(THE NORTHSTAR FUNDS LOGO)
SEMI-ANNUAL REPORT TO SHAREHOLDERS
June 30, 1998
(Photo of a star with the Northstar Funds listed)
<PAGE>
NORTHSTAR FUNDS
SEMI-ANNUAL REPORT
JUNE 30, 1998
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(logo)
MARK L. LIPSON
Dear Shareholders:
We are pleased to provide you with the semi-annual report of the Northstar
Funds for the six months ended June 30, 1998. We are gratified with your
decision to entrust your assets to the Northstar Funds and are confident that
we can assist you in reaching your financial objectives. Our goal is to provide
you with consistent, long term, attractive returns achieved through fundamental
research, analysis, and traditional investment disciplines. Following this
letter is a summary of the results of each Fund's portfolio by its respective
portfolio manager. We hope you will find it informative.
During the past six months investment returns in the U.S. have continued to be
very positive. The situation in Asia again reached crisis proportions in the
second quarter, but on balance the net impact actually turned out to be
favorable for U.S. financial markets, by further reducing inflation and
stimulating domestic consumption and by keeping interest rates low.
It has been the best of times in the U.S., a period of improvement in Western
Europe, and very difficult times in Asia, OPEC, and many emerging market
countries. After 5 - 10 years of corporate restructuring, investment for
productivity, restraint in government spending, and continued expansion, the
U.S. is uniquely positioned in the world. Employment is high and with strong
tax receipts and moderate spending, federal and local budget surpluses have
reappeared for the first time in decades. U.S. corporations are currently
operating at the highest profit margins since the 1960's and with very high
levels of free cash flow to reinvest, make acquisitions, or buy back stock.
The global situation has caused money to flow to U.S. financial markets and the
U.S. dollar to remain very strong. The stock market has been driven to
historically high valuation levels by strong investor demand plus high
profitability coupled with very low inflation. The global economic effects of
the Asian
crisis have become more pronounced and the impact of a rising U.S. trade
deficit on U.S. manufacturers is more noticeable. A slowdown in domestic output
from the first quarter 5.4% growth rate is expected to have reduced growth well
below 3.0%. With valuations dependent on high profitability and continued
growth, the concern for stock prices is that profits may come under increasing
pressure. Profit growth has already slowed, but overall it is likely to remain
positive and may accelerate in 1999. The market will remain volatile until the
outlook crystallizes. For the next few years, the new opportunities for growth
available to financially strong, well managed corporations in new markets
opening up in Europe, Asia, and South America are very exciting. Those
opportunities along with a very strong and fundamentally improved domestic
economy, continue to support a favorable investment environment.
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,
/s/ Mark L. Lipson
President
August 1, 1998
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NORTHSTAR GROWTH FUND
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(logo)
GEOFFREY WADSWORTH
The Markets
o For the six months ended June 30, the Dow Industrials gained 13.2%, the
S&P 500 16.8%, and the Russell 2000 was up 4.7%.
o The U.S. market was supported by strong money supply growth and foreign
buying. The relative performance of the indexes reflects the very strong
gains of large cap growth stocks with dominant business franchises, stable
growth prospects, and low exposure to Asia and emerging market problems.
o Also, the initial impact of the Asian crisis was unexpectedly favorable
for the U.S. economy and financial markets as it further reduced inflation
and stimulated U.S. consumption with low interest rates. Accelerating GDP
in the first quarter helped stocks of domestic consumer cyclicals. As the
negative drag of a widening trade deficit and foreign price competition
became more visible in May and June it put renewed pressure on many global
industrial cyclicals.
The Fund
o The Growth Fund A, B, C, T, and I shares had a total return of 11.05%,
10.70%, 10.66%, 10.70%, and 11.28%, respectively for the six month period.
This compares with the average of growth funds in Lipper, which was up
15.1%. The average mid-cap growth fund was up 10.7%.
o First half investment returns were helped by holdings in domestic
financials, communications equipment and services, pharmaceuticals,
retailing, and computer software and services. However, this was partially
offset by declines in commodity related stocks, global industrials, and by
several significant company specific disappointments (Compaq, Cendant).
The extent to which the price of oil would decline and impact drilling was
not fully anticipated and hurt oil service stocks dramatically.
o The Fund held a number of the largest growth stocks which led the market
such as Worldcom, Microsoft, Cisco, and Home Depot. However, about half
the stocks held are mid caps and other stocks with above average earnings
growth prospects for the next 18 months but trading at more conservative
valuations. The average earnings multiple on 1999 estimates is close to 19
times, no higher than the S&P 500 average.
Current Strategy
o After a brief period in the first quarter of guarded optimism that the
Asian crisis might be stabilizing instead seriously escalated and its
impact is now slowing the U.S. and Europe. Historically high equity
valuation levels are being supported by rapid money supply growth, very
high corporate profitability and low inflation. With the diminishing
prospect of renewed inflation or a restrictive monetary policy near term,
equity valuations are likely to remain high but very dependent on the
outlook for earnings growth which in a slowdown is coming under increasing
pressure unevenly across industries.
o About 15% of total Fund holdings in commodity related companies and
global industrials were sold in the first half and new purchases were
focussed in domestic financial, healthcare, business and consumer
services, biotech, and consumer durables where continued growth is more
likely. Although energy stocks appear at very attractive levels for the
long term the weighting in the Fund has been reduced because current
business trends.
o In the currently more risky environment, Fund holdings will continue to
favor domestic stable growth, particularly in somewhat smaller companies
with relatively attractive valuations. To further diversify the potential
for company specific disappointments the size of some large holdings are
being reduced and the number of holdings increased.
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Fund Information (All data are as of 6/30/98) Total Net Assets $226,093,394
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<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<S> <C> <C>
1 Cisco Systems, Inc. 4.3%
2 WorldCom, Inc. 4.3%
3 Capital One Financial Corp. 4.2%
4 Home Depot, Inc. 3.9%
5 Merck & Co., Inc. 3.9%
6 Ceridan Corp. 3.8%
7 Bristol-Myers Squibb Co. 3.4%
8 Citicorp 3.3%
9 Xerox Corp. 2.9%
10 Healthsouth Corp. 2.7%
----
36.7%
====
</TABLE>
<TABLE>
<CAPTION>
Top 5 Industries
(by percentage of net assets)
<S> <C>
------------
Computer Software/Service 8.4%
-----------
Finance & Banking 7.5%
-----------
Pharmaceutical 7.3%
----------
Financial Services 6.9%
----------
Oil & Gas 6.5%
</TABLE>
<TABLE>
<CAPTION>
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<S> <C> <C> <C>
Inception 5 years 1 year
Class A 20.16% N/A 14.56%
Class B 20.92% N/A 14.56%
Class C 21.28% N/A 18.47%
Class T 13.13% 15.11% 15.59%
Class I 29.62% N/A 20.89%
Cumulative Total Return
(do not reflect sales charge)
Inception 5 years 1 year
Class A 84.53% N/A 20.27%
Class B 81.18% N/A 19.56%
Class C 80.80% N/A 19.47%
Class T 362.47% 102.07% 19.59%
Class I 38.31% N/A 20.89%
</TABLE>
3
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
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<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------ -------------- -------------
<S> <C> <C>
Common Stocks -- 94.32%
Aerospace & Defense -- 1.38%
Boeing Co. 70,000 $ 3,119,375
-----------
Aluminum -- 1.39%
Alumax, Inc. @ 15,221 705,874
Aluminum Co. of America 35,000 2,307,812
Century Aluminum Co. 8,000 118,000
-----------
3,131,686
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Auto Parts & Equipment -- 1.65%
Magna International, Inc. @@ 54,300 3,726,338
-----------
Biotechnology -- 1.47%
Genzyme Corp. @ 130,000 3,323,125
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Broadcasting -- 3.72%
Meredith Corp. 100,000 4,693,750
Univision Communications, Inc. 100,000 3,725,000
-----------
8,418,750
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Computer Networking -- 4.28%
Cisco Systems, Inc. @ 105,000 9,666,562
-----------
Computers -- 2.66%
Compaq Computer Corp. 212,000 6,015,500
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Computer Software/Services -- 8.37%
Ceridian Corp. @ 144,200 8,471,750
Microsoft Corp. @ 20,000 2,167,500
Parametric Technology Corp. 120,000 3,255,000
Synopsys, Inc. @ 110,000 5,032,500
-----------
18,926,750
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Construction Materials -- 0.07%
Masco Corp. 2,700 163,350
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Consumer Products -- 3.80%
Kimberly-Clark Corp. 44,632 2,047,493
Philip Morris Cos., Inc. 97,000 3,819,375
Procter & Gamble Co. 30,000 2,731,875
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8,598,743
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Consumer Services -- 2.31%
Cendant Corp. @ 249,961 5,217,936
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Finance & Banking -- 7.48%
Citicorp 49,800 7,432,650
Mellon Bank Corp. 62,600 4,358,525
NationsBank Corp. 67,000 5,125,500
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16,916,675
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Financial Services -- 6.92%
Associates First Capital Corp. 35,000 2,690,625
Capital One Financial Corp. 75,500 9,376,156
Fannie Mae 58,800 3,572,100
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15,638,881
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</TABLE>
4
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NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
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(logo)
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------- -------------- -------------
<S> <C> <C>
Healthcare -- 4.21%
Healthsouth Corp. @ 230,000 $ 6,138,125
United Healthcare Corp. 53,300 3,384,550
-----------
9,522,675
-----------
Instrumentation -- 0.83%
Millipore Corp. 69,100 1,882,975
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Insurance -- 2.91%
Conseco, Inc. 98,000 4,581,500
Nationwide Financial Services, Inc. 39,200 1,999,200
-----------
6,580,700
-----------
Lodging -- 0.85%
Promus Hotel Corp. @ 50,000 1,925,000
-----------
Machinery -- 1.13%
Deere & Co. 48,300 2,553,863
-----------
Office Equipment/Supplies -- 2.90%
Xerox Corp. 64,400 6,544,650
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Oil & Gas -- 6.51%
El Paso Natural Gas Co. 128,600 4,918,950
Enron Oil & Gas Co. 68,900 1,395,225
Global Marine, Inc. @ 284,000 5,307,250
Parker Drilling Co. @ 197,300 1,393,431
Sonat, Inc. 44,100 1,703,363
-----------
14,718,219
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Petroleum Services -- 4.32%
Baker Hughes, Inc. 113,500 3,922,844
Schlumberger Ltd. 58,200 3,975,787
Seitel, Inc. @ 80,000 1,295,000
Stolt Comex Seaway S A @ @@ 20,000 387,500
Stolt Comex Seaway S A @ ** 10,000 176,250
-----------
9,757,381
-----------
Pharmaceutical -- 7.31%
Bristol-Myers Squibb Co. 67,000 7,700,812
Merck & Co., Inc. 66,000 8,827,500
-----------
16,528,312
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Regional Banking -- 0.82%
City National Corp. 50,000 1,846,875
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Retailing -- 6.41%
Home Depot, Inc. 105,000 8,721,562
OfficeMax, Inc. @ 350,000 5,775,000
-----------
14,496,562
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Semiconductor -- 0.90%
Texas Instruments, Inc. 35,000 2,040,938
-----------
Specialty Stores -- 1.76%
General Nutrition Cos., Inc. @ 128,000 3,984,000
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Telecommunications -- 5.83%
Paging Network, Inc. @ 250,000 3,500,000
WorldCom, Inc. @ 200,000 9,687,500
-----------
13,187,500
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</TABLE>
5
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
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<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- --------------------------------------------------------------------------- ------------------------- ---------------
<S> <C> <C>
Transportation -- 2.13%
CNF Transportation, Inc. 86,700 $ 3,684,750
Swift Transportation Co., Inc. @ 57,500 1,139,219
------------
4,823,969
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Total Common Stocks
(cost $148,704,526) 213,257,290
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Total Investment Securities -- 94.32%
(cost $148,704,526) 213,257,290
Repurchase Agreement -- 4.02%
Agreement with State Street Bank and Trust bearing interest at 5.70% dated
6/30/98, to be repurchased 7/01/98 in the amount of $9,080,438 and
collateralized by $7,885,000 U.S. Treasury Notes, 7.25% due 5/15/16, value
$ 9,263,645
(cost $9,079,000) $9,079,000 9,079,000
Other assets less liabilities -- 1.66% 3,757,104
------------
Net Assets -- 100.00% $226,093,394
============
</TABLE>
@ Non-income producing security.
@@ Foreign security.
** American Depositary Receipts.
See accompanying notes to financial statements.
6
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NORTHSTAR SPECIAL FUND
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(logo)
LOUIS NAVELLIER
The Markets
o During the first half of 1998, the Dow Industrials were up 13.2%, the S&P
500 rose 16.8%, the NASDAQ Composite was up 20.7%, while the Russell 2000
was up 4.7%.
o After a robust first quarter, the stock market faltered a bit in the
second quarter. However, the stock market started to show some strength at
the end of June, particularly in some of the small and mid cap stocks. The
NASDAQ market continued to show more potential than the S&P 500 as
institutional investors rotated toward smaller growth stocks. Smaller
companies with less international exposure than most large cap issues
began to perform better at the end of the period. The recent wave of
positive economic reports has rubbed off on the analyst community, which
recently revised small cap earnings estimates higher to reflect a stronger
U.S. economy. A consistently low interest rate environment also served to
generate some optimism at the end of the second quarter.
The Fund
o The Fund was up 9.98% for Class A, 9.61% for Class B, 9.58% for Class C
and 9.66% for Class T, compared to the Lipper Small Cap Fund Index which
was up 5.9% and the Russell 2000 Index which was up 4.7% during the first
two quarters of 1998.
o Over the first half, the Fund became more focused on domestic businesses,
avoiding those companies with greater foreign exposure. As a result, the
Fund rotated into finance, home building, and insurance stocks. Overall,
interest rate sensitive securities and retailers were the best performing
stocks for the Fund. Tech stocks continued to falter due to diminishing
overseas sales for many of the larger tech companies resulting from the
increasing strength of the dollar.
o The top performing stocks included: M&T Bank Corp., Catalytica, Fingerhut
Cos., Federal-Mogul Corp. and The Gap, Inc. Amongst the under-performing
stocks were: MTI Technology (sold), VWR Corp. and Keane, Inc. (sold).
Current Strategy
o The current period remains similar to the second and third quarters of
1997, when our stocks benefited from strong institutional buying pressure
as institutional investors started to rotate away from large
capitalization stocks due to deteriorating earnings. Since the earnings
prospects of the S&P 500 remains anemic, the institutional exodus from
large capitalization stocks into mid and small capitalization stocks
should continue. As the second quarter earnings announcements commence in
early July, we expect many stocks to "gap" higher. Small-to-mid
capitalization domestic companies have much better earnings growth over
the large multi-national companies that dominate the S&P 500. The stock
market's trading volume is rising and also serving to propel many stocks
higher. As a result of these factors, the focus of the Special Fund has
tilted towards small and mid cap stocks. The Special Fund currently has a
16% large cap allocation, 42% mid cap allocation and 42% small cap
allocation.
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/98) Total Net Assets $299,417,315
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<S> <C> <C>
1 Costco Cos., Inc. 3.6%
2 Federal-Mogul Corp. 2.7%
3 Fingerhut Cos., Inc. 2.7%
4 Commerce Bancshares, Inc. 2.5%
5 Advo, Inc. 2.4%
6 SBC Communications, Inc. 2.2%
7 Carnival Corp. 2.0%
8 Fruit of the Loom, Inc. 2.0%
9 M & T Bank Corp. 2.0%
10 Mutual Risk Management Ltd. 2.0%
----
o
24.1%
====
</TABLE>
<TABLE>
<CAPTION>
Top 5 Industries
(by percentage of net assets)
<S> <C>
------------
Banks 9.4%
------------
Insurance 6.4%
------------
Retail 6.1%
------------
Home Construction 5.1%
------------
Medical Specialties 3.5%
</TABLE>
<TABLE>
<CAPTION>
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<S> <C> <C> <C>
Inception 5 years 1 year
Class A 16.44% N/A 11.38%
Class B 17.04% N/A 11.09%
Class C 17.48% N/A 15.06%
Class T 10.85% 12.39% 12.21%
Cumulative Total Return
(do not reflect sales charge)
Inception 5 years 1 year
Class A 67.57% N/A 16.92%
Class B 64.10% N/A 16.09%
Class C 63.99% N/A 16.06%
Class T 259.14% 79.35% 16.21%
</TABLE>
7
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
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<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------- -------------- -------------
<S> <C> <C>
Common Stocks -- 72.95%
Advertising -- 2.39%
Advo, Inc.@ 254,400 $ 7,170,900
-----------
Airlines -- 2.74%
America West Holdings Corp. @ 161,000 4,598,563
Midwest Express Holdings, Inc. @ 99,750 3,609,703
-----------
8,208,266
-----------
Auto Parts & Equipment -- 2.70%
Autocam Corp. 5,800 96,425
Federal-Mogul Corp. 118,300 7,985,250
-----------
8,081,675
-----------
Banks -- 9.37%
Associated Banc-Corp. 102,605 3,860,513
Commerce Bancshares, Inc. 151,459 7,393,093
Dime Bancorp, Inc. 168,000 5,029,500
Fifth Third Bancorp. 89,700 5,651,100
M & T Bank Corp. 11,035 6,113,390
-----------
28,047,596
-----------
Building Materials -- 2.95%
Centex Construction Products, Inc. 145,700 5,609,450
Southdown, Inc. 45,000 3,211,875
-----------
8,821,325
-----------
Catalogue/Specialty Distribution -- 2.66%
Fingerhut Cos., Inc. 241,100 7,956,300
-----------
Clothing/Fabric -- 2.40%
Buckle, Inc. @ 60,800 1,793,600
Cato Corp. 310,600 5,406,381
-----------
7,199,981
-----------
Consumer Services -- 0.56%
OroAmerica, Inc. @ 150,000 1,687,500
-----------
Diversified Commerical Services -- 3.37%
Automobile Protection Corp. @ 200,000 1,987,500
Forensic Technologies International Corp. @ 227,400 3,865,800
Nhancement Technologies, Inc. @ 125,000 261,719
Western Staff Services, Inc. @ 215,400 3,984,900
-----------
10,099,919
-----------
Diversified Manufacturing -- 1.25%
Ametek Aerospace Products, Inc. 127,900 3,749,069
-----------
Electric Utilities -- 1.88%
Optek Technology, Inc. @ 100,000 1,912,500
United Illuminating Co. @ 73,500 3,720,937
-----------
5,633,437
-----------
Electrical Equipment -- 0.84%
Bel Fuse, Inc. @ 113,000 2,514,250
-----------
Environmental Control -- 3.04%
Catalytica, Inc. @ 292,500 5,740,312
Eastern Environmental Services, Inc. @ 98,700 3,355,800
-----------
9,096,112
-----------
</TABLE>
8
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
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(logo)
<TABLE>
<CAPTION>
Security Shares Value
- ---------------------------------------- -------------- -------------
<S> <C> <C>
Healthcare/Pharmaceutical -- 1.83%
ICN Pharmaceuticals, Inc. 120,000 $ 5,482,500
-----------
Homebuilders/Home Construction -- 5.06%
Champion Enterprises, Inc. @ 127,900 3,757,063
Ladd Furniture, Inc. @ 80,000 2,400,000
Lennar Corp. 100,000 2,950,000
Standard Pacific Corp. 292,700 6,036,937
-----------
15,144,000
-----------
Hospital/Nursing Management -- 0.61%
Universal Health Services, Inc. @ 31,500 1,838,813
-----------
Hotels/Resorts -- 1.98%
Carnival Corp. 150,000 5,943,750
-----------
Industrial Components -- 2.69%
Gencor Industries, Inc. 183,700 3,696,962
Johnstown America Industries, Inc. @ 250,000 4,343,750
-----------
8,040,712
-----------
Insurance -- 6.43%
Commerce Group, Inc. 121,300 4,700,375
Mercury General Corp. 60,000 3,866,250
Mutual Risk Management Ltd. 161,300 5,877,369
State Auto Financial Corp. 150,500 4,797,187
-----------
19,241,181
-----------
Medical Specialties -- 3.45%
Arterial Vascular Engineering, Inc. @ 50,000 1,787,500
Lincare Holdings, Inc. @ 116,600 4,904,487
Resmed, Inc. @ 3,000 136,688
Safeskin Corp. @ 84,800 3,487,400
-----------
10,316,075
-----------
Medical Supplies -- 1.21%
Hanger Orthopedic Group, Inc. @ 177,500 3,616,562
-----------
Metal Fabrications -- 0.01%
Mobile Mini, Inc. @ 2,500 25,000
-----------
Newspapers -- 1.14%
Hollinger International, Inc. 200,000 3,400,000
-----------
Oilfield Services/Equipment -- 0.82%
Coflexip ** 40,000 2,445,000
-----------
Precision Instruments -- 0.58%
Frequency Electronics, Inc. 138,500 1,739,906
-----------
Printing -- 1.19%
Mail-Well, Inc. @ 164,000 3,556,750
-----------
Retail -- 6.05%
Costco Cos., Inc. @ 169,800 10,708,012
Family Dollar Stores, Inc. 90,000 1,665,000
The Gap, Inc. 93,300 5,749,613
-----------
18,122,625
-----------
Specialty Stores -- 0.03%
Finlay Enterprises, Inc. @ 4,000 96,500
-----------
</TABLE>
9
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
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<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- --------------------------------------------------------------------------- ------------------------- ---------------
<S> <C> <C>
Telecommunications -- 2.23%
SBC Communications, Inc. 166,800 $ 6,672,000
------------
Trucking & Freight -- 0.40%
USA Truck, Inc. @ 75,000 1,209,375
------------
Wholesale Distributors -- 1.09%
VWR Scientific Products Corp. @ 133,100 3,277,588
------------
Total Common Stocks
(cost $184,572,119) 218,434,667
------------
Total Investment Securities -- 72.95%
(cost $184,572,119) 218,434,667
Repurchase Agreement -- 23.16%
Agreement with State Street Bank and Trust bearing interest at 5.70% dated
6/30/98 to be repurchased 7/01/98 at $69,358,980 and collateralized by
$60,210,000 U.S. Treasury Notes, 7.25% due 5/15/16, value $70,737,357
(cost $69,348,000) $69,348,000 69,348,000
Other assets less liabilities -- 3.89% 11,634,648
------------
Net Assets -- 100.00% $299,417,315
============
</TABLE>
@ Non-income producing.
** American Depositary Receipts.
See accompanying notes to financial statements.
10
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
(logo)
THOMAS OLE DIAL
The Markets
o Growth in the U.S. economy accelerated to 5.4% and then cooled to a rate
below 3% in the first half of 1998. Consumer spending at first outweighed
the effects of Asia on our growth, but declining manufacturing has
recently had the stronger impact. Inflation remained well under 2%
throughout those 6 months. Low inflation, slower growth, U.S. budget
surpluses and pursuit of the safety of quality pushed U.S. bond yields to
new lows in the first half. Yields of 10 and 30-year Treasury bonds traded
in about a 50 basis points (bps) range. Their yields ended June at 5.45%
and 5.63%, both down 30 bps. While volatility in economic trends and
expectations in Asia whipsawed markets, bonds and stocks nonetheless rose
during the first half of 1998.
o The Russell 2000 rose 4.7%, compared to a 13.2% rise in the Dow Jones
Industrials and a 16.8% rise in the S&P 500. In the first half of 1998,
high yield bonds returned 4.5% compared to 3.8% for all domestic bonds. In
general, lower-rated bonds outperformed higher-rated bonds in the first
quarter, while the opposite was true in the second quarter. That
corresponded to the changing outlook for Asian and the U.S. rate of
growth.
o Emerging market bonds fell 0.3% in the first half, but dropped 5% in the
second quarter. Foot-dragging in Japan, the collapse of Indonesia's
economy and brewing troubles in Russia were the main causes of the drop.
The Fund
o From January through June 1998, the total return of the Fund's Class A
shares was 7.47%, 7.08% for Class B, 7.06% for Class C, and 7.18% for
Class T; the Lipper average for income funds was 5.85% and for balanced
funds was 8.95%. Despite its outstanding longer-term performance, the
Fund's net assets essentially were unchanged at $60MM in the first half of
1998.
o The Fund's overall performance this year continued the momentum gathered
in 1997. However, while the first quarter was very strong for the Fund,
the second quarter performance was weakened by the Fund's holdings of
small cap stocks and lower-rated bonds. Both of those asset classes at
first benefited from strong domestic growth, but later suffered from
Asia-related credit-quality concerns.
o The second quarter pullback in the stock market caused us to defer sales
that could have reduced the Fund's equity holdings to our steady-state
target of a 50% allocation to common stocks and convertible securities.
Current Strategy
o Invest in securities of strong small and mid cap companies that can
provide income and capital appreciation. To compensate for renewed trading
volatility and credit risk from Asian fallout, we will look for more
medium cap stocks and higher-rated bonds while we implement the target mix
of 50% common stock and convertible securities and 50% bonds and cash.
o Emphasize "bottoms-up" security analysis rather than macroeconomic
analysis in selecting securities. Continue to search the entire capital
structure for opportunities that provide the best risk-adjusted returns.
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/98) Total Net Assets $59,579,159
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<S> <C> <C>
1 Intermedia Communications 3.7%
2 Chancellor Broadcasting 3.0%
3 Time Warner 2.9%
4 Comcast 2.8%
5 Intracel 2.8%
6 American Radio Systems 2.7%
7 Iridium 2.7%
8 Paxson Communications 2.7%
9 AES Corp. 2.6%
10 Star Choice 2.6%
----
28.5%
====
</TABLE>
<TABLE>
<CAPTION>
Top 5 Industries
(by percentage of net assets)
<S> <C>
------------
Telecommunications 16.0%
----------
Broadcasting 12.5%
---------
Cable 11.7%
-----
Healthcare 7.3%
----
Oil & Gas 6.1%
</TABLE>
<TABLE>
<CAPTION>
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<S> <C> <C> <C>
Inception 5 years 1 year
Class A 15.96% N/A 15.17%
Class B 16.55% N/A 15.11%
Class C 16.96% N/A 18.99%
Class T 11.00% 12.54% 16.35%
Cumulative Total Return
(do not reflect sales charge)
Inception 5 years 1 year
Class A 65.46% N/A 20.95%
Class B 62.02% N/A 20.11%
Class C 61.75% N/A 19.99%
Class T 265.01% 80.49% 20.35%
</TABLE>
11
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------- --------------- ------------
<S> <C> <C>
Common Stocks -- 47.13%
Aerospace & Defense -- 0.98%
BE Aerospace, Inc. @ 20,000 $ 582,500
----------
Broadcasting -- 3.03%
Chancellor Media Corp. @ ** 36,364 1,805,700
----------
Cable Television -- 6.69%
Comcast Corp. 40,816 1,656,875
EchoStar Communications Corp. @ 30,000 721,875
Tele-Communications, Inc. @ 19,086 733,618
Viacom, Inc. @ 15,000 873,750
----------
3,986,118
----------
Capital Goods Manufacturing -- 2.69%
Bell & Howell Co. @ 20,000 516,250
Flextronics International Ltd. 25,000 1,087,500
----------
1,603,750
----------
Chemicals -- 0.01%
Pharmerica, Inc. @ 445 5,368
----------
Energy -- 5.01%
AES Corp. @ 30,000 1,576,875
CalEnergy Co., Inc. @ 30,000 901,875
Calpine Corp. @ 25,000 504,687
----------
2,983,437
----------
Entertainment/Film -- 4.49%
News Corp. Ltd. ** 30,000 963,750
Time Warner, Inc. 20,000 1,708,750
----------
2,672,500
----------
Food & Beverage -- 1.24%
Canandaigua Brands, Inc. @ 15,000 737,813
----------
Healthcare -- 4.18%
Healthsouth Corp. @ 30,000 800,625
Intracel Corp.++ 111,000 1,692,750
----------
2,493,375
----------
Leisure -- 0.79%
Silverleaf Resorts, Inc. @ 31,000 472,750
----------
Oil & Gas -- 2.25%
Global Marine, Inc. @ 20,000 373,750
Parker Drilling Co. @ 30,000 211,875
Vintage Petroleum, Inc. 40,000 755,000
----------
1,340,625
----------
Paper -- 0.57%
Asia Pulp & Paper Ltd. ** 30,000 337,500
----------
Services -- 2.15%
Allied Waste Industries, Inc. @ 50,000 1,200,000
Coinstar, Inc. @ 8,750 80,938
----------
1,280,938
----------
Steel -- 0.90%
AK Steel Holding Corp. 30,000 536,250
----------
</TABLE>
12
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- --------------------------------------------------- ------------------------- -------------
<S> <C> <C>
Supermarkets -- 3.92%
Dominick's Supermarkets, Inc. @ 25,000 $ 1,114,062
Safeway, Inc. @ 30,000 1,220,625
-----------
2,334,687
-----------
Telecommunications -- 5.56%
Intermedia Communications, Inc. @ 1,524 63,913
Jacor Communications, Inc. @ 20,000 1,180,000
Telecom-TCI Ventures Group @ 21,828 437,924
Telecomunicacoes Brasileiras SA ** 5,000 545,937
Teleport Communications Group, Inc. @ 20,000 1,085,000
-----------
3,312,774
-----------
Textile/Apparel -- 1.35%
Interface, Inc. 40,000 807,500
-----------
Transportation -- 1.32%
Westinghouse Air Brake Co. 30,000 787,500
-----------
Total Common Stocks
(cost $17,374,581) 28,081,085
-----------
Preferred Stocks -- 4.63%
Broadcasting -- 3.75%
Paxson Communications Corp., 12.50% & 15,100 1,600,600
SFX Broadcasting, Inc., 12.625% & 5,315 635,142
-----------
2,235,742
-----------
Cable Television -- 0.88%
21St Century Telecom Group, Inc., 13.75% & # 5,180 524,475
-----------
Total Preferred Stocks
(cost $2,525,204) 2,760,217
-----------
Convertible Preferred Stocks -- 9.10%
Broadcasting -- 1.76%
Unisite, Inc., 8.50% ++ 21,600 1,047,708
-----------
Broadcasting & Media -- 2.66%
American Radio Systems Corp., 7.00% # 20,000 1,585,120
-----------
Telecommunications -- 4.68%
Intermedia Communication, Inc., 7.00% # (1) 10,000 557,920
Intermedia Communication, Inc., 7.00% # (2) 40,000 2,231,680
-----------
2,789,600
-----------
Total Convertible Preferred Stocks
(cost $3,320,354) 5,422,428
-----------
Domestic Corporate Bonds -- 21.40%
Broadcasting -- 1.31%
Sinclair Broadcast Group, Inc.
9.00%, Sr. Subordinated Notes, 7/15/07 $ 750,000 783,750
-----------
Cable Television -- 1.55%
EchoStar Satellite Broadcasting Corp. $
0/13.125%, Sr. Secured Discount Notes, 3/15/04 1,000,000 925,000
-----------
Computer/Electronics -- 0.75%
Electronic Retailing Systems International, Inc. $
0/13.25%, Sr. Discount Notes, 2/01/04 1,000,000 445,000
-----------
</TABLE>
13
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount Value
- ----------------------------------------- ---------------------- -------------
<S> <C> <C>
Consumer Products -- 1.70%
Packaged Ice, Inc. # $
0/9.75%, Sr. Notes, 2/01/05 $1,000,000 $ 1,012,500
-----------
Healthcare -- 3.10%
Alaris Medical Systems, Inc.
9.75%, Sr. Subordinated Notes, 12/01/06 1,000,000 1,020,000
Mediq, Inc. # $ (3)
0/13.00%, Units, 6/01/09 1,500 825,000
-----------
1,845,000
-----------
Hotel & Gaming -- 1.59%
Aladdin Gaming Corp. $ (4)
0/13.50%, Units, 3/01/10 2,000 950,000
-----------
Oil & Gas -- 1.72%
Forman Petroleum Corp.
13.50%, Company Guarantee, 6/01/04 1,000,000 1,025,000
-----------
Services -- 2.04%
Coinstar, Inc. $
0/13.00%, Sr. Discount Notes, 10/01/06 750,000 661,875
ICF Kaiser International, Inc.
13.00%, Sr. Notes, 12/31/03 500,000 552,500
-----------
1,214,375
-----------
Specialty Retailing -- 0.97%
Pamida, Inc.
11.75%, Sr. Subordinated Notes, 3/15/03 550,000 576,125
-----------
Telecommunications -- 4.96%
Iridium Capital Corp.
13.00%, Sr. Notes, 7/15/05 1,500,000 1,612,500
U.S. Xchange LLC #
15.00%, Sr. Notes, 7/01/08 750,000 774,375
Winstar Equipment II Corp.
12.50%, Company Guarantee, 3/15/04 500,000 567,500
-----------
2,954,375
-----------
Textile/Apparel -- 1.71%
Norton McNaughton, Inc. #
12.50%, Sr. Notes, 6/01/05 1,000,000 1,017,500
-----------
Total Domestic Corporate Bonds
(cost $12,633,496) 12,748,625
-----------
Foreign Corporate Bonds -- 13.38%
Aerospace & Defense -- 1.76%
Derlan Manufacturing, Inc.
10.00%, Sr. Notes, 1/15/07 1,000,000 1,050,000
-----------
Cable Television -- 2.58%
Star Choice Communications
13.00%, Sr. Secured Notes, 12/15/05 1,500,000 1,537,500
-----------
Food/Beverage/Tobacco -- 0.82%
Fage Dairy Industry SA
9.00%, Sr. Notes, 2/01/07 500,000 488,750
-----------
</TABLE>
14
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
(logo)
<TABLE>
<CAPTION>
Security Principal Amount/Shares Value
- --------------------------------------------------------------------- --------------------------- ------------
<S> <C> <C>
Oil & Gas -- 2.08%
Conproca SA #
12.00%, Sr. Secured Notes, 6/16/10 $ 500,000 $ 500,000
Hurricane Hydrocarbons #
11.75%, Sr. Notes, 11/01/04 750,000 738,750
---------
1,238,750
---------
Paper -- 0.74%
APP International Finance Co.
11.75%, Company Guarantee, 10/01/05 500,000 442,500
---------
Services -- 0.88%
Guangzhou Shenzhen Superhighway Holdings
10.25%, Sr. Notes, 8/15/07 750,000 525,000
---------
Shipping -- 2.98%
Equimar Shipholdings Ltd.
9.875%, Company Guarantee, 7/01/07 1,000,000 920,000
Navigator Gas Transport # (5)
12.00%, Units, 6/30/07 750 851,250
---------
1,771,250
---------
Utilities -- 1.54%
Panda Global Energy Co.
12.50%, Company Guarantee, 4/15/04 1,000,000 915,000
---------
Total Foreign Corporate Bonds
(cost $8,141,125) 7,968,750
---------
Convertible Bonds -- 2.31%
Food/Beverage/Tobacco -- 1.81%
International Fast Food Corp. &
11.00%, Sr. Subordinated Notes, 10/31/07 1,500,000 1,076,250
---------
Telecommunications -- 0.50%
SA Telecommunications, Inc. # *
10.00%, Notes, 8/15/06 2,000,000 300,000
---------
Total Convertible Bonds
(cost $3,168,236) 1,376,250
---------
Warrants -- 0.40% @
Cable Television -- 0.00%
21St Century Telecom Group, Inc. #, (expires 2/15/10) 5,000 0
Star Choice Communications, (expires 12/15/05) 34,740 0
---------
0
---------
Computer/Electronics -- 0.02%
Electronic Retailing Systems International, Inc., (expires 2/01/04) 1,000 10,000
---------
Consumer Products -- 0.08%
Packaged Ice, Inc. #, (expires 4/15/04) 500 50,000
---------
Oil & Gas -- 0.02%
Forman Petroleum Corp., (expires 6/01/04) 1,000 10,000
---------
Services -- 0.00%
ICF Kaiser International, Inc., (expires 12/31/99) 3,500 35
---------
</TABLE>
15
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- ---------------------------------------------------------------------- --------------------------- ---------------
<S> <C> <C>
Telecommunications -- 0.28%
Globalstar Telecommunications Ltd., (expires 2/15/04) 500 $ 67,625
Iridium World Communications, Inc. #, (expires 7/25/05) 500 102,500
UNIFI Communications, Inc. #, (expires 2003) 1,000 0
------------
170,125
------------
Total Warrants
(cost $50,517) 240,160
------------
Total Investment Securities -- 98.35%
(cost $47,213,513) 58,597,515
Repurchase Agreement -- 1.10%
Agreement with State Street Bank and Trust bearing interest at 5.70%
dated 6/30/98 to be repurchased 7/01/98 in the amount of $655,104
and collateralized by $570,000 U.S. Treasury Notes 7.25% due 5/15/16,
value $669,661
(cost $655,000) $655,000 655,000
Other assets less liabilities -- 0.55% 326,644
------------
Net Assets -- 100.00% $ 59,579,159
============
</TABLE>
@ Non-Income Producing Security.
** American Depositary Receipts.
++ Private Placement.
& Payment-in-Kind Security.
# Sale restricted to qualified institutional investors.
$ Step Bond.
* Defaulted Security.
(1) Convertible to 1.2853 shares.
(2) Convertible to 0.8269 shares.
(3) A unit consists of $1,000 par value 13.00%, Sr. Notes 6/01/09 and 1
warrant.
(4) A unit consists of $1,000 par value 13.50% Sr. Discount Notes, 3/01/10 and
10 warrants.
(5) A unit consists of $1,000 par value 12.00%, 2nd priority Mortgage Notes,
6/30/07 and 7.66 warrants.
See accompanying notes to financial statements.
16
<PAGE>
NORTHSTAR HIGH YIELD FUND
- ---------------------------------------------------------------------------
(logo)
JEFFREY AURIGEMMA
The Markets
o Growth in the U.S. economy accelerated to 5.4% and then cooled to a rate
below 3% in the first half of 1998. Consumer spending at first outweighed
the effects of Asia on our growth, but declining manufacturing has
recently had the stronger impact. Inflation remained well under 2%
throughout those 6 months. Low inflation, slower growth, U.S. budget
surpluses and pursuit of the safety of quality pushed U.S. bond yields to
new lows in the first half. Yields of 10- and 30-year Treasury bonds
traded in about a 50 basis points (bps) range. Their yields ended June 30,
1998 at 5.45% and 5.63%, both down 30 bps. While volatility in economic
trends and expectations in Asia whipsawed markets, bonds and stocks
nonetheless rose during the first half of 1998.
o In the first half of 1998, high yield bonds returned 4.5% compared to
3.8% for all domestic bonds. In general, lower-rated bonds outperformed
higher-rated bonds in the first quarter, while the opposite was true in
the second quarter. That corresponded to the changing outlook for Asian
and the U.S. rate of growth.
o Emerging market bonds fell 0.3% in the first half, but dropped 5% in the
second quarter. Foot-dragging in Japan, the collapse of Indonesia's
economy and brewing troubles in Russia were the main causes of the drop.
The Fund
o From January to June 1998, the total return of the Fund's Class A, B, C,
and T shares was 4.40%, 4.02%, 3.91% and 4.23%, respectively; the Lipper
average for high yield funds was 4.39%. The Fund's net assets rose by $2MM
to $258MM.
o We continued to position this Fund on the very low-risk end of the high
yield bond spectrum. The Fund underperformed when credit concerns were
low, but it outperformed when investors renewed their search for quality,
resulting in performance right at the average for the period. Other than
putting some more cash to work, the Fund made few net changes in its asset
quality or industry allocations in the first half of 1998.
o The Fund continued to benefit from timely sales of bonds with narrow
spreads over treasuries that did not correspond with their risks. The
Fund's avoidance of zero-coupon bonds and equities helped limit its
volatility in comparison to competitors that have lower quality
portfolios.
Current Strategy
o We will continue to position the Fund as a conservative "all-weather"
high yield fund. The Fund still seeks to outperform when the high-yield
market is declining or volatile, while remaining competitive when that
market is rising or stable.
o The continuing probability of lower interest rates, more signs of slower
U.S. growth due to Asia's problems and continuing investor preferences for
high yields justify continued focus on domestic issues rated Ba/BB.
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/98) Total Net Assets $257,845,797
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<S> <C> <C>
1 Alaris Medical Systems, Inc. 1.9%
2 Tenet Healthcare Corp. 1.8%
3 AES Corp. 1.7%
4 Americo Life, Inc. 1.7%
5 JCAC, Inc. 1.7%
6 SFX Broadcasting, Inc. 1.7%
7 Intracel Corp. 1.6%
8 North Atlantic Trading, Inc. 1.6%
9 Packaged Ice, Inc. 1.6%
10 Roller Bearing Co. America, Inc. 1.5%
----
16.8%
====
</TABLE>
<TABLE>
<CAPTION>
Top 5 Industries
(by percentage of net assets)
<S> <C>
------------
Telecommunications 11.1%
----------
Broadcasting 8.7%
--------
Food/Beverage/
7.1%
Tobacco
-------
Healthcare 6.7%
-------
Oil & Gas 6.1%
</TABLE>
<TABLE>
<CAPTION>
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<S> <C> <C> <C>
Inception 5 years 1 year
Class A 9.50% N/A 4.89%
Class B 9.95% N/A 4.45%
Class C 10.44% N/A 8.32%
Class T 10.83% 9.45% 5.79%
Cumulative Total Return
(do not reflect sales charge)
Inception 5 years 1 year
Class A 38.65% N/A 10.12%
Class B 35.81% N/A 9.45%
Class C 35.64% N/A 9.32%
Class T 154.69% 57.04% 9.79%
</TABLE>
17
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount Value
- ------------------------------------------------ --------------------- -------------
<S> <C> <C>
Domestic Bonds & Notes -- 76.98%
Aerospace & Defense -- 4.03%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 $1,500,000 $ 1,631,250
Aviation Sales Co. #
8.125%, Sr. Subordinated Notes, 2/15/08 2,000,000 1,965,000
BE Aerospace, Inc.
8.00%, Sr. Subordinated Notes, 3/01/08 2,000,000 1,995,000
Compass Aerospace Corp. #
10.125%, Sr. Subordinated Notes, 4/15/05 2,500,000 2,575,000
L 3 Communications Corp.
10.375%, Sr. Subordinated Notes, 5/01/07 2,000,000 2,217,500
-----------
10,383,750
-----------
Airlines -- 1.03%
Atlantic Coast Airlines, Inc. #
8.75%, Pass-Thru Certificates, 1/01/07 2,669,668 2,647,830
-----------
Auto Parts & Equipment -- 1.37%
Titan Wheel International, Inc.
8.75%, Sr. Subordinated Notes, 4/01/07 3,400,000 3,527,500
-----------
Broadcasting -- 7.48%
American Radio Systems Corp.
9.00%, Company Guarantee, 2/01/06 1,500,000 1,620,000
Capstar Broadcasting Partners, Inc.
9.25%, Sr. Subordinated Notes, 7/01/07 2,900,000 3,052,250
JCAC, Inc.
10.125%, Sr. Subordinated Notes, 6/15/06 4,000,000 4,370,000
SFX Broadcasting, Inc.
10.75%, Sr. Subordinated Notes, 5/15/06 4,000,000 4,430,000
Sinclair Broadcast Group, Inc.
8.75%, Sr. Subordinated Notes, 12/15/07 2,800,000 2,898,000
Sinclair Broadcast Group, Inc.
9.00%, Sr. Subordinated Notes, 7/15/07 1,500,000 1,567,500
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 9/30/05 1,250,000 1,346,875
-----------
19,284,625
-----------
Cable Television -- 3.19%
Century Communications Corp.
0%, Sr. Discount Notes, 1/15/08 3,000,000 1,387,500
EchoStar Communications Corp. $
0/12.875%, Sr. Discount Notes, 6/01/04 3,000,000 2,936,250
EchoStar Satellite Broadcasting Corp. $
0/13.125%, Sr. Secured Discount Notes, 3/15/04 1,500,000 1,387,500
Medicom LLC #
8.50%, Sr. Notes, 4/15/08 2,500,000 2,503,125
-----------
8,214,375
-----------
</TABLE>
18
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
(logo)
<TABLE>
<CAPTION>
Security Principal Amount Value
- ------------------------------------------- --------------------- -------------
<S> <C> <C>
Capital Goods Manufacturing -- 3.86%
Indesco International, Inc. #
9.75%, Sr. Subordinated Notes, 4/15/08 $3,000,000 $ 2,970,000
Moll Industries, Inc. #
10.50%, Sr. Subordinated Notes, 7/01/08 3,000,000 3,075,000
Roller Bearing Co. America, Inc.
9.625%, Company Guarantee, 6/15/07 3,850,000 3,917,375
-----------
9,962,375
-----------
Chemicals -- 3.37%
American Pacific Corp. #
9.25%, Sr. Notes, 3/01/05 3,000,000 3,112,500
Hydrochem Industrial Services, Inc.
10.375%, Company Guarantee, 8/01/07 3,500,000 3,587,500
Simcala, Inc. #
9.625%, Sr. Notes, 4/15/06 2,000,000 1,982,500
-----------
8,682,500
-----------
Consumer Products -- 1.57%
Packaged Ice, Inc. #
9.75%, Sr. Notes, 2/01/05 4,000,000 4,050,000
-----------
Energy -- 5.30%
Abraxas Petroleum Corp.
11.50%, Company Guarantee, 11/01/04 2,000,000 2,070,000
AES Corp.
10.25%, Sr. Subordinated Notes, 7/15/06 4,000,000 4,360,000
CalEnergy Co., Inc.
9.50%, Sr. Secured Notes, 9/15/06 1,000,000 1,083,750
California Energy, Inc.
9.875%, Sr. Notes, 6/30/03 1,000,000 1,087,500
California Energy, Inc. $
0/10.25%, Sr. Discount Notes, 1/15/04 2,650,000 2,855,375
Calpine Corp.
10.50%, Sr. Notes, 5/15/06 2,000,000 2,215,000
-----------
13,671,625
-----------
Food/Beverage/Tobacco -- 5.99%
Ameriserve Food Distribution, Inc.
8.875%, Company Guarantee, 10/15/06 2,750,000 2,777,500
Eagle Family Foods, Inc. #
8.75%, Sr. Subordinated Notes, 1/15/08 1,250,000 1,221,875
North Atlantic Trading, Inc.
11.00%, Sr. Notes, 6/15/04 4,000,000 4,040,000
RAB Enterprises, Inc. #
10.50%, Sr. Notes, 5/01/05 500,000 505,000
Richmont Marketing Specialists, Inc. #
10.125%, Sr. Subordinated Notes, 12/15/07 3,350,000 3,417,000
Standard Commercial Corp.
8.875%, Company Guarantee, 8/01/05 3,500,000 3,482,500
-----------
15,443,875
-----------
</TABLE>
19
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount Value
- ------------------------------------------ --------------------- -------------
<S> <C> <C>
Healthcare -- 6.65%
Alaris Medical Systems, Inc.
9.75%, Sr. Subordinated Notes, 12/01/06 $4,750,000 $ 4,845,000
Fisher Scientific International, Inc.
9.00%, Sr. Subordinated Notes, 2/01/08 2,000,000 2,000,000
Health Insurance Plan of Greater New York
11.25%, Notes, 7/01/10 3,000,000 3,210,000
Kinetic Concepts, Inc.
9.625%, Company Guarantee, 11/01/07 2,500,000 2,537,500
Tenet Healthcare Corp. #
8.125%, Sr. Subordinated Notes, 12/01/08 4,500,000 4,545,000
-----------
17,137,500
-----------
Homebuilding -- 0.58%
Engle Homes, Inc. #
9.25%, Company Guarantee, 2/01/08 1,500,000 1,488,750
-----------
Hotel & Gaming -- 1.66%
Courtyard By Marriott Ltd.
10.75%, Sr. Secured Notes, 2/01/08 2,000,000 2,205,000
Hard Rock Hotel, Inc. #
9.25%, Sr. Subordinated Notes, 4/01/05 2,000,000 2,065,000
-----------
4,270,000
-----------
Insurance -- 2.65%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 4,250,000 4,409,375
Superior National Insurance Group, Inc.
10.75%, Company Guarantee, 12/01/17 22,500 2,430,000
-----------
6,839,375
-----------
Manufacturing -- 1.08%
Clark-Schwebel, Inc.
10.50%, Sr. Notes, 4/15/06 2,500,000 2,775,000
-----------
Oil & Gas -- 3.82%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 2,000,000 2,130,000
Forcenergy, Inc.
9.50%, Sr. Subordinated Notes, 11/01/06 3,000,000 3,030,000
HS Resources, Inc.
9.875%, Sr. Subordinated Notes, 12/01/03 1,550,000 1,581,000
Windsor Petroleum Transport Corp. #
7.84%, Notes, 1/15/21 3,500,000 3,115,000
-----------
9,856,000
-----------
Paper -- 2.15%
Buckeye Cellulose Corp.
8.50%, Sr. Subordinated Notes, 12/15/05 2,725,000 2,765,875
SD Warren Co.
12.00%, Sr. Subordinated Notes, 12/15/04 2,500,000 2,781,250
-----------
5,547,125
-----------
</TABLE>
20
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
(logo)
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ------------------------------------------- ------------------------ -------------
<S> <C> <C>
Publishing/Printing -- 2.56%
Garden State Newspapers, Inc.
8.75%, Sr. Subordinated Notes, 10/01/09 $1,000,000 $1,020,000
Hollinger International Publishing, Inc.
9.25%, Company Guarantee, 3/15/07 3,000,000 3,150,000
Liberty Group Operating, Inc.
9.375%, Sr. Subordinated Notes, 2/01/08 2,400,000 2,436,000
----------
6,606,000
----------
Restaurants -- 1.38%
Romacorp, Inc. #
12.00%, Sr. Notes, 7/01/06 3,500,000 3,570,000
----------
Services -- 2.50%
Allied Waste North America, Inc.
10.25%, Sr. Subordinated Notes, 12/01/06 1,500,000 1,651,875
Mastec, Inc. #
7.75%, Sr. Subordinated Notes, 2/01/08 3,000,000 2,872,500
Nebraska Book Co. #
8.75%, Sr. Subordinated Notes, 2/15/08 2,000,000 1,920,000
----------
6,444,375
----------
Shipping -- 0.67%
International Shipholding Corp.
7.75%, Sr. Notes, 10/15/07 1,750,000 1,719,375
----------
Specialty Retailing -- 1.16%
Phillips Van-Heusen Corp. #
9.50%, Sr. Subordinated Notes, 5/01/08 3,000,000 3,000,000
----------
Steel -- 0.69%
Geneva Steel Co.
9.50%, Sr. Notes, 1/15/04 2,000,000 1,790,000
----------
Telecommunications -- 8.67%
Intermedia Communications, Inc. #
8.60%, Sr. Notes, 6/01/08 3,000,000 3,052,500
IXC Communications, Inc. #
9.00%, Sr. Subordinated Notes, 4/15/08 3,000,000 3,022,500
Level 3 Communications, Inc. #
9.125%, Sr. Notes, 5/01/08 3,500,000 3,430,000
Nextlink Communications, Inc. #
9.00%, Sr. Notes, 3/15/08 1,500,000 1,500,000
Nextlink Communications, Inc. # $
0/9.45%, Sr. Discount Notes, 4/15/08 3,500,000 2,161,250
Qwest Communications International, Inc. $
0/9.47%, Sr. Discount Notes, 10/15/07 2,700,000 2,028,375
RCN Corp.
10.00%, Sr. Notes, 10/15/07 2,500,000 2,581,250
RCN Corp. $
0/9.80%, Sr. Discount Notes, 2/15/08 1,500,000 900,000
Viatel, Inc. # (1)
11.25%, Units, 4/15/08 3,500 3,692,500
----------
22,368,375
----------
</TABLE>
21
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount Value
- ----------------------------------------------- ------------------ --------------
<S> <C> <C>
Textile/Apparel -- 0.97%
Worldtex, Inc.
9.625%, Company Guarantee, 12/15/07 $2,500,000 $2,512,500
------------
Transportation -- 2.60%
Sea Containers Ltd.
7.875%, Sr. Notes, 2/15/08 1,300,000 1,290,250
Sea Containers Ltd.
12.50%, Sr. Subordinated Debentures, 12/01/04 2,000,000 2,260,000
Westinghouse Air Brake Co.
9.375%, Sr. Notes, 6/15/05 3,000,000 3,150,000
------------
6,700,250
------------
Total Domestic Bonds & Notes
(cost $192,819,077) 198,493,080
------------
Foreign Bonds & Notes -- 16.31%
Aerospace & Defense -- 1.22%
Derlan Manufacturing, Inc.
10.00%, Sr. Notes, 1/15/07 3,000,000 3,150,000
------------
Broadcasting -- 1.17%
Antenna TV SA
9.00%, Sr. Notes, 8/01/07 3,000,000 3,030,000
------------
Cable Television -- 1.24%
Rogers Cablesystems Ltd.
9.625%, Notes, 8/01/02 3,000,000 3,210,000
------------
Food/Beverage/Tobacco -- 1.14%
Fage Dairy Industry SA
9.00%, Sr. Notes, 2/01/07 3,000,000 2,932,500
------------
Metals & Mining -- 1.34%
Great Central Mines Ltd. #
8.875%, Sr. Notes, 4/01/08 3,500,000 3,447,500
------------
Oil & Gas -- 2.30%
Conproca SA #
12.00%, Sr. Secured Notes, 6/16/10 3,000,000 3,000,000
Northern Offshore ASA #
10.00%, Company Guarantee, 5/15/05 3,000,000 2,925,000
------------
5,925,000
------------
Publishing/Printing -- 1.06%
Newsquest Capital PLC
11.00%, Sr. Subordinated Notes, 5/01/06 2,400,000 2,724,000
------------
Services -- 2.79%
Autopistas Del Sol SA #
10.25%, Sr. Notes, 8/01/09 3,000,000 2,778,750
Guangzhou Shenzhen Superhighway Holdings
10.25%, Sr. Notes, 8/15/07 1,950,000 1,365,000
Intertek Finance PLC
10.25%, Sr. Subordinated Notes, 11/01/06 2,900,000 3,045,000
------------
7,188,750
------------
</TABLE>
22
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
(logo)
<TABLE>
<CAPTION>
Security Principal Amount/Shares Value
- ------------------------------------------------- ------------------------- --------------
<S> <C> <C>
Shipping -- 2.54%
Alpha Shipping PLC #
9.50%, Sr. Notes, 2/15/08 $4,000,000 $3,790,000
Equimar Shipholdings Ltd.
9.875%, Company Guarantee, 7/01/07 3,000,000 2,760,000
-----------
6,550,000
-----------
Telecommunications -- 1.51%
Fonorola, Inc.
12.50%, Sr. Notes, 8/15/02 1,000,000 1,107,500
Rogers Cantel, Inc.
8.80%, Sr. Subordinated Notes, 10/01/07 2,800,000 2,789,500
-----------
3,897,000
-----------
Total Foreign Bonds & Notes
(cost $42,147,591) 42,054,750
-----------
Convertible Preferred Stocks -- 0.88%
Telecommunications -- 0.88%
American Tower Systems Corp., 10.6875% & ++ (2) 22,500 2,272,612
-----------
Total Convertible Preferred Stocks
(cost $2,253,340) 2,272,612
-----------
Preferred Stocks -- 1.62%
Publishing/Printing -- 0.40%
Primedia, Inc., 9.20% 10,000 1,025,000
-----------
Supermarkets -- 1.22%
Nebco Evans Holding Co., 11.25% & 30,796 3,148,891
-----------
Total Preferred Stocks
(cost $4,080,993) 4,173,891
-----------
Rights -- 0.08%
Capital Goods Manufacturing -- 0.08%
Terex Corp., (expires 2000) 8,000 188,000
-----------
Foreign Government Securities -- 0.00%
United Mexican States 1,500,000 0
-----------
Total Rights
(cost $0) 188,000
-----------
Warrants -- 0.06% @
Healthcare -- 0.06%
Intracel Corp. ++, (expires 4/17/03) 49,066 159,465
-----------
Total Warrants
(cost $142,927) 159,465
-----------
Total Investment Securities -- 95.93%
(cost $241,443,928) 247,341,798
-----------
Short Term Investments -- 1.55%
Healthcare -- 1.55%
Intracel ++
12.50%, Bridge Notes, 7/10/98 $4,000,000 4,000,000
-----------
Total Short Term Investments
(cost $4,000,000) 4,000,000
-----------
</TABLE>
23
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------------- --------------------- ---------------
<S> <C> <C>
Repurchase Agreement -- 2.08%
Agreement with State Street Bank and Trust bearing interest at 5.70% dated
6/30/98 to be repurchased 7/01/98 in the amount of $5,370,850 and
collateralized by $4,665,000 U.S. Treasury Notes, 7.25% due 5/15/16, value
$5,480,647
(cost $5,370,000) $5,370,000 $ 5,370,000
Other assets less liabilities -- 0.44% 1,133,999
------------
Net Assets -- 100.00% $257,845,797
============
</TABLE>
# Sale restricted to qualified institutional investors.
$ Step bond.
& Payment-in-kind security.
++ Private Placement.
@ Non-income producing security.
(1) A unit consists of $1,000 par value Sr. Notes, 11.25% due 4/15/08, and
0.483 preferred shares.
(2) Variable rate security. Rate as of June 30,1998.
See accompanying notes to financial statements.
24
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
(logo)
THOMAS OLE DIAL
The Markets
o Growth in the U.S. economy accelerated to 5.4% and then cooled to a rate
below 3% in the first half of 1998. Consumer spending at first outweighed
the effects of Asia on our growth, but declining manufacturing has
recently had the stronger impact. Inflation remained well under 2%
throughout those 6 months. Low inflation, slower growth, U.S. budget
surpluses and pursuit of the safety of quality pushed U.S. bond yields to
new lows in the first half. Yields of 10- and 30-year Treasury bonds
traded in about a 50 basis points (bps) range. Their yields ended June at
5.45% and 5.63%, both down 30 bps. While volatility in economic trends and
expectations in Asia whipsawed markets, bonds and stocks nonetheless rose
during the first half of 1998.
o In the first half of 1998, high yield bonds returned 4.5% compared to
3.8% for all domestic bonds. In general, lower-rated bonds outperformed
higher-rated bonds in the first quarter, while the opposite was true in
the second quarter. That corresponded to the changing outlook for Asian
and the U.S. rate of growth.
o Emerging market bonds fell 0.3% in the first half, but dropped 5% in the
second quarter. Foot-dragging in Japan, the collapse of Indonesia's
economy and brewing troubles in Russia were the main causes of the drop.
The strong U.S. dollar continues to limit the probability of profitably
investing in foreign currency securities.
The Fund
o From January through June 1998, the total return of the Fund's Class A
shares was 0.23%, Class B was (0.14)%, Class C was (0.14)%, and Class T
was (0.09)%; the Lipper average for multi-sector funds was 2.7%. The
Fund's net assets fell 15% from $67MM to $57MM due to its poor
performance.
o The Fund's relative performance was very poor for the entire six months
ended June 30, 1998. Our strategic decisions were undone by radical market
reversals. We did not buy on the rebound in emerging market bonds and we
did not sell before those bonds' prices resumed their decline. We also
sold treasuries and bought lower-quality high yield before market
volatility caused an increased investor preference for quality.
Current Strategy
o Continue to seek attractively priced U.S. dollar-denominated investment
grade corporate bonds and continue to limit the amount of foreign
exposure. We will very cautiously manage emerging market exposure until a
bottom has clearly occurred, after which we will position the Fund to
participate in the above-average returns that a recovery in emerging
market bond prices should generate.
o Despite some stabilization, since emerging markets are still weak,
interest rates are still declining and U.S., growth is slowing, we will
retain the relatively defensive asset allocation targets we adopted last
December: 50% domestic high yield; 20% domestic and foreign investment
grade; 20% U.S. government; and 10% cash. Keep the Fund's duration at 5-6
years and its credit quality at a minimum of BB+.
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/98) Total Net Assets $57,326,152
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<S> <C> <C>
1 Occidente Y Caribe 3.2%
Celular SA
2 WinStar Equipment Corp. 3.2%
3 Malayan Banking Berhad 2.9%
4 Fage Dairy Industry SA 2.6%
5 APP Global Finance Ltd. 2.5%
6 Americo Life, Inc. 2.4%
7 Shop Vac Corp. 2.4%
8 Empresa Electrica Del Norte 2.2%
Grande SA
9 Guangzhou Shenzhen 2.2%
Superhighway Holding
10 Fruit of the Loom, Inc. 2.1%
----
25.7%
====
</TABLE>
<TABLE>
<CAPTION>
Top 5 Sectors
(by percentage of net assets)
<S> <C>
------------
High Yield 64.2%
-----
Cash 12.6%
-----
U.S. Government 9.0%
----
Investment Grade 7.1%
---
Equity 2.2%
</TABLE>
<TABLE>
<CAPTION>
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<S> <C> <C> <C>
Inception 5 years 1 year
Class A 4.68% N/A -5.21%
Class B 5.00% N/A -5.89%
Class C 5.54% N/A -2.14%
Class T 6.88% N/A -4.79%
Cumulative Total Return
(do not reflect sales charge)
Inception 5 years 1 year
Class A 20.81% N/A -0.47%
Class B 18.06% N/A -1.29%
Class C 17.99% N/A -1.22%
Class T 31.47% N/A -1.10%
</TABLE>
25
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount Value
- ------------------------------------------ --------------------- ------------
<S> <C> <C>
Investment Grade Securities -- 7.08%
Foreign Bonds & Notes -- 7.08%
Diversified Financial Services -- 1.29%
Guangdong Enterprises Holding Ltd. #
8.875%, Sr. Notes, 5/22/07 $1,000,000 $ 740,870
----------
Electric Utilities -- 2.21%
Empresa Electrica Del Norte Grande SA #
7.75%, Notes, 3/15/06 1,550,000 1,265,653
----------
Foreign Government Securities -- 1.74%
Banque Centale De Tunisie
7.50%, Notes, 9/19/07 1,000,000 999,570
----------
Oil & Gas -- 1.84%
Bridas Corp.
12.50%, Sr. Notes, 11/15/99 1,000,000 1,052,500
----------
Total Foreign Bonds & Notes 4,058,593
----------
Total Investment Grade Securities
(cost $4,599,575) 4,058,593
----------
High Yield Securities -- 64.24%
Domestic Bonds & Notes -- 44.41%
Airlines -- 2.16%
Atlantic Coast Airlines #
7.97%, Pass-Thru Certificates, 1/01/00 530,778 526,532
Atlantic Coast Airlines, Inc. #
8.75%, Pass-Thru Certificates, 1/01/07 715,090 709,240
----------
1,235,772
----------
Broadcasting -- 1.77%
Chancellor Media Corp.
8.125%, Sr. Subordinated Notes, 12/15/07 1,000,000 1,015,000
----------
Cable Television -- 1.66%
Century Communications Corp.
0%, Sr. Discount Notes, 1/15/08 1,000,000 462,500
EchoStar Communications Corp. $
0/12.875%, Sr. Discount Notes, 6/01/04 500,000 489,375
----------
951,875
----------
Chemicals -- 1.79%
Hydrochem Industrial Services, Inc.
10.375%, Company Guarantee, 8/01/07 1,000,000 1,025,000
----------
Consumer Products -- 3.98%
Packaged Ice, Inc. #
9.75%, Sr. Notes, 2/01/05 900,000 911,250
Shop Vac Corp.
10.625%, Sr. Secured Notes, 9/01/03 1,250,000 1,371,875
----------
2,283,125
----------
Diversified Financial Services -- 1.69%
Natwest Asset Trust Securities
9.585%, Asset Trust, 1/31/03 1,000,000 970,000
----------
Energy -- 1.33%
AES Corp.
8.50%, Sr. Subordinated Notes, 11/01/07 750,000 763,125
----------
</TABLE>
26
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
(logo)
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ------------------------------------------- ------------------------ -------------
<S> <C> <C>
Food/Beverage/Tobacco -- 5.10%
North Atlantic Trading, Inc.
11.00%, Sr. Notes, 6/15/04 $1,000,000 $1,010,000
Richmont Marketing Specialists, Inc. #
10.125%, Sr. Subordinated Notes, 12/15/07 900,000 918,000
Standard Commercial Corp.
8.875%, Company Guarantee, 8/01/05 1,000,000 995,000
----------
2,923,000
----------
Healthcare -- 2.45%
Fisher Scientific International, Inc.
9.00%, Sr. Subordinated Notes, 2/01/08 400,000 400,000
Universal Hospital Services, Inc. #
10.25%, Sr. Notes, 3/01/08 1,000,000 1,005,000
----------
1,405,000
----------
Insurance -- 3.30%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 1,300,000 1,348,750
Superior National Insurance Group, Inc.
10.75%, Company Guarantee, 12/01/17 5,000 540,000
----------
1,888,750
----------
Oil & Gas -- 4.61%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 900,000 958,500
Lomak Petroleum, Inc.
8.75%, Sr. Subordinated Notes, 1/15/07 800,000 794,000
Windsor Petroleum Transport Corp. #
7.84%, Notes, 1/15/21 1,000,000 890,000
----------
2,642,500
----------
Publishing/Printing -- 1.06%
Liberty Group Operating, Inc.
9.375%, Sr. Subordinated Notes, 2/01/08 600,000 609,000
----------
Services -- 1.34%
Mastec, Inc. #
7.75%, Sr. Subordinated Notes, 2/01/08 800,000 766,000
----------
Shipping -- 1.71%
International Shipholding Corp.
7.75%, Sr. Notes, 10/15/07 1,000,000 982,500
----------
Telecommunications -- 6.96%
RCN Corp.
10.00%, Sr. Notes, 10/15/07 1,000,000 1,032,500
RCN Corp. $
0/9.80%, Sr. Discount Notes, 2/15/08 500,000 300,000
Viatel, Inc. # (1)
11.25%, Units, 4/15/08 800 844,000
WinStar Equipment Corp.
12.50%, Company Guarantee, 3/15/04 1,600,000 1,816,000
----------
3,992,500
----------
Textile/Apparel -- 2.11%
Fruit of the Loom, Inc.
6.50%, Notes, 11/15/03 1,250,000 1,210,887
----------
</TABLE>
27
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount/Shares Value
- ----------------------------------------- ------------------------- -------------
<S> <C> <C>
Transportation -- 1.39%
Sea Containers Ltd.
7.875%, Sr. Notes, 2/15/08 $800,000 $794,000
-----------
Total Domestic Bonds & Notes 25,458,034
-----------
Foreign Bonds & Notes -- 19.83%
Diversified Financial Services -- 3.62%
Malayan Banking Berhad-New York
7.125%, Subordinate Notes, 9/15/05 2,000,000 1,647,040
Westways Funding II Ltd. #
22.125%, Mortgage Backed Notes, 1/29/03 500,000 428,750
-----------
2,075,790
-----------
Food/Beverage/Tobacco -- 2.56%
Fage Dairy Industry SA
9.00%, Sr. Notes, 2/01/07 1,500,000 1,466,250
-----------
Foreign Government Securities -- 0.63%
Republic of Korea
8.875%, Unsubordinated Notes, 4/15/08 400,000 361,000
-----------
Paper -- 3.93%
APP Global Finance Ltd.
9.75%, Secured Notes, 10/04/01 2,000,000 1,430,000
APP International Finance BV Co.
8.867%, Notes, 9/15/99 1,000,000 822,500
-----------
2,252,500
-----------
Services -- 2.20%
Guangzhou Shenzhen Superhighway Holdings
10.25%, Sr. Notes, 8/15/07 1,800,000 1,260,000
-----------
Shipping -- 1.20%
Equimar Shipholdings Ltd.
9.875%, Company Guarantee, 7/01/07 750,000 690,000
-----------
Telecommunications -- 5.69%
Colt Telecom Group PLC $
0/12.00%, Sr. Discount Notes, 12/15/06 500,000 395,000
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes, 3/15/04 2,100,000 1,858,500
Telecom Brazil Funding Corp. #
11.4375%, Guaranteed Notes, 12/09/99 1,000,000 1,012,500
-----------
3,266,000
-----------
Total Foreign Bonds & Notes 11,371,540
-----------
Total High Yield Securities
(cost $37,113,698) 36,829,574
-----------
Preferred Stocks -- 1.83%
Supermarkets -- 1.83%
Nebco Evans Holding Co., 11.25% & 10,265 1,049,596
-----------
Total Preferred Stocks
(cost $1,026,964) 1,049,596
-----------
Warrants -- 0.33% @
Consumer Products -- 0.10%
Chattem, Inc., (expires 6/17/99) 500 55,375
-----------
</TABLE>
28
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
(logo)
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- ---------------------------------------------------------------------------- ------------------------- --------------
<S> <C> <C>
Supermarkets -- 0.00%
Dairy Mart Convenience Stores, Inc., (expires 12/01/01) 4,999 $ 3,749
-----------
Telecommunications -- 0.23%
Colt Telecom Group PLC #, (expires 12/31/06) 500 130,125
Occidente Y Caribe Celular SA #, (expires 3/15/04) 9,400 0
UNIFI Communications, Inc. #, (expires 2003) 1,000 0
-----------
130,125
-----------
Total Warrants
(cost $94) 189,249
-----------
U.S. Government and Agencies -- 9.03%
Cityscape Home Loan Owner Trust, 8.17%, due 7/25/18 $800,000 832,592
Federal Home Loan Mortgage Corp., 7.00%, due 1/30/13 - 4/15/28 3,730,871 1,638,190
Fannie Mae Remic, 7.00%, due 2/18/21 2,500,000 414,844
Fannie Mae, 2.94375%, due 9/18/10 10,746,808 147,769
Mego Mortgage Home Loan Trust, 8.01%, due 8/25/23 1,200,000 1,155,684
U.S. Treasury Strips, 0%, due 2/15/23 4,000,000 987,480
-----------
Total U.S. Government and Agencies
(cost $5,212,977) 5,176,559
-----------
Total Investment Securities -- 82.51%
(cost $47,953,308) 47,303,571
Repurchase Agreement -- 12.63%
Agreement with State Street Bank and Trust bearing interest at 5.70% dated
6/30/98 to be repurchased 7/01/98 in the amount of $7,240,146 and
collateralized by $6,285,000 U. S. Treasury Notes, 7.25% due 5/15/16, value
$ 7,383,895
(cost $7,239,000) 7,239,000 7,239,000
Other assets less liabilities -- 4.86% 2,783,581
-----------
Net Assets -- 100.00% $57,326,152
===========
</TABLE>
# Sale restricted to qualify institutional investors.
$ Step Bond.
& Payment-in-kind security.
@ Non-income producing security.
1) A unit consists of $1,000 par value Sr. Notes, 11.25% due 4/15/08 and 0.483
preferred shares.
See accompanying notes to financial statements.
29
<PAGE>
NORTHSTAR GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
JAMES L. MAHNKE
The Markets
o Economic Perspective: We expect the U.S. economy to slow from the first
quarter rate of 5.5% to approximately 2-3% for the remaining quarters.
While the slower growth should help offset the tight labor market, there
is still the potential of wage inflation and a Fed rate hike. However, the
Fed is probably in a "wait and see" mode until the lagged impact of the
Asian and Russian recession's ripples through the U.S. economy.
o Market Perspective: If the Asian and Russian economies continue to
worsen, the "flight-to-quality" rally in bonds will continue with the
30-year yield heading towards 5.25%. However, the surprise may be the
30-year yield heading back up towards 6% as new economic policies and IMF
support begin to stabilize Asia and Russia. Whether this rate rise is
accompanied by a Fed rate hike depends on whether inflation ticks up
significantly. We believe that inflation will remain low and the Fed will
stand pat.
The Fund
o Through June 1998 the total return of the Fund's Class A shares was
3.00%, 2.60% for Class B, 2.57% for Class C, and 2.77% for Class T. The
goal of the Fund continues to be high current income and conservation of
principal.
o The Fund continues to hold mortgage-backed securities, with about 48.61%
of the fund invested in GNMA, FMNA, and FHLMC collateral. The remaining
portions are support bonds of U.S. agency CMO's and U.S. Treasury strips.
Given current prepayment speeds, the average life of the portfolio is 5
years.
Current Strategy
o Given the potential of bigger market swings from the unstable
international economies, we have increased the U.S. Treasury strip
position to improve the Fund's convexity.
o Yet, we continue to overweight the mortgage sector to build a yield
advantage versus U.S. Treasury security yields.
o This combination of yield and convexity advantages should provide
competitive performance and high current income for our investors.
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/98) Total Net Assets $103,232,387
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SEC Average Annual Rates of Return
Top 10 Holdings (at maximum applicable sales charge)
Name % Fund
Inception 5 years 1 year
1 FNMA 5.50%, due 4/01/13 9.4% Class A 5.24% N/A 3.88%
Federal Home Loan Mortgage Class B 5.63% N/A 3.31%
2 6.50%, due 12/20/22 7.3% Class C 6.18% N/A 7.26%
3 FNMA 9.00%, due 6/01/07 6.8% Class T 7.18% 5.25% 4.68%
4 FNMA 11.50%, due 11/01/09 6.2% Cumulative Total Return
5 GNMA 9.00%, due 12/16/26 6.1%
6 FNMA 5.50%, due 7/01/11 5.6%
7 FNMA 6.00%, due 5/01/13 5.6%
Federal Home Loan Mortgage
8 6.50%, due 9/15/24 5.5%
9 FNMA 7.00%, due 8/18/25 4.9%
10 GNMA 7.00%, due 2/15/26 4.8%
----
62.2%
====
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(do not reflect sales charge)
Inception 5 years 1 year
Class A 22.76% N/A 9.00%
Class B 20.31% N/A 8.31%
Class C 20.21% N/A 8.26%
Class T 136.42% 29.13% 8.68%
30
<PAGE>
NORTHSTAR GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
(logo)
<TABLE>
<CAPTION>
Security Principal Amount Value
- ----------------------------------------------------------------------------------- ------------------ ---------------
<S> <C> <C>
U.S. Government and Agencies -- 100.98%
Countrywide Home Loans, Inc., 6.75%, due 4/25/28 $ 2,750,000 $ 2,682,969
Fannie Mae, 5.50%, due 7/01/11 5,913,932 5,758,691
Fannie Mae, 5.50%, due 4/01/13 10,014,132 9,713,708
Fannie Mae, 6.00%, due 5/01/13 5,912,894 5,846,374
Fannie Mae, 7.00%, due 7/25/22 138,264 138,221
Fannie Mae, 7.00%, due 8/18/25 5,000,000 5,095,450
Fannie Mae, 7.10%, due 2/28/11 500,000 500,795
Fannie Mae, 8.50%, due 11/01/09 6,205,597 6,434,459
Fannie Mae, 8.50%, due 8/01/11 4,364,380 4,541,662
Fannie Mae, 9.00%, due 6/01/07 6,758,207 7,015,830
Federal Home Loan Mortgage Corp., 6.00%, due 5/01/13 4,318,116 4,274,935
Federal Home Loan Mortgage Corp., 6.50%, due 12/20/22 7,500,000 7,558,650
Federal Home Loan Mortgage Corp., 6.50%, due 9/15/24 5,700,000 5,714,193
Federal Home Loan Mortgage Corp., 7.00%, due 1/30/13 400,000 399,128
Federal Home Loan Mortgage Corp., 8.00%, due 12/15/21 8,264,112 2,370,230
GNMA, 7.00%, due 9/15/23 4,146,016 4,214,674
GNMA, 7.00%, due 1/15/24 3,007,068 3,067,209
GNMA, 7.00%, due 2/16/24 1,870,000 1,915,965
GNMA, 7.00%, due 1/15/26 4,319,762 4,385,897
GNMA, 7.00%, due 2/15/26 4,881,908 4,956,650
GNMA, 7.50%, due 12/20/20 1,000,000 1,012,010
GNMA, 7.50%, due 1/16/23 5,548,066 1,186,842
GNMA, 7.50%, due 1/20/24 2,200,000 2,253,680
GNMA, 9.00%, due 12/16/26 5,500,000 6,308,225
U.S. Treasury Bonds, Nov 116.15625 Call Option expires 11/24/98 25,000,000 445,300
U.S. Treasury Bonds, Nov 116.3984375 Call Option expires 11/24/98 25,000,000 468,750
U.S. Treasury Bonds, Nov 124 Call Option expires 11/21/98 30,000,000 656,250
U.S. Treasury Bonds, Nov 126 Call Option expires 11/21/98 40,000,000 518,760
U.S. Treasury Strips, 0%, due 2/15/23 19,500,000 4,813,965
------------
104,249,472
------------
Total Investment Securities -- 100.98%
(cost $103,094,877) 104,249,472
------------
Repurchase Agreement -- 0.17%
Agreement with State Street Bank and Trust bearing interest at 5.70% dated 6/30/98
to be repurchased 7/01/98 in the amount of $172,027 and collateralized by
$120,000 U.S. Treasury Notes, 9.875% due 5/15/16, value $175,463
(cost $172,000) 172,000 172,000
Liabilities in excess of other assets -- (1.15%) (1,189,085)
------------
Net Assets -- 100.00% $103,232,387
============
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
NORTHSTAR FUNDS
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Northstar
Growth Special
Fund Fund
--------------- ---------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $148,704,526,
$184,572,119 $47,213,513, $241,443,928,
$47,953,308, and $103,094,877, respectively) $213,257,290 $218,434,667
Short-term securities, at value (cost $0, $0, $0,
$4,000,000, $0, and $0, respectively) 0 0
Repurchase agreements 9,079,000 69,348,000
Cash 54 543
Receivable for investments sold 5,733,826 18,772,562
Dividends and interest receivable 242,134 197,329
Receivable for shares of beneficial interest sold 67,401 317,290
Prepaid expenses 20,028 21,085
------------ ------------
Total Assets 228,399,733 307,091,476
------------ ------------
LIABILITIES:
Payable for investments purchased 1,840,681 2,382,501
Payable for shares of beneficial interest reacquired 159,857 4,685,399
Investment advisory fee payable 135,762 189,373
Distribution fee payable 62,317 211,865
Administrative services fee payable 39,079 110,002
Transfer agent fee payable 8,639 15,688
Tax withholding liability 2,597 0
Liability for options written 0 0
Accrued expenses 57,407 79,333
------------ ------------
Total Liabilities 2,306,339 7,674,161
------------ ------------
NET ASSETS $226,093,394 $299,417,315
============ ============
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of beneficial interest, $0.01
par value outstanding (unlimited shares authorized) $156,561,861 $216,567,924
Undistributed (overdistributed) net investment income (577,081) (1,549,578)
Accumulated net realized gain (loss) on investments,
foreign currency, options, and futures 5,555,866 50,536,421
Net unrealized appreciation (depreciation) of
investments and foreign currency 64,552,748 33,862,548
------------ ------------
Net Assets $226,093,394 $299,417,315
============ ============
Class A:
Net Assets $ 28,099,288 $ 64,932,182
------------ ------------
Shares outstanding 1,189,905 2,126,099
------------ ------------
Net asset value and redemption value per share (net
assets / shares outstanding) $ 23.61 $ 30.54
============ ============
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price) $ 24.79 $ 32.06
============ ============
Class B:
Net Assets $ 11,978,142 $165,016,247
------------ ------------
Shares outstanding 517,031 5,520,862
------------ ------------
Net asset value and offering price per share $ 23.17 $ 29.89
============ ============
Class C:
Net Assets $ 2,464,952 $ 44,163,900
------------ ------------
Shares outstanding 106,519 1,478,309
------------ ------------
Net asset value and offering price per share $ 23.14 $ 29.87
============ ============
Class T:
Net Assets $ 57,227,863 $ 25,304,986
------------ ------------
Shares outstanding 2,459,085 843,991
------------ ------------
Net asset value and offering price per share $ 23.27 $ 29.98
============ ============
Class I:
Net Assets $126,323,149
------------
Shares outstanding 5,315,145
------------
Net asset value and offering price per share $ 23.77
============
<CAPTION>
Northstar Northstar Northstar
Balance Sheet Northstar Strategic Government
Opportunities High Yield Income Securities
Fund Fund Fund Fund
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost $148,704,526,
$184,572,119 $47,213,513, $241,443,928,
$47,953,308, and $103,094,877, respectively) $ 58,597,515 $247,341,798 $ 47,303,571 $ 104,249,472
Short-term securities, at value (cost $0, $0, $0,
$4,000,000, $0, and $0, respectively) 0 4,000,000 0 0
Repurchase agreements 655,000 5,370,000 7,239,000 172,000
Cash 669 387 220 205
Receivable for investments sold 0 0 1,945,375 0
Dividends and interest receivable 479,884 5,255,494 1,109,466 647,889
Receivable for shares of beneficial interest sold 3,555 265,816 6,163 25,696
Prepaid expenses 14,700 17,885 33,127 17,579
------------ ------------ ------------ -------------
Total Assets 59,751,323 262,251,380 57,636,922 105,112,841
------------ ------------ ------------ -------------
LIABILITIES:
Payable for investments purchased 0 3,500,000 0 0
Payable for shares of beneficial interest reacquired 58,672 480,011 188,283 152,373
Investment advisory fee payable 31,561 127,221 31,653 42,983
Distribution fee payable 30,437 171,895 40,928 52,959
Administrative services fee payable 17,466 62,445 15,987 25,159
Transfer agent fee payable 11,617 17,955 3,492 8,057
Tax withholding liability 0 0 0 0
Liability for options written 0 0 0 1,568,363
Accrued expenses 22,411 46,056 30,427 30,560
------------ ------------ ------------ -------------
Total Liabilities 172,164 4,405,583 310,770 1,880,454
------------ ------------ ------------ -------------
NET ASSETS $ 59,579,159 $257,845,797 $ 57,326,152 $ 103,232,387
============ ============ ============ =============
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of beneficial interest, $0.01
par value outstanding (unlimited shares authorized) $ 46,467,687 $249,232,232 $ 63,129,273 $ 121,381,834
Undistributed (overdistributed) net investment income 22,846 (226,530) 171,105 279,018
Accumulated net realized gain (loss) on investments,
foreign currency, options, and futures 1,704,624 2,942,225 (5,324,489) (19,583,060)
Net unrealized appreciation (depreciation) of
investments and foreign currency 11,384,002 5,897,870 (649,737) 1,154,595
------------ ------------ ------------ -------------
Net Assets $ 59,579,159 $257,845,797 $ 57,326,152 $ 103,232,387
============ ============ ============ =============
Class A:
Net Assets $ 21,820,052 $ 22,919,740 $ 12,076,519 $ 31,155,979
------------ ------------ ------------ -------------
Shares outstanding 1,593,232 2,502,717 1,040,990 3,281,638
------------ ------------ ------------ -------------
Net asset value and redemption value per share (net
assets / shares outstanding) $ 13.70 $ 9.16 $ 11.60 $ 9.49
============ ============ ============ =============
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price) $ 14.38 $ 9.62 $ 12.18 $ 9.96
============ ============ ============ =============
Class B:
Net Assets $ 5,419,034 $119,068,705 $ 26,517,258 $ 16,881,230
------------ ------------ ------------ -------------
Shares outstanding 397,306 12,990,493 2,287,013 1,774,312
------------ ------------ ------------ -------------
Net asset value and offering price per share $ 13.64 $ 9.17 $ 11.59 $ 9.51
============ ============ ============ =============
Class C:
Net Assets $ 862,381 $ 22,341,288 $ 3,052,930 $ 1,654,949
------------ ------------ ------------ -------------
Shares outstanding 63,195 2,438,073 263,624 174,266
------------ ------------ ------------ -------------
Net asset value and offering price per share $ 13.65 $ 9.16 $ 11.58 $ 9.50
============ ============ ============ =============
Class T:
Net Assets $ 31,477,692 $ 93,516,064 $ 15,679,445 $ 53,540,229
------------ ------------ ------------ -------------
Shares outstanding 2,290,962 10,212,258 1,352,019 5,630,774
------------ ------------ ------------ -------------
Net asset value and offering price per share $ 13.74 $ 9.16 $ 11.60 $ 9.51
============ ============ ============ =============
Class I:
Net Assets
Shares outstanding
Net asset value and offering price per share
</TABLE>
Redemption price per share varies with the length of time Class B, C, and T
shares are held.
See accompanying notes to financial statements.
32
<PAGE>
NORTHSTAR FUNDS
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------
(logo)
<TABLE>
<CAPTION>
Northstar Northstar
Growth Special
Fund Fund
-------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of $0, $0, 0, $1,659,
$6,344, and $21,551, respectively) $ 942,796 $ 1,127,712
Interest (net of withholding tax of $0, $0, $0, $0, $0,
and $0, respectively) 36,417 616,027
----------- --------------
Total investment income 979,213 1,743,739
----------- --------------
EXPENSES:
Investment advisory and management fees 822,282 1,233,450
Distribution fees
Class A 19,999 110,478
Class B 52,688 869,991
Class C 6,634 253,491
Class T 343,612 145,214
Transfer agent fees and expenses
Class A 5,280 50,506
Class B 7,519 145,303
Class C 962 49,586
Class T 41,221 16,957
Class I 16,441 0
Administration service fees 130,338 248,870
Accounting and custodian fees 30,933 50,100
Printing and postage expenses 27,913 43,863
Registration fees 22,007 25,993
Audit fees 9,348 14,286
Trustee fees 5,655 12,369
Miscellaneous expenses 13,462 22,860
----------- --------------
1,556,294 3,293,317
Less expenses waived by management company 0 0
----------- --------------
Total expenses 1,556,294 3,293,317
----------- --------------
Net investment (loss) income (577,081) (1,549,578)
----------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments and options 8,239,762 44,732,297
Net realized gain on foreign currency 33 0
Net change in unrealized appreciation (depreciation) of
investments 15,089,341 (13,340,816)
Net change in unrealized depreciation of foreign currency (126) 0
----------- --------------
Net realized and unrealized gain (loss) on
investments 23,329,010 31,391,481
----------- --------------
Increase in net assets resulting from operations $22,751,929 $ 29,841,903
=========== ==============
<CAPTION>
Northstar Northstar Northstar
Balance Sheet Northstar Strategic Government
Opportunities High Yield Income Securities
Fund Fund Fund Fund
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of $0, $0, 0, $1,659,
$6,344, and $21,551, respectively) $ 268,530 $ 256,459 $ 53,689 $ 0
Interest (net of withholding tax of $0, $0, $0, $0, $0,
and $0, respectively) 1,344,367 11,717,832 2,842,577 3,997,067
---------- ------------ ------------- -------------
Total investment income 1,612,897 11,974,291 2,896,266 3,997,067
---------- ------------ ------------- -------------
EXPENSES:
Investment advisory and management fees 196,798 771,845 201,873 338,923
Distribution fees
Class A 6,551 26,627 17,298 9,063
Class B 26,560 569,940 142,851 77,352
Class C 4,210 110,131 18,776 4,303
Class T 187,620 336,428 86,722 266,211
Transfer agent fees and expenses
Class A 3,406 11,111 6,580 1,252
Class B 3,200 78,086 20,424 9,456
Class C 569 15,323 2,492 584
Class T 30,962 61,996 10,642 45,613
Class I 0 0 0 0
Administration service fees 42,657 169,541 42,017 67,962
Accounting and custodian fees 16,532 40,809 18,582 21,817
Printing and postage expenses 9,887 22,334 7,791 13,645
Registration fees 22,284 23,246 19,977 17,646
Audit fees 11,201 11,166 12,145 11,223
Trustee fees 5,288 5,893 5,373 5,493
Miscellaneous expenses 6,289 19,356 18,173 10,942
---------- ------------ ------------- -------------
574,014 2,273,832 631,716 901,485
Less expenses waived by management company 0 0 0 78,213
---------- ------------ ------------- -------------
Total expenses 574,014 2,273,832 631,716 823,272
---------- ------------ ------------- -------------
Net investment (loss) income 1,038,883 9,700,459 2,264,550 3,173,795
---------- ------------ ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments and options 447,130 5,402,333 (1,612,202) 936,569
Net realized gain on foreign currency 0 0 0 0
Net change in unrealized appreciation (depreciation) of
investments 2,777,814 (4,704,097) (649,259) (1,232,742)
Net change in unrealized depreciation of foreign currency 0 0 0 0
---------- ------------ ------------- -------------
Net realized and unrealized gain (loss) on
investments 3,224,944 698,236 (2,261,461) (296,173)
---------- ------------ ------------- -------------
Increase in net assets resulting from operations $4,263,827 $ 10,398,695 $ 3,089 $ 2,877,622
========== ============ ============= =============
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
NORTHSTAR FUNDS
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Northstar
Growth
Fund
----------------------------------
1998(1) 1997
---------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment (loss) income $ (577,081) $ (608,762)
Net realized gain on investments 8,239,762 5,123,066
Net realized gain (loss) on foreign currency 33 (189)
Net change in unrealized appreciation (depreciation)
of investments 15,089,341 32,606,026
Net change in unrealized (depreciation) appreciation
of foreign currency (126) 110
------------- ---------------
Increase in net assets resulting from operations 22,751,929 37,120,251
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A 0 0
Class B 0 0
Class C 0 0
Class T 0 0
Net realized gain from investments 0 (7,933,911)
Tax return of capital 0 (37,894)
------------- ---------------
Total distributions 0 (7,971,805)
------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 24,827,317 196,893,147
Net asset value of shares issued to shareholders
in reinvestment of distributions 0 7,655,103
------------- ---------------
24,827,317 204,548,250
Cost of shares redeemed (27,990,255) (107,156,780)
------------- ---------------
Net (decrease) increase in net assets derived from
capital share transactions (3,162,938) 97,391,470
------------- ---------------
Net increase (decrease) in net assets 19,588,991 126,539,916
NET ASSETS:
Beginning of period 206,504,403 79,964,487
------------- ---------------
End of period $ 226,093,394 $ 206,504,403
============= ===============
Undistributed net Investment Income (loss): $ (577,081) $ 0
============= ===============
<CAPTION>
Northstar
Northstar Balance Sheet
Special Opportunities
Fund Fund
--------------------------------- ---------------------------------
1998(1) 1997 1998(1) 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment (loss) income $ (1,549,578) $ (1,848,388) $ 1,038,883 $ 2,250,256
Net realized gain on investments 44,732,297 19,011,083 447,130 4,221,598
Net realized gain (loss) on foreign currency 0 0 0 0
Net change in unrealized appreciation (depreciation)
of investments (13,340,816) 24,201,023 2,777,814 6,464,152
Net change in unrealized (depreciation) appreciation
of foreign currency 0 0 0 0
------------- ------------- -------------- --------------
Increase in net assets resulting from operations 29,841,903 41,363,718 4,263,827 12,936,006
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A 0 0 (250,033) (47,893)
Class B 0 0 (87,177) (159,749)
Class C 0 0 (13,677) (23,637)
Class T 0 0 (666,315) (2,022,072)
Net realized gain from investments 0 (7,264,148) 0 (4,444,574)
Tax return of capital 0 0 0 0
------------- ------------- -------------- --------------
Total distributions 0 (7,264,148) (1,017,202) (6,697,925)
------------- ------------- -------------- --------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 24,349,868 112,190,424 21,406,715 1,854,297
Net asset value of shares issued to shareholders
in reinvestment of distributions 0 4,759,317 821,075 5,716,874
------------- ------------- -------------- --------------
24,349,868 116,949,741 22,227,790 7,571,171
Cost of shares redeemed (86,710,062) (84,645,169) (26,102,056) (18,329,438)
------------- ------------- -------------- --------------
Net (decrease) increase in net assets derived from
capital share transactions (62,360,194) 32,304,572 (3,874,266) (10,758,267)
------------- ------------- -------------- --------------
Net increase (decrease) in net assets (32,518,291) 66,404,142 (627,641) (4,520,186)
NET ASSETS:
Beginning of period 331,935,606 265,531,464 60,206,800 64,726,986
------------- ------------- -------------- --------------
End of period $ 299,417,315 $ 331,935,606 $ 59,579,159 $ 60,206,800
============= ============= ============== ==============
Undistributed net Investment Income (loss): $ (1,549,578) $ 0 $ 22,846 $ 1,165
============= ============= ============== ==============
</TABLE>
(1) Unaudited See accompanying notes to financial statements.
34
<PAGE>
NORTHSTAR FUNDS
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(logo)
<TABLE>
<CAPTION>
Northstar
High Yield
Fund
---------------------------------
1998(1) 1997
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 9,700,459 $ 18,548,793
Net realized gain (loss) on investments 5,402,333 7,107,354
Net realized loss on foreign currency 0 0
Net change in unrealized (depreciation) appreciation
of investments (4,704,097) (977,429)
Net change in unrealized appreciation of foreign
currency 0 0
------------- -------------
Increase in net assets resulting from operations 10,398,695 24,678,718
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (736,759) (1,210,886)
Class B (4,303,473) (7,343,871)
Class C (829,049) (1,360,819)
Class T (4,057,708) (9,450,916)
------------- -------------
Total distributions (9,926,989) (19,366,492)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 28,177,683 56,719,815
Net asset value of shares issued to shareholders in
reinvestment of distributions 3,916,816 7,905,559
------------- -------------
32,094,499 64,625,374
Cost of shares redeemed (30,114,967) (45,594,760)
------------- -------------
Net increase (decrease) in net assets derived from
capital share transactions 1,979,532 19,030,614
------------- -------------
Net increase (decrease) in net assets 2,451,238 24,342,840
NET ASSETS:
Beginning of period 255,394,559 231,051,719
------------- -------------
End of period $ 257,845,797 $ 255,394,559
============= =============
Undistributed (overdistributed) net Investment
Income: $ (226,530) $ 0
============= =============
<CAPTION>
Northstar Northstar
Strategic Income Government Securities
Fund Fund
--------------------------------- -------------------------------
1998(1) 1997 1998(1) 1997
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 2,264,550 $ 5,233,844 $ 3,173,795 $ 7,013,941
Net realized gain (loss) on investments (1,612,202) (432,671) 936,569 (1,786,143)
Net realized loss on foreign currency 0 (519,631) 0 0
Net change in unrealized (depreciation) appreciation
of investments (649,259) (2,789,807) (1,232,742) 2,710,567
Net change in unrealized appreciation of foreign
currency 0 2,508 0 0
-------------- -------------- ------------- -------------
Increase in net assets resulting from operations 3,089 1,494,243 2,877,622 7,938,365
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (456,579) (994,522) (221,674) (485,879)
Class B (1,023,009) (2,119,682) (471,508) (636,837)
Class C (131,846) (301,283) (27,103) (46,684)
Class T (657,868) (1,622,631) (2,564,947) (6,221,820)
-------------- -------------- ------------- -------------
Total distributions (2,269,302) (5,038,118) (3,285,232) (7,391,220)
-------------- -------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 6,486,474 13,363,625 36,292,176 7,045,182
Net asset value of shares issued to shareholders in
reinvestment of distributions 1,023,619 2,272,119 2,164,500 4,869,989
-------------- -------------- ------------- -------------
7,510,093 15,635,744 38,456,676 11,915,171
Cost of shares redeemed (14,929,864) (24,677,925) (40,544,505) (43,326,996)
-------------- -------------- ------------- -------------
Net increase (decrease) in net assets derived from
capital share transactions (7,419,771) (9,042,181) (2,087,829) (31,411,825)
-------------- -------------- ------------- -------------
Net increase (decrease) in net assets (9,685,984) (12,586,056) (2,495,439) (30,864,680)
NET ASSETS:
Beginning of period 67,012,136 79,598,192 105,727,826 136,592,506
-------------- -------------- ------------- -------------
End of period $ 57,326,152 $ 67,012,136 $ 103,232,387 $ 105,727,826
============== ============== ============= =============
Undistributed (overdistributed) net Investment
Income: $ 171,105 $ 175,857 $ 279,018 $ 390,455
============== ============== ============= =============
</TABLE>
(1) Unaudited
See accompanying notes to financial statements.
35
<PAGE>
NORTHSTAR FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net realized Dividends Distributions
Net Asset & unrealized Total declared declared
Value, Net gain (loss) from from net from net
Period beginning investment on investment investment realized Distributions
ended of period income investments operations income gain from Capital
- ---------------- ----------- ------------ -------------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Growth Fund, Class A
6/30/98(2) $ 21.26 $ (0.02) $ 2.37 $ 2.35 -- -- --
12/31/97 17.92 0.03 4.16 4.19 -- (0.85) --
12/31/96 15.53 0.02 3.18 3.20 -- (0.81) --
6/05/95-
12/31/95 17.59 0.08 1.95 2.03 (0.10) (3.99) --
Growth Fund, Class B
6/30/98(2) 20.93 (0.12) 2.36 2.24 -- -- --
12/31/97 17.76 (0.15) 4.17 4.02 -- (0.85) --
12/31/96 15.50 (0.06) 3.13 3.07 -- (0.81) --
6/05/95-
12/31/95 17.59 0.06 1.92 1.98 (0.08) (3.99) --
Growth Fund, Class C
6/30/98(2) 20.91 (0.07) 2.30 2.23 -- -- --
12/31/97 17.76 (0.13) 4.13 4.00 -- (0.85) --
12/31/96 15.50 (0.05) 3.12 3.07 -- (0.81) --
6/05/95-
12/31/95 17.59 0.04 1.92 1.96 (0.06) (3.99) --
Growth Fund, Class T
6/30/98(2) 21.02 (0.17) 2.42 2.25 -- -- --
12/31/97 17.82 (0.17) 4.22 4.05 -- (0.85) --
12/31/96 15.53 (0.06) 3.16 3.10 -- (0.81) --
12/31/95 15.75 0.07 3.77 3.84 (0.07) (3.99) --
12/31/94 17.33 0.08 (1.41) (1.33) (0.08) (0.15) (0.02)
12/31/93 16.36 0.02 1.67 1.69 (0.04) (0.67) (0.01)
12/31/92 16.37 0.02 1.30 1.32 (0.02) (1.31) --
12/31/91 12.49 0.09 4.62 4.71 (0.08) (0.75) --
12/31/90 13.85 0.10 (0.83) (0.73) (0.10) (0.51) (0.02)
Growth Fund, Class I
6/30/98(2) 21.36 (0.01) 2.42 2.41 -- -- --
3/31/97-
12/31/97 17.90 0.01 4.30 4.31 -- (0.85) --
Special Fund, Class A
6/30/98(2) 27.77 0.09 2.68 2.77 -- -- --
12/31/97 24.72 (0.02) 3.68 3.66 -- (0.61) --
12/31/96 20.92 (0.04) 3.84 3.80 -- -- --
6/05/95-
12/31/95 19.56 (0.09) 2.48 2.39 -- (1.03) --
Special Fund, Class B
6/30/98(2) 27.27 (0.17) 2.79 2.62 -- -- --
12/31/97 24.46 (0.19) 3.61 3.42 -- (0.61) --
12/31/96 20.84 (0.12) 3.74 3.62 -- -- --
6/05/95-
12/31/95 19.56 (0.12) 2.43 2.31 -- (1.03) --
Special Fund, Class C
6/30/98(2) 27.26 (0.20) 2.81 2.61 -- -- --
12/31/97 24.46 (0.20) 3.61 3.41 -- (0.61) --
12/31/96 20.84 (0.13) 3.75 3.62 -- -- --
6/05/95-
12/31/95 19.56 (0.15) 2.46 2.31 -- (1.03) --
Special Fund, Class T
6/30/98(2) 27.34 (0.19) 2.83 2.64 -- -- --
12/31/97 24.48 (0.18) 3.65 3.47 -- (0.61) --
12/31/96 20.84 (0.21) 3.85 3.64 -- -- --
12/31/95 19.64 (0.34) 2.57 2.23 -- (1.03) --
12/31/94 20.79 (0.25) (0.76) (1.01) -- (0.14) --
12/31/93 17.40 (0.32) 3.83 3.51 -- (0.12) --
12/31/92 15.74 (0.33) 2.61 2.28 -- (0.62) --
12/31/91 10.64 (0.21) 6.24 6.03 -- (0.93) --
12/31/90 11.67 (0.20) (0.83) (1.03) -- -- --
Balance Sheet Opportunities Fund, Class A
6/30/98(2) 13.00 0.23 0.74 0.97 (0.27) -- --
12/31/97 11.78 0.52 2.27 2.79 (0.54) (1.03) --
12/31/96 12.53 0.56 0.74 1.30 (0.57) (1.48) --
6/05/95-
12/31/95 12.77 0.43 1.06 1.49 (0.48) (1.25) --
Balance Sheet Opportunities Fund, Class B
6/30/98(2) 12.94 0.22 0.70 0.92 (0.22) -- --
12/31/97 11.74 0.44 2.25 2.69 (0.46) (1.03) --
12/31/96 12.51 0.50 0.71 1.21 (0.50) (1.48) --
6/05/95-
12/31/95 12.77 0.35 1.09 1.44 (0.45) (1.25) --
Balance Sheet Opportunities Fund, Class C
6/30/98(2) 12.95 0.22 0.70 0.92 (0.22) -- --
12/31/97 11.75 0.43 2.25 2.68 (0.45) (1.03) --
12/31/96 12.52 0.49 0.70 1.19 (0.48) (1.48) --
6/05/95-
12/31/95 12.77 0.38 1.07 1.45 (0.45) (1.25) --
Balance Sheet Opportunities Fund, Class T
6/30/98(2) 13.01 0.32 0.63 0.95 (0.22) -- --
12/31/97 11.79 0.50 2.24 2.74 (0.49) (1.03) --
12/31/96 12.54 0.53 0.73 1.26 (0.53) (1.48) --
12/31/95 11.54 0.57 2.27 2.84 (0.59) (1.25) --
12/31/94 12.94 0.57 (1.25) (0.68) (0.54) (0.16) (0.02)
12/31/93 12.05 0.49 1.20 1.69 (0.49) (0.31) --
12/31/92 11.66 0.55 0.36 0.91 (0.52) -- --
12/31/91 10.13 0.57 1.53 2.10 (0.57) -- --
12/31/90 10.71 0.61 (0.54) 0.07 (0.63) -- (0.02)
<CAPTION>
Net Net Ratio of Ratio of Ratio of net
Asset Assets, expenses expense investment
Value, end of to average reimbursement income to
Period Total end of Total period net to average average Portfolio
ended Distributions period Return (000's) assets(1) net assets(1) net assets(1) turnover
- ---------------- ----------------- ----------- ----------- ---------- ------------ --------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/98(2) -- $ 23.61 11.05% $ 28,099 1.34% -- (0.32)% 12%
12/31/97 ( 0.85) 21.26 23.59 9,334 1.37 0.03 0.04 32
12/31/96 ( 0.81) 17.92 20.54 4,750 1.50 0.06 0.11 62
6/05/95-
12/31/95 ( 4.09) 15.53 11.55 1,355 1.42 -- 0.63 134
6/30/98(2) -- 23.17 10.70 11,978 2.11 -- (1.21) 12
12/31/97 ( 0.85) 20.93 22.84 8,815 2.14 -- (0.95) 32
12/31/96 ( 0.81) 17.76 19.74 4,444 2.20 0.04 (0.55) 62
6/05/95-
12/31/95 ( 4.07) 15.50 11.27 1,987 2.07 -- 0.06 134
6/30/98(2) -- 23.14 10.66 2,465 2.12 -- (1.17) 12
12/31/97 ( 0.85) 20.81 22.73 1,152 2.17 -- (1.00) 32
12/31/96 ( 0.81) 17.76 19.74 365 2.20 0.15 (0.57) 62
6/05/95-
12/31/95 ( 4.05) 15.50 11.17 69 2.11 -- 0.02 134
6/30/98(2) -- 23.27 10.70 57,228 2.03 -- (1.17) 12
12/31/97 ( 0.85) 21.02 22.94 73,674 2.03 -- (0.81) 32
12/31/96 ( 0.81) 17.82 19.90 70,406 2.00 0.04 (3.05) 62
12/31/95 ( 4.06) 15.53 24.40 76,343 2.00 -- 0.37 134
12/31/94 ( 0.25) 15.75 (7.66) 76,391 2.00 -- 0.49 54
12/31/93 ( 0.72) 17.33 10.36 80,759 2.04 -- 0.13 42
12/31/92 ( 1.33) 16.36 8.05 56,759 2.15 -- 0.09 47
12/31/91 ( 0.83) 16.37 38.10 40,884 2.25 -- 0.66 64
12/31/90 ( 0.63) 12.49 (5.24) 24,927 2.33 -- 0.80 54
6/30/98(2) -- 23.77 11.28 126,323 1.00 -- (0.10) 12
3/31/97-
12/31/97 ( 0.85) 21.36 24.29 113,529 1.02 -- 0.08 32
6/30/98(2) -- 30.54 9.98 64,932 1.44 -- (0.38) 54
12/31/97 ((0.61) 27.77 14.92 78,160 1.43 -- (0.07) 175
12/31/96 -- 24.72 18.16 65,660 1.46 0.01 (0.30) 140
6/05/95-
12/31/95 ( 1.03) 20.92 12.20 2,335 1.50 -- (0.91) 71
6/30/98(2) -- 29.89 9.61 165,016 2.17 -- (1.11) 54
12/31/97 ( 0.61) 27.27 14.10 169,516 2.15 -- (0.78) 175
12/31/96 -- 24.46 17.37 126,859 2.17 0.01 (1.01) 140
6/05/95-
12/31/95 ( 1.03) 20.84 11.79 1,491 2.20 0.01 (1.64) 71
6/30/98(2) -- 29.87 9.58 44,164 2.20 -- (1.15) 54
12/31/97 ( 0.61) 27.26 14.06 51,460 2.18 -- (0.82) 175
12/31/96 -- 24.46 17.37 37,342 2.20 0.01 (1.03) 140
6/05/95-
12/31/95 ( 1.03) 20.84 11.79 62 2.20 0.03 (1.60) 71
6/30/98(2) -- 29.98 9.66 25,305 2.07 -- (1.03) 54
12/31/97 ( 0.61) 27.34 14.29 32,800 1.99 -- (0.62) 175
12/31/96 -- 24.48 17.47 35,670 2.07 0.04 (0.89) 140
12/31/95 ( 1.03) 20.84 11.34 33,557 2.16 -- (1.50) 71
12/31/94 ( 0.14) 19.64 (4.86) 38,848 2.16 -- (1.25) 39
12/31/93 ( 0.12) 20.79 20.16 28,838 2.34 -- (1.66) 35
12/31/92 ( 0.62) 17.40 14.54 11,336 2.84 -- (2.12) 40
12/31/91 ( 0.93) 15.74 57.27 5,480 2.95 0.74 (1.57) 85
12/31/90 -- 10.64 (8.83) 3,024 2.95 2.03 (0.97) 72
6/30/98(2) ( 0.27) 13.70 7.47 21,820 1.59 -- 3.13 24
12/31/97 ( 1.57) 13.00 24.31 1,281 1.50 0.02 4.01 130
12/31/96 ( 2.05) 11.78 10.54 1,100 1.40 0.09 4.30 107
6/05/95-
12/31/95 ( 1.73) 12.53 11.95 797 1.27 -- 4.99 131
6/30/98(2) ( 0.22) 13.64 7.08 5,419 2.15 -- 3.18 24
12/31/97 ( 1.49) 12.94 23.48 4,969 2.15 0.02 3.37 130
12/31/96 ( 1.98) 11.74 9.76 3,765 2.10 0.07 3.64 107
6/05/95-
12/31/95 ( 1.70) 12.51 11.56 1,759 1.95 -- 4.38 131
6/30/98(2) ( 0.22) 13.65 7.06 862 2.16 -- 3.16 24
12/31/97 ( 1.48) 12.95 23.41 756 2.25 -- 3.30 130
12/31/96 ( 1.96) 11.75 9.72 372 2.10 0.10 3.61 107
6/05/95-
12/31/95 ( 1.70) 12.52 11.49 231 1.91 -- 4.49 131
6/30/98(2) ( 0.22) 13.74 7.18 31,478 1.89 -- 3.49 24
12/31/97 ( 1.52) 13.01 23.91 53,201 1.83 0.04 3.70 130
12/31/96 ( 2.01) 11.79 10.18 59,490 1.69 0.06 3.99 107
12/31/95 ( 1.84) 12.54 25.11 72,472 1.68 -- 4.44 131
12/31/94 ( 0.72) 11.54 (5.33) 73,764 1.69 -- 4.36 59
12/31/93 ( 0.80) 12.94 14.08 80,841 1.77 -- 3.99 38
12/31/92 ( 0.52) 12.05 8.06 56,823 2.02 -- 4.73 59
12/31/91 ( 0.57) 11.66 21.17 49,367 2.06 -- 5.21 77
12/31/90 ( 0.65) 10.13 0.78 44,750 2.10 -- 5.73 57
</TABLE>
(1) Annualized
(2) Unaudited
See accompanying notes to financial statements.
36
<PAGE>
NORTHSTAR FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD -- (CONTINUED)
- --------------------------------------------------------------------------------
(logo)
<TABLE>
<CAPTION>
Net realized Dividends Distributions
Net Asset & unrealized Total declared declared
Value, Net gain (loss) from from net from net
Period beginning investment on investment investment realized Distributions
ended of period income investments operations income gain from Capital
- ---------------- ----------- ------------ -------------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
High Yield Fund, Class A
6/30/98(2) $ 9.14 $ 0.37 $ 0.03 $ 0.40 $ (0.38) -- --
12/31/97 8.94 0.73 0.23 0.96 (0.76) -- --
12/31/96 8.56 0.76 0.44 1.20 (0.75) -- (0.07)
12/31/95 8.68 0.48 (0.10) 0.38 (0.50) -- --
High Yield Fund, Class B
6/30/98(2) 9.15 0.34 0.03 0.37 (0.35) -- --
12/31/97 8.95 0.67 0.23 0.90 (0.70) -- --
12/31/96 8.57 0.71 0.43 1.14 (0.69) -- (0.07)
12/31/95 8.68 0.44 (0.09) 0.35 (0.46) -- --
High Yield Fund, Class C
6/30/98(2) 9.15 0.34 0.01 0.35 (0.34) -- --
12/31/97 8.95 0.67 0.23 0.90 (0.70) -- --
12/31/96 8.57 0.72 0.42 1.14 (0.69) -- (0.07)
12/31/95 8.68 0.44 (0.09) 0.35 (0.46) -- --
High Yield Fund, Class T
6/30/98(2) 9.14 0.35 0.03 0.38 (0.36) -- --
12/31/97 8.94 0.71 0.23 0.94 (0.74) -- --
12/31/96 8.56 0.73 0.45 1.18 (0.73) -- (0.07)
12/31/95 8.29 0.84 0.26 1.10 (0.83) -- --
12/31/94 9.31 0.81 (0.99) (0.18) (0.83) (0.01) --
12/31/93 9.09 0.85 0.80 1.65 (0.83) (0.60) --
12/31/92 7.94 0.92 1.19 2.11 (0.94) (0.02) --
12/31/91 6.27 1.08 1.67 2.75 (1.08) -- --
12/31/90 8.55 1.12 (2.30) (1.18) (1.10) -- --
Strategic Income Fund, Class A
6/30/98(2) 12.04 0.47 (0.44) 0.03 (0.47) -- --
12/31/97 12.67 1.00 (0.69) 0.31 (0.94) -- --
12/31/96 12.40 0.93 0.35 1.28 (1.01) -- --
6/05/95-
12/31/95 12.24 0.63 0.13 0.76 (0.60) -- --
Strategic Income Fund, Class B
6/30/98(2) 12.03 0.43 (0.44) (0.01) (0.43) -- --
12/31/97 12.67 0.87 (0.66) 0.21 (0.85) -- --
12/31/96 12.39 0.85 0.36 1.21 (0.93) -- --
6/05/95-
12/31/95 12.24 0.55 0.15 0.70 (0.55) -- --
Strategic Income Fund, Class C
6/30/98(2) 12.02 0.43 (0.44) (0.01) (0.43) -- --
12/31/97 12.65 0.88 (0.65) 0.23 (0.86) -- --
12/31/96 12.38 0.85 0.35 1.20 (0.93) -- --
6/05/95-
12/31/95 12.24 0.55 0.14 0.69 (0.55) -- --
Strategic Income Fund, Class T
6/30/98(2) 12.04 0.45 (0.46) (0.01) (0.43) -- --
12/31/97 12.67 0.94 (0.70) 0.24 (0.87) -- --
12/31/96 12.39 0.88 0.35 1.23 (0.95) -- --
12/31/95 11.71 0.98 0.66 1.64 (0.96) -- --
7/01/94-
12/31/94 12.00 0.51 (0.25) 0.26 (0.49) (0.05) (0.01)
Government Securities Fund, Class A
6/30/98(2) 9.53 0.20 0.08 0.28 (0.32) -- --
12/31/97 9.48 0.68 -- 0.68 (0.63) -- --
12/31/96 10.07 0.63 (0.60) 0.03 (0.62) -- --
6/05/95-
12/31/95 9.51 0.34 0.59 0.93 (0.37) -- --
Government Securities Fund, Class B
6/30/98(2) 9.55 0.26 (0.02) 0.24 (0.28) -- --
12/31/97 9.48 0.52 0.11 0.63 (0.56) -- --
12/31/96 10.07 0.57 (0.60) (0.03) (0.56) -- --
6/05/95-
12/31/95 9.51 0.30 0.59 0.89 (0.33) -- --
Government Securities Fund, Class C
6/30/98(2) 9.54 0.19 0.05 0.24 (0.28) -- --
12/31/97 9.47 0.59 0.04 0.63 (0.56) -- --
12/31/96 10.07 0.58 (0.62) (0.04) (0.56) -- --
6/05/95-
12/31/95 9.51 0.30 0.59 0.89 (0.33) -- --
Government Securities Fund, Class T
6/30/98(2) 9.55 0.31 (0.05) 0.26 (0.30) -- --
12/31/97 9.48 0.57 0.10 0.67 (0.60) -- --
12/31/96 10.07 0.60 (0.59) 0.01 (0.60) -- --
12/31/95 8.74 0.58 1.35 1.93 (0.60) -- --
12/31/94 10.32 0.56 (1.56) (1.00) (0.57) -- (0.01)
12/31/93 9.22 0.59 1.09 1.68 (0.58) -- --
12/31/92 8.99 0.61 0.23 0.84 (0.61) -- --
12/31/91 8.47 0.67 0.52 1.19 (0.67) -- --
12/31/90 8.47 0.68 -- 0.68 (0.68) -- --
<CAPTION>
Net Net Ratio of Ratio of Ratio of net
Asset Assets, expenses expense investment
Value, end of to average reimbursement income to
Period Total end of Total period net to average average Portfolio
ended Distributions period Return (000's) assets(1) net assets(1) net assets(1) turnover
- ---------------- --------------- ---------- ---------- ---------- ------------ --------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/98(2) $ (0.38) $ 9.16 4.40% $ 22,920 1.25% -- 8.13% 87%
12/31/97 (0.76) 9.14 11.18 16,213 1.20 -- 8.06 134
12/31/96 (0.82) 8.94 14.74 13,146 1.11 -- 8.60 128
12/31/95 (0.50) 8.56 4.48 7,466 1.02 -- 9.83 103
6/30/98(2) (0.35) 9.17 4.02 119,069 1.97 -- 7.35 87
12/31/97 (0.70) 9.15 10.38 108,469 1.91 -- 7.35 134
12/31/96 (0.76) 8.95 13.94 79,199 1.81 -- 7.88 128
12/31/95 (0.46) 8.57 4.17 29,063 1.71 -- 9.18 103
6/30/98(2) (0.34) 9.16 3.91 22,341 1.97 -- 7.34 87
12/31/97 (0.70) 9.15 10.37 21,393 1.92 -- 7.35 134
12/31/96 (0.76) 8.95 13.93 14,275 1.82 -- 7.85 128
12/31/95 (0.46) 8.57 4.17 3,410 1.72 -- 9.29 103
6/30/98(2) (0.36) 9.16 4.23 93,516 1.60 -- 7.69 87
12/31/97 (0.74) 9.14 10.86 109,320 1.47 -- 7.77 134
12/31/96 (0.80) 8.94 14.49 124,431 1.31 -- 8.43 128
12/31/95 (0.83) 8.56 13.71 139,711 1.33 -- 9.69 103
12/31/94 (0.84) 8.29 ( 2.18) 136,426 1.34 -- 9.08 86
12/31/93 (1.43) 9.31 18.89 125,095 1.40 -- 8.84 176
12/31/92 (0.96) 9.09 27.57 64,063 1.50 0.05 10.30 122
12/31/91 (1.08) 7.94 46.49 25,651 1.50 0.46 14.84 57
12/31/90 (1.10) 6.27 (14.59) 11,342 1.44 0.81 15.15 156
6/30/98(2) (0.47) 11.60 0.23 12,077 1.46 -- 7.91 182
12/31/97 (0.94) 12.04 2.50 12,523 1.45 0.03 7.75 225
12/31/96 (1.01) 12.67 10.88 17,293 1.40 0.05 7.55 130
6/05/95-
12/31/95 (0.80) 12.40 6.40 21,790 1.36 0.07 7.03 153
6/30/98(2) (0.43) 11.59 ( 0.14) 26,517 2.19 -- 7.14 182
12/31/97 (0.85) 12.03 1.67 29,921 2.18 0.02 7.02 225
12/31/96 (0.93) 12.67 10.18 30,733 2.10 0.09 6.82 130
6/05/95-
12/31/95 (0.55) 12.39 5.89 22,143 2.06 0.06 6.47 153
6/30/98(2) (0.43) 11.58 ( 0.14) 3,053 2.18 -- 7.12 182
12/31/97 (0.86) 12.02 1.75 4,397 2.17 0.02 7.03 225
12/31/96 (0.93) 12.65 10.11 4,222 2.10 0.11 6.79 130
6/05/95-
12/31/95 (0.55) 12.38 5.81 2,172 2.02 0.06 6.48 153
6/30/98(2) (0.43) 11.60 ( 0.09) 15,679 2.12 -- 7.18 182
12/31/97 (0.87) 12.04 1.89 20,172 2.03 0.05 7.17 225
12/31/96 (0.95) 12.67 10.39 27,350 1.90 0.09 7.07 130
12/31/95 (0.96) 12.39 14.54 30,228 1.90 0.28 6.86 153
7/01/94-
12/31/94 (0.55) 11.71 2.14 25,252 1.90 0.63 7.92 156
6/30/98(2) (0.32) 9.49 3.00 31,156 1.12 -- 6.57 164
12/31/97 (0.63) 9.53 7.46 1,744 1.15 0.17 6.44 129
12/31/96 (0.62) 9.48 0.57 14,185 1.09 0.20 6.85 101
6/05/95-
12/31/95 (0.37) 10.07 10.04 3,235 1.02 0.20 6.01 295
6/30/98(2) (0.28) 9.51 2.60 16,881 1.91 -- 5.75 164
12/31/97 (0.56) 9.55 6.93 13,503 1.89 0.17 5.50 129
12/31/96 (0.56) 9.48 ( 0.15) 9,135 1.80 0.20 6.05 101
6/05/95-
12/31/95 (0.33) 10.07 9.61 2,790 1.70 0.20 5.20 295
6/30/98(2) (0.28) 9.50 2.57 1,655 1.92 -- 5.72 164
12/31/97 (0.56) 9.54 6.93 542 1.85 0.17 5.67 129
12/31/96 (0.56) 9.47 ( 0.21) 1,147 1.80 0.21 6.22 101
6/05/95-
12/31/95 (0.33) 10.07 9.61 8 1.68 0.20 5.28 295
6/30/98(2) (0.30) 9.51 2.77 53,540 1.55 -- 6.12 164
12/31/97 (0.60) 9.55 7.38 89,939 1.45 0.20 5.99 129
12/31/96 (0.60) 9.48 0.32 112,126 1.30 0.21 6.37 101
12/31/95 (0.60) 10.07 22.90 150,951 1.30 0.20 6.23 295
12/31/94 (0.58) 8.74 ( 9.82) 152,608 1.29 0.20 6.00 315
12/31/93 (0.58) 10.32 18.48 184,156 1.31 0.20 5.83 81
12/31/92 (0.61) 9.22 9.77 144,144 1.39 0.20 6.81 120
12/31/91 (0.67) 8.99 14.73 121,389 1.44 0.20 7.68 87
12/31/90 (0.68) 8.47 8.57 108,420 1.43 0.20 8.23 17
</TABLE>
(1) Annualized
(2) Unaudited
See accompanying notes to financial statements.
37
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Note 1. Organization and Significant Accounting Policies
Organization -- Northstar Growth Fund, Northstar Special Fund, Northstar
Balance Sheet Opportunities Fund, Northstar High Yield Fund, Northstar
Strategic Income Fund and Northstar Government Securities Fund (collectively
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 Growth Fund ("Growth Fund") seeks to achieve long-term growth
of capital by investing principally in common stocks selected for their
prospects for capital appreciation.
Northstar Special Fund ("Special Fund") seeks to achieve capital
appreciation through investment in a diversified portfolio of equity securities
selected for their potential for growth, primarily in small and
mid-capitalization companies.
Northstar Balance Sheet Opportunities Fund ("Balance Sheet Opportunities
Fund") seeks to realize income and secondarily, capital appreciation through
investments in a balance of debt securities, common and preferred stocks, and
securities convertible into common stock.
Northstar High Yield Fund ("High Yield Fund") seeks to achieve high
current income primarily through investments in long and intermediate-term high
yield-high risk, lower-rated and nonrated corporate debt instruments.
Northstar Strategic Income Fund ("Strategic Income Fund") seeks to
achieve high current income by allocating 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 and obligations of supranational entities.
Northstar 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.
Security Valuation -- Equity securities are valued at the closing sale
prices reported on recognized securities exchanges or lacking any sales, at the
last available bid price. Prices of long-term debt securities are valued on the
basis of last reported sales price, or if no sales are reported, the value is
determined based upon the mean of representative quoted bid 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 Funds. 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 and Expenses -- 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 Fund or class of shares based upon the relative net asset value.
Distributions to Shareholders -- Dividends from net investment income are
declared and paid monthly by the Government Securities, Strategic Income and
High Yield Funds, declared and paid quarterly by the Balance Sheet
Opportunities Fund and declared and paid annually by the Growth and Special
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.
Foreign Currency -- The Funds isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held.
Net realized gain(loss) on foreign currency transactions represent 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.
Forward Foreign Currency Contracts, Options and Futures -- The Funds may
enter into forward foreign currency 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 purposes.
38
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
(logo)
The Funds write and purchase put and call options on foreign currencies.
The premium paid or collected 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 or sold expires on the stipulated expiration date, the Funds
realize a gain or 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.
Initial margin deposits made upon entering into futures contracts are
recognized as assets due from the broker (the Fund's agent in acquiring the
futures position). During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading.
Variation margin payments are received or made, depending upon whether
unrealized gains or losses are incurred. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
Repurchase Agreements -- The Funds' Custodian takes possession of
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to assure that the value,
including 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.
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.
Organization Expenses -- 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. Costs incurred by the Strategic
Income Fund in connection with its organization and its original registration
amounted to $105,074.
Management use of Estimates -- The preparation of financial statements in
conformity with generally accepted accountig principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilites at the date(s) of financial statements and the reported amounts of
income and expenses during the reportinfg period(s). Actual results could
differ from those estimates.
Note 2. Investment Adviser, Administrator and Distributor
Northstar Holding, Inc. (and its wholly-owned operating subsidiaries,
Northstar Investment Management Corp., Northstar Distributors, Inc. and
Northstar Administrator Corp.) is an indirect wholly-owned subsidiary of
ReliaStar Financial Corp.
Northstar Investment Management Corp. (the "Adviser") serves as each
Fund's investment adviser. Each Fund pays the Adviser an investment advisory
fee calculated at an annual rate of 0.60% of average daily net assets for High
Yield Fund, 0.65% of average daily net assets for the Government Securities,
Strategic Income, and Balance Sheet Opportunities Funds, and 0.75% of average
daily net assets for the Growth and Special Funds. The Adviser has agreed to
waive 0.15% of its advisory fee for the Government Securities Fund therefore
the rate paid equals 0.50% of average daily net assets. For the six month
period ended June 30, 1998, the Adviser waived $78,213 of advisory fees for the
Government Securities Fund. For the six month period ended June 30, 1998, the
Funds paid advisory fees to Northstar Investment Management Corp. of
$3,565,171. Navellier Fund Management, Inc. ("Navellier"), a registered
investment adviser, serves as subadviser to the Special Fund pursuant to a
Subadvisory Agreement dated February 1, 1997, between the Adviser and
Navellier. For its services, Navellier receives an annual fee equal to 0.48% of
the average daily net assets of the Fund. For the six month period ended June
30, 1998, Navellier received $789,408 in subadvisory fees from the Adviser.
Northstar Administrators Corp. (the "Administrator"), an affiliate of the
Adviser, serves as administrator to the Funds pursuant to an Administrative
Services Agreement. The Funds pay the Administrator a fee calculated at an
annual rate of 0.10% of each Fund's average daily net assets, and an annual
shareholder account servicing fee of $5.00, payable semi-annually, for each
account of benefical owners of shares. For the six month period ended June 30,
1998, the Administrator earned $701,385 in administrative and account servicing
fees.
39
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Northstar Distributors, Inc. (the "Distributor") an affiliate of the
Adviser and the Administrator, is the distributor of each Fund's shares. Under
separate Plans of Distribution pertaining to Class A, Class B, Class C, Class T
and Class I shares, the Funds pay the Distributor monthly service fees at an
annual rate of 0.25% of the average daily net assets in the case of Class A,
Class B, Class C and Class T shares, and monthly distribution fees at the
annual rate of 0.05% of the average daily net assets of Class A shares and
0.75% of the average daily net assets of Class B and Class C shares for all
Funds. Class T shares pay monthly distribution fees at an annual rate of 0.40%
of average daily net assets for the Government Securities and High Yield Funds,
0.50% of average daily net assets for the Balance Sheet Opportunities Fund and
0.70% of average daily net assets for the Strategic Income, Growth and Special
Funds. Class I does not pay distribution and service fees. At June 30, 1998,
the Funds owed the Distributor $570,401 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, Class T, and Class I shares. For the year ended June 30,
1998, the Distributor earned the following amounts in sales charges:
Class A Class B Class C Class T
Shares Shares Shares Shares
--------- ----------- --------- ----------
Initial sales charges $34,753 N/A N/A N/A
Contingent deferred sales
charges $16,326 $796,613 $19,745 $60,836
Note 3. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the six month period ended June 30,
1998, were as follows:
<TABLE>
<CAPTION>
Balance Sheet Strategic Government
Growth Special Opportunities High Yield Income Securities
Fund Fund Fund Fund Fund Fund
-------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Aggregate purchases $34,230,873 $206,945,508 $14,951,804 $226,293,997 $108,241,056 $534,272,585
Aggregate sales $41,846,890 $296,800,053 $18,698,975 $213,109,535 $115,651,746 $519,072,484
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<CAPTION>
Balance Sheet Strategic Government
Growth Special Opportunities High Yield Income Securities
Fund Fund Fund Fund Fund Fund
-------- --------- --------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Aggregate purchases $ 0 $ 0 $ 0 $ 0 $53,798,206 $197,164,613
Aggregate sales $ 0 $ 0 $ 0 $ 0 $51,574,127 $164,331,467
</TABLE>
Note 4. Portfolio Securities (Tax Basis)
The cost of securities for federal income tax purposes and the aggregate
appreciation and depreciation of securities at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
Growth Special
Fund Fund
--------------- ---------------
<S> <C> <C>
Cost (tax basis) $148,704,526 $184,572,119
------------ ------------
Appreciated securities 68,283,085 39,600,876
Depreciated securities (3,730,321) (5,738,328)
------------ ------------
Net unrealized appreciation (depreciation) $ 64,552,764 $ 33,862,548
------------ ------------
<CAPTION>
Balance Sheet Strategic Government
Opportunities High Yield Income Securities
Fund Fund Fund Fund
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Cost (tax basis) $ 47,213,513 $241,443,928 $ 47,953,308 $103,094,877
------------ ------------ ------------ ------------
Appreciated securities 14,548,684 7,851,326 1,480,766 1,864,281
Depreciated securities (3,164,682) (1,953,456) (2,130,503) (709,686)
------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation) $ 11,384,002 $ 5,897,870 $ (649,737) $ 1,154,595
------------ ------------ ------------ ------------
</TABLE>
40
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
(logo)
Note 5. Capital Share Transactions
Transactions in capital shares of each Fund for six months ended June 30,
1998, were as follows:
<TABLE>
<CAPTION>
Growth Fund
-------------------------------------------------------
Class A Class B
---------------------------- --------------------------
Shares Amount Shares Amount
------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold 860,768 $ 19,663,636 123,098 $2,792,434
Reinvested dividends 0 0 0 0
Shares redeemed (109,864) 2,531,221 (27,186) (620,428)
-------- ------------ ------- ----------
Net increase (decrease) 750,904 $ 17,132,415 95,912 $2,172,006
-------- ------------ ------- ----------
<CAPTION>
Growth Fund
----------------------------------------------------------------------------
Class C Class T Class I
-------------------------- -------------------------------- ----------------
Shares Amount Shares Amount Shares Amount
------------ ------------- --------------- ---------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 64,816 $1,488,750 38,925 $ 882,497 0 $0
Reinvested dividends 0 0 0 0 0 0
Shares redeemed (13,371) (311,493) (1,084,144) (24,527,113) 0 0
------- ---------- ---------- ------------- -------- --
Net increase (decrease) 51,445 $1,177,257 (1,045,219) $ (23,644,616) 0 $0
------- ---------- ---------- ------------- -------- --
</TABLE>
<TABLE>
<CAPTION>
Special Fund
---------------------------------------------------------------
Class A Class B
------------------------------ --------------------------------
Shares Amount Shares Amount
------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 289,833 $ 8,624,039 354,727 $ 10,359,034
Reinvested dividends 0 0 0 0
Shares redeemed (978,519) (28,808,326) (1,049,382) (30,389,314)
-------- ------------- ---------- -------------
Net decrease (688,684) $ (20,184,287) (694,655) $ (20,030,280)
-------- ------------- ---------- -------------
Balance Sheet Opportunities Fund
----------------------------------------------------------------
Class A Class B
------------------------------ --------------------------------
Shares Amount Shares Amount
----------- ------------- ------------- -------------
Shares sold 1,507,128 $ 20,288,739 58,097 $ 786,885
Reinvested dividends 13,534 185,065 4,957 68,589
Shares redeemed (25,926) (352,671) (49,753) (681,990)
----------- ------------- ------------- -------------
Net increase (decrease) 1,494,736 $ 20,121,133 13,301 $ 173,484
----------- ------------- ------------- -------------
High Yield Fund
----------------------------------------------------------------
Class A Class B
------------------------------ --------------------------------
Shares Amount Shares Amount
----------- ------------- ------------- -------------
Shares sold 943,574 $ 8,685,808 1,701,257 $ 15,749,014
Reinvested dividends 40,642 374,526 131,269 1,211,529
Shares redeemed (255,126) (2,357,278) (698,852) (6,471,771)
----------- ------------- ------------- -------------
Net increase (decrease) 729,090 $ 6,703,056 1,133,674 $ 10,488,772
----------- ------------- ------------- -------------
Strategic Income Fund
----------------------------------------------------------------
Class A Class B
------------------------------ --------------------------------
Shares Amount Shares Amount
----------- ------------- ------------- -------------
Shares sold 344,772 $ 4,085,284 171,335 $ 2,046,961
Reinvested dividends 28,807 341,145 25,594 303,152
Shares redeemed (372,543) (4,430,763) (396,177) (4,708,479)
----------- ------------- ------------- -------------
Net increase (decrease) 1,036 $ (4,334) (199,248) $ (2,358,366)
----------- ------------- ------------- -------------
Government Securities Fund
----------------------------------------------------------------
Class A Class B
------------------------------ --------------------------------
Shares Amount Shares Amount
----------- ------------- ------------- -------------
Shares sold 3,223,721 $ 30,531,536 475,631 $ 4,546,602
Reinvested dividends 11,497 108,980 40,375 383,376
Shares redeemed (136,559) (1,301,676) (155,215) (1,482,440)
----------- ------------- ------------- -------------
Net increase (decrease) 3,098,659 $ 29,338,840 360,791 $ 3,447,538
----------- ------------- ------------- -------------
<CAPTION>
Special Fund
---------------------------------------------------------------
Class C Class T
------------------------------ --------------------------------
Shares Amount Shares Amount
------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 177,165 $ 5,218,256 4,906 $ 148,539
Reinvested dividends 0 0 0 0
Shares redeemed (586,268) (17,033,146) (360,438) (10,479,276)
-------- ------------- -------- -------------
Net decrease (409,103) $ (11,814,890) (355,532) $ (10,330,737)
-------- ------------- -------- -------------
Class C Class T
------------------------------ ---------------------------------
Shares Amount Shares Amount
----------- ------------- ------------- -------------
Shares sold 5,748 $ 77,764 18,842 $ 253,327
Reinvested dividends 888 12,296 39,659 555,125
Shares redeemed (1,866) (25,582) (1,855,394) (25,041,813)
----------- ------------- ------------- -------------
Net increase (decrease) 4,770 $ 64,478 (1,796,893) $ (24,233,361)
----------- ------------- ------------- -------------
Class C Class T
------------------------------ ---------------------------------
Shares Amount Shares Amount
----------- ------------- ------------- -------------
Shares sold 333,102 $ 3,088,989 70,875 $ 653,872
Reinvested dividends 22,945 211,636 229,794 2,119,125
Shares redeemed (257,103) (2,381,201) (2,047,005) (18,904,717)
----------- ------------- ------------- -------------
Net increase (decrease) 98,944 $ 919,424 (1,746,336) $ (16,131,720)
----------- ------------- ------------- -------------
Class C Class T
------------------------------ ---------------------------------
Shares Amount Shares Amount
----------- ------------- ------------- -------------
Shares sold 27,979 $ 332,746 1,808 $ 21,483
Reinvested dividends 3,947 46,709 28,066 332,613
Shares redeemed (134,100) (1,590,608) (353,529) (4,200,014)
----------- ------------- ------------- -------------
Net increase (decrease) (102,174) $ (1,211,153) (323,655) $ (3,845,918)
----------- ------------- ------------- -------------
Class C Class T
------------------------------ ---------------------------------
Shares Amount Shares Amount
----------- ------------- ------------- -------------
Shares sold 127,325 $ 1,207,083 728 $ 6955
Reinvested dividends 1,492 14,141 174,649 1,658,004
Shares redeemed (11,348) (108,134) (3,963,443) (37,652,256)
----------- ------------- ------------- -------------
Net increase (decrease) 117,469 $ 1,113,090 (3,788,066) $ (35,987,297)
----------- ------------- ------------- -------------
</TABLE>
41
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Transactions in capital shares of each Fund for the twelve month period
ended December 31, 1997, were as follows:
<TABLE>
<CAPTION>
Growth Fund
-----------------------------------------------------------
Class A Class B
-------------------------------- --------------------------
Shares Amount Shares Amount
--------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold 4,948,104 $ 90,181,184 196,741 $4,073,833
Reinvested dividends 16,078 328,000 14,024 278,226
Shares redeemed (4,790,196) (92,183,541) (39,870) (806,346)
---------- ------------- ------- ----------
Net increase (decrease) 173,986 $ (1,674,357) 170,895 $3,545,713
---------- ------------- ------- ----------
<CAPTION>
Growth Fund
------------------------------------------------------------------------------------
Class C Class T Class I
-------------------------- ------------------------------ --------------------------
Shares Amount Shares Amount Shares Amount
------------ ------------- ------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 45,632 $ 942,905 103,219 $ 2,051,076 5,103,096 $ 99,644,149
Reinvested dividends 1,589 31,885 132,655 2,674,236 212,049 4,342,756
Shares redeemed (12,677) (268,724) (682,339) (13,898,169) 0 0
------- ----------- -------- ------------- --------- ------------
Net increase (decrease) 34,544 $ 706,066 (446,465) $ (9,172,857) 5,315,145 $103,986,905
------- ----------- -------- ------------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
Special Fund
-----------------------------------------------------------------
Class A Class B
-------------------------------- --------------------------------
Shares Amount Shares Amount
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 1,364,964 $ 35,499,440 2,018,199 $ 52,638,926
Reinvested dividends 50,419 1,341,158 88,461 2,311,517
Shares redeemed (1,257,205) (33,779,086) (1,077,764) (28,194,293)
---------- ------------- ---------- --------------
Net increase (decrease) 158,178 $ 3,061,512 1,028,896 $ 26,756,150
---------- ------------- ---------- --------------
Balance Sheet Opportunities Fund
------------------------------------------------------------------
Class A Class B
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------- ------------- ------------- --------------
Shares sold 18,655 $ 247,494 80,799 $ 1,029,162
Reinvested dividends 9,094 115,909 34,359 436,019
Shares redeemed (22,622) (289,132) (51,749) (651,384)
------------- ------------- ------------- --------------
Net increase (decrease) 5,127 $ 74,271 63,409 $ 813,797
------------- ------------- ------------- --------------
High Yield Fund
------------------------------------------------------------------
Class A Class B
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------- ------------- ------------- --------------
Shares sold 673,910 $ 6,107,186 4,082,034 $ 36,992,626
Reinvested dividends 68,304 617,643 223,181 2,020,829
Shares redeemed (438,817) (3,958,008) (1,299,119) (11,783,138)
------------- ------------- ------------- --------------
Net increase (decrease) 303,397 $ 2,766,821 3,006,096 $ 27,230,317
------------- ------------- ------------- --------------
Strategic Income Fund
------------------------------------------------------------------
Class A Class B
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------- ------------- ------------- --------------
Shares sold 446,966 $ 5,589,832 475,283 $ 5,964,807
Reinvested dividends 55,446 690,235 53,638 667,577
Shares redeemed (827,291) (10,431,620) (468,589) (5,851,465)
------------- ------------- ------------- --------------
Net increase (decrease) (324,879) $ (4,151,553) 60,332 $ 780,919
------------- ------------- ------------- --------------
Government Securities Fund
------------------------------------------------------------------
Class A Class B
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------- ------------- ------------- --------------
Shares sold 61,921 $ 582,690 578,504 $ 5,464,770
Reinvested dividends 39,003 361,654 56,149 526,891
Shares redeemed (1,414,955) (13,335,151) (184,573) (1,732,986)
------------- ------------- ------------- --------------
Net increase (decrease) (1,314,031) $ (12,390,807) 450,080 $ 4,258,675
------------- ------------- ------------- --------------
<CAPTION>
Special Fund
----------------------------------------------------------------
Class C Class T
------------------------------ ---------------------------------
Shares Amount Shares Amount
------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 875,397 $ 22,754,897 49,189 $ 1,297,161
Reinvested dividends 16,358 427,279 25,930 679,363
Shares redeemed (531,137) (13,917,748) (332,440) (8,754,042)
-------- -------------- -------- -------------
Net increase (decrease) 360,618 $ 9,264,428 (257,321) $ (6,777,518)
-------- -------------- -------- -------------
Class C Class T
------------------------------ ----------------------------------
Shares Amount Shares Amount
----------- -------------- ------------- -------------
Shares sold 26,217 $ 320,585 19,037 $ 257,056
Reinvested dividends 6,029 76,490 399,395 5,088,456
Shares redeemed (5,429) (70,103) (1,374,726) (17,318,819)
----------- -------------- ------------- -------------
Net increase (decrease) 26,817 $ 326,972 (956,294) $ (11,973,307)
----------- -------------- ------------- -------------
Class C Class T
------------------------------ ----------------------------------
Shares Amount Shares Amount
----------- -------------- ------------- -------------
Shares sold 1,196,278 $ 10,861,847 304,769 $ 2,758,156
Reinvested dividends 30,648 277,663 552,318 4,989,424
Shares redeemed (483,573) (4,370,241) (2,811,948) (25,483,373)
----------- -------------- ------------- -------------
Net increase (decrease) 743,353 $ 6,769,269 (1,954,861) $ (17,735,793)
----------- -------------- ------------- -------------
Class C Class T
------------------------------ ----------------------------------
Shares Amount Shares Amount
----------- -------------- ------------- -------------
Shares sold 118,356 $ 1,483,699 25,790 $ 325,287
Reinvested dividends 7,190 89,264 66,243 825,043
Shares redeemed (93,402) (1,163,649) (575,430) (7,231,191)
----------- -------------- ------------- -------------
Net increase (decrease) 32,144 $ 409,314 (483,397) $ (6,080,861)
----------- -------------- ------------- -------------
Class C Class T
------------------------------ ----------------------------------
Shares Amount Shares Amount
----------- -------------- ------------- -------------
Shares sold 68,250 $ 644,001 37,047 $ 353,721
Reinvested dividends 700 6,593 424,682 3,974,851
Shares redeemed (133,228) (1,259,675) (2,875,090) (26,999,184)
----------- -------------- ------------- -------------
Net increase (decrease) (64,278) $ (609,081) (2,413,361) $ (22,670,612)
----------- -------------- ------------- -------------
</TABLE>
42
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
(logo)
Note 6. Credit Risk and Defaulted Securities
Although the Funds have a diversified portfolio, the High Yield and
Strategic Income Funds had 93.3% and 64.2%, respectively, of their portfolios
invested in lower rated and comparable quality unrated high yield securities.
Investments in higher yield securities are accompanied by a greater degree of
credit risk and such lower rated securities tend to be more sensitive to
economic conditions than higher rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities, because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. At June 30, 1998, the
Balance Sheet Opportunities and Strategic Income Funds held SA
Telecommunications, Inc., security in default. In addition, the High Yield Fund
held Capital Gaming International, Inc., security in bankruptcy.
For financial reporting purposes, it is each Fund's accounting practice
to discontinue accrual of income and provide an estimate for probable losses
due to unpaid interest income on defaulted bonds for the current reporting
period.
Note 7. Federal Income Tax -- Capital Loss Carryforward
At December 31, 1997, the High Yield Fund had capital loss carryforwards
expiring December 31, 2003 and 2003 of $1,889,212 and $570,896, respectively.
The Government Securities Fund had capital loss carryforwards expiring December
31, 1998, 2002 and 2005 of $1,442,754, $16,737,216 and $2,339,660,
respectively. The Strategic Income Fund had capital loss carryforwards expiring
December 31, 2002 and 2003 of $640,074 and $1,301,325, respectively.
Note 8. Compensating Balance Arrangement
The Funds have an informal compensating balance arrangement with the
Custodian whereby the Funds may have overdrafts in their respective accounts
and have no interest assessed on the overdrafts. In return, the Funds are
required to maintain positive balances to offset negative balances. The
required deposits are calculated by dividing the overdrawn amounts by 0.90. At
June 30, 1998, the Funds did not have any compensating balances.
43
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