<PAGE>
[LOGO]
NORTHSTAR
ADVANTAGE FUNDS
SEMI-ANNUAL REPORT TO SHAREHOLDERS
JUNE 30, 1995
[PHOTO]
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
SEMI-ANNUAL REPORT,
JUNE 30, 1995
[LOGO]
Dear Shareholders:
We are pleased to provide you with the semi-annual reports of the Northstar
Advantage Funds for the period ended June 30, 1995. We are gratified with your
decision to entrust your assets to the Northstar Advantage Funds and are
confident that we can assist you in reaching your financial objectives. Our goal
is to provide you with long term, consistent, and superior investment results
through fundamental research, analysis, and traditional investment disciplines.
Following this letter is a summary of the results of each Fund by their
respective portfolio manager. We hope you will find it informative.
In the first half of 1995, many favorable changes occurred which benefited
the stock and bond markets. Investors began the year with substantial fears of
further large increases in interest rates driven by rising inflation and an
overheated economy. These fears were quickly proven to be incorrect. Although
the Federal Reserve Board did raise short term interest rates slightly on
February 1st, that proved to be the last in a series of Fed tightening moves.
Economic growth in the U.S. slowed to a moderate 3% pace, inflation remained
well controlled at about a 3% rate, and long term interest rates fell sharply
from over 8% last winter to 6.6% at mid year.
The result of this "soft landing" or moderate growth/moderate inflation
strategy by the Fed produced a solid rise in bond prices of about 10% and a
sharp rise in the major stock market indices of over 18%. Stock prices again
were supported by excellent gains in corporate profits even as economic growth
slowed somewhat. The efficiency, productivity, and world class competitiveness
of so many U.S. companies is finally being recognized by investors despite so
many "experts" who had forecast recession, high inflation and a decline in
corporate profits.
Our outlook for both the bond and stock markets in the second half of 1995
remains favorable. Government bond prices have corrected somewhat but other
segments, especially high yield bonds, continue to improve. With serious efforts
in Congress to reduce the federal budget deficit and with inflation still
moderate, the Fed reduced short term rates in July. We believe the bond market
should produce positive returns in the second half of this year.
Stock markets have remained strong during the summer. Profit reports for
June were strong, again exceeding most forecasts. Recent evidence points to
improvement in orders after a spring slowdown to work off excess inventories.
Conservative corporate managers continue to forecast rising earnings through
1995 and well into 1996. We do not foresee a recession any time soon and believe
U.S. companies will maintain or expand their leadership in most major
industries. Thus we expect further solid gains from selected common stocks in
the second half and into 1996.
We note with great conviction that attempts to "time" the market often prove
counterproductive. Investors are strongly urged to focus on the long term.
Consistent disciplined investing is the proven method of achieving attractive
returns and meeting your financial objectives. We continue to support this
philosophy and look forward to serving your investment needs in the future.
Sincerely,
[SIG]
President
<PAGE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND [PHOTO]
[LOGO]
MARGARET D. PATEL
INVESTMENT ENVIRONMENT
THE MARKETS
- With a favorable backdrop of slow economic growth and falling interest
rates, all areas of the fixed income markets advanced in price in the
second quarter of the year.
- The economy is likely to show moderate growth in the second half of
1995. A flat rate of growth should not put pressure on capacity.
- Subdued growth and low inflation even after four years of economic
expansion may well allow the Fed to make further reductions in short
term rates suggesting continued positive rates of return for the fixed
income markets.
THE FUND
- In the first half the Fund's Class T shares* rose 9.73% versus 10.20%
for the average Government fund.
- During 1995, the Fund has changed its structure from 100% in GNMA
securities to 54.2% in GNMAs - with the balance in long duration
Treasury and agency zero coupon issues. This change reflects our more
positive assessment of the bond market as economic growth decelerated
this spring.
- The Fund retains its heavy commitment to GNMAs because of the
substantial yield advantage over intermediate term Treasuries, as well
as monthly cash flows of interest and principal payments. The
allocation to long term federal agency and Treasury strips provides the
effective call protection not available with GNMAs. In addition, these
issues offer a significantly higher yield over similar final maturity
Treasuries and agencies.
CURRENT STRATEGY
- We expect interest rates to stay around current levels, or possibly
decline as the economy grows at subdued levels. With inflation in
check, we anticipate that the portfolio should maintain its current
structure.
---------------------------------------------------------------------------
Fund Information
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGEST HOLDINGS (BY PERCENTAGE OF NET ASSETS)
NAME % ASSETS
<C> <S> <C>
1 GNMA 7% 46.8%
2 Federal National Mortgage
Assoc. 0% 20.1%
3 Federal Home Loan Mortgage
Corp. 0% 10.4%
4 GNMA 7 1/2% 7.4%
5 U.S. Treasury 0% (11/15/18) 7.2%
6 U.S. Treasury 0% (2/15/18) 7.0%
7 Cash Equivalents 1.1%
Total 100.0%
<CAPTION>
SECTOR ALLOCATION
NAME % ASSETS
<S> <C>
GNMA 54.2%
Federal National Mortgage
Assoc. 20.1%
U.S. Treasuries 14.2%
Federal Home Loan Mortgage
Corp. 10.4%
Cash Equivalents 1.1%
Total 100.0%
Total Net Assets: $150.7 million
</TABLE>
* Class A, B, and C shares of the Fund were first offered on June 5, 1995.
1
<PAGE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Security Principal Amount Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCIES - 98.93%
Federal Home Loan Mortgage Corp., 0% due 11/29/19 $90,000,000 $15,746,400
Federal National Mortgage Association, 0% due
10/09/19 172,800,000 30,300,480
GNMA Pool # 780144, 7.00% due 7/15/24 71,637,366 70,540,383
GNMA Pool # 334644, 7.50% due 6/15/23 969,556 975,295
GNMA Pool # 337451, 7.50% due 5/15/23 985,743 991,578
GNMA Pool # 337620, 7.50% due 4/15/23 978,938 984,733
GNMA Pool # 340821, 7.50% due 6/15/23 983,427 989,249
GNMA Pool # 348628, 7.50% due 4/15/23 3,230,797 3,249,924
GNMA Pool # 354686, 7.50% due 11/15/23 979,741 985,541
GNMA Pool # 359515, 7.50% due 5/15/24 974,067 979,851
GNMA Pool # 375893, 7.50% due 6/15/24 989,659 995,518
GNMA Pool # 397463, 7.50% due 6/15/24 978,961 984,756
U.S. Treasury STRIP, Zero Coupon due 2/15/18 50,200,000 10,481,258
U.S. Treasury STRIP, Zero Coupon due 11/15/18 54,300,000 10,899,639
----------
149,104,605
----------
TOTAL INVESTMENTS SECURITIES - 98.93%
(cost $148,333,694) 149,104,605
REPURCHASE AGREEMENTS - 0.91%
Agreement with State Street Bank and Trust bearing
interest at 5.80% dated 6/30/95 to be repurchased
7/03/95 at $1,377,666 and collateralized by
$1,390,000 U.S. Treasury Notes, 7.50% due 1/31/97
(cost $1,377,000) 1,377,000 1,377,000
OTHER ASSETS LESS LIABILITIES - 0.16% 237,476
----------
NET ASSETS - 100.00% $150,719,081
----------
----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
[PHOTO]
[LOGO]
PRESCOTT B. CROCKER
INVESTMENT ENVIRONMENT
THE MARKETS
- Bond markets entered the year on the defensive but rallied steadily on
expectations and then the realization of a slowdown in the economy
which became apparent in early May.
- Stocks continued to rally throughout the year with the greatest returns
occurring in the Nasdaq small stock arena. This strength supported the
"equity component" of high yield bonds.
- As the economy slowed, high yield markets widened 100 basis points in
comparison to similar maturity treasuries. This relative spread began
to narrow again in July as economic indicators improved.
- Dollar block currencies (Canada & Australia) sold off on news of the
slowdown but recovered again as improved economic statistics were
released in early July. Meanwhile, the dollar sold off heavily against
the Mark and Yen.
- Emerging market bonds crashed early in the year after the Mexican Peso
devaluation but rallied strongly on IMF aid to Mexico and Argentina.
THE FUND
- As the bond rally developed in May, the Fund extended its duration in
government bonds.
- The Fund reduced its High Yield positions in certain retail, steel, and
automobile industry sectors while additions were made to the strong
broadcasting and paper sectors.
- Currency hedges were placed on declining Australian dollar positions.
CURRENT STRATEGY
- The Fund will increase its weighting in emerging country bonds as
institutional High Yield investor interest is expected to flow into
these markets.
- Holdings in Canadian longer dated bonds will be increased in
expectation of spreads narrowing further relative to U.S. Treasuries.
---------------------------------------------------------------------------
FUND INFORMATION
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <S> <C> <S> <C>
CREDIT RATING
DISTRIBUTION TOP TEN HOLDINGS LARGEST SECTORS
AAA - AA 47% U.S. Treasury 1999 6.6% U.S. Government 24.6%
BB 25% U.S. Treasury 2021 5.6% Foreign Govt. 21.9%
B 28% Canadian Govt. 2025 5.2% U.S. High Yield 51.8%
U.S. Treasury 1996 4.6%
Australia 1999 4.1% Duration 5.66 years
B.C Province 2024 3.7%
Australia 2021 2.4%
Rogers Cable 2014 2.0%
Domtar, Inc. 2017 1.9%
SCI Television 2005 1.9%
Total Net Assets: $31.1 million
</TABLE>
3
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS - 47.54%
BROADCASTING & CABLE - 11.21%
Cablevision Systems Corp.
10.75%, Sr. Subordinated Debentures, 4/01/04 $ 500,000 $ 524,375
Granite Broadcasting Corp.
10.375%, Sr. Subordinated Notes, 5/15/05 (1) 250,000 250,625
Jones Intercable, Inc.
9.625%, Sr. Notes, 3/15/02 500,000 522,500
Rogers Cablesystems Ltd.
9.65%, Debentures, 1/15/14 (2) 1,000,000 626,138
SCI Television, Inc.
11.00%, Sr. Notes, 6/30/05 550,000 576,125
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Notes, 12/15/03 500,000 505,000
Spanish Broadcasting System, Inc.
7.50%, Sr. Notes, 6/15/02 500,000 477,500
---------
3,482,263
---------
CAPITAL GOODS - 1.45%
Terex Corp.
13.75%, Sr. Secured Notes, 5/15/02 500,000 450,000
---------
CHEMICALS - 1.66%
Pioneer Americas Acquisition Corp.
13.375%, Sr. Notes, 4/01/05 (1) 500,000 515,000
---------
CONSUMER NONDURABLES - 1.22%
Roadmaster Industries, Inc.
11.75%, Sr. Subordinated Notes, 7/15/02 400,000 380,000
---------
CONSUMER SERVICES - 0.96%
Envirotest Systems Corp.
9.625%, Sr. Subordinated Notes, 4/01/03 400,000 299,000
---------
DEFENSE - 1.73%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 500,000 536,250
---------
FINANCIAL SERVICES - 1.57%
Reliance Group Holdings, Inc
9.75%, Sr. Subordinated Notes, 11/15/03 500,000 488,750
---------
FOOD & BEVERAGE - 1.71%
Curtice-Burns Foods, Inc.
12.25%, Sr. Subordinated Notes, 2/01/05 500,000 532,500
---------
GAMING - 1.53%
Ballys Park Place Funding, Inc.
9.25%, 1st Mortgage Notes, 3/15/04 500,000 473,750
---------
HOME BUILDING - 1.48%
NVR, Inc.
11.00%, Sr. Notes, 4/15/03 500,000 458,750
---------
</TABLE>
4
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
LODGING & RESTAURANTS - 1.54%
John Q. Hammons Hotels
8.875%, 1st Mortgage Notes, 2/15/04 $ 500,000 $ 480,000
---------
OIL & GAS - 1.65%
TransTexas Gas Corp.
11.50%, Sr. Secured Notes, 6/15/02 500,000 513,750
---------
PACKAGING - 1.20%
Gaylord Container Corp.
11.50%, Sr. Notes, 5/15/01 350,000 372,750
---------
PAPER & FOREST PRODUCTS - 9.19%
Domtar, Inc.
11.25%, Sr. Notes, 9/15/17 555,000 593,850
Grupo Industrial Durango SA
12.00%, Sr. Notes, 7/15/01 (2) 400,000 302,000
Malette, Inc.
12.25%, Sr. Notes, 7/15/04 500,000 556,250
PT Indah Kiat International Finance
12.50%, 6/15/06 (2)(3) 500,000 507,500
Stone Consolidated Corp.
10.25%, Sr. Secured Notes, 12/15/00 350,000 364,875
Stone Container Corp.
10.75%, 1st Mortgage Notes, 10/01/01 500,000 530,000
---------
2,854,475
---------
RETAILING - 1.58%
Pathmark Stores, Inc.
9.625%, Sr. Subordinated Notes, 5/01/03 500,000 490,625
---------
STEEL - 3.15%
AK Steel Corp.
10.75%, Sr. Notes, 4/01/04 500,000 526,250
Algoma Steel, Inc.
12.375%, 1st Mortgage Notes, 7/15/05 500,000 450,770
---------
977,020
---------
TELECOMMUNICATIONS - 1.63%
ProNet, Inc.
11.875%, Sr. Subordinated Notes, 6/15/05 (1) 500,000 505,000
---------
TEXTILES - 1.62%
Synthetic Industries, Inc.
12.75%, Debentures, 12/01/02 500,000 501,875
---------
TRANSPORTATION - 1.46%
Moran Transportation Co.
11.75%, Sr. Secured Notes, 7/15/04 500,000 452,500
---------
TOTAL CORPORATE BONDS
(cost $14,535,874) 14,764,258
---------
</TABLE>
5
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCIES - 22.54%
GNMA Pool # 200723, 8.50% due 1/15/17 $ 255,934 $ 267,367
GNMA Pool # 394167, 8.50% due 7/15/24 506,543 526,004
GNMA Pool # 211398, 9.00% due 1/15/20 446,955 471,113
GNMA Pool # 376113, 9.00% due 11/15/24 488,817 513,405
U.S. Treasury Bonds, 8.00% due 11/15/21 1,500,000 1,732,950
U.S. Treasury Notes, 9.125% due 5/15/99 1,850,000 2,049,263
U.S. Treasury Notes, 9.375% due 4/15/96 1,400,000 1,437,968
---------
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $6,889,299) 6,998,070
---------
FOREIGN GOVERNMENT - 20.08% (2)
Canadian Government Bonds, 9.50% due 10/01/98 2,100,000 1,621,168
Commonwealth of Australia Government Bonds, 10.00% due
10/15/07 1,000,000 747,306
Commonwealth of Australia Government Bonds, 12.00% due
7/15/99 1,600,000 1,273,541
Province of British Columbia, 9.00% due 8/23/24 1,500,000 1,142,077
Spanish Government Bonds, 10.90% due 8/30/03 60,000,000 479,010
U.K. Treasury Gilts, 8.50% due 12/07/05 350,000 558,270
U.K. Treasury Gilts, 9.50% due 1/15/99 250,000 414,421
---------
TOTAL FOREIGN GOVERNMENT
(cost $6,190,864) 6,235,793
---------
EMERGING MARKET OBLIGATIONS - 1.60%
Federal Republic of Brazil Capitalization Bonds, 8.00% due
4/15/14 (4) 1,000,000 497,500
---------
TOTAL EMERGING MARKET OBLIGATIONS
(cost $542,406) 497,500
---------
TOTAL INVESTMENTS SECURITIES - 91.76%
(cost $28,158,443) 28,495,621
REPURCHASE AGREEMENTS - 2.43%
Agreement with State Street Bank and Trust bearing
interest at 5.80% dated 6/30/95 to be repurchased 7/03/95
at $753,364 and collateralized by $760,000 U.S. Treasury
Notes, 7.50% due 1/31/97 (cost $753,000) 753,000 753,000
OTHER ASSETS LESS LIABILITIES - 5.81% 1,805,603
---------
NET ASSETS - 100.00% $31,054,224
---------
---------
</TABLE>
(1) Sale restricted to qualified institutional investors.
(2) Foreign denominated security.
(3) Guaranteed by PT Indah Kiat Pulp and Paper Corp.
(4) Floating rate coupon security.
----------------------------------------------------------------------
Forward Currency Contracts outstanding at June 30, 1995:
<TABLE>
<CAPTION>
Market Aggregate Delivery Unrealized
Value Face Value Date Appreciation
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
British Pounds (Sell) $ 953,850 $ 960,060 July 31, 1995 $ 6,210
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
[PHOTO]
[LOGO]
PRESCOTT B. CROCKER
INVESTMENT ENVIRONMENT
THE MARKETS
- Bond markets entered the year on the defensive, but rallied steadily on
expectations and then the realization of a slowdown in the economy,
which became apparent in early May.
- Stocks continued to rally throughout the year with the greatest returns
occurring in the Nasdaq arena. This strength supported the "equity
component" of high yield bonds.
- As the economy slowed, high yield markets widened 100 basis points in
spread to similar maturity treasuries. This relative spread began to
narrow again in July as economic indicators improved.
- Dollar block currencies (Canada & Australia) sold off on news of the
slowdown but recovered again as improved economic statistics were
released in early July. Meanwhile, the dollar sold off heavily against
the Mark and Yen.
- Emerging market bonds crashed early in the year after the Mexican Peso
devaluation but rallied strongly on IMF aid to Mexico and Argentina.
THE FUND
- The Fund's over-weighted positions in steel, paper, and energy held its
performance in check as economic growth slowed in May.
- A heavy participation in broadcasting and cable industries was
supported by developing CATV legislation and strong stock market
valuations.
- The Fund removed its single retail holding as this sector suffered
badly and reduced its gaming exposure as well. Broadcasting and energy
industry weightings were increased.
CURRENT STRATEGY
- The Fund will be selling certain issues which have risen to premium
prices when measured on a yield to call basis.
- Emerging market exposure will be increased as this sector seems to
offer unusual value in comparison to the "on the run" high yield
market. The Brady bond component of this sector also offers longer
duration exposure that is not available in the high yield market.
Investment here will be benefitted by a renewed rally in bond prices.
- The Fund will endeavor to maintain a higher than average credit profile
and avoid junior subordinated issues which have implied equity value
content.
---------------------------------------------------------------------------
FUND INFORMATION
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT RATING
DISTRIBUTION TOP TEN HOLDINGS LARGEST SECTORS
<S> <C> <S> <C> <S> <C>
BB 14.8% Crown Packaging 2.3% Diversified Industrials 15.1%
Split BB 37.3% Heritage Media 2.2% Cable & Broadcasting 12.9%
B 31.8% Specialty Foods 2.0% Paper & Forest Products 12.2%
CCC 3.5% Synthetic Industries 1.9% Energy 10.9%
NR 4.6% Roadmaster Industries 1.9% Steels 5.9%
Kenetech Corp. 1.9%
Mesa Capital Corp. 1.9% Duration 6.4 years
S.D. Warren 1.8%
Domtar 1.8%
Curtice-Burns Foods 1.8%
Total Net Assets: $147.4 million
</TABLE>
7
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS - 81.33%
AIRLINES - 6.06%
CHC Helicopter Corp.
11.50%, Sr. Subordinated Notes, 7/15/02 $2,000,000 $1,670,000
GPA Delaware, Inc.
10.20%, Medium Term Notes, 8/05/98 3,000,000 2,587,500
Sequa Corp.
9.625%, Sr. Notes, 10/15/99 2,260,000 2,260,000
US Air, Inc.
10.375%, Pass-Thru Certificates, 3/01/13 2,500,000 2,412,500
----------
8,930,000
----------
AUTOMOTIVE - 1.68%
Harvard Industries, Inc.
12.00%, Sr. Notes, 7/15/04 2,500,000 2,475,000
----------
BROADCASTING & CABLE - 10.72%
Cablevision Systems Corp.
9.875%, Sr. Subordinated Debentures, 4/01/23 1,500,000 1,567,500
Granite Broadcasting Corp.
10.375%, Sr. Subordinated Notes, 5/15/05 (1) 500,000 501,250
Heritage Media Corp.
11.00%, Sr. Subordinated Notes, 10/01/02 3,000,000 3,172,500
Pegasus Media Communications
12.50%, Units, 7/15/05 (2) 2,000 2,000,000
Rogers Cablesystems Ltd.
9.65%, Debentures, 1/15/14 (3) 2,025,000 1,267,929
Rogers Communications, Inc.
10.875%, Sr. Debentures, 4/15/04 1,000,000 1,030,000
SCI Television, Inc.
11.00%, Sr. Notes, 6/30/05 2,500,000 2,618,750
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Notes, 12/15/03 1,250,000 1,262,500
Spanish Broadcasting System, Inc.
7.50%, Sr. Notes, 6/15/02 2,500,000 2,387,500
----------
15,807,929
----------
BUILDING MATERIALS - 3.81%
Building Materials Corp. of America
11.75%, Sr. Deferred Coupon Notes, 7/01/04 3,500,000 2,082,500
G.I. Holdings, Inc.
0%, Sr. Notes, 10/01/98 3,000,000 2,032,500
Tarkett International, Inc.
9.00%, Sr. Notes, 3/01/02 1,500,000 1,500,000
----------
5,615,000
----------
CAPITAL GOODS - 1.22%
Terex Corp.
13.75%, Sr. Secured Notes, 5/15/02 2,000,000 1,800,000
----------
CHEMICALS - 1.75%
Pioneer Americas Acquisition Corp.
13.375%, Sr. Notes, 4/01/05 (1) 2,500,000 2,575,000
----------
</TABLE>
8
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER NONDURABLES - 3.72%
Ithaca Industries
11.125%, Sr. Subordinated Notes, 12/15/02 $ 175,000 $ 164,500
Renaissance Cosmetics, Inc.
13.75%, Sr. Notes, 8/15/01 2,500,000 2,475,000
Roadmaster Industries, Inc.
11.75%, Sr. Subordinated Notes, 7/15/02 3,000,000 2,850,000
----------
5,489,500
----------
DEFENSE - 1.09%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 1,500,000 1,608,750
----------
ENERGY - 1.86%
Kenetech Corp.
12.75%, Sr. Notes, 12/15/02 2,750,000 2,736,250
----------
ENVIRONMENTAL CONTROL - 0.54%
Allied Waste Industries, Inc.
12.00%, Sr. Subordinated Notes, 2/01/04 750,000 791,250
----------
FOOD & BEVERAGE - 5.03%
Curtice-Burns Foods, Inc.
12.25%, Sr. Subordinated Notes, 2/01/05 2,500,000 2,662,500
Grupo Embotellador De Mexico
10.75%, Sr. Notes, 11/19/97 (3) 2,000,000 1,860,000
Specialty Foods Acquisition Corp.
10.25%, Sr. Secured Notes, 8/15/01 3,000,000 2,895,000
----------
7,417,500
----------
GAMING - 1.99%
Ballys Grand, Inc.
10.375%, 1st Mortgage Notes, 12/15/03 2,500,000 2,450,000
Ballys Park Place Funding, Inc.
9.25%, 1st Mortgage Notes, 3/15/04 500,000 473,750
Capital Gaming International, Inc.
0%, Promissory Notes, 8/01/95 10,000 10,000
----------
2,933,750
----------
HEALTHCARE - 0.72%
National Medical Enterprises, Inc.
10.125%, Sr. Notes, 9/01/02 1,000,000 1,062,500
----------
HOME BUILDING - 1.56%
NVR, Inc.
11.00%, Sr. Notes, 4/15/03 2,500,000 2,293,750
----------
LODGING & RESTAURANTS - 0.67%
Family Restaurants, Inc.
0/10.875%, Sr. Subordinated Discount Notes, 2/01/04 (4) 1,500,000 356,250
Family Restaurants, Inc.
9.75%, Sr. Notes, 2/01/02 1,000,000 635,000
----------
991,250
----------
MANUFACTURING - 1.31%
Wyman Gorgon Co.
10.75%, Sr. Notes, 3/15/03 2,000,000 1,930,000
----------
</TABLE>
9
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
OIL & GAS - 11.48%
AmeriGas Partners LP
10.125%, Sr. Notes, 4/15/07 (1) $1,000,000 $1,052,500
California Energy, Inc.
0/10.25%, Sr. Deferred Notes, 1/15/04 (4) 2,650,000 2,272,375
Chesapeake Energy Corp.
10.50%, Sr. Notes, 6/01/02 (1) 1,000,000 987,500
HS Resources, Inc.
9.875%, Sr. Subordinated Notes, 12/01/03 2,500,000 2,437,500
Kelley Oil & Gas Corp.
13.50%, Sr. Notes, 6/15/99 2,500,000 2,487,500
Mesa Capital Corp.
12.75%, Discount Notes, 6/30/98 3,006,000 2,735,460
Petroleum Heat and Power, Inc.
9.375%, Subordinated Debentures, 2/01/06 1,500,000 1,387,500
TransTexas Gas Corp.
11.50%, Sr. Secured Notes, 6/15/02 2,500,000 2,568,750
WRT Energy Corp.
13.875%, Units, 03/01/02 (5) 1,000 995,000
----------
16,924,085
----------
PACKAGING - 3.74%
Crown Packaging Holdings Ltd.
0%, Sr. Notes, 11/01/03 7,500,000 3,384,375
Gaylord Container Corp.
11.50%, Sr. Notes, 5/15/01 2,000,000 2,130,000
----------
5,514,375
----------
PAPER & FOREST PRODUCTS - 9.25%
Domtar, Inc.
11.25%, Sr. Notes, 9/15/17 2,500,000 2,675,000
Grupo Industrial Durango SA
12.00%, Sr. Notes, 7/15/01 (3) 2,600,000 1,963,000
Malette, Inc.
12.25%, Sr. Notes, 7/15/04 2,000,000 2,225,000
SD Warren Co.
12.00%, Sr. Subordinated Notes, 12/15/04 2,500,000 2,700,000
Stone Consolidated Corp.
10.25%, Sr. Secured Notes, 12/15/00 2,000,000 2,085,000
Stone Container Corp.
9.875%, Sr. Notes, 2/01/01 2,000,000 1,995,000
----------
13,643,000
----------
PRINTING & PUBLISHING - 2.15%
Affiliated Newspapers Investments, Inc.
13.25%, Sr. Discount Debentures, 7/01/06 2,000,000 1,180,000
Garden State Newspapers, Inc.
11.50%, Sr. Subordinated Notes, 5/15/01 2,000,000 1,990,000
----------
3,170,000
----------
</TABLE>
10
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
STEEL - 5.33%
AK Steel Corp.
10.75%, Sr. Notes, 4/01/04 $2,400,000 $2,526,000
Algoma Steel, Inc.
12.375%, 1st Mortgage Notes, 7/15/05 2,000,000 1,803,082
UCAR Global Enterprises, Inc.
12.00%, Sr. Subordinated Notes, 1/15/05 1,000,000 1,082,500
WCI Steel, Inc.
10.50%, Sr. Notes, 3/01/02 2,500,000 2,450,000
----------
7,861,582
----------
TELECOMMUNICATIONS - 1.03%
ProNet, Inc.
11.875%, Sr. Subordinated Notes, 6/15/05 (1) 1,500,000 1,515,000
----------
TEXTILES - 1.94%
Synthetic Industries, Inc.
12.75%, Debentures, 12/01/02 2,850,000 2,860,687
----------
TRUCKING & TRANSPORTATION - 2.68%
Moran Transportation Co.
11.75%, Sr. Secured Notes, 7/15/04 2,200,000 1,991,000
Trism, Inc.
10.75%, Sr. Notes, 12/15/00 2,000,000 1,960,000
----------
3,951,000
----------
TOTAL CORPORATE BONDS
(cost $120,977,085) 119,897,158
----------
CONVERTIBLE BONDS - 1.69%
HOME BUILDING - 0.28%
U.S. Home Corp.
4.875%, Subordinated Debentures, 11/01/05 500,000 413,235
----------
LEISURE - .06%
Discovery Zone, Inc.
0%, Liquid Yield Option Notes, 10/14/13 250,000 85,000
----------
METALS & MINING 0.20%
Agnico Eagle Mines Ltd.
3.50%, Subordinated Debentures, 1/27/04 350,000 302,750
----------
OIL & GAS - 1.15%
Cross Timbers Oil Co.
5.25%, Subordinated Debentures, 11/01/03 2,000,000 1,695,000
----------
TOTAL CONVERTIBLE BONDS
(cost $2,936,263) 2,495,985
----------
EMERGING MARKET OBLIGATIONS - 1.21%
Federal Republic of Brazil Eligible Interest Bonds,
7.25%, 4/15/06 (3)(6) 3,000,000 1,792,500
----------
TOTAL EMERGING MARKET OBLIGATIONS
(cost $1,855,338) 1,792,500
----------
PREFERRED STOCKS - 1.28% Shares
Banking - 1.28% ------
First Nationwide Bank, 11.50% 17,500 1,890,000
----------
TOTAL PREFERRED STOCKS
(cost $1,750,000) 1,890,000
----------
</TABLE>
11
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 5.52%
METALS & MINING - 0.59%
Freeport McMoran Copper and Gold, Inc., 5.00% 40,000 $ 865,000
----------
OIL & GAS - 3.25%
BCP / Essex Holdings, 15.00% Series A (1) 60,000 1,575,000
Parker & Parsley Petroleum Co., 6.25% (1) 32,500 1,458,437
Tejas Gas Corp., 5.25% 38,600 1,751,475
----------
4,784,912
----------
WHOLESALE & RETAIL - 1.68%
Foxmeyer Health Corp., $4.20 Series A 68,297 2,484,303
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $7,926,884) 8,134,215
----------
COMMON STOCKS - 0.40%
GAMING - 0.02%
Capital Gaming International, Inc. (7) 44,540 30,621
----------
METALS & MINING - 0.34%
Freeport McMoran, Inc. 28,500 502,313
----------
PRINTING & PUBLISHING - 0.04%
Affiliated Newspapers Investments, Inc. (7) 2,000 50,000
----------
TOTAL COMMON STOCKS
(cost $826,963) 582,934
----------
WARRANTS - 0.18% (7)
CHC Helicopter Corp., (expires 12/15/00) 16,000 16,000
Capital Gaming International, Inc., (expires 02/01/99) 36,317 4,540
Crown Packaging Holdings Ltd., (expires 11/01/03) 7,500 159,375
Renaissance Cosmetics, Inc., (expires 08/15/01) 5,000 87,500
----------
267,415
----------
TOTAL WARRANTS
(cost $561,875) 267,415
----------
TOTAL INVESTMENTS SECURITIES - 91.61%
(cost $136,834,408) 135,060,207
<CAPTION>
Principal Amount
----------------
<S> <C> <C>
REPURCHASE AGREEMENTS - 7.05%
Agreement with State Street Bank and Trust bearing
interest at 5.80% dated 6/30/95 to be repurchased 7/03/95
at $10,400,024 and collateralized by $10,055,000 U.S.
Treasury Notes, 7.50% due 1/31/97 (cost $10,395,000) $10,395,000 10,395,000
OTHER ASSETS LESS LIABILITIES - 1.34% 1,972,702
----------
NET ASSETS - 100.00% $147,427,909
----------
----------
</TABLE>
(1) Sale restricted to qualified institutional investors.
(2) A unit consists of 1,000 par value 12.50%, Subordinated Notes, 7/15/05
and warrants for 5% of Pegasus Media common stock.
(3) Foreign denominated security.
(4) Step bond
(5) A unit consists of 1,000 par value 13.875%, Sr. Notes, 3/01/02 and 8
warrants.
(6) Floating rate coupon security.
(7) Non-income producing security.
See accompanying notes to financial statements.
12
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
[PHOTO] [PHOTO]
[LOGO]
ERNEST MYSOGLAND MARGARET D. PATEL
INVESTMENT ENVIRONMENT
THE MARKETS
- With a favorable backdrop of moderate economic growth and falling
interest rates, both the stock and bond markets advanced substantially
in price in the first half of 1995.
- Subdued growth and low inflation, even after four years of economic
expansion, may well allow the Fed to make further reductions in short
term rates, suggesting continuing positive rates of return for both the
equity and fixed income markets.
- Convertible issues (both bonds and preferreds) also performed well,
reflecting both better equity prices and lower interest rates.
THE FUND
- The Fund's Class T shares* rose 11.28% in the first half versus 12.81%
for the Lipper Income Fund average.
- The Fund increased its holdings of economically sensitive equities and
fixed income issues (such as wireless telecommunications, financial
services, and forest products) and reduced its exposure to slow growth
areas (such as electric utilities, real estate investment trusts,
regional telephone companies and gold stocks).
- These changes reflect our moderately positive outlook for both the
equity and fixed income markets over the balance of 1995.
- The Fund has increased its holdings of convertible issues, since this
market has offered yields close to those of intermediate term straight
bonds, yet offers the possibility of price appreciation should the
underlying common stock go up.
CURRENT STRATEGY
- Because the market outlook remains positive, the Fund is maintaining a
fully invested position in sectors having strong underlying credit
quality where business growth may well result in improving earnings and
financial ratios. The Fund will maintain its yield emphasis through
somewhat lower equity holdings, while maintaining its less volatile
(compared to stocks) convertible commitment as well as its straight
debt holdings.
---------------------------------------------------------------------------
FUND INFORMATION
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION TOP TEN HOLDINGS TOP FIVE SECTORS
<S> <C> <S> <C> <S> <C>
Common Stock 28.1% 1 Time Warner 4.4% Telecommunications 11.6%
Convertible Corporate 2 United States Cellular 4.4% Oil & Gas
Bonds 23.4% 9.4%
Convertible Preferreds 23.3% 3 Roche Holdings 4.1% Technology 7.9%
Corporate & Government 4 Georgia Pacific 4.1% Healthcare
Bonds 22.6% 7.8%
Preferred Stock 0.9% 5 MFS Communications 4.1% Banking 7.2%
Cash equivalents 1.7% 6 Gencorp 3.7%
7 Integrated Device 3.7%
Technology
8 United Companies 3.1 % Total: 43.9 %
Total: 100% Financial
9 Atlantic Richfield 2.9 %
(Lyondell)
10 AMR 2.9 %
Total Net Assets: $71.8 million
</TABLE>
* Class A, B, and C shares were first offered for sale on June 5, 1995.
13
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 28.13%
BANKING - 1.88%
Bank of Boston Corp. 15,000 $ 562,500
Citicorp 4,277 247,531
NationsBank Corp. 10,000 536,250
---------
1,346,281
---------
CAPITAL GOODS - 1.26%
General Electric Co. 16,000 902,000
---------
CHEMICALS - 2.16%
Dow Chemical Co. 9,000 646,875
Eastman Chemical Co. 15,200 904,400
---------
1,551,275
---------
CONSUMER NONDURABLES - 1.00%
Procter & Gamble Co. 10,000 718,750
---------
FOOD, BEVERAGE & TOBACCO - 2.57%
CPC International, Inc. 13,000 802,750
Philip Morris, Inc. 14,000 1,041,250
---------
1,844,000
---------
HEALTHCARE - 3.60%
Bristol-Myers Squibb Co. 10,000 681,250
Merck & Co., Inc. 20,000 980,000
Pfizer, Inc. 10,000 923,750
---------
2,585,000
---------
LEISURE - 1.15%
Cedar Fair LP 26,000 828,750
---------
OIL & GAS - 4.99%
Amoco Corp. 9,000 599,625
Atlantic Richfield Co. 6,000 658,500
Enron Corp. 16,000 562,000
Mobil Corp. 12,000 1,152,000
Sonat, Inc. 20,000 610,000
---------
3,582,125
---------
REAL ESTATE INVESTMENT TRUST - 5.91%
Health and Retirement Property Trust 42,000 630,000
Health Care Property Investors, Inc. 32,000 1,024,000
Health Care, Inc. 8,700 179,437
Meditrust 25,000 853,125
National Health Investors, Inc. 27,150 739,838
Nationwide Health Properties, Inc. 21,000 819,000
---------
4,245,400
---------
RETAIL & WHOLESALE - 0.83%
Sears, Roebuck & Co. 10,000 598,750
---------
TECHNOLOGY - 1.14%
Eastman Kodak Co. 13,500 818,438
---------
</TABLE>
14
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS - 1.64%
BellSouth Corp. 8,000 $ 508,000
SBC Communications, Inc. 14,000 666,750
---------
1,174,750
---------
TOTAL COMMON STOCK
(cost $15,394,025) 20,195,519
---------
PREFERRED STOCK - 0.91%
BANKING
Shawmut National Corp., 9.30% 25,000 653,125
---------
TOTAL PREFERRED STOCK
(cost $629,865) 653,125
---------
CONVERTIBLE PREFERRED STOCK - 23.31%
BANKING - 3.28%
Citicorp, 8.25% 15,245 308,711
H.F. Ahmanson & Co., 6.00% 40,000 2,045,000
---------
2,353,711
---------
CHEMICALS - 1.21%
Corning Delaware LP, 6.00% 17,000 869,125
---------
COMPUTERS - 1.18%
General Motors Corp., $3.25, Class E 13,500 850,500
---------
FINANCIAL SERVICES - 3.12%
United Companies Financial Corp., 6.75% 50,000 2,237,500
---------
INDUSTRIAL SERVICES - 2.80%
Browning Ferris Industries, Inc., 7.25% 55,000 2,007,500
---------
METALS & MINING - 0.76%
Pittston Minerals Group, 6.25% (1) 17,000 546,210
---------
OIL & GAS - 4.38%
Atlantic Richfield Co., 9.00% 80,000 2,080,000
Unocal Corp., 7.00% 20,000 1,065,000
---------
3,145,000
---------
REAL ESTATE INVESTMENT TRUST - 0.39%
One Liberty Properties, Inc., $1.60 16,683 277,355
---------
TECHNOLOGY - 2.10%
Unisys Corp., $3.75, Series A 35,000 1,509,375
---------
TELECOMMUNICATIONS - 4.09%
MFS Communications, Inc., 8.00% 85,000 2,932,500
---------
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $16,486,101) 16,728,776
---------
<CAPTION>
Principal Amount
----------------
<S> <C> <C>
CORPORATE BONDS - 18.20%
AIRLINES - 2.89%
AMR Corp.
9.00%, Debentures, 8/01/12 $2,000,000 2,078,520
---------
</TABLE>
15
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
BANKING - 1.51%
BankAmerica Corp.
8.95%, Subordinated Notes, 11/15/04 $1,000,000 $1,085,270
---------
FOOD, BEVERAGE & TOBACCO - 1.43%
ConAgra, Inc.
7.40%, Subordinated Notes, 9/15/04 1,000,000 1,026,470
---------
INSURANCE - 2.06%
Equitable Companies, Inc.
6.125%, Subordinated Debentures, 12/15/24 700,000 723,625
Integon Corp.
8.00%, Sr. Notes, 8/15/99 750,000 752,212
---------
1,475,837
---------
MEDIA & COMMUNICATION - 3.27%
Time Warner, Inc.
9.15%, Debentures, 2/01/23 2,250,000 2,346,930
---------
PAPER & FOREST PRODUCTS - 4.12%
Georgia-Pacific Corp.
7.70%, Debentures, 6/15/15 3,000,000 2,957,550
---------
REAL ESTATE MANAGEMENT - 1.40%
Rouse Co.
8.50%, Sr. Notes, 1/15/03 1,000,000 1,003,830
---------
RETAIL & WHOLESALE - 1.52%
Sears, Roebuck & Co.
8.60%, Medium Term Notes, 3/26/02 1,000,000 1,092,810
---------
TOTAL CORPORATE BONDS
(cost $12,840,053) 13,067,217
---------
CONVERTIBLE CORPORATE BONDS - 23.43%
AUTOMOTIVE - 3.71%
Gencorp, Inc.
8.00%, Subordinated Debentures, 8/01/02 2,750,000 2,660,625
---------
CONSUMER NONDURABLES - 2.81%
Alberto-Culver Co.
5.50%, Subordinated Notes, 6/30/05 (1) 2,000,000 2,020,000
---------
ELECTRONICS - 0.45%
General Signal Corp.
5.75%, Subordinated Debentures, 6/01/02 300,000 320,730
---------
HEALTHCARE - 4.15%
Roche Holdings, Inc.
0%, Liquid Yield Option Notes, 4/20/10 7,500,000 2,981,250
---------
MEDIA & COMMUNICATION - 1.16%
Time Warner, Inc.
8.75%, Subordinated Notes, 1/10/15 794,000 828,738
---------
REAL ESTATE INVESTMENT TRUST - 0.68%
Liberty Property LP
8.00%, Subordinated Debentures, 7/01/01 500,000 490,000
---------
</TABLE>
16
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY - 4.61%
Integrated Device Technology
5.50%, Subordinated Notes, 6/01/02 $2,500,000 $2,634,600
Thermo Electron Co.
5.00%, Debentures, 4/15/01 (1) 500,000 677,500
---------
3,312,100
---------
TELECOMMUNICATIONS - 5.86%
California Microwave, Inc.
5.25%, Subordinated Notes, 12/15/03 1,035,000 1,068,637
United States Cellular Corp.
0%, Notes, 6/15/15 10,000,000 3,137,500
---------
4,206,137
---------
TOTAL CONVERTIBLE CORPORATE BONDS
(cost $16,980,728) 16,819,580
---------
GOVERNMENT SECURITIES - 1.84%
U.S. GOVERNMENT & AGENCIES
GNMA POOL # 397542, 7.50% due 11/15/23 1,346,173 1,323,876
---------
TOTAL GOVERNMENT SECURITIES
(cost $1,212,397) 1,323,876
---------
MUNICIPAL BOND - 2.54%
Foothill Eastern Transportation Corridor, 6.00% due
01/01/34 2,000,000 1,820,000
---------
TOTAL MUNICIPAL BONDS
(cost $1,862,646) 1,820,000
---------
TOTAL INVESTMENTS SECURITIES - 98.36%
(cost $65,405,815) 70,608,093
REPURCHASE AGREEMENTS - 2.18%
Agreement with State Street Bank and Trust bearing
interest at 5.80% dated 6/30/95 to be repurchased 7/03/95
at $1,567,757 and collateralized by $1,580,000 U.S.
Treasury Notes, 7.50% due 1/31/97 (cost $1,567,000) 1,567,000 1,567,000
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.54)% (392,130)
---------
NET ASSETS - 100.00% $71,782,963
---------
---------
</TABLE>
(1) Sale restricted to qualified institutional investors.
See accompanying notes to financial statements.
17
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
[PHOTO] [PHOTO]
ERNEST MYSOGLAND ROBERT L. THOMAS
INVESTMENT ENVIRONMENT
THE MARKETS
- In the second quarter of 1995 stock prices rose sharply, 18.61% for the
S+P and 18.82% for the Dow Jones Industrials. As expected, the market
broadened so that most stocks rose, not just the top 100.
- Stocks responded to continued excellent earnings, lower interest rates
and the prospect that the current slowdown in economic growth will
foster an extended period of moderate growth.
THE FUND
- In the six months ended June 30, the Class T shares* rose 15.81% versus
18.69% for the Lipper Growth Funds.
- Very strong performance was driven by technology stocks as well as
financial and capital goods stocks.
- Substantial changes have been made recently. We sold 24 stocks and
reduced 2 others. We bought 23 new issues and added to 2 others.
Purchases were mainly in technology, finance, basic materials and
media. We primarily sold convertibles held for income, consumer
durables, energy and specialty finance.
CURRENT STRATEGY
- We remain bullish and over 90% invested.
- The risk of profit-taking on any bad news is present but the real
fundamentals remain strong.
- We expect several years of good earnings, greater recognition of U.S.
companies' exceptional competitive position, very reasonable
valuations, huge stock buybacks, large dividend increases and strong
inflows into equities to drive the market higher.
- We favor industrial producers and expect recent underperformance of
defensive consumer staples and utilities to continue.
----------------------------------------------------------------------------
FUND INFORMATION
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS TOP 5 HOLDINGS ASSET ALLOCATION
<S> <C> <S> <C> <S> <C>
NAME % ASSETS INDUSTRY % ASSETS
1 Nokia 3.8% 1 Technology 14.3% Common Stocks 89.4%
2 Citicorp 2.6% 2 Healthcare 10.8% Convertibles 1.7%
3 Phillip Morris 3 Food, Beverage, Cash
2.5% Tobacco 8.0% 8.9%
4 Arrow Electronics, 4 Wireless
Inc. 2.5% Communication 7.3%
5 Motorola 2.3% 5 Financial 7.1%
6 Pepsico, Inc. 2.3%
7 PPG Industries 2.2%
8 Johnson & Johnson 2.1%
9 MBNA Corp. 2.1%
10 National
Semiconductor 2.1%
(Total % of Assets = 24.5%) (Total % of Assets = 47.5%) Total Net Assets: $79.3 million
</TABLE>
* Class A, B, and C shares were first offered for sale on June 5, 1995.
18
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 89.37%
AEROSPACE - 1.18%
Boeing Co. 15,000 $ 939,375
---------
AIRLINE - 1.66%
Alaska Air Group, Inc. 71,500 1,313,813
---------
AUTOMOTIVE - 2.20%
Echlin, Inc. 30,000 1,042,500
General Motors Corp. 15,000 703,125
---------
1,745,625
---------
BANKING - 3.49%
Citicorp 35,000 2,025,625
State Street Boston Corp. 20,000 737,500
---------
2,763,125
---------
CAPITAL GOODS - 4.16%
General Electric Co. 20,000 1,127,500
Illinois Tool Works, Inc. 15,000 825,000
York International Corp. 30,000 1,350,000
---------
3,302,500
---------
CHEMICALS - 5.04%
Air Products and Chemicals, Inc. 15,000 836,250
Dow Chemical Co. 20,000 1,437,500
PPG Industries, Inc. 40,000 1,720,000
---------
3,993,750
---------
COMPUTER SOFTWARE - 1.71%
Microsoft Corp. 15,000 1,355,625
---------
ELECTRICAL EQUIPMENT - 1.33%
AMP, Inc. 25,000 1,056,250
---------
FINANCIAL SERVICES - 7.13%
Dean Witter, Discover & Co. 30,000 1,410,000
Federal National Mortgage Association 8,000 755,000
MBNA Corp. 50,000 1,687,500
MGIC Investment Corp. 17,000 796,875
Reuters Holdings PLC ADR 20,000 1,002,500
---------
5,651,875
---------
FOOD, BEVERAGE & TOBACCO - 7.96%
Canandaigua Wine Co. (1) 30,000 1,342,500
Panamerican Beverages, Inc. 38,000 1,140,000
Pepsico, Inc. 40,000 1,825,000
Philip Morris, Inc. 27,000 2,008,125
---------
6,315,625
---------
HEALTH CARE - 10.07%
Abbott Laboratories 40,000 1,620,000
Bristol-Myers Squibb Co. 15,000 1,021,875
Johnson & Johnson Co. 25,000 1,690,625
Merck & Co., Inc. 24,000 1,176,000
Pfizer, Inc. 15,000 1,385,625
US Healthcare, Inc. 25,000 765,625
Value Health, Inc. (1) 10,000 322,500
---------
7,982,250
---------
</TABLE>
19
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE - 2.40%
American International Group, Inc. 5,000 $ 570,000
MBIA, Inc. 20,000 1,330,000
---------
1,900,000
---------
LEISURE - 1.01%
Cedar Fair LP 25,000 796,875
---------
METALS & MINING - 0.43%
Reynolds Metals Co. 7,000 337,750
---------
OFFICE EQUIPMENT - 1.63%
Xerox Corp. 11,000 1,289,750
---------
OIL & GAS - 6.25%
Occidental Petroleum Corp. 35,000 800,625
Plains Petroleum Co. 25,000 740,625
Royal Dutch Petroleum Co. 10,000 1,218,750
Schlumberger Ltd. 13,000 807,625
Union Texas Petroleum Holdings, Inc. 40,000 845,000
Unocal Corp. 20,000 552,500
---------
4,965,125
---------
PAPER & FOREST PRODUCTS - 3.30%
Bowater, Inc. 10,000 377,500
Minerals Technologies, Inc. 40,000 1,440,000
Scott Paper Co. 16,000 792,000
---------
2,609,500
---------
REAL ESTATE INVESTMENT TRUST - 1.85%
National Health Investors, Inc. 60,000 1,470,000
---------
RETAIL & WHOLESALE - 4.68%
Home Depot, Inc. 20,000 812,500
Office Max, Inc. 51,000 1,421,625
Sysco Corp. 50,000 1,475,000
---------
3,709,125
---------
TECHNOLOGY - 13.31%
Applied Materials, Inc. (1) 7,500 649,688
Arrow Electronics, Inc. (1) 25,000 1,243,750
Cirrus Logic, Inc. (1) 23,000 1,441,812
Hewlett-Packard Co. 18,000 1,341,000
Intel Corp. 4,000 886,375
National Semiconductor Corp. (1) 60,000 1,665,000
Teradyne, Inc. (1) 22,000 1,438,250
Texas Instruments, Inc. 4,000 535,500
Vicor Corp. (1) 30,000 1,348,125
---------
10,549,500
---------
TELEPHONE - 1.28%
Alltel Corp. 40,000 1,015,000
---------
</TABLE>
20
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
WIRELESS COMMUNICATION - 7.30%
AirTouch Communications, Inc. 35,000 $ 997,500
Motorola, Inc. 27,000 1,812,375
Nokia Corp. ADR 50,000 2,981,250
---------
5,791,125
---------
TOTAL COMMON STOCKS
(cost $56,659,785) 70,853,563
---------
<CAPTION>
Principal Amount
----------------
<S> <C> <C>
CONVERTIBLE BONDS - 1.71%
HEALTHCARE - 0.75%
Roche Holdings, Inc.
0%, Liquid Yield Option Notes, 4/20/10 $1,500,000 596,250
---------
TECHNOLOGY - 0.96%
Arrow Electronics, Inc.
5.75%, Subordinated Debentures, 2/10/15 500,000 756,550
---------
TOTAL CONVERTIBLE BONDS
(cost $1,047,375) 1,352,800
---------
TOTAL INVESTMENT SECURITIES - 91.08%
(cost $57,707,160) 72,206,363
REPURCHASE AGREEMENTS - 12.03%
Agreement with State Street Bank and Trust bearing
interest at 5.80% dated 6/30/95 to be repurchased 7/03/95
at $9,541,610 and collateralized by $9,225,000 U.S.
Treasury Notes, 7.50% due 1/31/97 (cost $9,537,000) 9,537,000 9,537,000
LIABILITIES IN EXCESS OF OTHER ASSETS - (3.11)% (2,465,618)
---------
NET ASSETS - 100.00% $79,277,745
---------
---------
</TABLE>
(1) Non-income producing security
See accompanying notes to financial statements.
21
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
[PHOTO]
ROBERT L. THOMAS
INVESTMENT ENVIRONMENT
THE MARKET
-Overall, common stocks performed remarkably well in the first half of 1995.
Declining interest rates and still-rising corporate profits provided a
comforting environment for investors.
-Any concerns that a pronounced slowdown in business activity might lead to
more significant weakness were apparently relieved by the first Federal
Reserve rate cut in three years. That cut, although too small to have more
than symbolic value, at least suggested that the Fed was now paying as
close attention to the economy as it was to inflation.
-The first half provided strong returns, with large technology companies
providing the market's leadership. Stocks closely linked to the consumer
fared poorly. Stocks of small companies lagged early in the year as they
had in 1994, but strengthened during the second quarter.
THE FUND
-The Fund's performance for the first four months reflected its
concentration in secondary ("small cap") stocks, with particular weakness
evident in domestic consumer-related issues.
-In response, we built up the average capitalization of our top ten holdings
(comprising 27% of the portfolio) to nearly $600 million. That group
outperformed the portfolio as a whole and provided a comforting level of
liquidity.
-We also continued to emphasize the technology area, focusing on companies
which, however small, enjoy strong positions in attractive "niche" markets.
On June 30, the sectors labeled technology, computer hardware, software and
telecommunications combined represented more than 28% of the portfolio.
-The first half return of 6.98% for the Fund's Class T shares* came from
strong performance toward the end of the second quarter as stocks of quite
small companies began to attract attention. We continue to believe that
stocks not widely followed provide the best values in a market dominated by
large institutions with higher liquidity requirements than ours.
CURRENT STRATEGY
-We are retaining our holdings in technology based on the impressive sales
and earnings strength apparent for several quarters now.
-While our strategy of emphasizing smaller issues than those found in many
small cap funds was clearly put in place too early in the market cycle, we
believe the second half will see renewed enthusiasm for the still
relatively unknown stocks that we favor for the long term.
- --------------------------------------------------------------------------------
FUND INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS TOP 5 INDUSTRIES ASSET ALLOCATION
Name % Assets Industry % Assets
<S> <C> <S> <C> <S> <C>
1 Vicor Corp. 4.1% 1 Technology 16.1% Common Stocks 94.1%
2 NFO Research, Inc. 3.2% 2 Healthcare 8.7% Convertibles 1.5%
3 Trimble Navigation Ltd 3.1% 3 Retail & Wholesale 8.7% Cash 4.4%
4 Comair Holdings 3.0% 4 Computer Software 7.4%
5 Progress Software 5 Consumer
Corp. 2.7% Nondurables 5.7%
6 Omega Healthcare
Investors 2.3%
7 Systemsoft Corp. 2.3%
8 Paging Network, Inc. 2.2%
9 Oak Technology, Inc. 2.2%
10 Canadaigua Wine Co. 2.1%
(Total % of Assets = 27.2%) (Total % of Assets = 46.6%) Total Net Assets: $38.2 million
</TABLE>
* Class A, B, and C shares were first offered for sale on June 5, 1995.
22
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 94.12%
AIRLINES - 2.97
Comair Holdings, Inc. 30,000 $1,136,250
---------
AUTOMOTIVE - 5.07%
Cherry Corp. (1) 40,000 530,000
EK Chor China Motorcycle Co. Ltd. (1) 20,000 322,500
Excel Industries, Inc. 27,500 398,750
Lear Seating Corp. (1) 30,000 686,250
---------
1,937,500
---------
BANKING - 1.12%
Surety Capital Corp. (1) 124,000 426,250
---------
BROADCASTING & CABLE - 3.56%
Comcast UK Cable Partners Ltd. 35,000 564,375
Scandinavian Broadcasting Systems SA (1) 20,000 405,000
Westcott Communications, Inc. (1) 22,000 390,500
---------
1,359,875
---------
BUILDING MATERIALS - 0.51%
Centex Construction Products, Inc. 15,000 193,125
---------
CAPITAL GOODS - 0.95%
AES China Generating Co. Ltd. (1) 17,000 174,250
AGCO Corp. 5,000 187,500
---------
361,750
---------
COMMUNICATIONS - 3.39%
America Online, Inc. (1) 10,000 440,000
Paging Network, Inc. (1) 25,000 856,250
---------
1,296,250
---------
COMPUTER HARDWARE - 1.40%
Encad, Inc. (1) 10,000 270,000
Mylex Corp. (1) 20,000 265,000
---------
535,000
---------
COMPUTER SOFTWARE - 7.41%
Globalink, Inc. (1) 18,500 272,875
Macromedia, Inc. (1) 15,000 648,750
Progress Software Corp. (1) 20,000 1,040,000
Systemsoft Corp. (1) 60,000 870,000
---------
2,831,625
---------
CONSUMER NONDURABLES - 5.22%
Cinram Ltd. (2) 30,000 382,235
Mattel, Inc. 24,901 647,425
Roadmaster Industries, Inc. (1) 125,000 375,000
Safety First, Inc. (1) 30,000 588,750
---------
1,993,410
---------
CONSUMER SERVICES - 1.52%
Team Rental Group, Inc. (1) 80,000 580,000
---------
FINANCIAL SERVICES - 4.72%
Capital One Financial Corp. 20,000 390,000
Duff & Phelps Corp. 18,500 198,875
NFO Research, Inc. (1) 60,000 1,215,000
---------
1,803,875
---------
</TABLE>
23
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FOOD & BEVERAGE - 3.84%
Canandaigua Wine Co. (1) 18,000 $ 805,500
Panamerican Beverages, Inc. 22,000 660,000
---------
1,465,500
---------
HEALTHCARE - 8.74%
Elan Corp. ADR (1) 5,000 203,750
Fresenius USA, Inc. (1) 50,000 656,250
Health Systems International, Inc. (1) 25,000 725,000
Mariner Health Group, Inc. (1) 37,500 421,875
TECNOL Medical Products, Inc. (1) 25,000 550,000
TheraTech, Inc. (1) 10,000 138,750
Value Health, Inc. (1) 20,000 645,000
---------
3,340,625
---------
INDUSTRIAL MANUFACTURING - 2.27%
Greenfield Industries, Inc. 25,000 725,000
Haskel International, Inc. 20,000 140,000
---------
865,000
---------
INSURANCE - 1.16%
Home State Holdings, Inc. (1) 45,000 444,375
---------
LEISURE - 2.84%
Carmike Cinemas, Inc. (1) 25,000 606,250
Regal Cinemas, Inc. (1) 15,000 480,000
---------
1,086,250
---------
MEDIA & COMMUNICATIONS - 1.37%
Spelling Entertainment Group, Inc. 25,000 243,750
Viacom, Inc. (1) 6,061 281,079
---------
524,829
---------
OIL & GAS - 2.25%
Barrett Resources Corp. (1) 20,000 465,000
Parker & Parsley Petroleum Co. 20,000 392,500
---------
857,500
---------
PACKAGING - 0.77%
Brockway Standard Holdings Corp. (1) 20,000 292,500
---------
PAPER & FOREST PRODUCTS - 1.04%
Thermo Fibertek, Inc. (1) 20,000 397,500
---------
REAL ESTATE INVESTMENT TRUST - 2.33%
Omega Healthcare Investors, Inc. (1) 35,000 888,125
---------
RETAIL & WHOLESALE - 8.65%
Cole National Corp. (1) 33,000 342,375
Department 56, Inc. (1) 15,000 573,750
Dollar General Corp. 19,531 617,676
Geerlings & Wade, Inc. (1) 40,000 665,000
Hanover Direct, Inc. (1) 150,000 431,250
Zale Corp. (1) 50,000 675,000
---------
3,305,051
---------
</TABLE>
24
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
STEEL - 2.62%
CasTech Aluminum Group, Inc. (1) 40,000 $ 715,000
Steel of West Virginia, Inc. (1) 25,000 287,500
---------
1,002,500
---------
TECHNOLOGY - 16.11%
Arrow Electronics, Inc. (1) 12,000 597,000
Augat, Inc. 25,000 512,500
Electro Scientific Industries, Inc. (1) 10,000 332,500
Molex, Inc. 15,000 547,500
Oak Technology, Inc. (1) 22,800 837,900
Sterling Electronics Corp. (1) 35,000 568,750
TranSwitch Corp. (1) 1,000 9,125
Trimble Navigation Ltd. (1) 41,500 1,177,563
Vicor Corp. (1) 35,000 1,572,812
---------
6,155,650
---------
TEXTILES - 0.76%
Jupiter National, Inc. (1) 10,800 291,600
---------
TRANSPORTATION - 1.53%
Swift Transportation Corp. (1) 35,000 586,250
---------
TOTAL COMMON STOCKS
(cost $29,035,904) 35,958,165
---------
<CAPTION>
Principal Amount
----------------
<S> <C> <C>
CONVERTIBLE BONDS - 1.50%
Airlines - 1.01%
Greenwich Air Services, Inc.
8.00%, Subordinated Debentures, 11/05/00 $ 400,000 387,000
---------
CONSUMER NONDURABLES - 0.49%
Roadmaster Industries, Inc.
8.00%, Subordinated Debentures, 8/15/03 200,000 188,500
---------
TOTAL CONVERTIBLE BONDS
(cost $635,000) 575,500
---------
TOTAL INVESTMENTS SECURITIES - 95.62%
(cost $29,670,904) 36,533,665
REPURCHASE AGREEMENTS - 3.77%
Agreement with State Street Bank and Trust bearing
interest at 5.80% dated 6/30/95 to be repurchased 7/03/95
at $1,440,696 and collateralized by $1,450,000 U.S.
Treasury Notes, 7.50% due 1/31/97 (cost $1,440,000) 1,440,000 1,440,000
OTHER ASSETS LESS LIABILITIES - 0.61% 231,165
---------
NET ASSETS - 100.00% $38,204,830
---------
---------
</TABLE>
(1) Non-income producing security.
(2) Foreign denominated security.
See accompanying notes to financial statements.
25
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
Northstar Northstar
Advantage Advantage Northstar Northstar Northstar Northstar
Government Strategic Advantage Advantage Advantage Advantage
Securities Income High Yield Income Growth Special
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
ASSETS:
Investments in securities, at value (cost
$148,333,694, $28,158,443, $136,834,408, $65,405,815,
$57,707,160 and $29,670,904, respectively) $149,104,605 $28,495,621 $135,060,207 $70,608,093 $72,206,363 $36,533,665
Repurchase agreements 1,377,000 753,000 10,395,000 1,567,000 9,537,000 1,440,000
Cash 287 186 0 818,742 790 853
Dividends and interest receivable 487,300 674,443 2,927,354 623,122 143,726 19,693
Receivable for shares of beneficial interest sold 74,333 109,597 384,251 80,049 52,646 48,630
Prepaid expenses 19,035 109,133 30,252 14,991 41,297 14,847
Receivable for investments sold 0 1,429,917 2,710,125 4,458,689 2,598,048 503,022
Unrealized appreciation of forward foreign currency
contracts 0 6,210 0 0 0 0
------------------------------------------------------------------------
Total Assets 151,062,560 31,578,107 151,507,189 78,170,686 84,579,870 38,560,710
------------------------------------------------------------------------
LIABILITIES:
Payable for shares of beneficial interest reacquired 156,120 10,715 66,951 42,605 120,073 4,292
Distribution fee payable 82,042 24,320 78,737 44,898 60,874 28,517
Investment advisory fee payable 52,998 15,543 50,811 36,308 45,235 21,177
Accounting and custodian fee payable 23,781 12,500 23,642 17,299 16,905 12,574
Payable for investments purchased 0 450,771 3,803,082 6,219,677 5,028,397 270,713
Accrued expenses 28,538 10,034 56,057 26,936 30,641 18,607
------------------------------------------------------------------------
Total Liabilities 343,479 523,883 4,079,280 6,387,723 5,302,125 355,880
------------------------------------------------------------------------
Net Assets $150,719,081 $31,054,224 $147,427,909 $71,782,963 $79,277,745 $38,204,830
------------------------------------------------------------------------
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.01 par value
outstanding
(unlimited shares authorized) $181,680,556 $30,593,171 $155,909,032 $64,910,766 $61,399,261 $31,083,972
Accumulated net investment income (loss) 102,033 40,542 111,327 72,828 15,879 (263,389)
Accumulated net realized gain (loss) on investments (31,834,419) 127,368 (6,818,249) 1,597,091 3,391,035 521,486
Accumulated net realized loss on foreign currency 0 (50,297) 0 0 (27,633) 0
Net unrealized appreciation (depreciation) of
investments 770,911 337,178 (1,774,201) 5,202,278 14,499,203 6,862,761
Net unrealized appreciation of foreign currency 0 6,262 0 0 0 0
------------------------------------------------------------------------
Net Assets $150,719,081 $31,054,224 $147,427,909 $71,782,963 $79,277,745 $38,204,830
------------------------------------------------------------------------
Class A:
Net Assets $490,863 $159,807 $2,429,434 $333,539 $1,916,575 $1,332,794
------------------------------------------------------------------------
Shares outstanding 52,891 13,156 283,448 26,552 105,435 63,394
------------------------------------------------------------------------
Net asset value and redemption value per share
(net assets/shares outstanding) $9.28 $12.15 $8.57 $12.56 $18.18 $21.02
------------------------------------------------------------------------
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price) $9.74 $12.76 $9.00 $13.19 $19.09 $22.07
------------------------------------------------------------------------
Class B:
Net Assets $226,544 $435,420 $1,520,358 $222,151 $180,186 $265,696
------------------------------------------------------------------------
Shares outstanding 24,410 35,844 177,317 17,692 9,914 12,643
------------------------------------------------------------------------
Net asset value and offering price per share $9.28 $12.15 $8.57 $12.56 $18.17 $21.02
------------------------------------------------------------------------
Class C:
Net Assets $4,633 $2,696 $255,254 $13,503 $7,321 $28,078
------------------------------------------------------------------------
Shares outstanding 499 222 29,784 1,075 403 1,336
------------------------------------------------------------------------
Net asset value and offering price per share $9.28 $12.14 $8.57 $12.56 $18.17 $21.02
------------------------------------------------------------------------
Class T:
Net Assets $149,997,041 $30,456,301 $143,222,863 $71,213,770 $77,173,663 $36,578,262
------------------------------------------------------------------------
Shares outstanding 16,163,713 2,507,317 16,708,510 5,669,422 4,245,836 1,740,828
------------------------------------------------------------------------
Net asset value and offering price per share $9.28 $12.15 $8.57 $12.56 $18.18 $21.01
------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
[LOGO]
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Advantage Advantage Advantage Northstar Northstar Northstar
Government Strategic High Advantage Advantage Advantage
Securities Income Yield Income Growth Special
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------
INVESTMENT INCOME:
Dividends $0 $0 $204,152 $723,596 $705,481 $81,518
Interest 6,135,672 1,409,110 7,744,838 1,555,405 334,158 52,184
-----------------------------------------------------------------
Total investment income 6,135,672 1,409,110 7,948,990 2,279,001 1,039,639 133,702
-----------------------------------------------------------------
EXPENSES:
Investment advisory and
management fees 489,922 90,918 318,769 236,018 285,412 138,611
Distribution fees
Class A 19 8 68 17 195 77
Class B 75 146 455 72 32 44
Class C 2 2 15 2 2 5
Class T 489,769 132,716 459,991 272,230 360,866 175,283
Transfer agent fees and expenses
Class A 9 4 34 9 98 36
Class B 11 22 68 11 5 6
Class C 0 0 2 0 0 1
Class T 46,975 8,793 48,230 28,789 35,102 21,699
Printing and postage expenses 5,390 2,860 6,411 5,084 7,372 4,030
Registration fees 11,582 15,194 12,966 10,593 11,489 9,851
Accounting and custodian fees 42,397 23,770 43,151 31,042 30,926 22,921
Audit fees 8,149 6,280 9,712 5,543 6,288 4,285
Directors fees and expenses 13,918 9,876 14,153 10,757 11,186 9,672
Legal fees 8,221 3,964 8,652 4,908 5,148 3,442
Insurance expenses 12,353 4,148 9,662 6,366 6,504 3,500
Organization expenses 0 10,127 0 0 0 0
Miscellaneous expenses 5,945 2,940 8,652 3,691 4,116 3,628
-----------------------------------------------------------------
1,134,737 311,768 940,991 615,132 764,741 397,091
Less expenses reimbursed/waived
by management company 150,776 44,699 0 0 0 0
-----------------------------------------------------------------
Total expenses 983,961 267,069 940,991 615,132 764,741 397,091
-----------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 5,151,711 1,142,041 7,007,999 1,663,869 274,898 (263,389)
-----------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (loss) on
investments 5,957,415 116,048 (3,659,626) 1,456,827 3,341,596 521,486
Net realized loss on foreign
currency 0 (49,294) 0 0 (27,633) 0
Net change in unrealized
appreciation of investments 3,093,553 896,052 8,264,079 4,756,352 7,691,269 2,147,204
Net change in unrealized
appreciation of foreign
currency 0 21,008 0 0 0 0
-----------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 9,050,968 983,814 4,604,453 6,213,179 11,005,232 2,668,690
---------------------------------------------------------==------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $14,202,679 $2,125,855 $11,612,452 $7,877,048 $11,280,130 $2,405,301
-----------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
Northstar Northstar
Advantage Advantage Northstar Northstar Northstar Northstar
Government Strategic Advantage Advantage Advantage Advantage
Securities Income High Yield Income Growth Special
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $5,151,711 $1,142,041 $7,007,999 $1,663,869 $274,898 $(263,389)
Net realized gain (loss) on
investments 5,957,415 116,048 (3,659,626) 1,456,827 3,341,596 521,486
Net realized loss on foreign currency 0 (49,294) 0 0 (27,633) 0
Net change in unrealized appreciation
of investments 3,093,553 896,052 8,264,079 4,756,352 7,691,269 2,147,204
Net change in unrealized appreciation
of foreign currency 0 21,008 0 0 0 0
------------------------------------------------------------------------
Increase in net assets resulting from
operations 14,202,679 2,125,855 11,612,452 7,877,048 11,280,130 2,405,301
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (162) (167) (642) (749) (3,646) 0
Class B (631) (1,853) (6,814) (1,788) (89) 0
Class C (12) (17) (250) (28) (5) 0
Class T (5,048,873) (1,123,490) (6,936,386) (1,612,946) (255,279) 0
Net realized gain from investments -
Class T 0 0 0 (22,423) 0 0
------------------------------------------------------------------------
Total distributions (5,049,678) (1,125,527) (6,944,092) (1,637,934) (259,019) 0
------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 4,220,258 6,623,824 15,525,174 1,510,240 5,168,143 5,267,412
Net asset value of shares issued to
shareholders in reinvestment of
dividends 3,114,614 608,764 3,746,257 1,326,481 230,203 0
------------------------------------------------------------------------
7,334,872 7,232,588 19,271,431 2,836,721 5,398,346 5,267,412
Cost of shares redeemed (18,377,080) (2,430,999)(12,937,638) (11,056,744)(13,532,226) (8,316,240)
------------------------------------------------------------------------
Net increase (decrease) in net assets
derived from capital share
transactions (11,042,208) 4,801,589 6,333,793 (8,220,023) (8,133,880) (3,048,828)
------------------------------------------------------------------------
Net increase (decrease) in net assets (1,889,207) 5,801,917 11,002,153 (1,980,909) 2,887,231 (643,527)
NET ASSETS:
Beginning of period 152,608,288 25,252,307 136,425,756 73,763,872 76,390,514 38,848,357
End of period (including undistributed
net investment income (loss):
$102,033, $40,542, $111,327,
$72,828, $15,879
------------------------------------------------------------------------
and $(263,389), respectively) $150,719,081 $31,054,224 $147,427,909 $71,782,963 $79,277,745 $38,204,830
-------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
NORTHSTAR ADVANTAGE FUNDS *
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIODS ENDED DECEMBER 31, 1994
[LOGO]
<TABLE>
<CAPTION>
Government Strategic
Securities Income High Yield
Fund Fund (Six Bond Fund Income Growth Special
(Year months (Year Fund (Year Fund (Year Fund (Year
ended ended ended ended ended ended
12/31/94) 12/31/94)(1) 12/31/94) 12/31/94) 12/31/94) 12/31/94)
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------
FROM OPERATIONS:
Net investment income(loss) $9,969,143 $709,465 $12,572,129 $3,482,966 $394,554 $(446,594)
Net realized gain(loss) on investments (16,686,437) 107,862 (3,158,623) 1,000,270 656,441 267,480
Net change in unrealized depreciation
of investments (11,609,888) (573,620) (12,836,963) (8,922,243) (7,523,774) (1,674,276)
---------------------------------------------------------------------
Increase(decrease) in net assets
resulting from operations (18,327,182) 243,707 (3,423,457) (4,439,007) (6,472,779) (1,853,390)
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (10,141,623) (709,465) (12,847,877) (3,524,386) (414,465) --
Net realized gain from investments -- (96,195) (90,444) (956,639) (702,318) (267,480)
Distribution in excess of net
investment income (48,535) (31,758) -- (100,848) -- --
Tax return of capital (175,125) -- -- -- (104,514) --
---------------------------------------------------------------------
Total distributions (10,365,283) (837,418) (12,938,321) (4,581,873) (1,221,297) (267,480)
---------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 21,123,034 26,116,925 43,821,554 10,355,024 12,408,096 17,069,716
Net asset value of shares issued to
shareholders in reinvestment of
dividends 6,296,992 488,237 7,185,417 3,770,123 1,098,246 254,328
---------------------------------------------------------------------
27,420,026 26,605,162 51,006,971 14,125,147 13,506,342 17,324,044
Cost of shares redeemed (30,274,780) (859,152) (23,314,935)(12,181,158)(10,180,895) (5,193,117)
---------------------------------------------------------------------
Net increase(decrease) in net assets
derived from capital share
transactions (2,854,754) 25,746,010 27,692,036 1,943,989 3,325,447 12,130,927
---------------------------------------------------------------------
Net increase(decrease) in net assets (31,547,219) 25,152,299 11,330,258 (7,076,891) (4,368,629) 10,010,057
NET ASSETS:
Beginning of period 184,155,507 100,008 125,095,498 80,840,763 80,759,143 28,838,300
End of period (including undistributed
net investment income: $0, $24,028,
$47,420,
---------------------------------------------------------------------
$24,470, $0, and $0, respectively) $152,608,288 $25,252,307 $136,425,756 $73,763,872 $76,390,514 $38,848,357
---------------------------------------------------------------------
</TABLE>
* Formerly The Advantage Mutual Funds -- see Note 3.
(1) Initial capitalization of 8,334 shares in Strategic Income Fund at 7/01/94
(commencement of operations).
See accompanying notes to financial statements.
29
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
FINANCIAL HIGHLIGHTS (UNAUDITED)
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD
<TABLE>
<CAPTION>
NET
REALIZED & DIVIDENDS DISTRIBUTIONS
NET ASSET UNREALIZED DECLARED DECLARED NET ASSET
VALUE, NET GAIN (LOSS) TOTAL FROM FROM NET FROM NET DISTRIBUTIONS VALUE,
PERIOD BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED FROM TOTAL END OF TOTAL
ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAIN CAPITAL DISTRIBUTIONS PERIOD RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES FUND, CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 $9.51 $0.02 $(0.20) $(0.18) $(0.05) -- -- (0.05 ) 9.28 (1.68)
GOVERNMENT SECURITIES FUND, CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 9.51 0.02 (0.20 ) (0.18 ) (0.05 ) -- -- (0.05 ) 9.28 (1.73)
GOVERNMENT SECURITIES FUND, CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 9.51 0.03 (0.21 ) (0.18 ) (0.05 ) -- -- (0.05 ) 9.28 (1.73)
GOVERNMENT SECURITIES FUND, CLASS T
- ---------------------------------------------------------------------------------------------------------------------------------
6/30/95 8.74 0.31 0.53 0.84 (0.30 ) -- -- (0.30 ) 9.28 9.73
12/31/94 10.32 0.56 (1.56 ) (1.00 ) (0.57 ) -- (0.01 ) (0.58 ) 8.74 (9.82)
12/31/93 9.22 0.59 1.09 1.68 (0.58 ) -- -- (0.58 ) 10.32 18.48
12/31/92 8.99 0.61 0.23 0.84 (0.61 ) -- -- (0.61 ) 9.22 9.77
12/31/91 8.47 0.67 0.52 1.19 (0.67 ) -- -- (0.67 ) 8.99 14.73
12/31/90 8.47 0.68 -- 0.68 (0.68 ) -- -- (0.68 ) 8.47 8.57
STRATEGIC INCOME FUND, CLASS A
6/05/95-
6/30/95 12.24 0.02 (0.02 ) -- (0.09 ) -- -- (0.09 ) 12.15 (0.36)
STRATEGIC INCOME FUND, CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 12.24 0.04 (0.05 ) (0.01 ) (0.08 ) -- -- (0.08 ) 12.15 (0.42)
STRATEGIC INCOME FUND, CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 12.24 0.07 (0.09 ) (0.02 ) (0.08 ) -- -- (0.08 ) 12.14 (0.50)
STRATEGIC INCOME FUND, CLASS T
- ---------------------------------------------------------------------------------------------------------------------------------
6/30/95 11.70 0.48 0.45 0.93 (0.48 ) -- -- (0.48 ) 12.15 7.97
7/01/94-
12/31/94 12.00 0.51 (0.25 ) 0.26 (0.49 ) (0.05 ) (0.01 ) (0.55 ) 11.71 2.14
HIGH YIELD BOND FUND, CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 8.68 0.01 (0.05 ) (0.04 ) (0.07 ) -- -- (0.07 ) 8.57 (0.79)
HIGH YIELD BOND FUND, CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 8.68 0.02 (0.06 ) (0.04 ) (0.07 ) -- -- (0.07 ) 8.57 (0.85)
HIGH YIELD BOND FUND, CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 8.68 -- (0.04 ) (0.04 ) (0.07 ) -- -- (0.07 ) 8.57 (0.85)
HIGH YIELD BOND FUND, CLASS T
- ---------------------------------------------------------------------------------------------------------------------------------
6/30/95 8.29 0.42 0.27 0.69 (0.41 ) -- -- (0.41 ) 8.57 8.51
12/31/94 9.31 0.81 (0.99 ) (0.18 ) (0.83 ) (0.01 ) -- (0.84 ) 8.29 (2.18)
12/31/93 9.09 0.85 0.80 1.65 (0.83 ) (0.60 ) -- (1.43 ) 9.31 18.89
12/31/92 7.94 0.92 1.19 2.11 (0.94 ) (0.02 ) -- (0.96 ) 9.09 27.57
12/31/91 6.27 1.08 1.67 2.75 (1.08 ) -- -- (1.08 ) 7.94 46.49
12/31/90 8.55 1.12 (2.30 ) (1.18 ) (1.10 ) -- -- (1.10 ) 6.27 (14.59)
<CAPTION>
RATIO OF
NET RATIO OF RATIO OF INVESTMENT
ASSETS, EXPENSES EXPENSE INCOME TO
END OF TO AVERAGE REIMBURSEMENT AVERAGE
PERIOD PERIOD NET TO AVERAGE NET PORTFOLIO
ENDED (000'S) ASSETS(1) NET ASSETS(1) ASSETS(1) TURNOVER
<S> <C> <C> <C> <C> <C>
- ---------
- ---------
6/05/95-
6/30/95 491 1.38 % -- % 14.84 % 275%
- ---------
6/05/95-
6/30/95 227 1.78 -- 6.67 275
- ---------
6/05/95-
6/30/95 5 1.74 -- 6.18 275
- ---------
6/30/95 149,997 1.31 0.20 6.83 275
12/31/94 152,608 1.29 0.20 6.00 315
12/31/93 184,156 1.31 0.20 5.83 81
12/31/92 144,144 1.39 0.20 6.81 120
12/31/91 121,389 1.44 0.20 7.68 87
12/31/90 108,420 1.43 0.20 8.23 17
- ---------
6/05/95-
6/30/95 160 1.89 -- 12.22 115
- ---------
6/05/95-
6/30/95 435 2.18 -- 9.29 115
- ---------
6/05/95-
6/30/95 3 2.12 -- 7.99 115
- ---------
6/30/95 30,456 1.91 -- 8.16 115
7/01/94-
12/31/94 25,252 1.90 0.63 7.92 156
- ---------
6/05/95-
6/30/95 2,429 1.25 -- 11.70 54
- ---------
6/05/95-
6/30/95 1,520 1.84 -- 9.37 54
- ---------
6/05/95-
6/30/95 255 1.80 -- 8.24 54
- ---------
6/30/95 143,223 1.33 -- 9.89 54
12/31/94 136,426 1.34 -- 9.08 86
12/31/93 125,095 1.40 -- 8.84 176
12/31/92 64,063 1.50 0.05 10.30 122
12/31/91 25,651 1.50 0.46 14.84 57
12/31/90 11,342 1.44 0.81 15.15 156
</TABLE>
(1) ANNUALIZED
30
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
FINANCIAL HIGHLIGHTS (UNAUDITED)
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD
[LOGO]
<TABLE>
<CAPTION>
NET
REALIZED & DIVIDENDS DISTRIBUTIONS
NET ASSET UNREALIZED DECLARED DECLARED NET ASSET
VALUE, NET GAIN (LOSS) TOTAL FROM FROM NET FROM NET DISTRIBUTIONS VALUE,
PERIOD BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED FROM TOTAL END OF TOTAL
ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAIN CAPITAL DISTRIBUTIONS PERIOD RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FUND, CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 $12.77 $0.02 $(0.09) $(0.07) $(0.14) -- -- $(0.14) $12.56 (0.53)%
INCOME FUND, CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 12.77 0.02 (0.10) (0.08) (0.13) -- -- (0.13) 12.56 (0.54)
INCOME FUND, CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 12.77 0.01 (0.09) (0.08) (0.13) -- -- (0.13) 12.56 (0.58)
INCOME FUND, CLASS T
- ---------------------------------------------------------------------------------------------------------------------------------
6/30/95 11.54 0.28 1.02 1.30 (0.28) -- -- (0.28) 12.56 11.28
12/31/94 12.94 0.57 (1.25) (0.68) (0.54) (0.16) (0.02) (0.72) 11.54 (5.33)
12/31/93 12.05 0.49 1.20 1.69 (0.49) (0.31) -- (0.80) 12.94 14.08
12/31/92 11.66 0.55 0.36 0.91 (0.52) -- -- (0.52) 12.05 8.06
12/31/91 10.13 0.57 1.53 2.10 (0.57) -- -- (0.57) 11.66 21.17
12/31/90 10.71 0.61 (0.54) 0.07 (0.63) -- (0.02) (0.65) 10.13 0.78
GROWTH FUND, CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 17.59 0.01 0.62 0.63 (0.04) -- -- (0.04) 18.18 3.05
GROWTH FUND, CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 17.59 0.01 0.61 0.62 (0.04) -- -- (0.04) 18.17 2.97
GROWTH FUND, CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 17.59 0.01 0.60 0.61 (0.03) -- -- (0.03) 18.17 3.00
GROWTH FUND, CLASS T
- ---------------------------------------------------------------------------------------------------------------------------------
6/30/95 17.59 0.01 0.61 0.62 (0.03) -- -- (0.03) 18.18 15.81
12/31/94 17.33 0.08 (1.41) (1.33) (0.08) (0.15) (0.02) (0.25) 15.75 (7.66)
12/31/93 16.36 0.02 1.67 1.69 (0.04) (0.67) (0.01) (0.72) 17.33 10.36
12/31/92 16.37 0.02 1.30 1.32 (0.02) (1.31) -- (1.33) 16.36 8.05
12/31/91 12.49 0.09 4.62 4.71 (0.08) (0.75) -- (0.83) 16.37 38.10
12/31/90 13.85 0.10 (0.83) (0.73) (0.10) (0.51) (0.02) (0.63) 12.49 (5.24)
SPECIAL FUND, CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 19.56 (0.01) 1.47 1.46 -- -- -- -- 21.02 6.11
SPECIAL FUND, CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 19.56 (0.01) 1.47 1.46 -- -- -- -- 21.02 6.16
SPECIAL FUND, CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
6/05/95-
6/30/95 19.56 (0.01) 1.47 1.46 -- -- -- -- 21.02 6.11
SPECIAL FUND, CLASS T
- ---------------------------------------------------------------------------------------------------------------------------------
6/30/95 19.64 (0.14) 1.51 1.37 -- -- -- -- 21.01 6.98
12/31/94 20.79 (0.25) (0.76) (1.01) -- (0.14) -- (0.14) 19.64 (4.86)
12/31/93 17.40 (0.32) 3.83 3.51 -- (0.12) -- (0.12) 20.79 20.16
12/31/92 15.74 (0.33) 2.61 2.28 -- (0.62) -- (0.62) 17.40 14.54
12/31/91 10.64 (0.21) 6.24 6.03 -- (0.93) -- (0.93) 15.74 57.27
12/31/90 11.67 (0.20) (0.83) (1.03) -- -- -- -- 10.64 (8.83)
<CAPTION>
RATIO OF
NET RATIO OF RATIO OF INVESTMENT
ASSETS, EXPENSES EXPENSE INCOME TO
END OF TO AVERAGE REIMBURSEMENT AVERAGE
PERIOD PERIOD NET TO AVERAGE NET PORTFOLIO
ENDED (000'S) ASSETS(1) NET ASSETS(1) ASSETS(1) TURNOVER
<S> <C> <C> <C> <C> <C>
- ---------
- ---------
6/05/95-
6/30/95 $334 1.64% --% 7.07% 68%
- ---------
6/05/95-
6/30/95 222 2.06 -- 4.26 68
- ---------
6/05/95-
6/30/95 14 2.08 -- 4.48 68
- ---------
6/30/95 71,214 1.69 -- 4.58 68
12/31/94 73,764 1.69 -- 4.36 59
12/31/93 80,841 1.77 -- 3.99 38
12/31/92 56,823 2.02 -- 4.73 59
12/31/91 49,367 2.06 -- 5.21 77
12/31/90 44,750 2.10 -- 5.73 57
- ---------
6/05/95-
6/30/95 1,917 1.54 -- 1.81 47
- ---------
6/05/95-
6/30/95 180 2.32 -- 1.58 47
- ---------
6/05/95-
6/30/95 7 2.06 -- 0.99 47
- ---------
6/30/95 77,174 2.01 -- 0.72 47
12/31/94 76,391 2.00 -- 0.49 54
12/31/93 80,759 2.04 -- 0.13 42
12/31/92 56,759 2.15 -- 0.09 47
12/31/91 40,884 2.25 -- 0.66 64
12/31/90 24,927 2.33 -- 0.80 54
- ---------
6/05/95-
6/30/95 1,333 1.65 -- (1.27) 24
- ---------
6/05/95-
6/30/95 266 2.42 -- (1.94) 24
- ---------
6/05/95-
6/30/95 28 2.60 -- (2.09) 24
- ---------
6/30/95 36,578 2.15 -- 1.43 24
12/31/94 38,848 2.16 -- (1.25) 39
12/31/93 28,838 2.34 -- (1.66) 35
12/31/92 11,336 2.84 -- (2.12) 40
12/31/91 5,480 2.95 0.74 (1.57) 85
12/31/90 3,024 2.95 2.03 (0.97) 72
</TABLE>
(1) Annualized
31
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1995 (UNAUDITED)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Northstar Advantage Government Securities Fund, Northstar
Advantage Strategic Income Fund, Northstar Advantage High Yield Fund, Northstar
Advantage Income Fund, Northstar Advantage Growth Fund and Northstar Advantage
Special Fund (the "Funds") are organized under the laws of the Commonwealth of
Massachusetts and registered under the Investment Company Act of 1940 as
diversified open-end management investment companies. Each is a separate
investment company with its own investment objective and specific investment
goals set forth below:
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND ("Government Securities
Fund") seeks to achieve a high level of current income and to conserve principal
by investing in debt obligations issued or guaranteed by the U.S. Government or
its agencies and instrumentalities.
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND ("Strategic Income Fund") seeks to
achieve high current income. Under normal market conditions, the Fund allocates
its investments among the following three sectors of the fixed income securities
markets: debt obligations of the U.S. Government, its agencies and
instrumentalities; high yield, high risk, lower-rated and nonrated U.S. and
foreign fixed income securities; and investment grade debt obligations of
foreign governments, their agencies and instrumentalities.
NORTHSTAR ADVANTAGE HIGH YIELD FUND ("High Yield Fund") seeks high current
income and, secondarily, capital appreciation. This Fund invests primarily in
long-term and intermediate-term fixed income securities, with emphasis on high
yield, high risk, lower-rated and nonrated corporate debt instruments.
NORTHSTARADVANTAGE INCOME FUND ("Income Fund") seeks to realize income and
secondarily, capital appreciation. Basically conservative, this Fund invests in
a balance of debt securities (generally of investment grade), common and
preferred stocks, and debt securities and preferred stocks convertible into
common stock.
NORTHSTAR ADVANTAGE GROWTH FUND ("Growth Fund") seeks to achieve long-term
growth of capital and, secondarily, to realize income. This Fund invests
principally in common stocks and, to a lesser extent, it may also invest in
preferred stocks and convertible securities.
NORTHSTAR ADVANTAGE SPECIAL FUND ("Special Fund") seeks to achieve capital
appreciation through investment in a diversified portfolio of equity securities
selected for their potential for growth. This Fund does not seek current income.
The Fund invests primarily in smaller, lesser-known companies that may be
subject to greater price volatility than more mature companies.
SECURITY VALUATION - Equity securities and options 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 or asked prices
for such securities, or if such prices are not available, at prices provided by
market makers, or at prices for securities of comparable maturity, quality and
type. Short-term debt instruments with remaining maturities of less than 60 days
are valued at amortized cost, unless the Trustees determine that amortized cost
does not reflect the fair value of such obligations. Securities for which market
quotations are not readily available are valued at fair value determined in good
faith by or under direction of the Trustees of the Trust. The books and records
of the Funds are maintained in U.S. dollars. Securities quoted in foreign
currencies are translated into U.S. dollars based on the prevailing exchange
rates on that day. The Adviser uses independent pricing services to price the
Funds' securities.
SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTION TO
SHAREHOLDERS - Security transactions are recorded on the trade date. Realized
gains or losses on sales of investments are calculated on the identified cost
basis. Interest income is recorded on the accrual basis except when collection
is not expected; discounts are accrued, and premiums amortized to par at
maturity; dividend income is recorded on the ex-dividend dates. Income, expenses
(except class specific expenses,) and realized/unrealized gains/losses, are
allocated proportionately to each class of shares based upon the relative net
asset value of outstanding shares. Dividends from net investment income are
declared and paid monthly by the Government Securities, Strategic Income and
High Yield Funds and declared and paid quarterly by each of the other Funds.
Distributions of net realized capital gains, if any, are declared annually;
however, to the extent that a net realized capital gain can be reduced by a
capital loss carryover, such gain will not be distributed.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS - The Funds may enter into
forward foreign currency exchange contracts ("contracts") to purchase or sell
currencies at a specified rate at a future date. The Funds may enter into these
contracts solely for hedging purpose.
32
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1995 (UNAUDITED)
[LOGO]
The Funds write and purchase put and call options on foreign currencies. The
premium paid by the Funds for the 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 Funds have purchased expires
on the stipulated expiration date, the Funds realize a loss in the amount of the
cost of the option.
The amount of potential gain or loss to the Funds upon exercise of a written
call option is the value (in U.S. dollars) of the currency sold, less the value
of the U.S. dollars received in exchange. The amount of potential gain or loss
to the Funds upon exercise of a written put option is the value (in U.S.
dollars) of the currency received, less the value of the U.S. dollars paid in
exchange.
Risks may arise upon entering these contracts from the potential inability
of counterparties to meet the terms of their contract and from unanticipated
movement in the value of a foreign currency relative to the U.S. dollar.
The value of investments, assets and liabilities denominated in currencies
other than U.S. dollars are translated into U.S. dollars based upon current
foreign exchange rates. Purchases and sales of foreign investments and income
and expenses are converted into U.S. dollars based on currency exchange rates
prevailing on the respective dates of such transactions. The Funds do not
isolate that portion of the results of operations arising from changes in the
exchange rates from that portion arising from changes in the market prices of
securities.
Net realized and unrealized gain (loss) on foreign currency transactions
represents the foreign exchange:
(1) gains and losses from the sale of holdings of foreign currencies, (2)
gains and losses between trade date and settlement date on investment securities
transactions and forward exchange contracts, and (3) gains and losses from the
difference between amounts of interest and dividends recorded and the amounts
actually received.
REPURCHASE AGREEMENTS - The Funds' custodian takes possession of collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a marked-to-market basis to assure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the Funds have the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Funds may be delayed or limited.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, certain of the Funds may transfer uninvested cash balances into a
joint trading account at State Street Bank and Trust Company, the daily
aggregate balance of which is invested in one or more repurchase agreements. The
underlying collateral for the repurchase agreements are U.S. Treasury
obligations.
FEDERAL INCOME TAXES - The Funds intend to comply with the special
provisions of the Internal Revenue Code available to investment companies and to
distribute all of the taxable net income to their respective shareholders.
Therefore, no Federal income tax provision or excise tax provision is required.
GENERAL AND ORGANIZATION EXPENSES - General expenses of the Funds which do
not specifically relate to an individual Fund are allocated among the Funds in
proportion to their net assets or as deemed appropriate by the treasurer.
Organization expenses have been capitalized by the Funds and amortized on a
straight-line basis over a 60 month period from the commencement of operations
of each Fund. Cost incurred by the Strategic Income Fund in connection with its
organization and its original registration amounted to $105,074.
NOTE 2. INVESTMENT ADVISER AND ADMINISTRATOR AND DISTRIBUTOR
ReliaStar Financial Corp. owns 80% of NWNL Northstar, Inc., which has three
wholly owned operating subsidiaries - Northstar Investment Management Corp.,
NWNL Northstar Distributors, Inc. and Northstar Administrators Corp.
Northstar Investment Management Corp. (the "Adviser") has served as each
Funds' investment adviser since June 2, 1995. Each Fund pays the Adviser an
investment advisory fee calculated at an annual rate of .45% of average daily
net assets for the High Yield Fund, .65% of average daily net assets for the
Government Securities, Strategic Income and Income Funds, and .75% of average
daily net assets for the Growth and Special Funds. The Adviser has agreed to
waive .20% of its advisory fee for the Government Securities Fund through
December 31, 1995 (resulting in an effective rate of .45%). The Adviser has also
agreed to cap total operating expenses of the Class T shares of Strategic Income
Fund at 1.90% and to cap total operating expenses of the Class A, B, and C
shares of all the Funds at
33
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1995 (UNAUDITED)
1.50%, 2.20%, and 2.20%, respectively. Class A, B, and C shares were first
offered for sale on June 5, 1995; Class T shares are no longer offered for sale.
Prior to June 2, 1995 Boston Security Counsellors Inc. ("BSC") served as adviser
to the Funds. For the six months ended June 30, 1995, BSC and the Adviser earned
$1,559,650 in investment advisory fees.
Since June 2, 1995, NWNL Northstar Distributors, Inc. (the "Distributor") an
affiliate of the Adviser and the Administrator, has served as distributor of
each Fund's shares. Prior to June 2, 1995, Advest, Inc. served as distributor.
Under separate Plans of Distribution pertaining to Class A, Class B, Class C and
Class T shares, the Funds pay the Distributor monthly service fees at an annual
rate of .25% of the average daily net assets in the case of Class A, Class B,
Class C and Class T shares, and monthly distribution fees at the annual rate of
.05% of the average daily net assets of Class A shares and .75% of the average
daily net assets of Class B and Class C shares for all Funds. Class T shares pay
monthly distribution fees at an annual rate of .40% of average daily net assets
for the Government Securities and High Yield Funds, .50% of average daily net
assets for the Income Fund and .65% of average daily net assets for the
Strategic Income, Growth and Special Funds. At June 30, 1995, the Funds owed the
Distributor $319,388 in service and distribution fees.
The Distributor also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares, and the contingent deferred
sales charge paid by shareholders upon certain redemptions of Class A, Class B,
Class C and Class T shares. For the six months ended June 30, 1995, the
Distributor, and Advest, Inc. in the case of Class T shares, earned the
following amounts in sales charges:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
SHARES SHARES SHARES SHARES
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Initial Sales
Charges $ 2,616 $ 0 $ 0 $ 0
Contingent
Deferred Sales
Charges $ 0 $ 472 $ 0 $ 682,860
</TABLE>
NOTE 3. ACQUISITION
On the close of business June 2, 1995, the Adviser completed the acquisition
of certain assets related to the mutual fund business of The Advest Group, Inc.
At the time of the transaction, the Funds entered into new Investment
Advisory Agreements, Administrative Services Agreements, and Distribution
Agreements with the Adviser and/or its affiliates, and Transfer Agency and
Service Agreements with The Shareholder Services Group, Inc. and Advest Transfer
Agency Services, Inc. The terms and provisions of the new agreements relating to
the Class T shares are substantially identical to the Funds' previous
agreements. Class A, B, and C shares were not offered prior to the transaction.
NOTE 4. PURCHASES AND SALE OF INVESTMENT SECURITIES
The aggregate cost of purchases, and proceeds from sales of investments
(excluding short-term investment) for the six months ended June 30, 1995, were
as follows:
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE NORTHSTAR
GOVERNMENT STRATEGIC ADVANTAGE
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
---------- --------- ----------
<S> <C> <C> <C>
Aggregate Purchases $400,542,520 $33,415,313 $74,163,462
Aggregate Sales $400,500,722 $29,702,195 $76,857,467
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE ADVANTAGE
INCOME GROWTH SPECIAL
FUND FUND FUND
---------- --------- ----------
<S> <C> <C> <C>
Aggregate Purchases $46,763,862 $33,391,330 $8,598,890
Aggregate Sales $46,464,710 $41,674,658 $11,945,560
</TABLE>
NOTE 5. PORTFOLIO SECURITIES (TAX BASIS)
The cost of securities for federal income tax purposes and the aggregate
appreciation and depreciation of securities at June 30, 1995, were as follows:
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE NORTHSTAR
GOVERNMENT STRATEGIC ADVANTAGE
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
---------- --------- ----------
<S> <C> <C> <C>
Cost (tax basis) $148,333,694 $28,158,443 $136,834,408
---------- --------- ----------
Appreciated
Securities 2,160,969 723,211 3,916,914
Depreciated
Securities (1,390,058) (386,033) (5,691,115)
---------- --------- ----------
Net Unrealized
appreciation/
depreciation $ 770,911 $ 337,178 $(1,774,201)
---------- --------- ----------
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE ADVANTAGE
INCOME GROWTH SPECIAL
FUND FUND FUND
---------- --------- -----------
<S> <C> <C> <C>
Cost (tax basis) $65,405,815 $57,707,160 $29,670,904
---------- --------- -----------
Appreciated
Securities 5,853,829 15,148,450 8,975,041
Depreciated
Securities (651,551) (649,247) (2,112,280)
---------- --------- -----------
Net Unrealized
appreciation/
depreciation $5,202,278 $14,499,203 $6,862,761
---------- --------- -----------
</TABLE>
34
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1995 (UNAUDITED)
[LOGO]
NOTE 6. CAPITAL SHARE TRANSACTIONS
Transactions in capital share of each Fund for the six months ended June
30, 1995, were as follows:
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
-----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- ---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 52,881 $ 497,960 24,373 $ 228,259 498 $ 4,723 388,598 $3,489,316
Reinvested dividends 14 135 37 352 1 12 342,483 3,114,115
Shares redeemed (4) (42) -- -- -- -- (2,034,265)(18,377,038)
--------- --------- --------- --------- ----- --------- --------- ----------
Net increase
(decrease) 52,891 $ 498,053 24,410 $ 228,611 499 $ 4,735 (1,303,184)$(11,773,607)
--------- --------- --------- --------- ----- --------- --------- ----------
<CAPTION>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
-----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- ---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 13,142 $ 160,354 35,765 $ 436,927 221 $ 2,700 503,069 $6,023,843
Reinvested dividends 14 167 79 1,114 1 17 50,541 607,465
Shares redeemed -- -- -- -- -- -- (202,757) (2,430,998)
--------- --------- --------- --------- ----- --------- --------- ----------
Net increase 13,156 $ 160,521 35,844 $ 438,041 222 $ 2,717 350,853 $4,200,310
--------- --------- --------- --------- ----- --------- --------- ----------
<CAPTION>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
-----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- ---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 285,353 $2,443,268 177,738 $1,531,644 29,781 $ 255,467 1,332,385 $11,294,795
Reinvested dividends 31 470 537 4,995 3 21 439,879 3,740,771
Shares redeemed (1,936) (16,595) (958) (8,295) -- -- (1,514,711)(12,912,748)
--------- --------- --------- --------- ----- --------- --------- ----------
Net increase 283,448 $2,427,143 177,317 $1,528,344 29,784 $ 255,488 257,553 $2,122,818
--------- --------- --------- --------- ----- --------- --------- ----------
<CAPTION>
NORTHSTAR ADVANTAGE INCOME FUND
-----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- ---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 26,500 $ 337,193 17,662 $ 224,331 1,073 $ 13,530 77,542 $ 935,186
Reinvested dividends 59 749 42 534 2 28 107,067 1,325,170
Shares redeemed (7) (84) (12) (149) -- -- (908,011)(11,056,511)
--------- --------- --------- --------- ----- --------- --------- ----------
Net increase
(decrease) 26,552 $ 337,858 17,692 $ 224,716 1,075 $ 13,558 (723,402)$(8,796,155)
--------- --------- --------- --------- ----- --------- --------- ----------
<CAPTION>
NORTHSTAR ADVANTAGE GROWTH FUND
-----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- ---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 135,240 $2,449,297 9,965 $ 180,608 402 $ 7,214 158,396 $2,531,024
Reinvested dividends 50 913 5 87 1 5 6,875 229,198
Shares redeemed (29,855) (537,615) (56) (1,018) -- -- (770,231)(12,993,593)
--------- --------- --------- --------- ----- --------- --------- ----------
Net increase
(decrease) 105,435 $1,912,595 9,914 $ 179,677 403 $ 7,219 (604,960)$(10,233,371)
--------- --------- --------- --------- ----- --------- --------- ----------
</TABLE>
35
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE SPECIAL FUND
-----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- ---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 64,189 $1,339,356 12,643 $ 261,901 1,336 $ 27,699 187,887 $3,638,456
Shares redeemed (795) (16,489) -- -- -- -- (424,618) (8,299,751)
--------- --------- --------- --------- ----- --------- --------- ----------
Net increase
(decrease) 63,394 $1,322,867 12,643 $ 261,901 1,336 $ 27,699 (236,731)$(4,661,295)
--------- --------- --------- --------- ----- --------- --------- ----------
</TABLE>
36
<PAGE>
[LOGO]
<TABLE>
<S> <C> <C>
TRUSTEES
Paul S. Doherty Mark L. Lipson John G. Turner
Robert B. Goode David W. C. Putnam David W. Wallace
Alan L. Gosule John R. Smith Marjory D. Williams
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL OFFICERS
<S> <C>
John G. Turner - Chairman Margaret D. Patel - Vice President
Mark L. Lipson - President Robert L. Thomas - Vice President
Prescott B. Crocker - Vice President Geoffrey Wadsworth - Vice President
Thomas Ole Dial - Vice President Lisa Hurley - Vice President & Secretary
Ernest N. Mysogland - Vice President Agnes Mullady - Vice President & Treasurer
INVESTMENT ADVISER ADMINISTRATOR
NORTHSTAR INVESTMENT NORTHSTAR ADMINISTRATORS CORPORATION
MANAGEMENT CORPORATION Two Pickwick Plaza
Two Pickwick Plaza Greenwich, CT 06830
Greenwich, CT 06830
DISTRIBUTOR TRANSFER AGENT
NWNL NORTHSTAR DISTRIBUTORS, INC. THE SHAREHOLDER SERVICES GROUP, INC.
Two Pickwick Plaza One Exchange Place
Greenwich, CT 06830 Boston, MA 02109
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin St.
Boston, MA 02110
</TABLE>
37
