<PAGE>
[LOGO]
NORTHSTAR
EQUITY TRUST
SEMI-ANNUAL REPORT TO SHAREHOLDERS
JUNE 30, 1999
[GRAPHIC]
<PAGE>
[PHOTO]
MARK L. LIPSON
NORTHSTAR EQUITY TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1999
[LOGO]
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Northstar Eq-
uity Trust for the six months ended June 30, 1999. We are gratified with your
decision to entrust your assets to the Northstar Equity Trust and are confident
that we can assist you in reaching your financial objectives. Our goal is to
provide you with consistent, long-term, attractive returns achieved through
fundamental research, analysis, and traditional investment disciplines. Follow-
ing this letter is a summary of the results of the Northstar Mid-Cap Growth
Fund by Mary Lisanti, Chief Investment Officer--Equities and co-manager of the
Fund. We hope you will find it informative.
The past six months saw a continuation of the recovery that began in late 1998
in the U.S. markets. Investor fears about financial turmoil and a global defla-
tionary spiral faded in the wake of interest rate cuts around the globe. While
the U.S. Federal Reserve was the first to cut rates in response to Long Term
Capital Management, we have seen over 151 interest rate cuts worldwide since
September of last year as central banks responded to the crisis by increasing
liquidity. These rate cuts had the effect of stabilizing the Asian economies
and as we moved through the first six months of 1999 we saw increasing signs of
economic stabilization in commodity prices and economically sensitive compa-
nies. While the economic backdrop of the past six months could be described as
"the best of all worlds" for the U.S. financial markets, with strong GDP growth
accompanied by low inflation, the recovery in the rest of the world did cause
interest rates to move up by about 75 basis points. In more traditional eco-
nomic cycles, such strong growth might be accompanied by inflation, but strong
improvements in our productivity alleviated inflation concerns. The combination
of strong economic growth, low interest rates, and good earnings growth from
many sectors in the U.S. caused the markets to continue to rebound and sup-
ported historically high valuations in the S&P 500; the most significant re-
bound occurred in the technology and industrial sectors, which had been hit the
hardest in the correction in the Fall of 1998. For the six months ended June
30, 1999, the NASDAQ increased 22.5% and the Dow Jones Industrial Average in-
creased 19.49%, while the S&P 500 returned 12.32%, the S&P Midcap Index 6.22%,
and the Russell 2000 was up 9.28%.
As we moved through 1999, the market began to broaden out significantly as in-
vestors' confidence in a global recovery increased. While the overall backdrop
was favorable for most asset classes, more traditional cyclical stocks, econom-
ically sensitive issues and traditional riskier asset classes such as U.S.
small capitalization stocks and emerging market issues began to outperform the
larger capitalization S&P 500-type issues which had been a safe haven in times
of financial turmoil. Industrial stocks as represented by the Dow Jones Indus-
trial Average surpassed the S&P 500 in return for the first time in a number of
years. The Spring of 1999 also saw a resurgence in interest in smaller U.S.
stocks, as the Russell 2000 began to significantly outperform the S&P 500. In-
ternational stocks also showed a very strong resurgence, as the Morgan Stanley
International indices significantly outperformed the S&P 500, with returns
ranging from 26.99% to 56.59%. While investor appetite for risk did increase,
certain of the asset classes perceived as riskier or more tied to the credit
cycle, such as high yield bonds, continued to lag through most of the past six
months. Traditional "value" stocks began to outperform "growth" stocks in this
time frame, and commodity prices strengthened as Asia recovered. Most notable
was the sharp recovery in the price of oil, which rose from $12.05 per barrel
to $19.29 per barrel during the first six months of 1999.
While it is too early to state that the market leadership has shifted, we do
believe that the market will continue to broaden out as investors increas-
ingly focus on companies with the potential to provide strong earnings growth
that sell at reasonable valuations relative to their growth rates. As the
global economy accelerates, the unusual confluence of events that conspired to
keep inflation levels perhaps artificially low will dissipate, and it is logi-
cal to assume that inflation returns to a more normalized "pre-financial cri-
sis" 2.5%-3.0% rate. While we do not expect inflation to accelerate much beyond
that, that move alone represents a significant increase from the 1.5%-2.0% rate
we had seen for most of 1998 and the early part of 1999. While we do not view
the recent Fed interest rate increase of 25 basis points as "the first of man-
y", as the global economy recovers its equilibrium, it is also logical to as-
sume that interest rates recover to their "pre-crisis" levels, which would put
the yield on long-term rates in the U.S. in the 6%-7% range versus the current
rate of 6.07%. This may put a further cap on the performance of the larger cap-
italization S&P 500 stocks. We believe that over the next six to twelve months,
active managers may have an opportunity to outperform the indices as stock-
picking capabilities become increasingly important.
As we move into the next millenium, we see a continuation of the global eco-
nomic recovery leading to stronger profit growth for equities.
The returns for the equity market as measured by the S&P 500 over the past sev-
eral years have been significantly outside the historical range of 8-10% and it
is logical to assume that at some point we will return to this historical
range. While returns of the S&P 500 over the next twelve months may be a bit
more subdued than in the recent past, the vast majority of stocks have not been
invited to "join the party" until recently; we believe that we may see returns
in those stocks improve, as we believe that is where most of the profit im-
provement will be concentrated.
Pundits say that "bull markets always climb a wall of worry" and this one has
been no different. We continue to face uncertainty on the geopolitical front
with the situation in Kosovo and economic uncertainty about the impact of Y2K.
As of now, we believe that both of those issues are manageable. We do not see
the military action in Kosovo developing into a full-scale war. While it is
possible that the Y2K phenomenon may create some dislocations, this has been an
area of significant investment and focus by corporate America for some period
of time; given the amount of time, energy and money that has been spent to en-
sure that Y2K does not have a catastrophic impact on the American economy, we
believe the odds are high that any problems will be manageable.
Many of the positive forces that have driven the U.S. stock market to new
heights are secular, not cyclical. Throughout this decade, U.S. corporations
have improved their efficiency and profitability through strategic investments
in productivity-improving technology and the replacement of labor with technol-
ogy; we believe that trend will continue, if not accelerate, as we enter the
next millenium and U.S. corporations begin to exploit the power of the Internet
as a distribution channel and reap the benefits of a recovery in Asia and the
developing world.
We thank you for the trust you have placed in our firm and look forward to con-
tinuing to serve your investment needs in the future.
Sincerely,
/s/ Mark L. Lipson
Mark L. Lipson
President
MARK L. LIPSON
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(This Page Left Blank Intentionally)
<PAGE>
[PHOTO]
MARY LISANTI
[PHOTO]
JEFF BERNSTEIN
NORTHSTAR
Mid-Cap Growth Fund
[LOGO]
The Markets
. After a tumultuous close to 1998, the first six months of 1999 saw the
U.S. equity markets climb in a relatively straightforward manner. The im-
peachment of President Clinton, the devaluation of the Brazilian Real, and
a war in the Balkans were unable to derail the stock market's ascent. The
rally in the equity market was one of the broadest in recent history. All
asset classes from small cap to megacap stocks had solid gains, while more
cyclical economic sectors fueled the returns in the second quarter on the
heels of robust economic data.
. The strength of the economy and some rare signs of inflation put pressure
on the bond market, sending the yield on the 30-Year U.S. Treasury bond
from 5.08% at the start of the year to 5.99% by the end of June. The April
Consumer Price Index turned in its largest monthly increase in nearly nine
years, while Japan's economy appeared to be on the road to recovery as
first quarter GDP grew 1.9%. While this news spelled trouble for the bond
market, the markets largely anticipated the Fed rate hike that came at the
end of June. However, U.S. equity investors took this as a sign that earn-
ings growth would make a comeback sooner than expected.
. The S&P 500 gained 12.32% during the first six months of 1999, while the
Dow Jones Industrials crossed the 10,000 mark for the first time and re-
turned 19.49%. Small cap stocks showed substantial improvement, as the
Russell 2000 Index turned in a gain of 9.28%, while the S&P Midcap Index
earned 6.22%.
The Fund
. For the six months ended June 30, 1999, the Northstar Mid-Cap Growth Fund
returned 32.79%, 32.61%, 32.33%, and 32.95% for Class A, B, C, and I
shares, respectively.
. The Fund benefited from a number of market trends and investment strate-
gies. In the rising interest rate environment, financial stocks were
avoided almost completely, while the portfolio broadened its exposure to
more economically-sensitive sectors such as energy and consumer cyclicals.
Second, while the Internet fueled a large part of the Fund's early gains,
these positions were reduced in favor of semiconductor and communications
stocks.
Current Strategy
. We have maintained the outlook that the U.S. economy was stronger than
most observers had originally thought, and we are now seeing evidence of
this in economic data and in corporate earnings. At the same time, the
global economy is recovering, which has broadened investor interest away
from the megacap and technology stocks, which have been fueling most of
the market's gains during 1998.
. While we have broadened the sector allocations into more cyclical sectors,
we continue to concentrate on the technology and communications trends
that are consuming much of corporate spending. Within these two sectors,
we have allocated capital towards the companies that are providing the
Internet infrastructure, as it remains unclear as to who the winners will
be in the consumer Internet space. Thus, we have increased positions in
semiconductors, networking equipment, and telecommunications.
. The strong performance during the first half of 1999 has caused an even
sharper focus on the valuations of the holdings in the Fund. We have not
been afraid to realize gains on some of our best performing stocks, but we
remain encouraged that we can find companies with excellent growth pros-
pects at reasonable prices, while we continue to see increasing investor
interest in small and midcap stocks.
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/99) Total Net Assets $47,126,162
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<C> <S> <C>
1 Teradyne, Inc. 1.8%
2 QUALCOMM, Inc. 1.6%
3 Lam Research Corp. 1.5%
4 Comverse Technology, Inc. 1.4%
5 Solectron Corp. 1.4%
6 Conexant Systems, Inc. 1.3%
7 Lexmark International Group, Inc. 1.3%
8 National Semiconductor Corp. 1.3%
9 Tandy Corp. 1.3%
10 Uniphase Corp. 1.3%
-----
14.2%
=====
</TABLE>
Top 5 Industries
(by percentage of net assets)
Semiconductor 16.9%
Consumer Cyclicals 11.8%
Telecommunications
Equipment 7.2%
Energy 7.0%
Electronic
Production/
Equipment 6.4%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<TABLE>
- ---------------------------------
<CAPTION>
Inception 5 years 1 year
- ---------------------------------
<S> <C> <C> <C>
Class A 63.90% N/A N/A
- ---------------------------------
Class B 67.00% N/A N/A
- ---------------------------------
Class C 70.50% N/A N/A
- ---------------------------------
Class I 72.70% N/A N/A
- ---------------------------------
</TABLE>
Cumulative Total Return
(do not reflect sales charge)
<TABLE>
- ---------------------------------
<CAPTION>
Inception 5 years 1 year
- ---------------------------------
<S> <C> <C> <C>
Class A 72.10% N/A N/A
- ---------------------------------
Class B 72.00% N/A N/A
- ---------------------------------
Class C 71.50% N/A N/A
- ---------------------------------
Class I 72.70% N/A N/A
- ---------------------------------
</TABLE>
- ------------------------------------------------ ---------
3
<PAGE>
NORTHSTAR MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ----------------------------------------------------------
<S> <C> <C>
Common Stocks -- 98.74%
Basic Material -- 3.33%
Abitibi-Consolidated, Inc. 27,800 $ 316,225
Bemis Co., Inc. 8,800 349,800
Bowater, Inc. 4,200 198,450
H.B. Fuller Co. 6,100 417,087
Smurfit-Stone Container Corp. @ 13,900 285,819
-----------
1,567,381
-----------
Biotechnology -- 3.25%
Centocor, Inc. @ 9,600 447,600
Gilead Sciences, Inc. @ 2,300 120,175
Immunex Corp. @ 2,300 293,106
MedImmune, Inc. @ 6,200 420,050
The Liposome Co., Inc. @ 13,100 250,538
-----------
1,531,469
-----------
Capital Goods -- 4.84%
KEMET Corp. @ 10,000 229,375
Millipore Corp. 9,200 373,175
PACCAR, Inc. 2,900 154,788
Pall Corp. 15,800 350,562
Republic Services, Inc. @ 11,800 292,050
Solectron Corp. @ 10,000 666,875
Terex Corp. 7,000 213,062
-----------
2,279,887
-----------
Communication Services -- 3.79%
Advanced Radio Telecom Corp. @ 18,900 271,688
Allegiance Telecom, Inc. @ 6,300 345,712
Colt Telecom Group PLC @ ** 3,600 310,950
Time Warner Telecom, Inc. @ 900 26,100
VoiceStream Wireless Corp. @ 17,900 509,031
Western Wireless Corp. @ 11,900 321,300
-----------
1,784,781
-----------
Computer Communications -- 1.91%
Brocade Communications Systems, Inc. @ 1,500 144,656
Extreme Networks, Inc. @ 6,100 354,182
Juniper Networks, Inc. @ 1,000 149,000
Redback Networks, Inc. @ 2,000 251,125
-----------
898,963
-----------
Computer Software -- 3.84%
Citrix Systems, Inc. @ 4,400 248,600
Compuware Corp. @ 14,000 445,375
Macromedia, Inc. @ 4,700 165,675
New Era of Networks, Inc. @ 5,100 224,081
Rational Software Corp. @ 13,200 434,775
Siebel Systems, Inc. @ 4,400 292,050
-----------
1,810,556
-----------
Consumer Cyclicals -- 11.77%
Abercrombie & Fitch Co. @ 7,800 374,400
American Eagle Outfitters, Inc. @ 12,800 582,400
AnnTaylor Stores Corp. @ 7,200 324,000
</TABLE>
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4
<PAGE>
NORTHSTAR MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Consumer Cyclicals -- continued
Cooper Tire & Rubber Co. 9,400 $ 222,075
Family Dollar Stores, Inc. 7,100 170,400
Gemstar International Group Ltd. @ 5,600 365,400
Hasbro, Inc. 16,100 449,794
Linens 'n Things, Inc. @ 8,100 354,375
Mandalay Resort Group @ 15,400 325,325
Nielsen Media Research, Inc. 8,500 248,625
Park Place Entertainment Corp. @ 35,200 341,000
Saks, Inc. @ 14,300 412,912
Tandy Corp. 12,400 606,050
Tiffany & Co. 4,900 469,326
Tommy Hilfiger Corp. @ 4,100 301,350
-----------
5,547,432
-----------
Consumer Staples -- 5.62%
Chancellor Media Corp. @ 3,900 214,988
EchoStar Communications Corp. @ 1,800 276,187
Foodmaker, Inc. @ 7,300 207,138
Hispanic Broadcasting Corp. @ 3,100 235,212
Outback Steakhouse, Inc. @ 6,450 253,566
Radio One, Inc. @ 6,800 316,200
RCN Corp. @ 6,000 249,750
Sinclair Broadcast Group, Inc. @ 14,500 237,437
United Pan-Europe Communications N.V. @ ** 3,500 193,375
Univision Communications, Inc. @ 7,000 462,000
-----------
2,645,853
-----------
Diversified Commerical Services -- 0.02%
Abacus Direct Corp. @ 100 9,150
-----------
Diversified Electronic Products -- 1.30%
Uniphase Corp. @ 3,700 614,200
-----------
EDP Peripherals -- 2.43%
Electronics for Imaging, Inc. @ 6,600 339,075
Lexmark International Group, Inc. @ 9,000 594,562
Network Appliance, Inc. @ 3,800 212,325
-----------
1,145,962
-----------
EDP Services -- 1.86%
BEA Systems, Inc. @ 16,200 462,713
The BISYS Group, Inc. @ 7,100 415,350
-----------
878,063
-----------
Electronic Components -- 1.02%
DSP Communications, Inc. @ 16,700 482,213
-----------
Electronic Data Processing -- 0.68%
Apple Computer, Inc. 6,900 319,556
-----------
Electronic Production/Equipment -- 6.44%
Applied Materials, Inc. @ 3,700 273,338
ASM Lithography Holding N.V. @ 5,900 350,312
KLA-Tencor Corp. @ 4,400 285,450
Lam Research Corp. @ 15,400 718,987
Taiwan Semiconductor Manufacturing Co. Ltd. @ ** 15,800 537,200
Teradyne, Inc. @ 12,100 868,175
-----------
3,033,462
-----------
</TABLE>
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5
<PAGE>
NORTHSTAR MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------
<S> <C> <C>
Energy -- 6.95%
Apache Corp. 11,900 $ 464,100
Baker Hughes, Inc. 13,900 465,650
BJ Services Co. @ 10,500 309,094
ENSCO International, Inc. 17,600 350,900
Precision Drilling Corp. @ 20,900 398,406
Santa Fe International Corp. 16,200 372,600
Smith International, Inc. 11,400 495,187
Vastar Resources, Inc. 8,000 419,500
-----------
3,275,437
-----------
Financial -- 4.91%
AFLAC, Inc. 9,800 469,175
CompuCredit Corp. @ 3,000 57,000
Donaldson, Lufkin & Jenrette, Inc. @ 1,800 53,100
Equity Residential Properties Trust 6,600 297,413
Hambrecht & Quist Group @ 5,600 207,900
Knight/Trimark Group, Inc. @ 2,900 174,906
Metris Cos., Inc. 13,800 562,350
Providian Financial Corp. 900 84,150
The Charles Schwab Corp. 3,700 406,537
-----------
2,312,531
-----------
Hospital/Nursing Management -- 0.75%
Columbia/HCA Healthcare Corp. 15,100 344,469
LifePoint Hospitals, Inc. @ 794 10,669
-----------
355,138
-----------
Internet Services -- 0.81%
AppNet Systems, Inc. @ 15,500 208,282
InfoSpace.com, Inc. @ 2,300 108,100
Inktomi Corp. @ 500 65,281
-----------
381,663
-----------
Managed Health Care -- 2.42%
Foundation Health Systems, Inc. @ 27,600 414,000
Oxford Health Plans, Inc. @ 28,100 437,306
Wellpoint Health Networks, Inc. @ 3,400 288,575
-----------
1,139,881
-----------
Medical Electronics -- 1.16%
Medtronic, Inc. 4,700 366,013
VISX, Inc. @ 2,300 182,131
-----------
548,144
-----------
Medical Specialties -- 0.86%
Boston Scientific Corp. @ 9,200 404,225
-----------
Medical/Nursing Services -- 1.11%
TLC The Laser Center, Inc. @ 10,900 523,200
-----------
Metal Fabrications -- 1.08%
CommScope, Inc. @ 16,600 510,450
-----------
Semiconductor -- 16.87%
Altera Corp. @ 12,200 449,112
Analog Devices, Inc. @ 11,200 562,100
Atmel Corp. @ 19,000 497,562
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
NORTHSTAR MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Semiconductor -- continued
Broadcom Corp. @ 2,600 $ 375,863
Conexant Systems, Inc. @ 10,900 632,881
Cypress Semiconductor Corp. @ 26,700 440,550
Lattice Semiconductor Corp. @ 7,900 491,775
Linear Technology Corp. 7,600 511,100
LSI Logic Corp. @ 8,800 405,900
Maker Communications, Inc. @ 15,200 471,200
Maxim Integrated Products, Inc. @ 7,500 498,750
Micrel, Inc. @ 5,000 370,000
Microchip Technology, Inc. @ 11,000 521,125
Micron Technology, Inc. 6,200 249,938
National Semiconductor Corp. @ 23,500 594,844
Vitesse Semiconductor Corp. @ 6,900 465,319
Xilinx, Inc. @ 7,200 412,200
-----------
7,950,219
-----------
Services to Health Industry -- 0.42%
Express Scripts, Inc. @ 3,300 198,619
-----------
Telecommunications -- 0.37%
Viatel, Inc. @ 3,100 173,988
-----------
Telecommunications Equipment -- 7.15%
ADC Telecommunications, Inc. @ 3,200 145,800
ADTRAN, Inc. @ 8,600 312,825
CIENA, Corp. @ 3,300 99,619
Comverse Technology, Inc. @ 8,600 649,300
General Instrument Corp. @ 10,400 442,000
Motorola, Inc. 5,100 483,225
QUALCOMM, Inc. @ 5,300 760,550
RF Micro Devices, Inc. @ 6,400 477,600
-----------
3,370,919
-----------
Utilities -- 1.78%
The Montana Power Co. 5,600 394,800
Washington Gas Light Co. 17,100 444,600
-----------
839,400
-----------
Total Common Stocks
(cost $34,480,433) 46,532,742
-----------
Total Investment Securities -- 98.74%
(cost $34,480,433) 46,532,742
Repurchase Agreement -- 2.85%
Agreement with State Street Bank and
Trust bearing interest at 4.70% dated
6/30/99, to be repurchased 7/01/99 in the
amount of $1,342,175 and collateralized
by $1,355,000 U.S. Treasury Notes, 6.25%
due 2/15/07, value $1,371,606
(cost $1,342,000) $1,342,000 1,342,000
Liabilities in excess of other assets -- (1.59%) (748,580)
-----------
Net Assets -- 100.00% $47,126,162
===========
</TABLE>
@Non-income producing security.
**American Depositary Receipts.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
7
<PAGE>
NORTHSTAR EQUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Northstar
Mid-Cap
Growth Fund
-----------
<S> <C>
ASSETS:
Investments in securities, at value (cost $34,480,433) $46,532,742
Repurchase agreements 1,342,000
Cash 907
Receivable for investments sold 710,576
Receivable for shares of beneficial interest sold 60,922
Dividends and interest receivable 13,674
Prepaid expenses 7,500
-----------
Total Assets 48,668,321
-----------
LIABILITIES:
Payable for investments purchased 1,453,593
Investment advisory fee payable 36,168
Audit fee payable 11,880
Custodian fee payable 19,713
Printing fee payable 6,412
Payable for fund shares repurchased 5,270
Administrative service fees payable 4,072
Transfer agent fee payable 1,905
Distribution fee payable 1,016
Accrued expenses 2,130
-----------
Total Liabilities 1,542,159
-----------
Net Assets $47,126,162
===========
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of benefical interest, $.01 par value
outstanding (unlimited shares authorized) $26,936,206
Accumulated net investment loss (233,867)
Undistributed net realized gain on investments 8,371,514
Net unrealized appreciation of investments 12,052,309
-----------
Net Assets $47,126,162
===========
Class A:
Net Assets $ 1,519,468
-----------
Shares outstanding 88,313
-----------
Net asset value and redemption value per share (net assets/shares
outstanding) $ 17.21
===========
Maximum offering price per share (net asset value plus sales
charge of 4.75% of offering price) $ 18.07
===========
Class B:
Net Assets $ 749,893
-----------
Shares outstanding 43,594
-----------
Net asset value and offering price per share* (net assets/shares
outstanding) $ 17.20
===========
Class C:
Net Assets $ 384,907
-----------
Shares outstanding 22,441
-----------
Net asset value and offering price per share* (net assets/shares
outstanding) $ 17.15
===========
Class I:
Net Assets $44,471,894
-----------
Shares outstanding 2,574,798
-----------
Net asset value, offering and redemption price per share (net
assets/shares outstanding) $ 17.27
===========
</TABLE>
* Redemption price per share varies with the length of time Class B and C
shares are held.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
8
<PAGE>
NORTHSTAR EQUITY TRUST
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Northstar
Mid-Cap
Growth Fund
-----------
<S> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of $283) $ 36,567
Interest 29,693
-----------
Total investment income 66,260
-----------
EXPENSES:
Investment advisory fees 197,576
Distribution fees:
Class A 1,708
Class B 1,120
Class C 836
Transfer agent fees and expenses:
Class A 1,769
Class B 367
Class C 342
Class I 18,003
Custodian and fund accounting 24,974
Administrative service fees 20,212
Printing and postage 12,083
Registration fees 9,686
Audit 8,690
Miscellaneous expenses 8,042
-----------
305,408
Less expenses reimbursed by management company 5,281
-----------
Total expenses 300,127
-----------
Net investment loss (233,867)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 9,071,197
Net change in unrealized appreciation of investments 2,682,844
-----------
Net realized and unrealized gain on investments 11,754,041
-----------
Increase in net assets resulting from operations $11,520,174
===========
</TABLE>
See accompanying notes to financial statements.
[NORTHSTAR EQUITY TRUST LOGO APPEARS HERE]
- --------------------------------------------------------------------------------
9
<PAGE>
NORTHSTAR EQUITY TRUST
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
Northstar Mid-Cap Growth Fund
-----------------------------------
For the six For the period
months ended August 20, 1998 (1)
June 30, 1999 to December 31, 1998
<S> <C> <C>
-----------------------------------
FROM OPERATIONS:
Net investment loss $ (233,867) $ (53,072)
Net realized gain (loss) on investments 9,071,197 (699,683)
Net change in unrealized appreciation 2,682,844 9,369,465
-----------------------------------
Increase in net assets resulting from
operations 11,520,174 8,616,710
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 1,432,341 25,619,790
Cost of shares redeemed (104,295) (58,558)
-----------------------------------
Net increase in net assets derived from
capital share transactions 1,328,046 25,561,232
-----------------------------------
Net increase in net assets 12,848,220 34,177,942
NET ASSETS:
Beginning of period 34,277,942 100,000
-----------------------------------
End of period $47,126,162 $34,277,942
===================================
Accumulated net investment loss $ (233,867) $ 0
===================================
</TABLE>
(1) Commencement of operations.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
10
<PAGE>
NORTHSTAR EQUITY TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST
OUTSTANDING THROUGHOUT EACH PERIOD
[LOGO]
<TABLE>
<CAPTION>
Ratio of
Net expense
Net Asset realized & Total Net Asset Net Assets, Ratio of reimbursement
Value, Net unrealized from Value, end of expenses to average
Period beginning investment gain on investment end of Total period to average net assets
ended of period income (loss) investments operations period return (000's) net assets (1) (1)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Cap Growth Fund Class A
---------------------------
8/20/98-
12/31/98 $10.00 ($0.03) $2.99 $2.96 $12.96 29.60% $610 1.80% 0.62%
6/30/99 12.96 (0.09) 4.34 4.25 17.21 32.79 1,519 1.80 0.22
Mid-Cap Growth Fund Class B
---------------------------
8/20/98-
12/31/98 10.00 (0.03) 3.00 2.97 12.97 29.70 140 2.50 0.77
6/30/99 12.97 (0.05) 4.28 4.23 17.20 32.61 750 2.50 0.25
Mid-Cap Growth Fund Class C
---------------------------
8/20/98-
12/31/98 10.00 (0.04) 3.00 2.96 12.96 29.60 87 2.50 0.72
6/30/99 12.96 (0.08) 4.27 4.19 17.15 32.33 385 2.50 0.33
Mid-Cap Growth Fund Class I
---------------------------
8/20/98-
12/31/98 10.00 (0.02) 3.01 2.99 12.99 29.90 33,441 1.50 0.51
6/30/99 12.99 (0.09) 4.37 4.28 17.27 32.95 44,472 1.50 0.02
<CAPTION>
Ratio of net
investment
loss
Period to average Portfolio
ended net assets (1) turnover
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mid-Cap Growth Fund Class A
---------------------------
8/20/98-
12/31/98 (1.10)% 61%
6/30/99 (1.45) 124
Mid-Cap Growth Fund Class B
---------------------------
8/20/98-
12/31/98 (2.05) 61
6/30/99 (2.12) 124
Mid-Cap Growth Fund Class C
---------------------------
8/20/98-
12/31/98 (2.04) 61
6/30/99 (2.14) 124
Mid-Cap Growth Fund Class I
---------------------------
8/20/98-
12/31/98 (0.70) 61
6/30/99 (1.17) 124
</TABLE>
(1) Annualized
See accompanying notes to financial statements.
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11
<PAGE>
NORTHSTAR EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1999 (UNAUDITED)
Note 1. Organization and Significant Accounting Policies
Organization -- The Northstar Equity Trust (the "Trust"), a business trust,
was organized under the laws of the Commonwealth of Massachusetts on June 12,
1998 and registered under the Investment Company Act of 1940 as a diversified
open-end management investment company. The name of the investment series (the
"Fund") which comprises the Trust and its respective investment objectives are
set forth below.
Northstar Mid-Cap Growth Fund, ("Mid-Cap Growth Fund") is a diversified
portfolio with the investment objective of long term appreciation by investing
in equity securities. The Fund seeks to achieve its objective through invest-
ments primarily in mid-sized companies the portfolio manager identifies as an
above average prospect for growth.
Security Valuation -- Equity securities are valued at the closing sale
prices reported on recognized securities exchanges or lacking any sales, at
the last available bid price. Prices of long-term debt securities are valued
on the basis of last reported sales price, or if no sales are reported, the
value is determined based upon the mean of representative quoted bid and asked
prices for such securities, or, if such prices are not available, at prices
provided by market makers, or at prices for securities of comparable maturity,
quality and type. Short-term debt instruments with remaining maturities of
less than 60 days are valued at amortized cost, unless the Trustees determine
that amortized cost does not reflect the fair value of such obligations. Secu-
rities for which market quotations are not readily available are valued at
fair value determined in good faith by or under direction of the Trustees of
the Trust. The books and records of the Funds are maintained in U.S. dollars.
Securities quoted in foreign currencies are translated into U.S. dollars based
on the prevailing exchange rates on that day. The Adviser uses independent
pricing services to price the Funds' securities.
Security Transactions, Investment Income, Expenses-- Security transactions
are recorded on the trade date. Realized gains or losses on sales of invest-
ments are calculated on the identified cost basis. Interest income is recorded
on the accrual basis except when collection is not expected; discounts are ac-
creted, and premiums amortized to par at maturity; dividend income is recorded
on the ex-dividend dates. Income, expenses (except class specific expenses),
and realized/unrealized gains/losses, are allocated proportionately to the
Fund's class of shares based upon the relative net asset value.
Distributions to Shareholders -- Dividends are paid annually by the Mid-Cap
Growth Fund. Distributions of net realized capital gains, if any, are declared
annually; however, to the extent that a net realized capital gain can be re-
duced by a capital loss carryover, such gain will not be distributed.
Foreign Currency -- The Fund isolates that portion of the results of opera-
tions resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Net realized and unrealized gain (loss) on foreign currency transactions
represents the foreign exchange: (1) gains and losses from the sale of hold-
ings of foreign currencies, (2) gains and losses between trade date and set-
tlement date on investment securities transactions and forward exchange con-
tracts, and (3) gains and losses from the difference between amounts of inter-
est and dividends recorded and the amounts actually received. Net change in
unrealized appreciation (depreciation) of investments and foreign currency
arise from changes in the value of assets and liabilities including invest-
ments in securities resulting from changes in the exchange rate.
Foreign Currency Forward Contracts -- The Fund may enter into foreign cur-
rency forward contracts primarily to hedge against foreign currency exchange
rate risks on their non-U.S. dollar denominated investment securities. When
entering into a currency forward contract, the Fund agrees to receive or de-
liver a fixed quantity of foreign currency for an agreed-upon price on an
agreed future date. These contracts are valued daily and the fund's net equity
therein, representing unrealized gain or loss on the contracts as measured by
the difference between the forward foreign exchange rates at the dates of en-
try into the contracts and the forward rates at the reporting date, is in-
cluded in the statement of assets and liabilities. Realized and unrealized
gains and losses are included in the state-
- -------------------------------------------------------------------------------
12
<PAGE>
NORTHSTAR EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1999 (UNAUDITED)
[LOGO]
ment of operations. These instruments involve market and/or credit risk in ex-
cess of the amount recognized in the statement of assets and liabilities.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts and from movement in currency and securities values and inter-
est rates.
Options -- The Fund may write (sell) and purchase put and call options. The
premium collected or paid by the Fund for the sale or purchase of a call or
put option is recorded as an investment and subsequently "marked to market" to
reflect the current market value of the option. If an option which the Fund
has sold or purchased expires on the stipulated expiration date, the Fund re-
alizes a gain or loss in the amount of the premium received or paid for the
option.
For written options, the Fund's obligation may be discharged in three ways:
(1) the option expires on the stipulated expiration date; (2) the option
holder exercises the right to call (buy) or put (sell) the security, or (3)
the Fund enters into a closing transaction. If the option is held until expi-
ration, the Fund recognizes a gain equal to the amount of premium received. If
the written call option is exercised by the counterparty, the premium is added
to the proceeds from the sale of the underlying security or currency in deter-
mining whether the Fund has realized a gain or loss. If the written put option
is exercised by the counterparty, the premium reduces the cost basis of the
securities purchased by the Fund. If the Fund enters into a closing transac-
tion, a gain or loss is recognized equal to the difference between the premium
received by the Fund from the counterparty and the amount paid by the Fund on
effecting a closing purchase transaction, including brokerage commissions. As
the writer of options, the Fund bears the market risk of an unfavorable change
in the price of the security underlying the written option.
Futures contracts -- The Fund may invest in futures contracts solely for the
purpose of hedging its existing portfolio securities, or securities that the
Fund intends to purchase, against fluctuations in fair value caused by changes
in prevailing market or interest rates.
Initial margin deposits made upon entering into futures contracts are recog-
nized as assets due from the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by "marking
to market" on a daily basis to reflect the daily market value of the contract.
Variation margin payments are received or made by the Fund each day, depend-
ing upon the daily fluctuations in the fair value of the underlying instru-
ment. The Fund recognizes a gain or loss equal to the daily variation margin.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the proceeds from (or cost of) the closing transaction
and the Fund's basis in the contract.
Should market conditions move unexpectedly, the Fund may not achieve the an-
ticipated benefits of the financial futures contracts and may realize a loss.
The use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates, and the under-
lying hedged assets.
Repurchase Agreements -- The Fund's Custodian takes possession of collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to assure that the value, including ac-
crued interest, is at least equal to the repurchase price. In the event of de-
fault of the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if bankruptcy pro-
ceedings are commenced with respect to the seller of the security, realization
of the collateral by the Fund may be delayed or limited.
Federal Income Taxes -- The Trust intends to comply with the special provi-
sions of the Internal Revenue Code available to investment companies and to
distribute all of the taxable net income to their respective shareholders.
Therefore, no Federal income tax provision or excise tax provision is re-
quired.
Management's Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of
- -------------------------------------------------------------------------------
13
<PAGE>
NORTHSTAR EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1999 (UNAUDITED)
assets and liabilities at the date of financial statements and the reported
amounts of income and expenses during the reporting period. Actual results
could differ from those estimates.
Note 2. Investment Adviser, Administrator and Distributor
Northstar Holding, Inc. (and its wholly owned operating subsidiaries,
Northstar Investment Management Corp., Northstar Distributors, Inc., and
Northstar Administrators Corp.) is an indirect wholly owned subsidiary of
Reliastar Financial Corp. Northstar Investment Management Corp. (the "Advis-
er") serves as the Fund's investment adviser. The Mid-Cap Growth Fund pays the
Adviser an investment advisory fee calculated at an annual rate of 1.00% of
average daily net assets. For the six months ended June 30, 1999, the Adviser
earned $197,576 in investment advisory fees. The Adviser has voluntarily un-
dertaken to limit the expenses of the Mid-Cap Growth Fund to 1.80% (Class A),
2.50% (Class B&C), and 1.50% (Class I) of each respective class's average net
assets. The Adviser will reimburse the Fund for amounts in excess of such lim-
its, up to the total amount of fees received during the period. As of June 30,
1999, the Adviser's reimbursements totaled $5,281 for the Mid-Cap Growth Fund.
Northstar Administrators Corp. (the "Administrator"), an affiliate of the Ad-
viser, serves as the Fund's administrator. The Fund pays the Administrator a
fee calculated at an annual rate of 0.10% of the Fund's average daily net as-
sets, and an annual shareholder account servicing fee of $5.00, payable semi-
annually, for each account of beneficial owners of shares. For the six months
ended June 30, 1999, the Administrator earned $20,212 in administrative and
account servicing fees. Northstar Distributors, Inc. (the "Distributor"), an
affiliate of the Adviser and the Administrator, is the distributor of the
Fund's shares. Under separate Distribution Plans pertaining to Class A, Class
B, and Class C shares, the Trust pays the Distributor monthly service fees at
an annual rate of 0.25% of the average daily net assets in the case of Class
A, Class B, and Class C shares, and monthly distribution fees at the annual
rate of 0.05% of the average daily net assets of Class A shares and 0.75% of
the average daily net assets of Class B and Class C shares. Class I does not
pay distribution and service fees. At June 30, 1999, the Trust owed the Dis-
tributor $1,016 in service and distribution fees. The Distributor also re-
ceives the proceeds of initial sales charges paid by shareholders upon the
purchase of Class A shares and contingent deferred sales charges paid by
shareholders upon certain redemptions of Class A, B and C shares. For the six
months ended June 30, 1999, the Distributor earned the following amounts in
sales charges:
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
------- ------- -------
<S> <C> <C> <C>
Initial sales charges $154 n/a n/a
Contingent deferred sales charges $ 0 $1,001 $ 0
</TABLE>
Note 3. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments (ex-
cluding short-term investments) for the six months ended June 30, 1999, were
as follows:
<TABLE>
<CAPTION>
Mid-Cap
Growth Fund
-----------
<S> <C>
Aggregate purchases $48,891,329
Aggregate sales $47,485,054
</TABLE>
Note 4. Portfolio Securities (Tax Basis)
The cost of securities for federal income tax purposes and the aggregate ap-
preciation and depreciation of securities at June 30, 1999, were as follows:
<TABLE>
<CAPTION>
Mid-Cap
Growth Fund
-----------
<S> <C>
Cost (tax basis) $34,480,433
-----------
Appreciated securities 12,242,803
Depreciated securities (190,494)
-----------
Net unrealized appreciation $12,052,309
===========
</TABLE>
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14
<PAGE>
NORTHSTAR EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1999 (UNAUDITED)
[LOGO]
Note 5. Capital Share Transactions
Transactions in capital shares of the Fund for the six months ended June 30,
1999, were as follows:
<TABLE>
<CAPTION>
Mid-Cap Growth Fund
---------------------------------------------------
Class A Class B Class C
---------------- ---------------- ---------------
Shares Amount Shares Amount Shares Amount
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 45,134 $617,061 35,747 $568,373 15,730 $246,907
Shares redeemed (3,866) (62,136) (2,994) (42,159) 0 0
------ -------- ------ -------- ------ --------
Net increase 41,268 $554,925 32,753 $526,214 15,730 $246,907
====== ======== ====== ======== ====== ========
</TABLE>
Transactions in capital shares of the Fund for the period ended December 31,
1998, were as follows:
<TABLE>
<CAPTION>
Mid-Cap Growth Fund
----------------------------------------------------------------------
Class A Class B Class C Class I
---------------- --------------- -------------- ---------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ -------- ------ -------- ------ ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 43,111 $429,944 10,841 $119,263 6,711 $70,583 2,574,798 $25,000,000
Shares redeemed (6,066) (58,558) 0 0 0 0 0 0
------ -------- ------ -------- ----- ------- --------- -----------
Net increase 37,045 $371,386 10,841 $119,263 6,711 $70,583 2,574,798 $25,000,000
====== ======== ====== ======== ===== ======= ========= ===========
</TABLE>
Note 6. Compensating Balance Arrangement
The Fund has an informal compensating balance with the Custodian whereby the
Fund may have overdrafts in it's respective accounts and has no interest as-
sessed on the overdrafts. In return, the Fund is required to maintain positive
balances to offset negative balances. The required deposits are calculated by
dividing the overdrawn amounts by 0.90. At June 30, 1999, the Fund did not have
any compensating balances.
Note 7. Security Loans
The Fund may lend its securities to brokers, dealers and other financial in-
stitutions in amounts up to one third of the value of its total assets. The
loans are fully collateralized at all times by cash or liquid high grade secu-
rities. As with other extensions of credit, the Fund may bear risk of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Fund receives compensation for lending its se-
curities in the form of fees or all or a portion of the income from investments
of the collateral. The Fund also continues to earn income on the securities
loaned. At June 30, 1999, the Fund did not have any securities on loan.
Note 8. Federal Income Tax -- Capital Loss Carryforward
At December 31, 1998, the Mid-Cap Growth Fund had capital loss carryforwards
expiring December 31, 2006 of $699,683.
Note 9. Letter of Credit
The Northstar Funds, Northstar Equity Trust, Northstar Galaxy Trust and
Northstar Trust (collectively the "Funds") have entered into an unsecured com-
mitted revolving line of credit agreement (the "Credit Agreement") with State
Street Bank and Trust Company for an aggregate amount of $50,000,000. The pro-
ceeds may be used only to (1) temporarily finance the purchase and sale of se-
curities; (2) finance the redemption of shares of an investor in the Funds; and
(3) enable the Funds to meet other emergency expenses as defined in the Credit
Agreement. The fund pays a commitment fee equal to 0.08% per annum on the daily
unused portion of the committed line amount payable quarterly in arrears. Dur-
ing the six months ended June 30, 1999, the Fund did not have any loans out-
standing.
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15
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<PAGE>
[LOGO]
NORTHSTAR
EQUITY TRUST
630 TRUST SA
