, including without implied limitation the power and authority to act in the name of the Trust and of the Trustees, to sign documents and to act as attorney-in-fact for the Trustees; (l) INVESTMENTS. Invest and reinvest cash and other property, and hold cash or other property univested; (m) DISPOSITION OF ASSETS. Sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or all of the assets of the Trust; (n) OWNERSHIP POWERS. Vote or give assent, or exercise any rights of ownership with respect to stock or other securities, including without limitation debt instruments, or other property; and execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such 12 6 person or persons such power and discretion with relation to securities or other property as the Trustees shall deem proper; (o) SUBSCRIPTION. Exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities; (p) FORM OF HOLDING. Hold any security or other property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or in the name of the Trustees or of the Trust or of any Series of Shares or in the name of a custodian, subcustodian or other depository or a nominee or nominees or otherwise; (q) REORGANIZATION, ETC. Consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer, any security of which is or was held in the Trust; consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer; and pay calls or subscriptions with respect to any security held in the Trust; (r) VOTING TRUSTS, ETC. Join with other holders of any securities in acting through a committee, depository, voting trustee or otherwise, and in that connection deposit any security with, or transfer any security to, any such committee, depository or trustee, and delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and agree to pay, and pay, such portion of the expenses and compensation of such committee, depository or trustee as the Trustees shall deem proper; (s) COMPROMISE. Compromise, prosecute, defend, arbitrate or otherwise adjust any claims, actions, suits, proceedings, or demands in favor of or against the Trust or any Series of Shares or any matter in controversy, including but not limited to claims for taxes; (t) PARTNERSHIPS, ETC. Enter into joint ventures, general or limited partnerships and any other combinations or associations; (u) BORROWING AND SECURITY. Borrow funds and mortgage and pledge the assets of the Trust or any part thereof to secure obligations arising in connection with such borrowing; (v) GUARANTEES, ETC. Endorse or guarantee the payment of any notes or other obligations of any person; make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof; and mortgage and pledge the Trust Property or any part thereof to secure any of or all such obligations; (w) INDEMNIFICATION. To the extent permitted by law, provide for the indemnification out of the assets of the Trust of any person with whom the Trust has dealings, including any investment adviser, administrator, transfer agent, distributor, principal underwriter and selected dealers to such extent as the Trustees shall determine; (x) INSURANCE. Purchase and pay for entirely out of Trust Property such insurance as they may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust and payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, consultants, investment advisers, managers, administrators, distributors, principal underwriters, or independent contractors, or any thereof (or any person connected therewith), of the Trust individually against all claims and liabilities of every nature arising by reason of holding or having held any such office or position, or by reason of any action 13 7 alleged to have been taken or omitted by any such person in any such capacity, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such person against such liability; (y) PENSIONS, ETC. Pay pensions for faithful service, as deemed appropriate by the Trustees, and adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust; and (z) MINIMUM TOTAL INVESTMENT. Establish, from time to time, a minimum total investment for Shareholders of any Series of Shares, and require redemption of the Shares of any Shareholders whose investment is less than such minimum. Section 3.3 CERTAIN CONTRACTS. Notwithstanding any limitations of any present or future law or custom in regard to delegation of powers by trustees generally, the Trustees may, at any time and from time to time and without limiting the generality of their power and authority otherwise set forth herein, enter into one or more contracts with any one or more corporations, trusts, associations, partnerships, limited partnerships, other types of organizations, and individuals, including North American Life Assurance Company and its affiliates ("Contracting Party"), to provide for the performance and assumption of services, duties and responsibilities to, for or on behalf of the Trust, with respect to the entire Trust or any Series of Shares, or on behalf of the Trustees, including but not limited to those set forth in paragraphs (a) to (g) below, as the Trustees may determine appropriate. (a) ADVISORY. Subject to the general supervision of the Trustees and in conformity with the stated policy of the Trustees with respect to the investments of the Trust or of the assets belonging to any Series of Shares, to manage such investments and assets, make investment decisions with respect thereto, furnish statistical and research facilities and services, and to place purchase and sale orders for portfolio transactions relating to such investments and assets. The Trustees may authorize the investment adviser to employ one or more subadvisers, 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 subadviser; (b) ADMINISTRATION. Subject to the general supervision of the Trustees and in conformity with any policies of the Trustees with respect to the operations of the Trust and each Series of Shares, to supervise all or any part of the operations of the Trust and each Series of Shares, and to provide all or any part of the administrative and clerical personnel, office space and office equipment and services appropriate for the efficient administration and operations of the Trust and each Series of Shares; (c) DISTRIBUTION. To distribute the Shares of the Trust and each Series of Shares, to be principal underwriter of such Shares, and to act as agent of the Trust and each Series of Shares in the sale of Shares and the acceptance or rejection of orders for the purchase of Shares; (d) CUSTODIAN AND DEPOSITORY. To act as a depository for and to maintain custody of property of the Trust and each Series of Shares and accounting records in connection therewith; (e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records of the ownership of outstanding Shares, the issuance and redemption and the transfer thereof, and to disburse any dividends declared by the Trustees and in accordance with the policies of the Trustees and the instructions of any particular Shareholder to reinvest any such dividends; 14 8 (f) SHAREHOLDER SERVICING. To provide service with respect to the relationship of the Trust and its Shareholders, records with respect to Shareholders and their Shares, and similar matters; and (g) ACCOUNTING. To handle all or any part of the accounting responsibilities, whether with respect to the Trust Property, Shareholders or otherwise. Section 3.4 PARTIES TO CONTRACTS. The same person may be the Contracting Party for some or all of the services, duties and responsibilities to, for and of the Trust and the Trustees, and the contracts with respect thereto may contain such terms interpretive of or in addition to the delineation of the services, duties and responsibilities provided for, including provisions relating to the standard duty of and the rights to indemnification of the Contracting Party and others, as the Trustees may determine. Nothing herein shall preclude, prevent or limit the Trust or a Contracting Party from entering into subcontractual arrangements relative to any of the matters referred to in Sections 3.3(a) through (g) hereof. The fact that: (a) any of the Shareholders, Trustees, or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, manager, adviser, principal underwriter or distributor or agent of or for any Contracting Party, or of or for any parent or affiliate of any Contracting Party or that the Contracting Party or any parent or affiliate thereof is a Shareholder or has an interest in the Trust or any Series of Shares, or that (b) any Contracting Party may have a contract providing for the rendering of any similar services to one or more other corporations, trusts, associations, partnerships, limited partnerships or other organizations, or have other business or interests, shall not affect the validity of any contract for the performance and assumption of services, duties and responsibilities to, for or of the Trust or any Series of Shares or the Trustees 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, any Series of Shares or Shareholders, provided that in the case of any relationship or interest referred to in the preceding clause (a) on the part of any Trustee or officer of the Trust either: (c) the material facts as to such relationship or interest have been disclosed to or are known by the Trustees not having any such relationship or interest and the contract involved is approved in good faith by a majority of such Trustees not having any such relationship or interest (even though such unrelated or disinterested Trustees are less than a quorum of all the Trustees), (d) the material facts as to such relationship or interest and as to the contract have been disclosed to or are known by the Shareholders entitled to vote thereon and the contract involved is specifically approved in good faith by vote of the Shareholders, or (e) the specific contract involved is fair to the Trust as of the time it is authorized, approved or ratified by the Trustees or by the Shareholders. Section 3.5 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The Trustees are authorized to pay or cause to be paid out of the assets of the Trust or any Series of Shares and to charge or allocate the same to, between or among such one or more of the Series of Shares that may be established and designated pursuant to Article IV, as the Trustees deem fair, all expenses, fees, charges, taxes and liabilities incurred or 15 9 arising in connection with the Trust or any Series of Shares, or in connection with the management thereof, including, but not limited to, the Trustees' compensation and such expenses and charges for the services of the Trust's officers, employees, investment adviser, administrator, distributor, principal underwriter, auditor, counsel, depository, custodian, transfer agent, dividend disbursing agent, accounting agent, Shareholder servicing agent, and such other agents, consultants, and independent contractors and such other expenses and charges as the Trustees may deem necessary or proper to incur; provided, however, that all expenses, fees, charges, taxes and liabilities incurred or arising in connection with a particular Series of Shares, as determined by the Trustees, shall be payable solely out of the assets of that Series of Shares. Without limiting the generality of any other provision hereof, the Trustees shall be entitled to reasonable compensation from the Trust for their services as Trustees and may fix the amount of such compensation. Section 3.6 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of each Series of Shares and of the Trust shall at all times be considered as vested in the Trustees. No Shareholder shall be deemed to have a severable ownership in any individual asset of the Trust or any Series of Shares or any right of partition or possession thereof, but each Shareholder shall have an undivided beneficial interest in each Series of Shares in which he or she is a Shareholder. ARTICLE IV SHARES Section 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust shall be divided into Shares, par value $0.01 per share. (a) SERIES OF SHARES. The Trustees shall have the authority, without action or approval of the Shareholders, from time to time to divide the Shares into two or more Series of Shares as they deem necessary or desirable. Each Series of Shares shall be separate from each other Series of Shares. The Trustees shall have exclusive power without the requirement of shareholder approval to establish and designate such separate Series of Shares, and to fix and determine the relative rights and preferences as between the Shares of the separate Series of Shares as to purchase price, right of redemption and the price, terms and manner of redemption, special and relative rights as to dividends and other distributions and on liquidation, sinking or purchase fund provisions, conversion rights, and conditions under which the several Series of Shares shall have separate voting rights or no voting rights. Each Share of a Series of Shares shall represent a beneficial interest only in the assets belonging to that Series of Shares, and such interest shall not extend to the assets of any other Series of Shares or to the assets of the Trust generally. Shareholders of a particular Series of Shares shall not be entitled to participate in a derivative or class action on behalf of any other Series of Shares or the Shareholders of any other Series of Shares. The establishment and designation of any Series of Shares in addition to those established and designated in Section 4.2 shall be effective upon the execution by a majority of the Trustees of an instrument setting forth such establishment and designation and the relative rights and preferences of the Shares of such Series of Shares. At any time that there are no Shares outstanding of any particular Series of Shares previously established and designated, the Trustees may by an instrument executed by a majority of their number abolish that Series of Shares and the establishment and designation thereof. Any Trustee, officer or other agent of the Trust, and any organization in which any such person is interested, may acquire, own, hold and dispose of Shares of any Series of Shares to the same extent as if such 16 10 person were not a Trustee, officer or other agent of the Trust; and the Trust may issue and sell or cause to be issued and sold and may purchase Shares of any Series of Shares from any such person or any such organization subject only to the general limitations, restrictions or other provisions applicable to the sale or purchase of Shares of such Series of Shares generally. (b) CLASSES OF SHARES. The Trustees shall have authority, without action or approval of the Shareholders, from time to time to divide the Shares of any Series of Shares into two or more classes as they deem necessary or desirable. The Trustees may allocate liabilities and expenses of a Series of Shares to a particular class of Shares of that Series of Shares or apportion the same among two or more classes of Shares of that Series of Shares. The liabilities and expenses being borne solely by a class of Shares shall be appropriately reflected (in the manner determined by the Trustees) in the net asset value, dividends and liquidation rights of the Shares of such class. As provided in Section 4.2(f), a class may have exclusive voting rights with respect to the liabilities and expenses being borne solely by such class and with respect to any other matter which does not affect the interest of any other class. (c) NUMBER AND ISSUANCE OF SHARES. The number of authorized Shares is unlimited as is the number of Shares of each Series of Shares and of each class that may be issued. The Trustees may issue Shares of any Series of Shares and of any class for such consideration and on such terms as they may determine (or for no consideration if pursuant to a Share dividend or split-up), all without action or approval of the Shareholders. All Shares when so issued on the terms and for the consideration determined by the Trustees shall be fully paid and non-assessable. The Trustees may classify or reclassify any unissued Shares or any Shares previously issued and reacquired into one or more Series of Shares that may be established and designated from time to time. The Trustees may hold as treasury shares, reissue for such consideration and on such terms as they may determine, or cancel, at their discretion from time to time, any Shares of any Series of Shares reacquired by the Trust. The Trustees may from time to time divide or combine the Shares of any Series of Shares or any class into a greater or lesser number without thereby changing the proportionate beneficial interest in the Series of Shares or class. The Trustees may from time to time close the transfer books or establish record dates and time for the purposes of determining the holders of Shares entitled to be treated as such, to the extent provided or referred to in Section 5.5. Section 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES OF SHARES. Without limiting the authority of the Trustees set forth in Section 4.1 to establish and designate any further Series of Shares, the Trustees hereby establish and designate six Series of Shares: 1. Equity Trust 2. Bond Trust 3. Money Market Trust 4. Global Equity Trust 5. Global Government Bond Trust 6. Convertible Securities Trust The Shares of these Series of Shares and any Shares of any further Series of Shares that may from time to time be established and designated by the Trustees shall have the relative rights and preferences described below in 17 11 this Section 4.2; provided that the Trustees may determine otherwise with respect to some further Series of Shares at the time of establishing and designating the same; and provided further that the Trustees, in their absolute discretion, may amend any previously established relative rights and preferences as they may deem necessary or desirable to enable the Trust to comply with the 1940 Act or other applicable law. (a) ASSETS BELONGING TO SERIES OF SHARES. All consideration received by the Trust for the issue or sale of Shares of a particular Series of Shares, 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 (collectively, "Specific Asset Items"), shall be held by the Trustees in trust for the benefit of the holders of Shares of that Series of Shares and shall irrevocably belong to that Series of Shares for all purposes, 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 of Shares (collectively "General Asset Items"), the Trustees shall allocate such General Asset Items to and among any one or more of the Series of Shares established and designated from time to time in such manner and on such basis as they, in their sole discretion, deem fair and equitable; and any General Asset Items so allocated to a particular Series of Shares shall belong to that Series of Shares. Each allocation of assets by the Trustees shall be conclusive and binding upon the Shareholders of all Series of Shares for all purposes. The Specific Asset Items of a Series of Shares together with any General Asset Items allocated to that Series of Shares are hereby referred to as "assets belonging to" that Series of Shares. (b) LIABILITIES BELONGING TO SERIES OF SHARES. The assets belonging to each particular Series of Shares shall be charged with all the liabilities, expenses, costs, charges and reserves which, as determined by the Trustees, are readily identifiable as belonging to that particular Series of Shares (collectively "Specific Liability Items"). Any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular Series of Shares (collectively "General Liability Items") shall be allocated and charged by the Trustees to and among any one or more of the Series of Shares 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. Expenses related to the distribution of the Shares of a class may be borne solely by that class (as shall be determined by the Trustees). Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the Shareholders of all Series of Shares and of all classes for all purposes. The Specific Liability Items of a Series of Shares together with any General Liability Items allocated to that Series of Shares are herein referred to as "liabilities belonging to" that Series of Shares. Distribution expenses being borne solely by a class of Shares are herein referred to as "expenses being borne solely" by a class. Under no circumstances shall the assets belonging to any particular Series of Shares be charged with the liabilities belonging to any other Series of Shares. All persons who have extended credit which the Trustees have allocated to a particular Series of Shares, or who have a claim or contract which the Trustees have allocated to a particular Series of Shares, shall look only to the assets of that particular Series of Shares for payment of such credit, claim or contract. (c) INCOME AND CAPITAL. The Trustees shall have full discretion to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders. (d) DIVIDENDS AND DISTRIBUTIONS. The Trustees shall from time to time distribute ratably among the Shareholders of a Series of Shares such proportion of the net profits, surplus (including paid-in surplus), capital, or assets held by the Trustees with respect to that Series of Shares as they may deem proper with any expenses being borne solely by a class of Shares of that Series of Shares being reflected in the net profits or 18 12 other assets being distributed to such class. Dividends and distributions may be paid with such frequency as the Trustees may determine, which may be daily or otherwise, pursuant to a standing resolution or resolutions adopted only once or with such frequency as the Trustees may determine. Distributions may be made in cash or property (including without limitation any type of obligations of the Trust or any assets thereof), and the Trustees may distribute ratably among the Shareholders additional Shares issuable hereunder in such manner, at such times, and on such terms as the Trustees 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 later date as the Trustees shall determine. The Trustees may always retain from the net profits of a Series of Shares such amount as they may deem necessary to pay the liabilities belonging to the Series of Shares or to meet obligations of the Series of Shares, 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. 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 and the Series of Shares to avoid or reduce liability for taxes. (e) LIQUIDATION. In the event of the liquidation or dissolution of the Trust or of any Series of Shares, the Shareholders of each affected Series of Shares shall be entitled to receive, when and as declared by the Trustees, the excess of the assets belonging to that Series of Shares over the liabilities belonging to that Series of Shares. The assets so distributable to the Shareholders of any particular Series of Shares shall be distributed among the Shareholders of each class according to their respective rights taking into account the proper allocation of expenses being borne solely by any class of Shares of that Series of Shares. (f) VOTING. Shareholders shall be entitled to vote only with respect to such matters as may be required by law, the Declaration of Trust or the By-Laws and such additional matters as the Trustees may consider necessary or desirable. On each matter submitted to a vote of the Shareholders, each holder of a Share shall be entitled to one vote for each whole Share and to a proportionate fractional vote for each fractional Share standing in his name on the books of the Trust. All Shares of the Trust then entitled to vote shall be voted by Series of Shares, except that when voting for the election of Trustees and when otherwise permitted by the 1940 Act, Shares shall be voted in the aggregate and not by Series of Shares. As to any matter which does not affect the interest of a particular Series of Shares, only the holders of Shares of the one or more affected Series of Shares shall be entitled to vote. As to any matter relating to expenses being borne solely by a class of a Series of Shares or to any other matter which does not affect the interest of a particular class of a particular Series of Shares, only the holders of Shares of the one or more affected classes of the Series of Shares shall be entitled to vote. (g) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular Series of Shares shall have the right at such time as may be permitted by the Trust to require the Trust to redeem all or any part of his Shares of that Series of Shares, subject to the terms and conditions set forth in this Declaration of Trust and to such additional terms and conditions that may be adopted by the Trustees. Shares of any particular Series of Shares may be redeemed solely out of the assets belonging to that Series of Shares. Payment of the redemption price shall be in cash; provided, however, that if the Trustees determine, which determination shall be conclusive, that conditions exist which make payment wholly in cash unwise or undesirable, the Trust may make payment wholly or partly in securities or other assets belonging to the Series of Shares of which the Shares being redeemed are part at the value of such securities or assets used in such determination of net asset value. The 19 13 amount per Share at which the Trust redeems or repurchases Shares shall be determined by the application of a formula adopted for such purpose by resolution of the Trustees provided that (i) such amount per Share shall not exceed the cash equivalent of the proportionate interest of each Share in the assets of the particular Series of Shares at the time of the purchase or redemption and (ii) if so authorized by the Trustees, the Trust may, at any time and from time to time, charge fees for effecting such redemption, at such rates as the Trustees may establish. Notwithstanding the foregoing, the Trust, at the discretion of the Trustees, may postpone payment of the redemption price and may suspend the right of the holders of Shares of any Series of Shares to require the Trust to redeem Shares of that Series of Shares during any period or at any time when and to the extent permissible under the 1940 Act. (h) REDEMPTION BY TRUST. Each Share of each Series of Shares is subject to redemption by the Trust at the redemption price determined pursuant to subsection (g) of this Section 4.2: (i) at any time, if the Trustees determine in their sole discretion that failure to so redeem may have materially adverse consequences to the holders of the other Shares of the Trust or any Series of Shares, or (ii) upon such other conditions as may from time to time be determined by the Trustees and described in the then current Prospectus for a Series of Shares with respect to maintenance of Shareholder accounts of a minimum or maximum amount, number of Shares or percentage of Shares in that Series of Shares. Upon such redemption the holders of the Shares so redeemed shall have no further right with respect thereto other than to receive payment of such redemption price. (i) NET ASSET VALUE. The net asset value of a Series of Shares shall be the amount determined by subtracting the liabilities belonging to that Series of Shares from the assets belonging to that Series of Shares. The net asset value of each outstanding Share of each Series of Shares shall be determined at such time or times on such days as the Trustees may determine. The method of determination of the net asset value of a Series of Shares shall be determined by the Trustees from time to time with any expenses being borne solely by a class of Shares being reflected in the net asset value of such Shares. The power and duty to make the calculations may be delegated by the Trustees to the adviser, administrator, manager, custodian, transfer agent or such other person as the Trustees may determine. The Trustees may suspend the determination of net asset value to the extent permitted by the 1940 Act. The Trustees may determine to maintain the net asset value per Share of any of the classes of any Series of Shares at a designated constant dollar amount and in connection therewith may adopt procedures for the continuing declarations of income and capital gains attributable to that Series of Shares as dividends payable in additional Shares of that Series of Shares at the designated constant dollar amount and for the handling of any losses attributable to that Series of Shares. Such procedures may provide that in the event of any loss each Shareholder shall be deemed to have contributed to the capital of the Trust attributable to that Series of Shares his pro rata portion of the total number of Shares required to be cancelled in order to permit the net asset value per Share of that Series of Shares to be maintained, after reflecting such loss, at the designated constant dollar amount. Each Shareholder of the Trust shall be deemed to have agreed, by his investment in any Series of Shares with respect to which the Trustees shall have adopted any such procedure, to make the contribution referred to in the preceding sentence in the event of any such loss. (j) TRANSFER. Subject to such limitations as may be set forth herein or in the By-Laws, all Shares shall be transferable, but transfers of Shares of a particular Series of Shares will be recorded on the Share transfer records of the Trust applicable to that Series of Shares only at such times as Shareholders shall have the right to require the Trust to redeem Shares of that Series of Shares and at such other times as may be permitted by the Trustees. Shares shall be transferable on the records of the Trust upon delivery to the Trust or its transfer agent of such evidence of assignment, transfer, succession or authority to transfer as the Trustees or the transfer agent may reasonably require, accompanied by any certificate or certificates representing such shares previously issued to the transferor. Upon such delivery the transfer shall be recorded on the books of the Trust. 20 14 The Trust shall be entitled to treat the record holder of Shares as shown on its books as the owner of such Shares for all purposes, including the payment of dividends and the right to receive notice and to vote with respect thereto, regardless of any transfer, pledge or other disposition of such Shares until the Shares have been transferred on the books of the Trust in accordance with the requirements of this Declaration of Trust. (k) EQUALITY. All Shares of each Series of Shares shall represent an equal proportionate interest in the assets belonging to that Series of Shares (subject to the liabilities belonging to that Series of Shares), and each Share of each Series of Shares shall be equal to each other Share of that Series of Shares; provided that such equality need not be maintained among all Shares of a Series of Shares but shall be maintained among all Shares of each class of that Series of Shares whenever the Trustees divide the Shares of the Series of Shares into classes pursuant to Section 4.1. (l) FRACTIONS. Any fractional Share of any class or any Series of Shares, if any such fractional Share is outstanding, shall carry proportionately all the rights and obligations of a whole Share of that class of that Series of Shares, including rights and obligations with respect to voting, receipt of dividends and distributions, redemption of Shares, and liquidation of the Trust. (m) CONVERSION AND EXCHANGE RIGHTS. The Trustees shall have the authority to provide that holders of Shares of any class of any Series of Shares shall have the right to convert such Shares into, or to exchange such Shares for, Shares of the same or one or more other Series of Shares in accordance with such requirements and procedures as may be established by the Trustees. Section 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded on the books of the Trust or of a transfer or similar agent for the Trust. No certificates certifying the ownership of Shares need be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of Shares certificates, the use of facsimile signatures, the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive for all purposes as to who are the Shareholders of the Trust and of any Series or class of Shares and as to the number of Shares of each class of each Series of Shares held from time to time by each such Shareholder. Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept investments in the Trust from such persons and on such terms and for such consideration, as they from time to time authorize. The Trustees may authorize any distributor, principal underwriter, custodian, transfer agent or other person to accept orders for the purchase of Shares that conform to such authorized terms and to reject any purchase orders for Shares whether or not conforming to such authorized terms. Section 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive or other right to receive, purchase or subscribe to any additional Shares or other securities issued by the Trust. Section 4.6 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 on the terms and conditions described herein. Nothing in this Declaration of Trust shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association. Section 4.7 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares shall be deemed to be personal property giving only the rights provided in this instrument. Every Shareholder by virtue of having 21 15 become a Shareholder shall be held to have expressly assented and agreed to the terms hereof and to have become a party hereto. The death of a Shareholder during the continuance of the Trust shall not operate to terminate the Trust or any Series of Shares thereof nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but only to the rights of said decent under this Trust. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust Property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders partners. Neither the Trust nor the Trustees nor any officer, employee or agent of the Trust shall have any power to bind personally any Shareholder nor, except as specifically provided herein, to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay. ARTICLE V SHAREHOLDERS' VOTING POWERS AND MEETINGS Section 5.1 VOTING POWERS. The Shareholders shall have power to vote only (i) for the election or removal of Trustees as provided in Section 3.1, (ii) with respect to any contract with a Contracting Party as provided in Section 3.3 as to which Shareholder approval is contemplated by the 1940 Act, (iii) with respect to any termination or reorganization of the Trust or any Series of Shares to the extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any amendment of the Declaration of Trust to the extent and as provided in Section 7.3, (v) 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 brought or maintained derivatively or as a class action on behalf of the Trust or any Series of Shares thereof or the Shareholders (provided, however, that a Shareholder of a particular Series of Shares shall not be entitled to bring, maintain or participate in a derivative or class action on behalf of any other Series of Shares (or Shareholder of any other Series of Shares)) and (vi) with respect to such additional matters relating to the Trust as may be required by this Declaration of Trust, the By-Laws or any registration of the Trust with the Commission (or any successor agency ) or any state, or as the Trustees may consider necessary or desirable. Only Shareholders of record shall be entitled to vote. There shall be no cumulative voting in the election of Trustees. Until Shares of any Series or class of Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, this Declaration of Trust or the By-Laws to be taken by Shareholders as to such Series or class of Shares. Section 5.2 PROXIES. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote in person or by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Trustees, proxies may be solicited in the name of one or more persons, including one or more Trustees or one or more of the officers of the Trust. When any Shares are held in the names of two or more persons, any one of them may vote at any meeting in person or by proxy in respect of such Shares, 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 Shares. If the holder of any Shares is a minor or a person of unsound mind, and subject to guardianship or to the legal control of any other person as regards the charge or management of such Shares, 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. 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. 22 16 Section 5.3 MEETINGS. Meetings of Shareholders of the Trust or of any Series of Shares may be called by the Trustees (or such other person or persons as may be specified in the By-Laws) from time to time for the purpose of taking action upon any matter requiring the vote or authority of such Shareholders as herein provided or upon any other matter deemed by the Trustees to be necessary or desirable. Written notice of any meeting of Shareholders shall be given at least seven days before such meeting by mailing such notice, postage prepaid stating the time, place and purpose of the meeting, to each Shareholder entitled to vote at such meeting at the Shareholder's address as it appears on the records of the Trust. If the Trustees (or such other person or persons as may be specified in the By-Laws) fail to call or give notice of any meeting of Shareholders for 30 days after written application by Shareholders holding at least 25% of the Shares issued and outstanding, and entitled to vote at the meeting, requesting a meeting be called for a purpose requiring action by the Shareholders as provided herein or in the By-Laws, then Shareholders holding at least 25% of such Shares then outstanding may call and give notice of such meeting, and thereupon the meeting shall be held in the manner provided for herein in case of call thereof by the Trustees. The preceding sentence shall apply upon written application by Shareholders holding less than 25% of the Shares issued and outstanding, and entitled to vote at the meeting, when the By-Laws so provide. Notice of a meeting need not be given to any Shareholder if a written waiver of notice, executed by him or her before or after the meeting, is filed with the records of the meeting, or to any Shareholder who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him or her. Section 5.4 PLACE OF MEETINGS. All meetings of the Shareholders shall be held at the principal office of the Trust or at such other place within the United States as shall be designated by the Trustees or the President of the Trust. Section 5.5 RECORD DATES. For the purpose of determining the Shareholders who are entitled to notice of and to vote or act at any meeting or any adjournment thereof, or who are entitled to receive any dividend or distribution, or for the purpose of any other action, the Trustees may from time to time close the transfer books for such period, not exceeding 30 days (except at or in connection with the termination of the Trust), as the Trustees may determine; or without closing the transfer books, the Trustees may fix a date and time not more than 60 days prior to the date of any meeting of Shareholders or other action as the date and time of record for the determination of Shareholders entitled to notice of and to vote at such meeting or any adjournment thereof or to be treated as Shareholders of record for purposes of such other action, and any Shareholder who was a Shareholder at the date and time so fixed shall be entitled to vote at such meeting or any adjournment thereof or to be treated as a Shareholder of record for purposes of such other action, even though he has since that date and time disposed of his Shares, and no Shareholder becoming such after that date and time shall be so entitled to vote at such meeting or any adjournment thereof or to be treated as a Shareholder of record for purposes of such other action. Section 5.6 QUORUM AND REQUIRED VOTE. Thirty percent of the Shares entitled to vote on a matter shall be a quorum for the transaction of business on that matter at a Shareholders' meeting, but any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. A majority of the Shares voted, at a meeting at which a quorum is present, shall decide any questions and a plurality shall elect a Trustee, except when a different vote is required or permitted by any provision of the 1940 Act or other applicable law or by this Declaration of Trust or the By-Laws. If voting is by a Series of Shares or a class of Shares, the aforesaid quorum and voting requirements shall apply to the action to be taken on those matters by the Shareholders of such Series of Shares or class of Shares. Section 5.7 ACTION BY WRITTEN CONSENT. Any action taken by Shareholders may be taken without a meeting if the Shareholders of a majority of the outstanding shares entitled to vote on the matter (or such larger 23 17 proportion thereof as shall be required by the 1940 Act or by any express provision of this Declaration of Trust or the By-Laws) consent to the action in writing and such 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. Section 5.8 ADDITIONAL PROVISIONS. The By-Laws may include further provisions for Shareholders' votes and meetings and related matters not inconsistent with the provisions hereof. ARTICLE VI LIMITATION OF LIABILITY; INDEMNIFICATION Section 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. All persons extending credit to, contracting with or having any claim against the Trust shall look only to the assets of the Series of Shares with respect to which such persons extended credit or contracted, or with respect to which such claim arose for payment under such credit, contract or claim; and neither the Shareholders of any Series of Shares nor the Trustees nor any of the Trust's officers, employees or agents, whether past, present or future, nor any other Series of Shares shall be personally liable therefor. Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust, any Series of Shares or the Trustees or any of them shall be conclusively deemed to have been executed or done only by or for the Trust (or the Series of Shares) or the Trustees and not personally. Nothing in this Declaration of Trust shall protect any Trustee or officer against any liability to the Trust or the Shareholders to which such Trustee or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee or of such officer. Every note, bond, contract, instrument, certificate or undertaking made or issued by the Trustees or by any officers or officer shall give notice that this Declaration of Trust is on file with the Secretary of The Commonwealth of Massachusetts and shall recite that the same was executed or made by or on behalf of the Trust or by them as Trustees or Trustee or as officers or officer and not individually and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only upon the assets belonging to the Trust, or the particular Series of Shares in question, as the case may be, but the omission thereof shall not operate to bind any Trustees or Trustee or officers or officer or Shareholders or Shareholder individually. Section 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR SURETY. The exercise by the Trustees of their powers and discretions hereunder shall be binding upon everyone interested. A Trustee shall be liable for his own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. Subject to the foregoing, (a) the Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, consultant, adviser, administrator, distributor or principal underwriter, custodian, or transfer, dividend disbursing, Shareholder servicing or accounting agent of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee; (b) the Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust and their duties as Trustees, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice; and (c) in discharging their duties, the Trustees, when acting in good faith, shall be entitled to rely upon the books of account of the Trust and upon written reports made to the Trustees by any officer appointed by them, any independent public accountant, and (with respect to the subject matter of the contract involved) any officer, partner or responsible employee of a Contracting Party appointed 24 18 by the Trustees pursuant to Section 3.3. The Trustees as such shall not be required to give any bond or surety or any other security for the performance of their duties. Section 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder (or former Shareholder) of any Series of Shares shall be charged or held to be personally liable solely by reason of being or having been a Shareholder and not because of such Shareholder's acts or omissions or for some other reason, the Trust (upon proper and timely request by the Shareholder) shall assume the defense against such charge and satisfy any judgment thereon, and the Shareholder or former Shareholder (or his heirs, executors, administrators or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified against all loss and expense arising from such liability, but in each case only out of the assets of such Series of Shares. Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall indemnify (from the assets of the Series of Shares in question) each of its Trustees and officers (including persons who serve at the Trust's request as directors, officers, or trustees of another organization in which the Trust has an interest as a shareholder, creditor or otherwise) (herein referred to as a "Covered Person") against all liabilities, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and against all expenses, including but not limited to accountants and counsel fees, reasonably incurred by any Covered Person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such Covered Person may be or may have been involved as a party or otherwise or with which such person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Trustee or officer, director or trustee, except as otherwise provided in Section 6.5. Expenses, including accountants and counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), shall be paid from time to time from the assets of the Series of Shares in question in advance of the final disposition of any such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the Covered Person to repay the amounts so paid to the Series of Shares in question if it is ultimately determined that indemnification of such expenses is not authorized under this Article, provided that (i) the Covered Person shall have provided security for such undertaking, (ii) the Trust shall be insured against losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the Trustees who are neither Interested Persons of the Trust (the "disinterested Trustees") nor parties to the proceeding, or an independent legal counsel in a written opinion, shall have determined, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the Covered Person ultimately will be found entitled to indemnification. Section 6.5 EXCEPTIONS TO INDEMNIFICATION. Indemnification shall not be provided to a Covered Person under Section 6.4 if it shall have been finally adjudicated in a decision on the merits by the court or other body before which the proceeding was brought that such Covered Person (i) did not act in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Trust or (ii) is liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office (either and both of the conduct described in (i) and (ii) being referred to hereafter as "Disabling Conduct"). As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without a final adjudication in a decision on the merits that such Covered Person is liable by reason of Disabling Conduct, indemnification shall be provided if there has been (i) a determination by the court or other body before which the proceeding was brought that the Covered Person was not liable by reason of Disabling Conduct, (ii) a dismissal of a court action or any administrative or other proceeding against a Covered Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable determination, based upon a review of the readily available facts (as opposed to a full trial-type inquiry), that the Covered Person was not liable by reason of Disabling Conduct either by a vote 25 19 a majority of a quorum of disinterested Trustees who are not parties to the proceeding, or by an independent legal counsel in a written opinion. Approval by the Trustees or by independent legal counsel of indemnification as to any matter disposed of by a compromise payment by the Covered Person shall not prevent the recovery from the covered Person of any amount paid to such Covered Person as indemnification for such payment or for any other expenses if such Covered Person is subsequently adjudicated by a court of competent jurisdiction to be liable by reason of Disabling Conduct. Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of indemnification provided by this Article shall not be exclusive of or affect any other rights to which any such Covered Person may be entitled. As used in this Article, "Covered Person" shall include such person's heirs, executors and administrators. Nothing contained in this Article shall affect any rights to indemnification to which personnel of the Trust, other than Trustees and officers, and other persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of any such person. Section 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEE. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order. ARTICLE VII MISCELLANEOUS Section 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as provided herein, the Trust shall continue without limitation of time and, without limiting the generality of the foregoing, no change, alteration or modification with respect to any Series of Shares shall operate to terminate the Trust. The Trust may be terminated at any time by the Trustees by written notice to the Shareholders or by a Majority Shareholder Vote, Shares of each Series of Shares voting separately by Series of shares. Any Series of Shares may be terminated at any time by the Trustees by written notice to the Shareholders of that Series of Shares or by a Majority Shareholder Vote of the Shares of that Series of Shares. Upon termination of the Trust or any Series of Shares, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets to distributable form in cash, securities or other property, or any combination thereof, and distribute the proceeds to the Shareholders of the Series of Shares involved, in conformity with provisions of subsection (e) of Section 4.2. Section 7.2 REORGANIZATION. The Trust or one or more Series of Shares may merge or consolidate with any other trust, partnership, association, corporation or other organization and the Trustees may sell, convey and transfer the assets of the Trust, or the assets belonging to any one or more Series of Shares ("Transferor Series of Shares"), to another trust, partnership, association, corporation or other organization, or to the Trust to be held as assets belonging to another Series of Shares, in exchange for cash, securities or other consideration (including, in the case of a transfer to another Series of Shares of the Trust, Shares of such other Series of Shares) with such transfer being made subject to, or with the assumption by the transferee of, the liabilities belonging to each Transferor Series of Shares; provided, however, that no merger, consolidation or sale of all or substantially all the assets belonging to any particular Series of Shares shall be effected unless the terms of such transaction shall have first been approved by a Majority Shareholder Vote of the Shareholders of that Series of Shares. 26 20 Section 7.3 AMENDMENTS. All rights granted to the Shareholders under this Declaration of Trust are granted subject to the reservation of the right to amend this Declaration of Trust as herein provided, except that no amendment shall repeal the limitations on personal liability of any Shareholder or Trustee or repeal the prohibition of assessment upon the Shareholders without the express consent of each Shareholder or Trustee involved. Subject to the foregoing, the provisions of this Declaration of Trust (whether or not related to the rights of Shareholders) may be amended at any time by an instrument in writing signed by a majority of the then Trustees (or by an officer of the Trust pursuant to the vote of a majority of such Trustees): (a) for one or more of the following purposes: to change the name of the Trust, to supply any omission, to cure, correct or supplement any ambiguous, defective or inconsistent provision hereof or, as the Trustees deem necessary or advisable, to conform this Declaration of Trust to the requirements of applicable federal laws or regulations, including the requirements of the Internal Revenue Code with respect to regulated investment companies, but the Trustees shall not be liable for failing to do so; and (b) for any other purpose so long as such amendment does not adversely affect the rights of any Shareholder with respect to which such amendment is or purports to be applicable. Any amendment to this Declaration of Trust that adversely affects the rights of Shareholders may be effected at any time by an instrument in writing signed by a majority of the then Trustees (or by an officer of the Trust pursuant to a vote of a majority of such Trustees) when authorized to do so by a Majority Shareholder Vote in accordance with subsection (f) of Section 4.2. An amendment which would adversely affect the Shareholders of one or more Series of Shares but not the Shareholders of all Series of Shares shall be authorized by a Majority Shareholder Vote of the Shareholders of each Series of Shares so affected, and no vote of Shareholders of a Series of Shares not so affected shall be required. Section 7.4 RESIDENT AGENT. The Trustees shall have power to appoint on behalf of the Trust a resident agent and maintain a resident agent for the Trust in The Commonwealth of Massachusetts, and from time to time, to replace the resident agent so appointed. Section 7.5. FILING OF COPIES; REFERENCES; HEADINGS. The original or a copy of this instrument and of each amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each amendment hereto shall be filed by the Trust with the Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk, as well as any other governmental office where such filing may from time to time be required, but the failure to make any such filing shall not impair the effectiveness of this instrument or any such amendment. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such amendments have been made, as to the identities of the Trustees and officers, and as to any matters in connection with the Trust hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such amendments. A restated Declaration of Trust, containing the original Declaration of Trust and all amendments theretofore made, may be executed from time to time by a majority of Trustees and shall, upon filing with the Secretary of The Commonwealth of Massachusetts, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration of Trust and the various amendments thereto. In this instrument and in any such amendment, references to this instrument, and all expressions like "herein," "hereof" and "hereunder" shall be deemed to refer to this instrument as a whole as the same may be amended or affected by any such amendments. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. This instrument may be executed in any number of counterparts each of which shall be deemed an original. Section 7.6 APPLICABLE LAW. This Declaration of Trust is made in The Commonwealth of Massachusetts and is created under and is to be governed by and construed and administered according to the laws of The Commonwealth of Massachusetts. The Trust shall be of the type referred to in Section 1 of 27 21 Chapter 182 of the Massachusetts General Laws and of the type commonly called a Massachusetts business trust, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust. Section 7.7 RELIANCE BY THIRD PARTIES. Any certificate executed by an individual who, according to the records of the Trust, appears to be a Trustee hereunder, or Secretary or Assistant Secretary of the Trust, 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 requirement of this Declaration of Trust, (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 7.8 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. 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, the laws of The Commonwealth of Massachusetts or other applicable laws and regulations, the conflicting provisions shall be deemed superseded by such law or regulation to the extent necessary to eliminate such conflict; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration of Trust or render invalid or improper any action taken or omitted prior to such determination. If any provision of this Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall pertain only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration of Trust in any jurisdiction. EX-99.B1B 3 ESTABLISHM'T & DESIGNAT'N OF ADD'L SERIES & SHARES 1 EXHIBIT (b)(1)(b) 2 NASL SERIES TRUST Establishment and Designation of Additional Series of Shares of Beneficial Interest ($0.01 par value per share) The undersigned, being a majority of the Trustees of NASL Series Trust (the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of Trust") hereby redesignate the Series of Shares known as the "Convertible Securities Trust" as the "U.S. Government Bond Trust," such Series to continue to have the relative rights and preferences described in Section 4.2 of the Declaration of Trust, provided that the Trustees, in their absolute discretion, may amend any previously established relative rights and preferences as they may deem necessary or desirable to enable the Trust to comply with the Investment Company Act of 1940 or other applicable law. In witness whereof, the undersigned have executed this instrument in duplicate original counterparts and have caused a duplicate original to be lodged among the records of the Trust as of the 31st day of March, 1989, to be effective as of May 1, 1989. /S/ Don B. Allen /S/ William J. Atherton ------------------------ ------------------------ Don B. Allen William J. Atherton /S/ Charles L. Bardelis ------------------------- ------------------------- Charles L. Bardelis Brian L. Moore /S/ Robert J. Meyers ------------------------- Robert J. Meyers The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy of which together with all amendments thereto is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that this instrument was executed by the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of them or the shareholders of the Trust individually but are binding only upon the assets belonging to the Trust, or the particular Series of Shares in question, as the case may be. EX-99.B1C 4 ESTABLISHM'T & DESIGNAT'N OF ADD'L SERIES & SHARES 1 EXHIBIT (b)(1)(c) 2 NASL SERIES TRUST Establishment and Designation of Additional Series of Shares of Beneficial Interest ($0.01 par value per share) The undersigned, being a majority of the Trustees of NASL Series Trust (the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of Trust") hereby establish and designate three new Series of Shares (as defined in the Declaration of Trust), such Series of Shares to have the following special and relative rights: 1. The new Series of Shares shall be designated the "Conservative Asset Allocation Trust," the "Moderate Asset Allocation Trust" and the "Aggressive Asset Allocation Trust." 2. The new Series of Shares shall have the relative rights and preferences described in Section 4.2 of the Declaration of Trust, provided that the Trustees, in their absolute discretion, may amend any previously established relative rights and preferences as they may deem necessary or desirable to enable the Trust to comply with the Investment Company Act of 1940 or other applicable law. In witness whereof, the undersigned have executed this instrument in duplicate original counterparts and have caused a duplicate original to be lodged among the records of the Trust as of the 31st day of March, 1989, to be effective as of the 1st day of May, 1989. /S/ Don B. Allen /S/ William J. Atherton ------------------------ --------------------------- Don B. Allen William J. Atherton /S/ Charles L. Bardelis ------------------------ --------------------------- Charles L. Bardelis Brian L. Moore /S/ Robert J. Myers ------------------------ Robert J. Myers The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy of which together with all amendments thereto is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that this instrument was executed by the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of them or the shareholders of the Trust individually but are binding only upon the assets belonging to the Trust, or the particular Series of Shares in question, as the case may be. EX-99.B1D 5 ESTABLISHM'T & DESIGNAT'N OF ADD'L SERIES & SHARES 1 EXHIBIT (b)(1)(d) 2 NASL SERIES TRUST Establishment and Designation of Additional Series of Shares of Beneficial Interest ($0.01 par value per share) The undersigned, being a majority of the Trustees of NASL Series Trust (the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of Trust") hereby establish and designate three new Series of Shares (as defined in the Declaration of Trust), such Series of Shares to have the following special and relative rights: 1. The new Series of Shares shall be designated the "Growth and Income Trust." 2. The new Series of Shares shall have the relative rights and preferences described in Section 4.2 of the Declaration of Trust, provided that the Trustees, in their absolute discretion, may amend any previously established relative rights and preferences as they may deem necessary or desirable to enable the Trust to comply with the Investment Company Act of 1940 or other applicable law. In witness whereof, the undersigned have executed this instrument in duplicate original counterparts and have caused a duplicate original to be lodged among the records of the Trust as of the 1st day of February, 1991. /S/ Don B. Allen ----------------------- -------------------------- Don B. Allen William J. Atherton /S/ Charles L. Bardelis ----------------------- -------------------------- Charles L. Bardelis Brian L. Moore /S/ Samuel Hoar /S/ Robert J. Meyers ----------------------- -------------------------- Samuel Hoar Robert J. Meyers The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy of which together with all amendments thereto is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that this instrument was executed by the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of them or the shareholders of the Trust individually but are binding only upon the assets belonging to the Trust, or the particular Series of Shares in question, as the case may be. EX-99.B1E 6 ESTABLISHM'T & DESIGNAT'N OF ADD'L SERIES & SHARES 1 EXHIBIT (b)(1)(e) 2 NASL SERIES TRUST Establishment and Designation of Additional Series of Shares of Beneficial Interest ($0.01 par value per share) The undersigned, being a majority of the Trustees of NASL Series Trust (the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of Trust") hereby redesignate the Series of Shares known as the "Bond Trust" as the "Investment Quality Bond Trust," such Series to continue to have the relative rights and preferences described in Section 4.2 of the Declaration of Trust, provided that the Trustees, in their absolute discretion, may amend any previously established relative rights and preferences as they may deem necessary or desirable to enable the Trust to comply with the Investment Company Act of 1940 or other applicable law. In witness whereof, the undersigned have executed this instrument in duplicate original counterparts and have caused a duplicate original to be lodged among the records of the Trust as of the 3rd day of April, 1991, to be effective as of April 16, 1991. /S/ Don B. Allen --------------------------- -------------------------- Don B. Allen William J. Atherton /S/ Charles L. Bardelis --------------------------- -------------------------- Charles L. Bardelis Brian L. Moore /S/ Samuel Hoar /S/ Robert J. Meyers --------------------------- -------------------------- Samuel Hoar Robert J. Meyers The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy of which together with all amendments thereto is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that this instrument was executed by the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of them or the shareholders of the Trust individually but are binding only upon the assets belonging to the Trust, or the particular Series of Shares in question, as the case may be. EX-99.B1F 7 ESTABLISHM'T & DESIGNAT'N OF ADD'L SERIES & SHARES 1 EXHIBIT (b)(1)(f) 2 NASL SERIES TRUST Establishment and Designation of Additional Series of Shares of Beneficial Interest ($0.01 par value per share) The undersigned, being a majority of the Trustees of NASL Series Trust (the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of Trust") hereby redesignate the Series of Shares known as the "U.S. Government Bond Trust" as the "U.S. Government Securities Trust," such Series to continue to have the relative rights and preferences described in Section 4.2 of the Declaration of Trust, provided that the Trustees, in their absolute discretion, may amend any previously established relative rights and preferences as they may deem necessary or desirable to enable the Trust to comply with the Investment Company Act of 1940 or other applicable law. In witness whereof, the undersigned have executed this instrument in duplicate original counterparts and have caused a duplicate original to be lodged among the records of the Trust as of the 17th day of April, 1991, to be effective as of June 14, 1991. /S/ Don B. Allen ------------------------ ------------------------- Don B. Allen William J. Atherton /S/ Charles L. Bardelis ------------------------ ------------------------- Charles L. Bardelis Brian L. Moore /S/ Samuel Hoar /S/ Robert J. Meyers ------------------------ --------------------- Samuel Hoar Robert J. Meyers The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy of which together with all amendments thereto is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that this instrument was executed by the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of them or the shareholders of the Trust individually but are binding only upon the assets belonging to the Trust, or the particular Series of Shares in question, as the case may be. EX-99.B1G 8 ESTABLISHM'T & DESIGANT'N OF ADD'L SERIES & SHARES 1 EXHIBIT (b)(1)(g) 2 NASL SERIES TRUST Establishment and Designation of Additional Series of Shares of Beneficial Interest ($0.01 par value per share) The undersigned, being a majority of the Trustees of NASL Series Trust (the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of Trust") hereby establish and designate three new Series of Shares (as defined in the Declaration of Trust), such Series of Shares to have the following special and relative rights: 1. The new Series of Shares shall be designated the "Pasadena Growth Trust," the "Growth Trust" and the "Strategic Income Trust." 2. The new Series of Shares shall have the relative rights and preferences described in Section 4.2 of the Declaration of Trust, provided that the Trustees, in their absolute discretion, may amend any previously established relative rights and preferences as they may deem necessary or desirable to enable the Trust to comply with the Investment Company Act of 1940 or other applicable law. In witness whereof, the undersigned have executed this instrument in duplicate original counterparts and have caused a duplicate original to be lodged among the records of the Trust as of the 7th day of August, 1992. /S/ Don B. Allen --------------------- ---------------------- Don B. Allen William J. Atherton /S/ Charles L. Bardelis --------------------- ---------------------- Charles L. Bardelis Brian L. Moore /S/ Samuel Hoar /S/ Robert J. Meyers ---------------------- ---------------------- Samuel Hoar Robert J. Meyers The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy of which together with all amendments thereto is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that this instrument was executed by the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of them or the shareholders of the Trust individually but are binding only upon the assets belonging to the Trust, or the particular Series of Shares in question, as the case may be. EX-99.B1H 9 ESTABLISHM'T & DESIGNAT'N OF ADD'L SERIES & SHARES 1 EXHIBIT (b)(1)(h) 2 NASL SERIES TRUST Establishment and Designation of Additional Series of Shares of Beneficial Interest ($0.01 par value per share) The undersigned, being a majority of the Trustees of NASL Series Trust (the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of Trust") hereby redesignate the Series of Shares known as the "Growth Trust" as the "Value Equity Trust" and the Series of Shares known as the "Strategic Income Trust" as the "Strategic Bond Trust," such Series to continue to have the relative rights and preferences described in Section 4.2 of the Declaration of Trust, provided that the Trustees, in their absolute discretion, may amend any previously established relative rights and preferences as they may deem necessary or desirable to enable the Trust to comply with the Investment Company Act of 1940 or other applicable law. In witness whereof, the undersigned have executed this instrument in duplicate original counterparts and have caused a duplicate original to be lodged among the records of the Trust as of the 10th day of December, 1992, to be effective as of December 30, 1992, in the case of the Strategic Bond Trust and as of April 4, 1993, in the case of the Value Equity Trust. /S/ Don B. Allen ----------------------- ---------------------- Don B. Allen William J. Atherton /S/ Charles L. Bardelis ----------------------- ---------------------- Charles L. Bardelis Brian L. Moore /S/ Samuel Hoar /S/ Robert J. Meyers ----------------------- ---------------------- Samuel Hoar Robert J. Meyers The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy of which together with all amendments thereto is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that this instrument was executed by the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of them or the shareholders of the Trust individually but are binding only upon the assets belonging to the Trust, or the particular Series of Shares in question, as the case may be. EX-99.B1I 10 ESTABLISHM'T & DESIGNAT'N OF ADD'L SERIES & SHARES 1 EXHIBIT (b)(1)(i) 2 NASL SERIES TRUST Establishment and Designation of Additional Series of Shares of Beneficial Interest ($0.01 par value per share) The undersigned, being a majority of the Trustees of NASL Series Trust (the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of Trust") hereby establish and designate a new Series of Shares (as defined in the Declaration of Trust), such Series of Shares to have the following special and relative rights: 1. The new Series of Shares shall be designated the "International Growth and Income Trust." 2. The new Series of Shares shall have the relative rights and preferences described in Section 4.2 of the Declaration of Trust, provided that the Trustees, in their absolute discretion, may amend any previously established relative rights and preferences as they may deem necessary or desirable to enable the Trust to comply with the Investment Company Act of 1940 or other applicable law. In witness whereof, the undersigned have executed this instrument in duplicate original counterparts and have caused a duplicate original to be lodged among the records of the Trust this28th day of December, 1994. /S/ Don B. Allen -------------------------- ------------------------- Don B. Allen William J. Atherton /S/ Charles L. Bardelis /S/ Frederick W. Gorbet --------------------------- ------------------------- Charles L. Bardelis Frederick W. Gorbet /S/ Samuel Hoar --------------------------- -------------------------- Samuel Hoar Brian L. Moore /S/ Robert J. Myers --------------------------- Robert J. Myers The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy of which together with all amendments thereto is on 3 file in the office of the Secretary of The Commonwealth of Massachusetts, provides that this instrument was executed by the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of them or the shareholders of the Trust individually but are binding only upon the assets belonging to the Trust, or the particular Series of Shares in question, as the case may be. EX-99.B10B 11 CONSENT OF JONES AND BLOUCH 1 EXHIBIT (b)(10)(b) 2 Jones & Blouch L.L.P. Suite 405 West 1025 Thomas Jefferson Street, N.W. Washington, D.C. 20007-0805 April 24, 1996 NASL Series Trust 116 Huntington Avenue Boston, MA 02116 Dear Sirs: We hereby consent to the reference to this firm under the caption "Legal Counsel" in the Statement of Additional Information included in Post-Effective Amendment No. 31 under the Securities Act of 1933 and Amendment No. 32 under the Investment Company Act of 1940 to the Registration Statement for NASL Series Trust to be filed with the Securities and Exchange Commission, File No. 2-94157. Very truly yours, /s/ Jones & Blouch L.L.P. ---------------------------- Jones & Blouch L.L.P. EX-99.B11 12 CONSENT OF COOPERS & LYBRAND, LLP 1 EXHIBIT (b)(11) 2 CONSENT OF INDEPENDENT ACCOUNTANTS ================================== We consent to the inclusion in this Post-Effective Amendment No. 31 under the Securities Act of 1933 and Amendment No. 32 under the Investment Company Act of 1940 to the Registration Statement on Form N-1A (File No. 2-94157) of our report dated February 15, 1996, on our audit of the financial statements and financial highlights of NASL Series Trust which are included in Part B of the Registration Statement. We also consent to the reference to our Firm under the caption "Independent Accountants" in Part B of the Registration Statement. Coopers & Lybrand L.L.P. Boston, Massachusetts April 24, 1996 EX-99.B13 13 SCHEDULE OF COMPUTATION 1 EXHIBIT (b)(13) 2 EXHIBIT 13 TOTAL RATE OF RETURN CALCULATION FORMULA ------- P(1 + T)[superscript caret]n = ERV P = A hypothetical payment of $1,000 T = Average annual total return n = Number of years T = (ERV/P)[superscript caret]1/n - 1 EX-27.1 14 FDS FOR EQUITY TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 01 EQUITY TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 810,537,978 976,065,248 14,193,954 8,285 750,444 991,017,931 2,081,617 0 136,109 2,217,726 0 722,594,064 47,562,040 36,452,063 4,695,040 0 95,984,414 0 165,526,687 988,800,205 8,022,622 2,722,339 0 6,041,617 4,703,344 103,129,315 142,486,886 250,319,545 0 4,092,853 0 0 15,461,830 4,613,712 261,859 454,238,254 4,079,883 (7,140,235) 0 0 5,643,363 0 6,041,617 752,448,449 14.66 .10 6.14 .11 0 0 20.79 .80 0 0
EX-27.2 15 FDS FOR INVESTMENT QUALITY BOND TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 02 INVESTMENT QUALITY BOND TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 134,606,419 142,715,378 2,941,297 1,227 809 145,658,711 2,524,479 0 31,628 2,556,107 0 131,176,104 11,618,055 10,123,550 8,478,262 0 (4,660,721) 0 8,108,959 143,102,604 0 9,389,063 0 902,846 8,486,217 934,173 12,443,229 21,863,619 0 7,077,320 0 0 4,829,840 3,987,022 651,687 31,679,248 7,074,815 (5,600,344) 0 0 798,045 0 902,846 122,776,116 11.01 .77 1.28 .74 0 0 12.32 .74 0 0
EX-27.3 16 FDS FOR MONEY MARKET TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 03 MONEY MARKET TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 258,581,602 258,581,602 446,107 2,865 701 259,031,275 0 0 914,312 914,312 0 258,116,963 25,811,696 27,667,381 0 0 0 0 0 258,116,963 0 15,862,051 0 1,423,581 14,438,470 0 0 14,438,470 0 14,438,470 0 0 31,669,307 34,968,839 1,443,847 (18,556,843) 0 0 0 0 1,318,573 0 1,423,581 263,714,662 10.00 .55 0 .55 0 0 10.00 .54 0 0
EX-27.4 17 FDS FOR GLOBAL EQUITY TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 04 GLOBAL EQUITY TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 581,007,795 641,380,864 4,340,162 6,862 65,525,750 711,253,638 691,930 0 62,379,070 63,071,000 0 594,157,053 40,249,612 39,140,838 11,144,253 0 (17,623,479) 0 60,504,811 648,182,638 9,309,807 891,167 0 6,453,250 3,747,724 (7,229,061) 48,856,611 45,375,274 0 2,969,604 27,013,345 0 6,207,847 7,147,089 2,048,016 32,044,758 2,412,913 24,386,140 0 0 5,513,312 0 6,453,250 612,590,163 15.74 .29 .84 .08 .69 0 16.10 1.05 0 0
EX-27.5 18 FDS FOR GLOBAL GOVERNMENT BOND TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 05 GLOBAL GOVERNMENT BOND TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 215,527,656 227,153,803 6,750,983 2,355 65,468,463 299,375,604 0 0 64,132,670 64,132,670 0 210,172,142 16,160,125 16,716,312 20,496,692 0 (7,654,732) 0 12,228,832 235,242,934 0 17,051,448 0 2,046,737 15,004,711 8,387,712 22,355,680 45,748,103 0 11,483,093 0 0 3,271,665 4,742,839 914,987 26,730,264 13,288,441 (12,355,812) 0 0 1,757,909 0 2,046,737 219,738,532 12.47 1.16 1.62 .69 0 0 14.56 .93 0 0
EX-27.6 19 FDS FOR US GOVERNMENT SECURITIES TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 06 US GOVERNMENT SECURITIES TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 251,263,091 256,049,772 14,437,731 2,075 183 270,489,761 53,664,033 0 37,309 53,701,342 0 201,843,207 15,880,625 14,941,588 12,847,931 0 (2,689,400) 0 4,786,681 216,788,419 0 14,251,650 0 1,408,938 12,842,712 6,615,440 9,054,850 28,513,002 0 11,856,226 0 0 5,766,460 5,784,342 956,919 27,975,071 11,807,528 (9,250,923) 0 0 1,291,668 0 1,408,938 198,718,184 12.64 .89 .99 .87 0 0 13.65 .71 0 0
EX-27.7 20 FDS FOR CONSERVATIVE ASSET ALLOCATION TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 07 CONSERVATIVE ASSET ALLOCATION TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 209,523,478 224,247,646 5,087,670 2,247 175,019 229,512,582 4,673,692 0 448,890 5,122,582 0 196,057,546 19,363,198 20,956,187 10,622,367 0 2,923,461 0 14,786,626 224,390,000 1,117,122 11,016,349 0 1,901,334 10,232,137 8,472,474 17,545,346 36,249,957 0 10,860,847 0 0 773,201 3,426,820 1,060,630 7,674,260 11,588,833 5,903,757 0 0 1,639,903 0 1,901,334 218,653,751 10.34 .54 1.26 .55 0 0 11.59 .87 0 0
EX-27.8 21 FDS MODERATE ASSET ALLOCATION TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 08 MODERATE ASSET ALLOCATION TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 589,635,114 648,772,669 19,242,280 6,508 1,380,470 669,401,927 18,628,439 0 637,351 19,265,790 0 538,036,239 52,461,719 56,010,309 26,460,562 0 26,127,969 0 59,511,367 650,136,137 5,596,929 25,112,904 0 5,235,236 25,474,597 27,612,332 63,670,061 116,756,990 0 24,223,191 5,181,586 0 1,091,213 7,375,131 2,735,328 45,645,062 25,570,598 3,285,302 0 0 4,667,061 0 5,235,236 622,274,842 10.79 .50 1.65 .45 .10 0 12.39 .84 0 0
EX-27.9 22 FDS FOR AGGRESSIVE ASSET ALLOCATION TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 09 AGGRESSIVE ASSET ALLOCATION TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 186,120,943 211,255,251 6,745,427 2,058 671,028 218,673,764 6,451,236 0 465,576 6,916,812 0 170,560,910 16,484,402 16,525,699 5,427,633 0 10,450,155 0 25,318,254 211,756,952 2,609,671 4,557,825 0 1,774,575 5,392,921 10,394,886 23,766,711 39,554,518 0 5,166,253 6,299,483 0 2,106,928 3,194,369 1,046,144 27,095,137 5,235,271 6,287,998 0 0 1,463,421 0 1,774,575 195,122,754 11.17 .35 2.07 .33 .41 0 12.85 .91 0 0
EX-27.10 23 FDS FOR GROWTH AND INCOME TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 10 GROWTH AND INCOME TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 550,600,569 671,637,979 1,777,317 5,639 12,526 673,433,461 0 0 4,046,217 4,046,217 0 520,900,232 40,893,098 31,409,684 11,667,389 0 15,781,628 0 121,037,995 669,387,244 14,278,070 1,545,025 0 4,168,499 11,654,596 15,794,421 103,849,728 131,298,745 0 8,549,161 4,313,653 0 10,336,698 1,799,079 945,795 259,852,899 8,554,134 4,308,680 0 0 3,922,671 0 4,168,499 523,022,838 13.04 .27 3.45 .26 .13 0 16.37 .80 0 0
EX-27.11 24 FDS FOR PASADENA GROWTH TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROMNASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 11 PASADENA GROWTH TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 226,902,751 277,336,287 401,009 2,420 523 277,740,239 22,266 0 43,780 66,046 0 236,892,573 24,363,208 16,757,839 908,877 0 (10,560,793) 0 50,433,536 277,674,193 2,328,072 696,239 0 2,115,434 908,877 (2,374,757) 49,321,341 47,855,461 0 834,112 0 0 10,076,574 2,556,755 85,550 125,947,492 834,112 (8,186,036) 0 0 2,115,434 0 2,234,447 216,967,554 9.05 .03 2.36 .04 0 0 11.40 .975 0 0
EX-27.12 25 FDS FOR VALUE EQUITY TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 12 VALUE EQUITY TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 365,206,838 395,072,032 3,680,666 3,357 979 398,757,034 1,878,666 0 51,812 1,930,478 0 336,061,467 28,733,585 19,575,533 5,009,152 0 25,890,743 0 29,865,194 396,826,556 4,568,101 3,046,996 0 2,605,945 5,009,152 25,890,743 29,918,641 60,818,536 0 1,721,862 2,091,517 0 10,319,618 1,475,942 314,376 174,991,222 1,721,862 2,091,517 0 0 2,459,247 0 2,605,945 307,406,014 11.33 .17 2.49 .08 .10 0 13.81 .85 0 0
EX-27.13 26 FDS FOR STRATEGIC BOND TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 13 STRATEGIC BOND TRUST 1 USD YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 122,860,614 124,924,833 3,244,978 1,041 37,502,394 165,673,246 42,910,517 0 58,553 42,969,070 0 113,732,275 10,898,515 8,519,256 10,644,655 0 (3,633,638) 0 1,960,884 122,704,176 0 9,588,869 0 913,858 8,675,011 1,480,845 7,434,148 17,590,004 0 4,125,434 0 0 3,611,326 1,663,147 431,080 38,271,210 5,682,980 (4,485,030) 0 0 767,448 0 913,858 99,025,605 9.91 .78 1.04 .47 0 0 11.26 .92 0 0
EX-27.14 27 FDS FOR INT'L GROWTH & INCOME TRUST
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000756913 NASL SERIES TRUST 14 INTERNATIONAL GROWTH AND INCOME TRUST 1 USD YEAR DEC-31-1995 JAN-09-1995 DEC-31-1995 1 84,712,979 87,198,943 798,208 1,477 22,669,438 110,668,066 21,913,390 0 116,642 22,030,032 0 86,188,482 8,462,125 0 (70,205) 0 (233,834) 0 2,753,591 88,638,034 689,974 344,831 0 696,285 338,520 1,232,130 2,753,591 4,324,241 0 998,757 875,932 0 12,066,223 3,783,494 179,396 88,638,034 0 0 0 0 450,200 0 696,285 48,418,212 10.00 .11 .59 .12 .11 0 10.47 1.47 0 0
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