<PAGE>
(Northstar Logo appears here)
SEMI-ANNUAL REPORT TO SHAREHOLDERS
June 30, 1997
(3-D graphic of Northstar brochure)
<PAGE>
NORTHSTAR FUNDS
SEMI-ANNUAL REPORT,
JUNE 30, 1997
MARK L. LIPSON
(photo of Mark L. Lipson)
Dear Shareholders:
We are pleased to provide you with the semi-annual report of the Northstar Funds
for the six months ending June 30, 1997. 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, superior investment results through fundamental research, analysis,
and traditional investment disciplines. Following this letter is a summary of
the results of each Fund by its respective portfolio manager. We hope you will
find these informative.
During the past six months the U.S. financial markets have been supported by
strong growth in the economy, above average corporate profit gains, and
surprisingly subdued inflation.
Concerns last fall were centered in the belief that a perfect environment
(moderate growth and low inflation) must be maintained for the stock market to
continue to do well. Valuations seemed high as well as profit margins. With
unemployment declining, wages rising and inflation trending up during most of
1996, any acceleration of these trends was viewed as a problem for both bond and
stock prices. In fact, as the economic strength of the December and the March
quarters became evident a market correction of 9.5% for the S&P 500 ensued and
long term interest rates backed up to over 7%. This however, proved short lived
as inflation was actually trending down rather than accelerating. Productivity
gains more than offset wage increases allowing corporate profit margins to
remain high and consumer prices low. Global growth in industrialized countries
outside the U.S. has also been slower than expected allowing capacity to keep up
with demand. The strong growth has not only allowed profit increases to remain
high but also employment and personal income gains. This resulted in unforeseen
tax revenues significantly reducing the Federal deficit which in turn is
facilitating political compromise on budget issues. The U.S. dollar remained
strong helping inflation. While the Federal Reserve has raised short term rates
slightly, monetary policy has not become restrictive and longer term rates are
about the same as six months ago. In short, the environment has been
exceptionally good.
Looking to the balance of the year, most of the same earlier questions
persist but the current outlook remains favorable. Real incomes are rising,
there are few signs of increased inflation and growth appears to have moderated
recently. There do not appear to be the type of excesses present which would
necessitate either a recession or an overheated inflationary condition.
In closing, we reiterate 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,
(signature of Mark L. Lipson)
Mark L. Lipson
President
July 1997
<PAGE>
(photo of Ryan R. Johanson)
RYAN R. JOHANSON
NORTHSTAR GOVERNMENT SECURITIES FUND
THE MARKETS
(Bullet) The first half of 1997 was a roller coaster ride for government and
investment grade bonds. The year began with a rally in the treasury
market with rates bottoming on February 14. On that date the thirty
year bell weather bond closed at a yield of 6.52%. This rally was
snuffed out by growing Fed concerns over the possible growth in
inflation. The Fed eventually raised the Fed Funds rate on March
25. Rates continued to climb, with the long end topping out at
7.17% on April 14. This increase in rates began to cool the
economy, resulting in GDP growth slowing from a first quarter of
1997 annual rate of 5.6% to an estimated 1.7% for the second
quarter. Since early April the market has gained confidence that
inflation is not a problem and that the Fed would not increase
rates near term. As a result, the rally that marked the first part
of the year returned, with the first half long term rates ending
just 14 basis points higher than where the year started.
(Bullet) The mortgage bond market saw a fairly consistent convergence of
yields to that of the treasury market over the course of the first
six months of 1997. Spreads between GNMA 7.5% coupon bonds and the
ten year U.S. Treasury bond tightened from approximately 120 basis
points(bps) in early January to approximately 100 bps by the end of
the second quarter. This tightening was due primarily to the slow
growth in new mortgage bond issuance and relatively stable
prepayment speeds.
(Bullet) It currently appears that the early action by the Fed in raising
rates slowed the economy sufficiently to avoid an over heating, and
a rekindling of inflation. The outlook for the remainder of 1997
looks very positive. It is anticipated that rates will continue
their decline in the near term, for employment to remain around 5%
and inflation less than 2.5%, and for GDP to be above 3% for the
year. The mortgage market should see an increase in prepayments
which may bring a widening in spreads. Given this scenario, the
Government Fund should perform well for 1997.
THE FUND
(Bullet) For the first half of 1997, the total return of the Fund's Class A,
B, C, and T shares were 1.54%, 1.29%, 1.31%, and 1.54%,
respectively; the Lipper average was 2.47%. Net redemptions caused
the Fund's net assets to fall 12.4%, from $137 million to $120
million, during first half of 1997. However, the Fund's 7.55% total
return for the last 12 months (compared to the Lipper average of
7.01%) ranks it among the top third of similar funds, and gives it
a sound base on which to build asset growth.
(Bullet) The Fund's year to date performance was hurt due to the very long
duration of the Fund's bond holdings, which included a large
investment in zero-coupon strips of a 23-year bond, during the
sizable rate rise in the first quarter. The Fund remains interest-
rate sensitive, although less so than at the beginning of the year,
and has performed relatively well given that rates with one or more
years to maturity rose over the first half of 1997. For example,
the bell weather 30 year bond rose from 6.64% on January 1, to
6.79% on June 30.
CURRENT STRATEGY
(Bullet) Reduce the average duration of the Fund's holdings between
approximately 5 to 7 years, while maximizing the current income
from the population of bonds available. Swap a majority of the
existing GNMA collateral with that of other government agencies,
primarily bonds issued by FNMA and FHLMC.
(Bullet) Increase the diversification of the types of securities held by the
Fund, in terms of both issuers and structures. Such diversification
will be implemented with a view to reducing the volatility of the
Fund's NAV while maintaining high current income.
(Bullet) By pursuing the above strategies to stabilize the NAV and increase
the Fund's earning power, we expect to achieve higher risk-adjusted
returns, which should help us stem redemptions and boost sales.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 6/30/97) TOTAL NET ASSETS $120,419,138
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO HOLDINGS
NAME % FUND
<C> <S> <C>
1 GNMA 7.0%
71.5%
2 GNMA 7.5%
12.3%
3 U.S. Dept. Veteran
Affairs 4.1%
4 U.S. Treasury
11/15/24 4.1%
5 GNMA 6.5%
3.7%
6 GNMA 8.5%
2.2%
7 Cash equivalents
2.1%
------
100.0%
------
------
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- ------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- ------------------------------------------
Class A 3.46% n/a 2.46%
- ------------------------------------------
Class B 3.85% n/a 1.77%
- ------------------------------------------
Class C 5.19% n/a 5.79%
- ------------------------------------------
Class T 7.05% 7.53% 3.44%
- ------------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURN
(does not reflect sales charge)
<S> <C> <C> <C>
- ------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- ------------------------------------------
Class A 12.62% n/a 7.55%
- ------------------------------------------
Class B 11.08% n/a 6.77%
- ------------------------------------------
Class C 11.04% n/a 6.79%
- ------------------------------------------
Class T 117.53% 43.74% 7.44%
- ------------------------------------------
</TABLE>
3
<PAGE>
NORTHSTAR GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
U.S. GOVERNMENT AND AGENCIES -- 97.92%
<S> <C> <C>
GNMA Pool #352081, 7.00%, due 9/15/23 $4,603,421 $ 4,547,305
GNMA Pool #369686, 7.00%, due 12/15/23 6,538,184 6,458,484
GNMA Pool #382159, 7.00%, due 1/15/24 3,485,129 3,448,117
GNMA Pool #362607, 7.00%, due 1/15/26 4,811,643 4,734,946
GNMA Pool #417832, 7.00%, due 1/15/26 3,301,637 3,249,009
GNMA Pool #420648, 7.00%, due 1/15/26 4,792,500 4,716,107
GNMA Pool #417276, 7.00%, due 2/15/26 6,740,610 6,633,165
GNMA Pool #413627, 7.00%, due 3/15/26 4,849,560 4,772,258
GNMA Pool #422307, 7.00%, due 3/15/26 4,431,453 4,360,816
GNMA Pool #426384, 7.00%, due 3/15/26 4,756,078 4,680,266
GNMA Pool #422324, 7.00%, due 4/15/26 4,891,931 4,813,954
GNMA Pool #430882, 7.00%, due 6/15/26 4,954,843 4,875,863
GNMA Pool #432878, 7.00%, due 6/15/26 4,957,916 4,878,886
GNMA Pool #412637, 7.00%, due 7/15/26 7,745,251 7,621,792
GNMA Pool #431008, 7.00%, due 7/15/26 3,467,704 3,412,428
GNMA Pool #431018, 7.00%, due 7/15/26 3,466,986 3,411,722
GNMA Pool #438543, 8.50%, due 4/15/12 1,148,600 1,195,624
GNMA Pool #386535, 8.50%, due 9/15/24 1,394,342 1,457,087
GNMA REMIC, 6.50%, due 10/16/08 4,453,499 4,401,527
GNMA REMIC, 7.00%, due 11/16/20 1,594,000 1,548,651
GNMA REMIC, 7.00%, due 2/16/24 8,250,000 8,010,502
GNMA REMIC, 7.50%, due 12/20/20 5,000,000 5,041,600
GNMA REMIC, 7.50%, due 8/20/21 6,000,000 6,056,640
GNMA REMIC, 7.50%, due 1/16/23 5,548,066 1,497,978
GNMA REMIC, 7.50%, due 1/20/24 2,200,000 2,209,262
U.S. Department Veteran Affairs, 7.25%, due 2/15/19 4,963,570 4,904,107
U.S. Treasury Strips, 0%, due 11/15/24 32,000,000 4,971,520
------------
TOTAL INVESTMENT SECURITIES -- 97.92%
(cost $116,003,221) 117,909,616
REPURCHASE AGREEMENT -- 1.54%
Agreement with State Street Bank and Trust bearing interest at
5.65% dated
6/30/97, to be repurchased 7/01/97 in the amount of $1,859,292
and
collateralized by $1,860,000 U.S. Treasury Notes, 6.00% due
8/31/97, value
$1,897,200
(cost $1,859,000) 1,859,000 1,859,000
OTHER ASSETS LESS LIABILITIES -- 0.54% 650,522
------------
NET ASSETS -- 100.00% $120,419,138
------------
------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
(photo of Ryan R. Johanson)
RYAN R. JOHANSON
NORTHSTAR STRATEGIC INCOME FUND
THE MARKETS
(Bullet) The first three months of the year were characterized by high GDP
growth and inflation worries. After the Fed increased the fed funds
rate in March, the economy began to cool. GDP growth fell from an
annual rate of 5.6% to below 3%. In the first 6 months of 1997
(1H97), the yields on both the 10- and 30-year Treasury bonds
traded in a 70 basis point (bps) range, but their rates rose only 8
and 12 bps to 6.50% and 6.79%, respectively. Low interest rates and
continued growth helped stock prices to again rise to all-time
highs. Small cap stocks grew at half the big cap rate of 20%, but
that still helped the creditworthiness and prices of high yield
bonds.
(Bullet) High yield bond returns in 1H97(80% of which came in the last 3
months of 1H97) were 5.82% compared to 3.09% for all domestic
bonds. These returns were due to strong demand for high coupons and
rising stock valuations underlying high yield bonds. Among high
yield bonds, lower-rated bonds outperformed more interest-rate
sensitive higher-rated bonds. Like government bonds, domestic
investment grade corporates' yields rose in 1H97. Emerging market
bonds, especially Russian and Brady bonds, outperformed again,
increasing 10.47%, due to improving political and economic
fundamentals and the ongoing hunt for yield.
(Bullet) Expected Fed policies pave the way for the U.S. economy to maintain
annual GDP growth and CPI inflation rates below 3%. The outlook for
U.S. debt and equity markets therefore remains positive for
full-year 1997. The strong U.S. dollar continues to limit the
probability of profitably investing in foreign currency securities,
but countries pursuing economic reforms offer some opportunities
(e.g., Australia, Brazil, Canada, Ecuador, Egypt, Italy, New
Zealand, Spain, the U.K. and Venezuela).
THE FUND
(Bullet) From 1/01/97 to 6/30/97, the total return of the Fund's Class A, B,
C, and T shares were 3.22%, 2.86%, 2.86%, and 2.94% respectively,
compared to 4.48% for the Lipper average. Low sales, one $5 million
exchange to another Northstar fund and modest redemptions offset
higher bond prices, which caused the net assets of the Fund to
decline from $79.6 million to $72.7 million.
(Bullet) During 1H97, in order to ensure that the Fund's yield continues to
cover its dividend, we bought some high-yielding U.S. agencies, and
replaced many high yield bonds with higher yielding domestic and
foreign bonds. The Fund's returns were helped by lower interest
rates, by the pick-up in yield from our substitutions, by the
healthy dose of emerging market bonds the Fund holds and by sales
of high-rated foreign currency bonds.
CURRENT STRATEGY
(Bullet) Continue to seek mispriced U.S. dollar-denominated investment grade
corporates. Continue to maintain heavy weightings of emerging
market bonds.
(Bullet) Maximize high yield holdings, limit U.S. government and foreign
currency investments while the U.S. dollar is strong, and increase
holdings of U.S. dollar investment grade bonds to enhance the
Fund's returns. Keep the Fund's duration moderate and its credit
quality at a minimum of BB+. Keep total return subordinate to
earning the monthly dividend.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 6/30/97) TOTAL NET ASSETS $72,694,631
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
FNMA 8.00% '24
1 12.5%
Republic of
2 Argentina 11.75% '14 3.8%
3 FNMA 8.50% '21
3.7%
4 APP Finance
Mauritius Ltd. 3.5%
5 Altos Hornos de
Mexico SA 3.4%
6 CE Casecnan Water &
Energy Co. 3.2%
7 First Nationwide
Parent Hldgs. 3.2%
8 Statia Terms
International 3.0%
9 RBS Participacoes SA
2.9%
10 Guangdong
Enterprises Holdings
Ltd. 2.8%
------
42.0%
------
------
</TABLE>
<TABLE>
<S> <C>
TOP 5 SECTORS
(BY PERCENTAGE OF NET ASSET)
High Yield ---------------------------
54.8%
U.S. Government -----------
20.3%
Investment ----------
Grade 17.8%
Cash --------
4.5%
Preferred Stock ----
2.6%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- -----------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- -----------------------------------------
Class A 7.27% n/a 6.12 %
- -----------------------------------------
Class B 7.71% n/a 5.63 %
- -----------------------------------------
Class C 8.96% n/a 9.63 %
- -----------------------------------------
Class T 9.40% n/a 6.82 %
- -----------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
<S> <C> <C> <C>
- -----------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- -----------------------------------------
Class A 21.38% n/a 11.42 %
- -----------------------------------------
Class B 19.61% n/a 10.63 %
- -----------------------------------------
Class C 19.45% n/a 10.63 %
- -----------------------------------------
Class T 32.94% n/a 10.82 %
- -----------------------------------------
</TABLE>
5
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
INVESTMENT GRADE SECURITIES -- 17.81%
<S> <C> <C>
FOREIGN BONDS & NOTES -- 17.81%
CABLE -- 0.73%
Le Groupe Videotron Ltee.
10.25%, Sr. Subordinated Notes, 10/15/02 $ 500,000 $ 530,000
-----------
FOREIGN GOVERNMENT SECURITIES -- 15.57%
Commonwealth of Australia Government
10.00%, Government Guarantee, 10/15/07 2,000,000 1,827,630
Guangdong Enterprises Holding Ltd. #
8.875%, Sr. Notes, 5/22/07 2,000,000 2,065,360
New Zealand Government
8.00%, Government Guarantee, 11/15/06 2,429,000 1,768,412
Republic of Argentina #
11.75%, Government Guarantee, 2/12/07 2,500,000 2,781,250
Republic of Poland $ (1)
4.00%, Government Guarantee, 10/27/14 2,250,000 1,935,000
Spanish Government Bonds (2)
10.00%, Government Guarantee, 2/28/05 112,000,000 940,351
-----------
11,318,003
-----------
OIL & GAS -- 1.51%
Bridas Corp.
12.50%, Sr. Notes, 11/15/99 1,000,000 1,098,750
-----------
TOTAL FOREIGN BONDS & NOTES 12,946,753
-----------
TOTAL INVESTMENT GRADE SECURITIES
(cost $12,414,543) 12,946,753
-----------
HIGH YIELD SECURITIES -- 54.78%
DOMESTIC BONDS & NOTES -- 19.34%
BANKS & THRIFTS -- 3.24%
First Nationwide Parent Holdings
12.50%, Sr. Notes, 4/15/03 2,100,000 2,354,625
-----------
COMPUTER SERVICES -- 1.40%
Viasystems, Inc. #
9.75%, Sr. Subordinated Notes, 6/01/07 1,000,000 1,020,000
-----------
CONSUMER PRODUCTS -- 1.84%
Shop Vac Corp.
10.625%, Sr. Notes, 9/01/03 1,250,000 1,337,500
-----------
HOTEL & GAMING -- 2.02%
Trump Atlantic City Funding, Inc.
11.25%, Company Guarantee, 5/01/06 1,500,000 1,466,250
-----------
INSURANCE -- 1.83%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 1,300,000 1,332,500
-----------
OIL & GAS -- 2.70%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 900,000 983,250
Transamerican Energy Corp. #
11.50%, Sr. Secured Notes, 6/15/02 1,000,000 980,000
-----------
1,963,250
-----------
</TABLE>
6
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
(Northstar Logo appears here)
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
STEEL -- 1.42%
<S> <C> <C>
AK Steel Corp.
9.125%, Sr. Notes, 12/15/06 $ 1,000,000 $ 1,028,750
-----------
TELECOMMUNICATIONS -- 4.89%
Jacor Communications Co. #
8.75%, Sr. Subordinated Notes, 6/15/07 1,000,000 990,000
Unifi Communications, Inc. # (3)
14.00%, Units, 3/01/04 1,000 995,000
WinStar Equipment Corp. # $
0/12.50%, Sr. Secured Notes, 3/15/04 1,600,000 1,568,000
-----------
3,553,000
-----------
TOTAL DOMESTIC BONDS & NOTES 14,055,875
-----------
FOREIGN BONDS & NOTES -- 35.44%
CABLE -- 5.25%
Innova S De R. L. #
12.875%, Sr. Notes, 4/01/07 1,000,000 1,050,000
Multicanal SA #
10.50%, Notes, 2/01/07 1,500,000 1,623,750
Multicanal Participacoes SA
12.625%, Company Guarantee, 6/18/04 1,000,000 1,145,000
-----------
3,818,750
-----------
ENTERTAINMENT -- 2.89%
RBS Participacoes SA #
11.00%, Company Guarantee, 4/01/07 2,000,000 2,100,000
-----------
FOOD & BEVERAGE -- 1.98%
Fage Dairy Industries SA #
9.00%, Sr. Notes, 2/01/07 1,500,000 1,440,000
-----------
OIL & GAS -- 1.40%
Pacalta Resources Ltd. #
10.75%, Sr. Notes, 6/15/04 1,000,000 1,015,000
-----------
PAPER -- 4.29%
APP Finance II Mauritius Ltd. # $
12.00%/16.00%, Notes, 12/29/49 2,500,000 2,556,250
Indah Kiat International Finance Corp.
12.50%, Company Guarantee, 6/15/06 500,000 566,875
-----------
3,123,125
-----------
PRINTING & PUBLISHING -- 2.33%
Grupo Industrial Durango SA de CV
12.625%, Notes, 8/01/03 1,500,000 1,691,250
-----------
SERVICES -- 5.65%
Road King Infrastructure Ltd.
9.50%, Company Guarantee, 7/15/07 2,000,000 1,988,460
Statia Terms International
11.75%, 1st Mortgage Notes, 11/15/03 2,000,000 2,120,000
-----------
4,108,460
-----------
STEEL -- 3.38%
Altos Hornos De Mexico SA #
11.375%, Notes, 4/30/02 2,300,000 2,455,250
-----------
</TABLE>
7
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Security Units/Principal Amount/Shares Value
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
<CAPTION>
TELECOMMUNICATIONS -- 5.12%
<S> <C> <C>
Colt Telecom Group PLC $ (4)
0/12.00%, Units, 12/15/06 500 $ 320,000
Ionica PLC $ (5)
0/15.00%, Units, 5/01/07 1,500 802,500
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes, 3/15/04 $ 2,100,000 1,585,500
Telecom Brazil Funding Corp. # (1)
11.09375%, Guaranteed Notes, 12/09/99 1,000,000 1,013,750
-----------
3,721,750
-----------
UTILITIES -- 3.15%
CE Casecnan Water & Energy Co.
11.95%, Sr. Secured Notes, 11/15/10 2,000,000 2,290,000
-----------
TOTAL FOREIGN BONDS & NOTES 25,763,585
-----------
TOTAL HIGH YIELD SECURITIES
(cost $38,306,447) 39,819,460
-----------
PREFERRED STOCKS -- 2.58%
CABLE -- 0.85%
Cablevision Systems Corp., 11.75% & 5,951 620,373
-----------
ENTERTAINMENT -- 1.73%
Time Warner, Inc., 10.25% & 11,313 1,258,525
-----------
TOTAL PREFERRED STOCKS
(cost $1,594,039) 1,878,898
-----------
WARRANTS -- 0.03% @
CONSUMER PRODUCTS -- 0.01%
Chattem, Inc., (expires 6/17/99) 500 10,625
-----------
SUPERMARKETS -- 0.02%
Dairy Mart Convenience Stores, Inc., (expires 12/01/01) 4,999 11,248
-----------
TELECOMMUNICATIONS -- 0.00%
Occidente Caribe Celular SA, (expires 3/15/04) # (6) 9,400 94
-----------
TOTAL WARRANTS
(cost $94) 21,967
-----------
</TABLE>
8
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Principal Amount Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
<CAPTION>
U.S. GOVERNMENT AND AGENCIES -- 20.34%
<S> <C> <C>
Federal Home Loan Mortgage Corp. 6.50%, due 5/15/10 $ 1,470,688 $ 1,430,700
Fannie Mae 8.00%, due 3/25/24 8,839,837 9,104,237
Fannie Mae 8.50%, due 4/17/21 - 6/18/27 4,235,293 4,248,305
-----------
TOTAL U.S. GOVERNMENT AND AGENCIES 14,783,242
-----------
(cost $14,364,708)
TOTAL INVESTMENT SECURITIES -- 95.54%
(cost $66,679,831) 69,450,320
REPURCHASE AGREEMENT -- 4.63%
Agreement with State Street Bank and Trust bearing
interest at 5.65% dated 6/30/97, to be repurchased
7/01/97 in the amount of $3,365,528 and collateralized
by $3,698,000 U.S. Treasury Notes, 6.00% due 8/31/97,
value $3,432,300
(cost $3,365,000) 3,365,000 3,365,000
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.17%) (120,689)
-----------
NET ASSETS -- 100.00% $72,694,631
-----------
-----------
</TABLE>
# Sale restricted to qualified institutional investors.
$ Step bond.
& Payment-in-kind.
@ Non-income producing security.
(1) Floating Rate Bond. Rate as of June 30, 1997.
(2) The principal amount is shown in the respective country's currency.
(3) A unit consists of $1,000 par value Sr. Notes, 14.00% due 3/01/04 and 1
warrant.
(4) A unit consists of $1,000 par value Sr. Discount Notes, 12.00% due 12/15/06
and 1 warrant.
(5) A unit consists of $1,000 par value Sr. Discount Notes, 15.00% due 5/01/07
and 1 warrant.
(6) Foreign security
See accompanying notes to financial statements.
9
<PAGE>
(photo of Jeffrey Aurigemma)
JEFFREY AURIGEMMA
NORTHSTAR HIGH YIELD FUND
THE MARKETS
(Bullet) The first 3 months of the year were characterized by high GDP
growth and inflation worries. After the Fed increased the Fed funds
rate in March, the economy began to cool. GDP growth fell from an
annual rate of 5.6% to below 3%. In the first 6 months of 1997
(1H97), the yields on both the 10- and 30-year Treasury bonds
traded in a 70 basis points(bps) range, but their rates rose only 8
and 12 bps to 6.50% and 6.79%, respectively. Low interest rates and
continued growth helped stock prices to again rise to all time
highs. Small cap stocks grew at half the big cap rate of 20%, but
that still helped the creditworthiness and prices of high yield
bonds.
(Bullet) High yield bond returns in 1H97(80% of which came in the last 3
months of 1H97) were 5.82% compared to 3.09% for all domestic
bonds. These returns were due to strong demand for high coupons and
rising stock valuations underlying high yield bonds. Among high
yield bonds, lower-rated bonds outperformed more interest-rate
sensitive higher-rated bonds. Like government bonds, domestic
investment grade corporates' yields rose in 1H97. Emerging market
bonds, especially Russian and Brady bonds, outperformed again,
increasing 10.47%, due to improving political and economic
fundamentals and the ongoing hunt for yield.
(Bullet) Expected Fed policies pave the way for the U.S. economy to maintain
annual GDP growth and CPI inflation rates below 3%. The outlook for
U.S. debt and equity markets therefore remains positive for
full-year 1997.
THE FUND
(Bullet) From January through June 1997, the total return of the Fund's
Class A, B, C, and T shares were 5.38%, 4.91%, 4.90%, 5.26%,
respectively; the Lipper average was 5.92%. The Fund's long-term
performance helped its net assets rise 5.6%, from $231 million to
$245 million.
(Bullet) The generally high quality of its holdings and its reduction of
emerging market holdings held-back the Fund's strong performance
since investors favored yield over safety. In response, we have
slightly increased B-rated names. The Fund continued to benefit
from timely sales of overpriced bonds. We remain selective, but are
less willing to hold cash in these strong markets.
(Bullet) The Fund's performance was protected and enhanced by changes in
portfolio allocations. We sold more telecom and broadcasting bonds,
while we bought more oil & gas, energy and printing & publishing
issues. Cable and healthcare positions rose in value substantially.
We severely cut our positions in zero-coupon bonds. The cash
position was cut in half.
CURRENT STRATEGY
(Bullet) We will continue to position the Fund as a conservative
"all-weather" high yield fund. We will focus on securities with low
risks and good downside protection. The Fund will seek to
outperform when the high-yield market is declining or volatile,
while remaining competitive when that market is rising or stable.
(Bullet) Given the currently low probability of a recession and general
market conditions, temporarily favor issues rated B1/B+ and
emerging market names that still have high risk-adjusted returns
and spreads.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 6/30/97) TOTAL NET ASSETS $244,544,940
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
MFS Communications, 2.1%
1 Inc.
Time Warner, Inc. 2.1%
2
Imed Corp. 2.0%
3
CE Casecnan Water & 1.9%
4 Energy Co.
AES Corp. 1.8%
5
Americo Life, Inc. 1.8%
6
APP International 1.8%
7 Finance
Dade International, 1.8%
8 Inc.
Newsquest Capital 1.8%
9 PLC
SFX Broadcasting, 1.8%
10 Inc.
------
18.9%
------
------
</TABLE>
<TABLE>
<S> <C>
TOP 5 INDUSTRIES
(by percentage of net asset)
---------------------------
Telecommunications 8.4%
-------------------------
Cable 7.4%
----------------
Healthcare 6.7%
--------------
Energy 6.6%
---------
Broadcasting 6.3%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- ----------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- ----------------------------------------
Class A 9.19% n/a 9.85%
- ----------------------------------------
Class B 9.68% n/a 9.44%
- ----------------------------------------
Class C 10.98% n/a 13.43%
- ----------------------------------------
Class T 10.96% n/a 11.15%
- ----------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
<S> <C> <C> <C>
- ----------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- ----------------------------------------
Class A 25.89% n/a 15.38%
- ----------------------------------------
Class B 24.08% n/a 14.44%
- ----------------------------------------
Class C 24.07% n/a 14.43%
- ----------------------------------------
Class T 131.98% 74.82% 15.15%
- ----------------------------------------
</TABLE>
10
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
DOMESTIC BONDS & NOTES -- 73.35%
AEROSPACE & DEFENSE -- 2.76%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 $ 1,500,000 $ 1,661,250
Derlan Manufacturing, Inc. #
10.00%, Sr. Notes, 1/15/07 3,000,000 3,045,000
Tracor, Inc.
8.50%, Sr. Subordinated Notes, 3/01/07 2,000,000 2,035,000
------------
6,741,250
------------
AUTO PARTS & EQUIPMENT -- 1.43%
Titan Wheel International, Inc.
8.75%, Sr. Subordinated Notes, 4/01/07 3,400,000 3,502,000
------------
BROADCASTING & MEDIA -- 6.32%
American Radio Systems Corp.
9.00%, Company Guarantee, 2/01/06 1,500,000 1,537,500
Capstar Radio Broadcasting #
9.25%, Sr. Subordinated Notes, 7/01/07 2,900,000 2,827,500
SCI Television, Inc.
11.00%, Sr. Notes, 6/30/05 2,500,000 2,650,525
SFX Broadcasting, Inc.
10.75%, Sr. Subordinated Notes, 5/15/06 4,000,000 4,380,000
Sinclair Broadcast Group, Inc. #
9.00%, Sr. Subordinated Notes, 7/15/07 1,500,000 1,462,500
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 12/15/03 1,250,000 1,293,750
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 9/30/05 1,250,000 1,293,750
------------
15,445,525
------------
CABLE -- 3.99%
Comcast Corp.
9.375%, Sr. Subordinated Debentures, 5/15/05 2,000,000 2,110,000
Echostar Communications Corp. $
0/12.875%, Sr. Discount Notes, 6/01/04 3,000,000 2,535,000
EchoStar Satellite Broadcasting Corp. $
0/13.125%, Sr. Discount Notes, 3/15/04 3,000,000 2,145,000
Lenfest Communications, Inc.
8.375%, Sr. Notes, 11/01/05 3,000,000 2,962,500
------------
9,752,500
------------
CAPITAL GOODS MANUFACTURING -- 1.61%
Roller Bearing Co. of America, Inc. #
9.625%, Sr. Subordinated Notes, 6/15/07 3,850,000 3,936,625
------------
CHEMICALS -- 0.87%
Key Plastics, Inc. #
10.25%, Sr. Subordinated Notes, 3/15/07 2,000,000 2,125,000
------------
</TABLE>
11
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Principal Amount Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMPUTER SERVICES -- 1.25%
Viasystems, Inc. #
9.75%, Sr. Subordinated Notes, 6/01/07 $ 3,000,000 $ 3,060,000
------------
CONSUMER PRODUCTS -- 2.56%
Drypers Corp.
10.25%, Sr. Notes, 6/15/07 2,000,000 1,992,500
JCAC, Inc.
10.125%, Sr. Subordinated Notes, 6/15/06 4,000,000 4,260,000
------------
6,252,500
------------
CONTAINERS AND PACKAGING -- 0.59%
U.S. Can Corp.
10.125%, Company Guarantee, 10/15/06 1,350,000 1,444,500
------------
ENERGY -- 6.60%
CalEnergy Co., Inc.
9.50%, Sr. Notes, 9/15/06 1,000,000 1,075,000
California Energy, Inc.
9.875%, Sr. Notes, 6/30/03 1,000,000 1,075,000
California Energy, Inc. $
0/10.25%, Sr. Discount Notes, 1/15/04 2,650,000 2,868,625
Calpine Corp.
10.50%, Sr. Notes, 5/15/06 2,000,000 2,165,000
Chesapeake Energy Corp.
9.125%, Company Guarantee, 4/15/06 1,000,000 1,005,000
Forcenergy, Inc.
9.50%, Sr. Subordinated Notes, 11/01/06 3,000,000 3,112,500
Transamerican Energy Corp. #
11.50%, Sr. Notes, 6/15/02 4,000,000 3,920,000
Wiser Oil Co. #
9.50%, Sr. Subordinated Notes, 5/15/07 900,000 906,750
------------
16,127,875
------------
FOOD & BEVERAGE -- 2.89%
Aurora Foods, Inc. #
9.875%, Sr. Subordinated Notes, 2/15/07 3,400,000 3,459,500
North Atlantic Trading, Inc. #
11.00%, Sr. Notes, 6/15/04 3,500,000 3,596,250
------------
7,055,750
------------
HEALTHCARE -- 5.47%
Dade International, Inc.
11.125%, Sr. Subordinated Notes, 5/01/06 3,900,000 4,368,000
Imed Corp. #
9.75%, Sr. Subordinated Notes, 12/01/06 4,750,000 4,856,875
Tenet Healthcare Corp.
8.625%, Sr. Subordinated Notes, 1/15/07 3,000,000 3,060,000
Tenet Healthcare Corp.
10.125%, Sr. Subordinated Notes, 3/01/05 1,000,000 1,100,000
------------
13,384,875
------------
</TABLE>
12
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Principal Amount Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL & GAMING -- 2.72%
Courtyard By Marriott Ltd.
10.75%, Sr. Notes, 2/01/08 $ 2,000,000 $ 2,165,000
Horseshoe Gaming L.L.C. #
9.375%, Sr. Subordinated Notes, 6/15/07 1,900,000 1,926,125
John Q. Hammons Hotels L.P.
9.75%, 1st Mortgage Notes, 10/01/05 1,000,000 1,045,000
John Q. Hammons Hotels, Inc.
8.875%, 1st Mortgage Notes, 2/15/04 1,500,000 1,522,500
------------
6,658,625
------------
INSURANCE -- 1.78%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 4,250,000 4,356,250
------------
MANUFACTURING -- 1.56%
Clark-Schwebel, Inc.
10.50%, Sr. Notes, 4/15/06 2,500,000 2,687,500
Homeside, Inc.
11.25%, Sr. Notes, 5/15/03 974,000 1,139,580
------------
3,827,080
------------
OIL & GAS -- 4.82%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 2,000,000 2,185,000
HS Resources, Inc.
9.875%, Sr. Subordinated Notes, 12/01/03 3,500,000 3,565,625
Synder Oil Corp.
8.75%, Sr. Subordinated Notes, 6/15/07 2,850,000 2,850,000
Triton Energy Ltd.
9.25%, Sr. Notes, 4/15/05 3,000,000 3,195,000
------------
11,795,625
------------
PAPER -- 2.28%
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 2,812,500
------------
5,578,375
------------
PRINTING & PUBLISHING -- 3.10%
Garden State Newspapers, Inc.
12.00%, Sr. Subordinated Notes, 7/01/04 2,000,000 2,230,000
Hollinger International Publishing, Inc.
9.25%, Company Guarantee, 3/15/07 3,000,000 3,090,000
Sea Containers Ltd.
12.50%, Sr. Subordinated Debentures, 12/01/04 2,000,000 2,260,000
------------
7,580,000
------------
</TABLE>
13
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Principal Amount Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 2.86%
Allied Waste North America, Inc. #
10.25%, Sr. Subordinated Notes, 12/01/06 $ 1,500,000 $ 1,610,625
KinderCare Learning Centers, Inc.
9.50%, Sr. Subordinated Notes, 2/15/09 2,400,000 2,322,000
Loomis Fargo & Co. #
10.00%, Sr. Subordinated Notes, 1/15/04 3,050,000 3,065,250
------------
6,997,875
------------
SPECIALTY RETAILING -- 1.93%
Barnes & Noble, Inc.
11.875%, Sr. Subordinated Notes, 1/15/03 1,750,000 1,903,125
Waban, Inc.
11.00%, Sr. Subordinated Notes, 5/15/04 2,500,000 2,818,750
------------
4,721,875
------------
STEEL -- 1.57%
AK Steel Corp.
10.75%, Sr. Notes, 4/01/04 3,000,000 3,240,000
UCAR Global Enterprises, Inc.
12.00%, Sr. Subordinated Notes, 1/15/05 535,000 605,887
------------
3,845,887
------------
SUPERMARKETS -- 1.28%
Dominicks Finer Foods, Inc.
10.875%, Sr. Subordinated Notes, 5/01/05 2,000,000 2,220,000
Quality Food Centers, Inc. #
8.70%, Sr. Subordinated Notes, 3/15/07 900,000 911,250
------------
3,131,250
------------
TELECOMMUNICATIONS -- 6.69%
L-3 Communications Corp.
10.375%, Sr. Subordinated Notes, 5/01/07 2,000,000 2,130,000
MFS Communications, Inc. $
0/8.875%, Sr. Discount Notes, 1/15/06 6,500,000 5,151,250
Paging Network, Inc.
10.125%, Sr. Subordinated Notes, 8/01/07 3,500,000 3,412,500
Teleport Communications Group, Inc. $
0/11.125%, Sr. Discount Notes, 7/01/07 5,000,000 3,587,500
Western Wireless Corp.
10.50%, Sr. Subordinated Notes, 2/01/07 2,000,000 2,070,000
------------
16,351,250
------------
TEXTILE/APPAREL -- 1.72%
Avondale Mills, Inc.
10.25%, Company Guarantee, 5/01/06 2,000,000 2,110,000
Westpoint Stevens, Inc.
9.375%, Sr. Subordinated Debentures, 12/15/05 2,000,000 2,090,000
------------
4,200,000
------------
TOYS -- 0.79%
Hedstrom Corp. #
10.00%, Sr. Subordinated Notes, 6/01/07 1,900,000 1,938,000
------------
</TABLE>
14
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Principal Amount Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION -- 1.26%
Westinghouse Air Brake Co.
9.375%, Sr. Notes, 6/15/05 $ 3,000,000 $ 3,072,150
------------
UTILITIES -- ELECTRICAL & GAS -- 2.65%
AES Corp.
10.25%, Sr. Subordinated Notes, 7/15/06 4,000,000 4,400,000
Long Island Lighting Co.
7.125% Debentures, 6/01/05 2,100,000 2,082,549
------------
6,482,549
------------
TOTAL DOMESTIC BONDS & NOTES
(cost $171,793,195) 179,365,191
------------
FOREIGN BONDS & NOTES -- 16.92%
CABLE -- 3.39%
Bell Cablemedia PLC $
0/11.875%, Sr. Discount Notes, 9/15/05 2,000,000 1,675,000
Multicanal Participacoes SA #
12.625%, Company Guarantee,, 4/01/07 3,000,000 3,435,000
Rogers Cablesystems Ltd.
9.625%, Notes, 8/01/02 3,000,000 3,165,000
------------
8,275,000
------------
CAPITAL GOODS MANUFACTURING -- 1.52%
Celestica International, Inc.
10.50%, Sr. Subordinated Notes, 12/31/06 3,450,000 3,726,000
------------
ENTERTAINMENT -- 0.62%
RBS Participacoes SA #
11.00%, Company Guarantee, 4/01/07 1,450,000 1,522,500
------------
FOOD & BEVERAGE -- 1.18%
Fage Dairy Industries SA #
9.00%, Sr. Notes, 2/01/07 3,000,000 2,880,000
------------
FOREIGN GOVERNMENT SECURITIES -- 0.85%
Guangdong Enterprises Holding Ltd. #
8.875%, Sr. Notes, 5/22/07 2,000,000 2,065,360
------------
PAPER -- 2.78%
APP International Finance Co.
11.75%, Company Guarantee,, 10/01/05 3,900,000 4,309,500
Indah Kiat Finance Mauritius Ltd. #
10.00%, Company Guarantee,, 7/01/07 2,500,000 2,490,625
------------
6,800,125
------------
PRINTING & PUBLISHING -- 1.79%
Newsquest Capital PLC
11.00%, Sr. Subordinated Notes, 5/01/06 4,000,000 4,380,000
------------
SERVICES -- 1.24%
Intertek Finance PLC
10.25%, Sr. Subordinated Notes, 11/01/06 2,900,000 3,037,750
------------
</TABLE>
15
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Principal Amount/Shares Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS -- 1.68%
Fonorola, Inc.
12.50%, Sr. Notes, 8/15/02 $ 1,000,000 $ 1,115,000
Telefonica de Argentina SA
11.875%, Notes, 11/01/04 2,500,000 2,987,500
------------
4,102,500
------------
UTILITIES -- 1.87%
CE Casecnan Water & Energy Co.
11.95%, Sr. Secured Notes, 11/15/10 4,000,000 4,580,000
------------
TOTAL FOREIGN BONDS & NOTES
(cost $38,447,213) 41,369,235
------------
PREFERRED STOCKS -- 3.31%
ENTERTAINMENT -- 2.06%
Time Warner, Inc., 10.25% 45,240 5,032,961
------------
HEALTHCARE -- 1.25%
Fresenius Medical Care Capital Trust, 9.00% 30,000 3,075,000
------------
TOTAL PREFERRED STOCKS
(cost $7,119,064) 8,107,961
------------
RIGHTS -- 0.05% @
CAPITAL GOODS MANUFACTURING -- 0.05%
Terex Corp. 8,000 124,000
------------
FOREIGN GOVERNMENT SECURITIES -- 0.00%
United Mexican States 1,500,000 0
------------
TOTAL RIGHTS
(cost $0) 124,000
------------
TOTAL INVESTMENT SECURITIES -- 93.63%
(cost $217,359,472) 228,966,387
REPURCHASE AGREEMENT -- 4.85%
Agreement with State Street Bank and Trust bearing
interest at 5.65% dated 6/30/97 to be repurchased 7/01/97
in the amount of $11,865,862 and collateralized by
$11,865,000 U.S. Treasury Notes, 6.00% due 8/31/97, value
12,102,300
(cost $11,864,000) $ 11,864,000 11,864,000
OTHER ASSETS LESS LIABILITIES -- 1.52% 3,714,553
------------
NET ASSETS -- 100.00% $244,544,940
------------
------------
</TABLE>
# Sale restricted to qualified institutional investors.
$ Step Bond.
@ Non-income producing security.
See accompanying notes to financial statements.
16
<PAGE>
(photo of Thomas Ole Dial)
THOMAS OLE DIAL
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
THE MARKETS
(Bullet) The first 3 months of the year were characterized by high GDP
growth and inflation worries. After the Fed increased the fed funds
rate in March, the economy began to cool. GDP growth fell from an
annual rate of 5.6% to below 3%. In the first 6 months of 1997
(1H97), the yields on both the 10 and 30 year Treasury bonds traded
in a 70 basis point (bps) range, but their rates rose only 8 and 12
bps to 6.50% and 6.79%, respectively. Low interest rates and
continued growth helped stock prices to again rise to all-time
highs. Small cap stocks grew at half the big cap rate of 20%, but
that still helped the creditworthiness and prices of high yield
bonds.
(Bullet) High yield bond returns in 1H97(80% of which came in the last 3
months of 1H97) were 5.82% compared to 3.09% for all domestic
bonds. These returns were due to strong demand for high coupons and
rising stock valuations underlying high yield bonds. Among high
yield bonds, lower-rated bonds outperformed more interest-rate
sensitive higher-rated bonds. Like government bonds, domestic
investment grade corporates' yields rose in 1H97. Emerging market
bonds, especially Russian and Brady bonds, outperformed again,
increasing 10.47%, due to improving political and economic
fundamentals and the ongoing hunt for yield.
(Bullet) Expected Fed policies pave the way for the U.S. economy to maintain
annual GDP growth and CPI inflation rates below 3%. The outlook for
U.S. debt and equity markets therefore remains positive for
full-year 1997.
THE FUND
(Bullet) From January through June 1997, the total return of the Fund's
shares was 10.46%, 10.08%, 10.11%, and 10.34% for Class A, B, C,
and T respectively, the Lipper average was 7.92. Limited sales and
some redemptions offset the Fund's very strong price appreciation,
so its net assets fell from $64.7 million to $60.3 million during
1H97.
(Bullet) The Fund's performance in 1H97 was very strong. After 3 quarters of
soft values for small cap stocks, many of our equity holdings rose
dramatcially (e.g. AES Corp., Buckeye Cellulose, CalEnergy, Comnet
Cellular and Smith Food and Drug). The Fund's high yield and
convertible bond positions benefited from improved yields and
spreads. We cut our exposure in telecom and gaming bonds and
increased it in healthcare and energy bonds.
(Bullet) Asset allocation is almost at the target range of 50% common and
convertibles and 50% bonds and cash. We will retain that target for
the foreseeable future.
CURRENT STRATEGY
(Bullet) Continue to look for securities of strong small- and mid-cap
companies that can provide income and capital appreciation.
(Bullet) Emphasize "bottoms-up" security analysis rather than macroeconomic
analysis in selecting securities. Continue to search anywhere in
the capital structure for opportunities that provide the best
risk/return potential.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 6/30/97) TOTAL NET ASSETS $60,311,058
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
SA Telecomm. Corp.
1 2.4%
Transamerican Energy
2 Corp. 2.4%
WorldCom, Inc.
3 2.4%
Beverly Enterprises,
4 Inc. 2.3%
Paxson Comm. Corp.
5 2.3%
Buckeye Cellulose Corp.
6 2.1%
American Radio Systems
7 1.9%
CalEnergy Co., Inc.
8 1.9%
Multicanal
9 Participacoes SA 1.9%
Newsquest Capital
10 P.L.C. 1.8%
------
21.4%
------
------
</TABLE>
<TABLE>
<S> <C>
TOP 5 INDUSTRIES
(by percentage of net asset)
----------------
Telecommunications 15.6%
-----------
Healthcare 10.0%
--------
Energy 9.9%
------
Broadcasting 7.4%
-----
Services 6.3%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- -----------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- -----------------------------------------
Class A 15.52% n/a 13.63%
- -----------------------------------------
Class B 10.21% n/a 14.31%
- -----------------------------------------
Class C 13.66% n/a 15.52%
- -----------------------------------------
Class T 21.06% 12.00% 10.21%
- -----------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
<S> <C> <C> <C>
- -----------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- -----------------------------------------
Class A 36.80% n/a 16.32%
- -----------------------------------------
Class B 34.89% n/a 15.46%
- -----------------------------------------
Class C 34.81% n/a 15.48%
- -----------------------------------------
Class T 203.28% 76.24% 16.03%
- -----------------------------------------
</TABLE>
17
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 38.99%
AEROSPACE & DEFENSE -- 1.05%
BE Aerospace, Inc. @ 20,000 $ 632,500
------------
BROADCASTING & MEDIA -- 2.28%
Chancellor Broadcasting Corp. @ 20,000 800,000
News Corp. Ltd. ** 30,000 577,500
------------
1,377,500
------------
CABLE -- 2.26%
EchoStar Communications Corp. @ 30,000 468,750
Tele-Communications, Inc. 30,000 446,250
Viacom, Inc. @ 15,000 450,000
------------
1,365,000
------------
CAPITAL GOODS MANUFACTURING -- 2.14%
Bell & Howell Co. @ 20,000 616,250
Flextronics International, Ltd. 25,000 675,000
------------
1,291,250
------------
ENERGY -- 4.44%
AES Corp. @ 15,000 1,061,250
CalEnergy Co., Inc. @ 30,000 1,140,000
Calpine Corp. @ 25,000 475,000
------------
2,676,250
------------
ENTERTAINMENT -- 1.60%
Time Warner, Inc. 20,000 965,000
------------
FOOD & BEVERAGE -- 0.85%
Canandaigua Wine Co., Inc. @ 15,000 510,000
------------
HEALTHCARE -- 2.21%
Fresenius Medical Care AG ** 20,000 582,500
Healthsouth Corp. @ 30,000 748,125
------------
1,330,625
------------
METALS & MINING -- 0.80%
U.S. Can Corp. @ 33,700 480,225
------------
OFFICE EQUIPMENT/SUPPLIES -- 0.73%
Interface, Inc. 20,000 442,500
------------
OIL & GAS -- 2.51%
HS Resources, Inc. 40,000 565,000
Parker Drilling Co. @ 30,000 333,750
Vintage Petroleum, Inc. 20,000 615,000
------------
1,513,750
------------
OIL & GAS DRILLING -- 0.77%
Global Marine, Inc. @ 20,000 465,000
------------
PAPER -- 2.90%
Asia Pulp & Paper Ltd. @ ** 30,000 453,750
Buckeye Cellulose Corp. @ 38,300 1,292,625
------------
1,746,375
------------
SERVICES -- 1.44%
Allied Waste Industries, Inc. @ 50,000 868,750
------------
</TABLE>
18
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
STEEL -- 1.10%
AK Steel Holding Corp. 15,000 $ 661,875
------------
SUPERMARKETS -- 2.25%
Dominick's Supermarkets, Inc. @ 25,000 665,625
Safeway, Inc. @ 15,000 691,875
------------
1,357,500
------------
TELECOMMUNICATIONS -- 8.67%
CommNet Cellular, Inc. @ 25,000 868,750
Globalstar Telecommunications Ltd. 22,262 681,774
Jacor Communications, Inc. @ 20,000 765,000
Telecomunicacoes Brasileiras SA ** 5,000 758,750
Teleport Communications Group, Inc. @ 20,000 682,500
WorldCom, Inc. @ 46,000 1,472,000
------------
5,228,774
------------
TRANSPORTATION -- 0.99%
Westinghouse Air Brake Co. 30,000 600,000
------------
TOTAL COMMON STOCKS
(cost $19,357,640) 23,512,874
------------
PREFERRED STOCKS -- 5.05%
BROADCASTING & MEDIA -- 4.20%
Chancellor Radio Broadcasting, 12.00% # 5,000 575,000
Paxson Communications Corp. 12.50% & 13,390 1,412,645
SFX Broadcasting, Inc., 12.625% & 5,000 542,500
------------
2,530,145
------------
HEALTHCARE -- 0.85%
Fresenius Medical Care Capital Trust, 9.00% 5,000 512,500
------------
TOTAL PREFERRED STOCKS
(cost $2,826,852) 3,042,645
------------
CONVERTIBLE PREFERRED STOCKS -- 2.71%
BROADCASTING & MEDIA -- 1.87%
American Radio Systems Corp., 7.00% # 20,000 1,126,960
------------
OIL & GAS -- 0.84%
Atlantic Richfield Corp., 9.00% (1) 23,600 507,400
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $1,649,852) 1,634,360
------------
DOMESTIC CORPORATE BONDS -- 29.52%
AEROSPACE & DEFENSE -- 1.68%
Derlan Manufacturing, Inc. #
10.00%, Sr. Notes, 1/15/07 $ 1,000,000 1,015,000
------------
BROADCASTING & MEDIA -- 1.21%
Sinclair Broadcast Group, Inc. #
9.00%, Sr. Subordinated Notes, 7/15/07 750,000 731,250
------------
CABLE -- 1.19%
EchoStar Satellite Broadcasting Corp. $
0/13.125%, Sr. Discount Notes, 3/15/04 1,000,000 715,000
------------
</TABLE>
19
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Units/Principal Amount Value
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.86%
Packaged Ice, Inc. (2)
12.00%, Units, 4/15/04 500 $ 515,000
------------
HEALTHCARE -- 4.65%
Imed Corp. #
9.75%, Sr. Subordinated Notes, 12/01/06 $ 1,000,000 1,022,500
Tenet Healthcare Corp.
8.625%, Sr. Subordinated Notes, 1/15/07 1,000,000 1,020,000
Urohealth Systems, Inc. # (3)
12.50%, Units, 4/01/04 750 761,250
------------
2,803,750
------------
HOTEL & GAMING -- 1.62%
Trump Atlantic City Funding, Inc.
11.25%, Company Guarantee, 5/01/06 1,000,000 977,500
------------
LEISURE -- 1.73%
KSL Recreation Group, Inc. #
10.25%, Sr. Subordinated Notes, 5/01/07 1,000,000 1,045,000
------------
OIL & GAS -- 2.43%
Transamerican Energy Corp. # $
0/13.00%, Sr. Discount Notes, 6/15/02 1,994,000 1,465,590
------------
SERVICES -- 3.39%
Allied Waste Industries, Inc. # $
0/11.30%, Sr. Discount Notes, 6/01/07 1,000,000 632,500
Coinstar, Inc. # $
0/13.00%, Sr. Subordinated Notes, 10/01/06 1,250,000 875,000
ICF Kaiser International, Inc.
13.00%, Sr. Notes, 12/31/03 500,000 537,500
------------
2,045,000
------------
SHIPPING -- 1.64%
Equimar Shipholdings Ltd. #
9.875%, Company Guarantee, 7/01/07 1,000,000 990,000
------------
SPECIALTY RETAILING -- 1.15%
Electronic Retailing Systems International # (4)
13.25%, Units, 2/01/04 1,000 695,000
------------
SUPERMARKETS -- 1.05%
Food 4 Less Supermarkets, Inc. &
13.625%, Sr. Subordinated Debentures, 6/15/07 534,063 632,864
------------
TELECOMMUNICATIONS -- 5.27%
Globalstar L.P./Globalstar Capital # (5)
11.375%, Units, 2/15/04 500 502,500
Paging Network, Inc.
10.00%, Sr. Subordinated Notes, 10/15/08 1,000,000 965,000
Teleport Communications Group, Inc. $
0/11.125%, Sr. Discount Notes, 7/01/07 1,000,000 717,500
Unifi Communications, Inc. # (6)
14.00%, Units, 3/01/04 1,000 995,000
------------
3,180,000
------------
</TABLE>
20
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL -- 1.65%
Brazos Sportswear, Inc. #
10.50%, Sr. Notes, 7/01/07 $ 1,000,000 $ 995,000
------------
TOTAL DOMESTIC CORPORATE BONDS
(cost $17,580,699) 17,805,954
------------
CONVERTIBLE BONDS -- 6.48%
CABLE -- 1.75%
Comcast Corp. $
0/5.50%, Subordinated Debentures, 9/09/05 1,000,000 1,055,930
------------
HEALTHCARE -- 2.32%
Beverly Enterprises, Inc.
5.50%, Subordinated Debentures, 8/01/18 1,125,000 1,399,837
------------
TELECOMMUNICATIONS -- 2.41%
SA Telecommunications, Inc. #
10.00%, Notes, 8/15/06 2,000,000 1,452,500
------------
TOTAL CONVERTIBLE BONDS
(cost $4,053,532) 3,908,267
------------
FOREIGN CORPORATE BONDS -- 9.58%
CABLE -- 1.90%
Multicanal Participacoes SA
12.625%, Company Guarantee, 6/18/04 1,000,000 1,145,000
------------
FOOD & BEVERAGE -- 0.79%
Fage Dairy Industries SA #
9.00%, Sr. Notes, 2/01/07 500,000 480,000
------------
OIL & GAS -- 1.62%
Panda Global Energy Co. #
12.50%, Sr. Secured Notes, 4/15/04 1,000,000 975,000
------------
PAPER -- 2.57%
APP International Finance Co.
11.75%, Company Guarantee, 10/01/05 500,000 552,500
Indah Kiat Finance Mauritius Ltd. #
10.00%, Company Guarantee, 7/01/07 1,000,000 996,250
------------
1,548,750
------------
PRINTING & PUBLISHING -- 1.81%
Newsquest Capital P.L.C.
11.00%, Sr. Subordinated Notes, 5/01/06 1,000,000 1,095,000
------------
TELECOMMUNICATIONS -- 0.89%
Ionica PLC $(7)
0/15.00%, Units, 5/01/07 1,000 535,000
------------
TOTAL FOREIGN CORPORATE BONDS
(cost $5,511,934) 5,778,750
------------
</TABLE>
21
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
WARRANTS -- 0.15% @
SERVICES -- 0.14%
Coinstar, Inc., (expires 10/01/06) 1,250 $ 87,500
ICF Kaiser International, Inc., (expires 12/31/99) 3,500 35
------------
87,535
------------
SPECIALTY RETAILING -- 0.01%
Electronic Retailing Systems International, (expires
2/01/04) 1,000 4,000
------------
TOTAL WARRANTS
(cost $0) 91,535
------------
TOTAL INVESTMENT SECURITIES -- 92.48%
(cost $50,980,509) 55,774,385
REPURCHASE AGREEMENT -- 10.74%
Agreement with State Street Bank and Trust bearing
interest at 5.65% dated 6/30/97, to be repurchased 7/01/97
in the amount of $6,478,017 and collateralized by
$6,480,000 U.S. Treasury Notes, 6.00% due 8/31/97, value
$6,609,600
(cost $6,477,000) $ 6,477,000 6,477,000
LIABILITIES IN EXCESS OF OTHER ASSETS -- (3.22%) (1,940,327)
------------
NET ASSETS -- 100.00% $ 60,311,058
------------
------------
</TABLE>
@ Non-income producing security.
** American Depositary Receipts.
# Sale restricted to qualified institutional investors.
& Payment-in-kind security.
$ Step Bond.
(1) Mandatory conversion on 9/15/97 into shares of Lyondell Petroleum Co. common
stock.
(2) A unit consists of $1,000 par value Sr. Notes, 12.00% due 4/15/04, and 1
warrant.
(3) A unit consists of $1,000 par value Sr. Subordinated Notes, 12.50% due
4/01/04, and 1 warrant.
(4) A unit consists of $1,000 par value Sr. Discount Notes, 13.25% due 2/01/04,
and 1 warrant.
(5) A unit consists of $1,000 par value Sr. Notes, 11.375% due 2/15/04, and 1
warrant.
(6) A unit consists of $1,000 par value Sr. Notes, 14.00% due 3/01/04, and 1
warrant.
(7) A unit consists of $1,000 par value Sr. Discount Notes, 15.00% due 5/01/07,
and 1 warrant.
See accompanying notes to financial statements.
22
<PAGE>
(photo of Geoffrey Wadsworth)
GEOFFREY WADSWORTH
(Northstar logo appears here)
NORTHSTAR GROWTH FUND
THE MARKETS
(Bullet) During the first half of 1997 the Dow Industrials rose 19.0%, the
S&P 500 was up 19.5%, the S&P 400 Mid-Cap Index was up 13.0%, and
the Russell 2000 was up 9.3%.
(Bullet) Fears of an overheated economy peaked in early April ending the
9.5% correction in the S&P 500 from its February highs. Since then
the S&P has risen over 25% through mid July as profits have been
strong, economic growth moderated, and despite a tightening labor
market, inflation actually declined rather than accelerating.
(Bullet) While small and mid-cap averages lagged, the relative performance
improved considerably during the second quarter. Large-cap blue
chips with a consistent growth outlook continued to be leaders.
THE FUND
(Bullet) The Growth Fund shares were up 14.12%, 13.74%, 13.68%, 13.80%, and
14.41% for Class A, B, C, T, and I shares, respectively, for the
six months compared to the 14.3% for the average of growth funds
tracked by Lipper. This brought the trailing 12 months performance
to 25.2% vs. an average of 24.0% for the comparables.
(Bullet) Performance was helped by strong gains of large holdings in several
sectors including computers, semiconductors, and pharmaceuticals.
Also doing well were individual large-cap leaders in their
respective industries such as Proctor & Gamble, Home Depot, Deere,
and Xerox. Weak performance was experienced with retailers, natural
gas, and a number of individual stocks.
CURRENT STRATEGY
(Bullet) The U.S. and global economies will likely accelerate somewhat from
the recent lull. While corporate profit margins are high,
productivity gains have been strong and the outlook remains
favorable. Earnings growth will continue to bolster stock prices
making a significant decline unlikely without a definitive reversal
in the trend of interest rates.
(Bullet) Re-acceleration of growth is likely to arrest further declines in
interest rates but not cause a major reversal without building a
larger body of inflationary evidence than now exists.
(Bullet) The Fund continues to have significant holdings in computer related
technology, healthcare, oil services, specialty retailing and
financial stocks. Some of the large-cap stocks with extended
valuations and those with disappointing fundamentals have been sold
or reduced while we continue to look for good companies with above
average growth selling at attractive relative valuations.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA AS OF 6/30/97) TOTAL NET ASSETS $184,329,454
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
Compaq Computer Corp.
1 4.3%
Global Marine, Inc.
2 3.6%
Philip Morris Cos.,
3 Inc. 3.4%
Citicorp
4 3.3%
WorldCom, Inc.
5 3.0%
AMP, Inc.
6 2.9%
Schlumberger, Ltd.
7 2.7%
Ceridian Corp.
8 2.6%
Home Depot, Inc.
9 2.6%
Magna International,
10 Inc. 2.6%
------
31.0%
------
------
</TABLE>
<TABLE>
<S> <C>
TOP 5 SECTORS
(by percentage of net assets)
------------------
Technology 23.4%
Consumer -------------
Cyclical 18.8%
----------
Energy 14.0%
Financial -------
Services 11.5%
-----
Healthcare 8.1%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- -----------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- -----------------------------------------
Class A 20.11% n/a 19.22%
- -----------------------------------------
Class B 21.06% n/a 19.32%
- -----------------------------------------
Class C 22.16% n/a 23.26%
- -----------------------------------------
Class T 12.59% 14.15% 20.50%
- -----------------------------------------
Class I 70.61% n/a n/a
- -----------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
<S> <C> <C> <C>
- -----------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- -----------------------------------------
Class A 53.43% n/a 25.15%
- -----------------------------------------
Class B 51.53% n/a 24.32%
- -----------------------------------------
Class C 51.33% n/a 24.26%
- -----------------------------------------
Class T 286.72% 93.82% 24.50%
- -----------------------------------------
Class I 14.41% n/a n/a
- -----------------------------------------
</TABLE>
23
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 95.72%
AEROSPACE & DEFENSE -- 2.97%
Boeing Co. 70,000 $ 3,714,375
Northrop Grumman Corp. 20,000 1,756,250
------------
5,470,625
------------
ALUMINUM -- 0.28%
Century Aluminum Co. 35,000 511,875
------------
AUTO PARTS & EQUIPMENT -- 2.63%
Magna International, Inc. 80,500 4,845,094
------------
BIOTECHNOLOGY -- 1.68%
Amgen, Inc. @ 20,000 1,162,500
Genzyme Corp. @ 70,000 1,942,500
------------
3,105,000
------------
BUSINESS SERVICES -- 0.96%
Loewen Group, Inc. 51,000 1,772,250
------------
COMPUTER HARDWARE -- 4.28%
Compaq Computer Corp. @ 79,400 7,880,450
------------
COMPUTER NETWORKING -- 2.55%
Cisco Systems, Inc. @ 70,000 4,698,750
------------
COMPUTER SOFTWARE -- 1.89%
Microsoft Corp. @ 27,600 3,487,950
------------
COMPUTER SOFTWARE & SERVICES -- 3.85%
Ceridian Corp. @ 114,200 4,824,950
Electronic Data Systems Corp. 55,370 2,270,170
------------
7,095,120
------------
CONSTRUCTION -- 0.76%
Fluor Corp. 25,500 1,407,281
------------
CONSUMER PRODUCTS -- 3.57%
Kimberly-Clark Corp. 89,632 4,459,192
Procter & Gamble Co. 15,000 2,118,750
------------
6,577,942
------------
ELECTRICAL EQUIPMENT -- 2.86%
AMP, Inc. 126,400 5,277,200
------------
ENERGY -- 6.85%
El Paso Natural Gas Co. 64,300 3,536,500
Enron Oil & Gas Co. 68,900 1,248,812
Schlumberger, Ltd. 39,100 4,887,500
Seitel, Inc. @ 18,000 684,000
Sonat, Inc. 44,100 2,260,125
------------
12,616,937
------------
</TABLE>
24
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES -- 10.28%
Associates First Capital Corp. 35,000 $ 1,942,500
Capital One Financial Corp. 117,000 4,416,750
Citicorp 49,800 6,004,012
City National Corp. 50,000 1,203,125
Fannie Mae 58,800 2,565,150
Mellon Bank Corp. 62,600 2,824,825
------------
18,956,362
------------
HEALTHCARE -- 1.81%
Columbia / HCA Healthcare Corp. 28,300 1,112,544
Healthsouth Corp. @ 89,200 2,224,425
------------
3,336,969
------------
HOTEL & RESTAURANTS -- 2.57%
Doubletree Corp. @ 50,000 2,056,250
La Quinta Inns, Inc. 122,500 2,679,688
------------
4,735,938
------------
INSURANCE -- 1.19%
General Re Corp. 12,000 2,184,000
------------
MACHINERY -- 2.48%
Deere & Co. 83,400 4,576,575
------------
OFFICE EQUIPMENT/SUPPLIES -- 3.01%
American Pad & Paper Co. @ 50,000 843,750
Xerox Corp. 59,700 4,708,838
------------
5,552,588
------------
OIL & GAS -- 1.19%
Parker Drilling Co. @ 197,300 2,194,963
------------
OIL & GAS DRILLING -- 3.58%
Global Marine, Inc. @ 284,000 6,603,000
------------
OIL & GAS EXPLORATION -- 2.38%
Baker Hughes, Inc. 113,500 4,391,031
------------
PHARMACEUTICAL -- 4.57%
Bristol-Myers Squibb Co. 53,400 4,325,400
Merck & Co., Inc. 26,900 2,784,150
Pfizer, Inc. 11,000 1,314,500
------------
8,424,050
------------
RETAILING -- 12.67%
AutoZone, Inc. @ 138,000 3,251,625
CUC International, Inc. @ 125,000 3,226,562
General Nutrition Cos., Inc. @ 128,000 3,584,000
Home Depot, Inc. 70,000 4,825,625
Nine West Group, Inc. @ 100,000 3,818,750
Office Depot, Inc. @ 80,000 1,555,000
Pep Boys - Manny, Moe & Jack 91,000 3,099,688
------------
23,361,250
------------
</TABLE>
25
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR -- 6.26%
Intel Corp. 15,800 $ 2,240,638
Millipore Corp. 69,100 3,040,400
National Semiconductor Corp. @ 71,000 2,174,375
Texas Instruments, Inc. 48,500 4,077,031
------------
11,532,444
------------
TELECOMMUNICATIONS -- 4.19%
Paging Network, Inc. @ 250,000 2,195,312
WorldCom, Inc. @ 172,700 5,526,400
------------
7,721,712
------------
TOBACCO -- 3.36%
Philip Morris Cos., Inc. 139,500 6,190,312
------------
TRUCKING & FREIGHT -- 1.05%
US Freightways Corp. 75,000 1,940,625
------------
TOTAL COMMON STOCKS
(cost $138,798,513) 176,448,293
------------
TOTAL INVESTMENT SECURITIES -- 95.72%
(cost $138,798,513) 176,448,293
REPURCHASE AGREEMENT -- 7.94%
Agreement with State Street Bank and Trust bearing
interest at 5.65% dated 6/30/97, to be repurchased 7/01/97
in the amount of $14,637,297 and collateralized by
$14,635,000 U.S. Treasury Notes, 6.00% due 8/31/97, value
$14,927,700
(cost $14,635,000) $14,635,000 14,635,000
LIABILITIES IN EXCESS OF OTHER ASSETS -- (3.66%) (6,753,839)
------------
NET ASSETS -- 100.00% $184,329,454
------------
------------
</TABLE>
@Non-income producing security.
See accompanying notes to financial statements.
26
<PAGE>
(photo of Louis Navellier)
LOUIS NAVELLIER
(Northstar logo appears here)
NORTHSTAR SPECIAL FUND
THE MARKETS
(Bullet) During the first half of 1997 the S&P 500 rose 19.5%, the NASDAQ
Composite was up 11.7%, and the Dow Industrials were up 19.0%.
(Bullet) The stock market was unusually strong during the past few months,
primarily because long term bond yields fell and trading volume
continued to swell. After lagging in the first quarter, small and
mid capitalization stocks began to catch with the large
capitalization stocks during the second quarter. NASDAQ trading
volume surged toward the end of the period, lending greater
relative strength to the small caps. Fundamentally, small caps
remained more attractive than the large caps as evidenced by the
relatively high price/earnings ratios of the S&P 500 and Dow
Industrials. Investor optimism became even more bullish during the
second quarter due to the excellent economic environment. The U.S.
economy has cooled off dramatically from its torrid pace in the
first quarter (5.9% annual GNP growth) and deflation may now be at
hand. During the last five months, wholesale prices have fallen
dramatically, their largest decrease in 45 years. Retail sales have
fallen for three consecutive months lending further support to the
widespread opinion that the Federal Reserve Board will not raise
interest rates in the near future.
THE FUND
(Bullet) From 1/01/97 to 6/30/97 the total returns of the Fund's Class A, B,
C and T shares were 8.09%, 7.73%, 7.69%, and 7.84% respectively;
compared to 15.44% for the Lipper Growth Fund Index.
(Bullet) The top performing stocks in the Fund for this period included:
Manugistics, Mail-Well Inc., Telecomunicoes Brasil., Bristol Myers
and Southdown Inc. Amongst the underperformers were: First Plus
Financial, Zoltek, Russell Corp., Eagle USA Airfreight and
Wellsford Residential.
CURRENT STRATEGY
(Bullet) We see a more selective stock market environment developing over
the upcoming months characterized by decelerating earnings
momentum, particularly among the more vulnerable large
capitalization stocks. The slower pace of economic growth combined
with eroding profit margin expansion may manifest itself when
second quarter earnings are announced in July. Most small cap
companies will continue to perform well during the second quarter
earnings announcements, since they have predominately low to
moderate price earnings ratios. The Special Fund currently has an
allocation that is 52% small cap, 23% mid cap, and a 25% large cap.
The Fund's portfolio was recently adjusted to give greater emphasis
to small capitalization stocks. Our screens have been emphasizing
more earnings surprises since Wall Street continues to be obsessed
with upward analysts' earnings revisions and stocks with consistent
earnings growth. We believe that we can still outperform the market
in a narrow stock picking environment, since we remain focused on
stocks with superior fundamentals relative to the S&P 500.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 6/30/97) TOTAL NET ASSETS $314,041,788
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
Camco International,
1 Inc. 3.0%
Manugistics Groups,
2 Inc. 2.3%
Costco Cos., Inc.
3 2.1%
Southdown, Inc.
4 2.0%
Telecommunicacoes
5 Brasileiras SA 2.0%
Mail-Well, Inc.
6 1.9%
Bristol-Myers Squibb
7 Co. 1.8%
Tubos de Acero de
8 Mexico SA 1.8%
Bowne & Co., Inc.
9 1.7%
Owens-Illinois, Inc.
10 1.7%
------
20.3%
------
------
</TABLE>
<TABLE>
<S> <C>
TOP 5 INDUSTRIES
(by percentage of net asset)
Oil & Gas ------------------
Exploration 3.0%
Computer -------------
Software 2.3%
------------
Retail 2.1%
------------
Telecommunications 2.0%
Building -----------
Materials 1.9%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- -----------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- -----------------------------------------
Class A 16.21% n/a 2.81%
- -----------------------------------------
Class B 16.98% n/a 2.11%
- -----------------------------------------
Class C 18.18% n/a 6.12%
- -----------------------------------------
Class T 10.39% 14.81% 3.32%
- -----------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
<S> <C> <C> <C>
- -----------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- -----------------------------------------
Class A 43.31% n/a 7.92%
- -----------------------------------------
Class B 41.35% n/a 7.11%
- -----------------------------------------
Class C 41.30% n/a 7.12%
- -----------------------------------------
Class T 209.04% 99.51% 7.32%
- -----------------------------------------
</TABLE>
27
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 96.70%
ADVERTISING/MARKETING -- 1.52%
Valassis Communications, Inc. @ 198,600 $ 4,766,400
------------
AEROSPACE & DEFENSE -- 1.30%
Coltec Industries, Inc. @ 209,000 4,075,500
------------
AIR FREIGHT/COURIERS -- 0.92%
Expeditors International of Washington, Inc. 102,100 2,897,088
------------
APPAREL/FABRIC -- 2.71%
Jones Apparel Group, Inc. @ 105,200 5,023,300
Wolverine World Wide, Inc. 114,300 3,471,862
------------
8,495,162
------------
AUTOMOTIVE -- 1.00%
PACCAR, Inc. 67,900 3,153,106
------------
BANKS -- 9.74%
BankAmerica Corp. 79,000 5,100,437
Commerce Bancshares, Inc. 96,165 4,351,466
First of America Bank Corp. 100,500 4,597,875
Northern Trust Corp. 49,400 2,389,725
ONBANCorp, Inc. 89,000 4,539,000
Riggs National Corp. 231,300 4,770,563
Zions Bancorp. 128,800 4,846,100
------------
30,595,166
------------
BIOTECHNOLOGY -- 0.88%
Bio-Technology General Corp. @ 204,400 2,759,400
------------
BUILDING MATERIALS -- 1.94%
Southdown, Inc. 139,700 6,094,413
------------
CHEMICALS -- 1.41%
Rhone-Poulenc SA ** 106,500 4,433,063
------------
COMPUTER HARDWARE -- 0.82%
Quantum Corp. @ 127,000 2,579,688
------------
COMPUTER SERVICES -- 1.60%
Keane, Inc. @ 96,900 5,038,800
------------
COMPUTER SOFTWARE -- 5.18%
BMC Software, Inc. @ 61,300 3,394,487
Manugistics Group, Inc. @ 164,600 7,324,700
Microsoft Corp. @ 41,000 5,181,375
Nhancement Technologies Inc. @ 100,000 350,000
Sanctuary Woods Multimedia @ 3,500 6,563
------------
16,257,125
------------
CONSUMER PRODUCTS -- 0.78%
The Scotts Co. @ 84,700 2,456,300
------------
CONTAINERS AND PACKAGING -- 1.72%
Owens-Illinois, Inc. @ 174,100 5,397,100
------------
ELECTRICAL EQUIPMENT -- 1.17%
Hubbell, Inc. 83,400 3,669,600
------------
ENVIRONMENTAL CONTROL -- 0.73%
Barringer Technologies, Inc. @ 152,500 2,287,500
------------
</TABLE>
28
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES -- 1.21%
Student Loan Marketing Association 30,000 $ 3,810,000
------------
FOOD -- 4.36%
Campbell Soup Co. 91,200 4,560,000
Dean Foods Co. 102,100 4,122,287
Suiza Foods Corp. @ 122,300 5,014,300
------------
13,696,587
------------
GAS & PIPELINE UTILITIES -- 2.57%
Columbia Gas System, Inc. 47,000 3,066,750
Duke Power Corp. 104,440 5,006,592
------------
8,073,342
------------
HOME FURNISHINGS -- 1.51%
O'Sullivan Industries Holdings, Inc. @ 285,700 4,731,906
------------
HOUSEHOLD APPLIANCES & HOME FURNISHINGS -- 1.01%
Interface, Inc. 143,200 3,168,300
------------
HOUSEHOLD PRODUCTS -- 1.45%
Clorox Co. 34,600 4,567,200
------------
INDUSTRIAL MANUFACTURING -- 1.57%
Tyco International Ltd. 70,700 4,918,069
------------
INSURANCE -- 3.77%
Allstate Corp. 64,000 4,672,000
Conseco, Inc. 72,700 2,689,900
Progressive Corp. 51,600 4,489,200
------------
11,851,100
------------
MANUFACTURING -- 1.35%
Samsonite Corp. @ 96,400 4,253,650
------------
METALS & MINING -- 0.88%
Zeigler Coal Holding Co. 118,900 2,779,288
------------
OFFICE EQUIPMENT/SUPPLIES -- 1.39%
Herman Miller, Inc. 121,600 4,377,600
------------
OIL -- 1.35%
British Petroleum Co. PLC ** 56,418 4,224,298
------------
OIL & GAS -- 0.98%
Snyder Oil Corp. 167,300 3,074,138
------------
OIL & GAS DRILLING -- 1.38%
Global Marine, Inc. @ 84,100 1,955,325
Marine Drilling Cos., Inc. @ 120,400 2,362,850
------------
4,318,175
------------
OIL & GAS EXPLORATION -- 4.45%
Camco International, Inc. 170,870 9,355,132
Smith International, Inc. @ 76,100 4,623,075
------------
13,978,207
------------
PHARMACEUTICAL -- 1.81%
Bristol-Myers Squibb Co. 70,000 5,670,000
------------
PUBLISHING -- 1.50%
Houghton Mifflin Co. 70,400 4,699,200
------------
</TABLE>
29
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRINTING -- 3.59%
Bowne & Co., Inc. 154,900 $ 5,402,137
Mail-Well, Inc. @ 205,500 5,856,750
------------
11,258,887
------------
REAL ESTATE INVESTMENT TRUST -- 6.16%
BRE Properties, Inc. 111,200 2,793,900
Cali Realty Corp. 129,300 4,396,200
Equity Residential Properties Trust 86,812 4,123,570
First Industrial Realty Trust, Inc. 132,400 3,872,700
General Growth Properties, Inc. 112,600 3,772,100
Wellsford Real Properties, Inc. 34,725 381,975
------------
19,340,445
------------
RESTAURANTS -- 1.01%
Stein Mart, Inc. @ 106,000 3,180,000
------------
RETAIL -- 4.51%
Burlington Coat Factory Warehouse Corp. @ 150,000 2,925,000
Costco Cos., Inc. @ 204,000 6,706,500
Funco, Inc. @ 245,300 4,538,050
------------
14,169,550
------------
RETAIL -- DISCOUNT -- 2.83%
Family Dollar Stores, Inc. 176,000 4,796,000
Mac Frugals Bargains Close-Outs, Inc. @ 150,100 4,090,225
------------
8,886,225
------------
RETAIL & WHOLESALE -- 0.96%
ShopKo Stores, Inc. 118,500 3,021,750
------------
SAVINGS & LOAN -- 2.30%
First Financial Corp. 107,300 3,151,937
RCSB Financial, Inc. 85,200 4,078,950
------------
7,230,887
------------
SEMICONDUCTOR -- 3.02%
Dallas Semiconductor Corp. 111,900 4,392,075
Intel Corp. 35,800 5,076,887
------------
9,468,962
------------
STEEL -- 1.76%
Tubos de Acero de Mexico SA @ ** 300,000 5,531,250
------------
TELECOMMUNICATIONS -- 2.84%
Compania de Telecomunicaciones de Chile SA ** 83,600 2,758,800
Telecomunicacoes Brasileiras SA ** 40,600 6,161,050
------------
8,919,850
------------
TRANSPORTATION -- 1.31%
Swift Transportation Co., Inc. @ 139,800 4,124,100
------------
WATER COMPANIES -- 0.45%
United Water Resources, Inc. 72,500 1,404,688
------------
TOTAL COMMON STOCKS
(cost $251,426,030) 303,683,065
------------
TOTAL INVESTMENT SECURITIES -- 96.70%
(cost $251,426,030) 303,683,065
------------
</TABLE>
30
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
(Northstar logo appears here)
<TABLE>
<CAPTION>
Principal
Security Amount Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 6.41%
Agreement with State Street Bank and Trust bearing interest at
5.65% dated 6/30/97, to be repurchased 7/01/97 in the amount of
$20,127,158 and collateralized by $20,125,000 U.S. Treasury
Notes, 6.00% due 8/31/97, value $20,527,500
(cost $20,124,000) $ 20,124,000 $ 20,124,000
LIABILITIES IN EXCESS OF OTHER ASSETS -- (3.11%) (9,765,277)
------------
NET ASSETS -- 100.00% $314,041,788
------------
------------
</TABLE>
@ Non-income producing security.
** American Depository Receipts.
See accompanying notes to financial statements.
31
<PAGE>
NORTHSTAR FUNDS
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
Northstar Northstar
Government Northstar Northstar Balance Sheet
Securities Strategic High Yield Opportunities Northstar Northstar
Fund Income Fund Fund Fund Growth Fund Special Fund
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
ASSETS:
Investments in securities, at value (cost
$116,003,221, $66,679,831, $217,359,472,
$50,980,509, $138,798,513 and
$251,426,030, respectively) $117,909,616 $69,450,320 $228,966,387 $ 55,774,385 $176,448,293 $303,683,065
Repurchase agreements 1,859,000 3,365,000 11,864,000 6,477,000 14,635,000 20,124,000
Cash 730 335 67 17,879 953 725
Dividends and interest receivable 700,818 1,135,803 3,798,958 500,444 218,644 374,748
Receivable for shares of beneficial
interest sold 205,633 9,408 1,203,017 9,307 44,700 1,258,615
Prepaid expenses 12,159 51,756 16,275 10,887 13,498 18,908
Receivable for investments sold 0 818,750 4,281,736 393,286 0 1,596,596
---------------------------------------------------------------------------------------
Total Assets 120,687,956 74,831,372 250,130,440 63,183,188 191,361,088 327,056,657
---------------------------------------------------------------------------------------
LIABILITIES:
Payable for shares of beneficial interest
reacquired 123,973 23,778 285,062 70,077 59,441 1,819,731
Distribution fee payable 64,499 51,190 157,665 37,914 72,839 206,178
Investment advisory fee payable 49,409 38,960 89,874 32,337 112,161 189,869
Accrued expenses 30,937 31,078 81,823 15,207 46,547 152,357
Payable for investments purchased 0 1,988,460 4,970,125 2,716,595 6,738,023 10,646,734
Other payables 0 3,275 951 0 2,623 0
---------------------------------------------------------------------------------------
Total Liabilities 268,818 2,136,741 5,585,500 2,872,130 7,031,634 13,014,869
---------------------------------------------------------------------------------------
NET ASSETS $120,419,138 $72,694,631 $244,544,940 $ 60,311,058 $184,329,454 $314,041,788
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of beneficial
interest, $0.01 par value outstanding
(unlimited shares authorized) $144,080,364 $73,203,566 $240,336,925 $ 51,838,607 $144,736,808 $274,349,999
Undistributed (overdistributed) net
investment income 43,253 529,078 (462,597) 72,664 (128,071) (535,120)
Accumulated net realized gain (loss) on
investments, foreign currency, options,
and futures (25,610,874) (3,807,312) (6,936,303) 3,605,911 2,070,934 (12,030,126)
Net unrealized appreciation of investments
and foreign currency 1,906,395 2,769,299 11,606,915 4,793,876 37,649,783 52,257,035
---------------------------------------------------------------------------------------
Net Assets $120,419,138 $72,694,631 $244,544,940 $ 60,311,058 $184,329,454 $314,041,788
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
CLASS A:
Net Assets $ 12,246,763 $13,435,252 $ 14,240,493 $ 1,127,347 $ 39,326,983 $ 80,038,876
---------------------------------------------------------------------------------------
Shares outstanding 1,314,809 1,066,911 1,577,635 88,386 1,922,790 2,995,743
---------------------------------------------------------------------------------------
Net asset value and redemption value per
share
(net assets / shares outstanding) $ 9.31 $ 12.59 $ 9.03 $ 12.75 $ 20.45 $ 26.72
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Maximum offering price per share (net
asset value plus sales charge of 4.75%
of offering price) $ 9.77 $ 13.22 $ 9.48 $ 13.39 $ 21.47 $ 28.05
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
CLASS B:
Net Assets $ 10,413,479 $31,340,043 $ 96,280,382 $ 4,272,396 $ 6,427,671 $152,748,115
---------------------------------------------------------------------------------------
Shares outstanding 1,117,279 2,490,202 10,657,558 336,211 318,219 5,797,320
---------------------------------------------------------------------------------------
Net asset value and offering price per
share $ 9.32 $ 12.59 $ 9.03 $ 12.71 $ 20.20 $ 26.35
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
CLASS C:
Net Assets $ 1,277,011 $ 4,388,211 $ 17,107,249 $ 667,764 $ 676,221 $ 46,717,075
---------------------------------------------------------------------------------------
Shares outstanding 137,160 349,130 1,894,144 52,520 33,496 1,773,502
---------------------------------------------------------------------------------------
Net asset value and offering price per
share $ 9.31 $ 12.57 $ 9.03 $ 12.71 $ 20.19 $ 26.34
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
CLASS T:
Net Assets $ 96,481,885 $23,531,125 $116,916,816 $ 54,243,551 $ 74,437,975 $ 34,537,722
---------------------------------------------------------------------------------------
Shares outstanding 10,356,329 1,868,970 12,950,054 4,247,580 3,670,862 1,308,365
---------------------------------------------------------------------------------------
Net asset value and offering price per
share $ 9.32 $ 12.59 $ 9.03 $ 12.77 $ 20.28 $ 26.40
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
CLASS I:
Net Assets $ 63,460,604
------------
Shares outstanding 3,098,543
------------
------------
Net asset value and offering price per
share $ 20.48
------------
------------
</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, 1997
(Northstar logo appears here)
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Government Strategic Northstar Balance Sheet Northstar
Securities Income High Yield Opportunities Northstar Special
Fund Fund Fund Fund Growth Fund Fund
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of withholding tax of $0, $0,
0, $209, $5,280, and $29,089,
respectively) $ 0 $ 105,366 $ 267,940 $ 318,792 $ 832,708 $ 1,888,370
Interest (net of withholding tax of $0,
$5,743, $0, $0, $0, and $0 respectively) 4,847,145 3,392,654 10,633,097 1,399,196 346,513 292,633
-----------------------------------------------------------------------------------
Total investment income 4,847,145 3,498,020 10,901,037 1,717,988 1,179,221 2,181,003
-----------------------------------------------------------------------------------
EXPENSES:
Investment advisory and management fees 410,319 238,831 527,309 198,541 624,993 1,062,572
Distribution fees
Class A 19,357 20,745 20,041 1,585 90,883 106,367
Class B 48,417 152,957 430,132 19,864 26,352 687,309
Class C 5,885 21,206 76,837 2,841 2,573 205,029
Class T 333,084 117,914 388,717 208,095 337,621 161,373
Transfer agent fees and expenses
Class A 12,257 13,733 11,765 1,051 28,800 68,570
Class B 9,307 28,055 74,783 3,530 4,910 144,753
Class C 902 3,838 14,219 451 548 52,948
Class T 43,204 11,855 52,592 24,905 32,041 16,274
Class I 0 0 0 0 7,066 0
Accounting and custodian fees 32,798 29,467 46,527 26,913 40,534 54,377
Registration fees 29,392 29,808 43,089 29,348 34,864 46,187
Audit fees 12,036 12,367 14,817 10,782 13,837 14,226
Printing and postage expenses 11,510 17,391 27,442 7,282 24,359 37,627
Administration service fees 9,285 5,597 18,661 4,645 13,977 23,669
Directors 5,746 4,829 9,739 5,045 7,029 10,033
Legal fees 3,077 1,266 4,950 1,054 5,841 5,936
Insurance 2,931 1,657 4,611 1,479 2,589 3,212
Organization 0 10,860 0 0 0 0
Miscellaneous expenses 10,656 5,497 15,860 6,137 8,475 15,661
-----------------------------------------------------------------------------------
1,000,163 727,873 1,782,091 553,548 1,307,292 2,716,123
Less expenses reimbursed/waived by
management company 147,549 21,320 0 20,690 0 0
-----------------------------------------------------------------------------------
Total expenses 852,614 706,553 1,782,091 532,858 1,307,292 2,716,123
-----------------------------------------------------------------------------------
Net investment income(loss) 3,994,531 2,791,467 9,118,946 1,185,130 (128,071) (535,120)
-----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments (4,490,378) (666,117) 2,631,159 2,082,290 1,209,363 (6,087,315)
Net realized loss on foreign currency 0 0 0 0 (251) 0
Net change in unrealized appreciation
(depreciation) of investments 2,229,625 (18,840) 27,519 2,651,840 20,792,383 29,254,694
Net change in unrealized appreciation of
foreign currency 0 1,318 0 0 3 0
-----------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (2,260,753) (683,639) 2,658,678 4,734,130 22,001,498 23,167,379
-----------------------------------------------------------------------------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 1,733,778 $2,107,828 $11,777,624 $ 5,919,260 $21,873,427 $22,632,259
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
NORTHSTAR FUNDS
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Government Strategic High Yield
Securities Fund Income Fund Fund
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
1997(1) 1996 1997(1) 1996 1997(1) 1996
<CAPTION>
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 3,994,531 $ 9,085,300 $ 2,791,467 $ 5,829,223 $ 9,118,946 $ 17,278,818
Net realized gain (loss) on
investments (4,490,378) 932,343 (666,117) (250,042) 2,631,159 (831,501)
Net realized gain on foreign currency 0 0 0 297,066 0 18,211
Net change in unrealized appreciation
(depreciation) of investments 2,229,625 (9,831,154) (18,840) 2,773,999 27,519 11,649,652
Net change in unrealized appreciation
(depreciation) of foreign currency 0 0 1,318 (1,117) 0 0
<CAPTION>
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets resulting
from operations 1,733,778 186,489 2,107,828 8,649,129 11,777,624 28,115,180
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (422,415) (727,805) (504,062) (1,854,931) (577,713) (941,693)
Class B (291,973) (357,791) (1,066,125) (2,062,659) (3,434,141) (4,644,718)
Class C (35,752) (50,912) (148,657) (242,856) (613,855) (796,850)
Class T (3,287,505) (7,862,425) (865,426) (2,172,688) (4,955,834) (10,913,768)
Tax return of capital 0 0 0 0 0 (1,706,413)
<CAPTION>
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total distributions (4,037,645) (8,998,933) (2,584,270) (6,333,134) (9,581,543) (19,003,442)
<CAPTION>
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 2,793,490 19,576,499 8,070,487 21,030,229 30,862,914 73,147,596
Net asset value of shares issued to
shareholders in reinvestment of
dividends 2,681,309 6,013,372 1,172,358 2,480,616 3,953,895 8,526,557
<CAPTION>
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5,474,799 25,589,871 9,242,845 23,510,845 34,816,809 81,674,153
Cost of shares redeemed (19,344,300) (37,168,170) (15,669,964) (22,562,072) (23,519,669) (39,383,908)
<CAPTION>
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net increase (decrease) in net assets
derived from capital share
transactions (13,869,501) (11,578,299) (6,427,119) 948,773 11,297,140 42,290,245
<CAPTION>
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net increase (decrease) in net assets (16,173,368) (20,390,743) (6,903,561) 3,264,768 13,493,221 51,401,983
NET ASSETS:
Beginning of period 136,592,506 156,983,249 79,598,192 76,333,424 231,051,719 179,649,736
<CAPTION>
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
End of period $120,419,138 $136,592,506 $ 72,694,631 $ 79,598,192 $244,544,940 $231,051,719
<CAPTION>
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Undistributed (overdistributed) net
investment income: $ 43,253 $ 86,367 $ 529,078 $ 321,881 $ (462,597) $ 0
<CAPTION>
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
</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, 1997 AND YEAR ENDED DECEMBER 31, 1996
(North star logo
appears here)
<TABLE>
<CAPTION>
Northstar
Balance Sheet
Opportunities Northstar Northstar
Fund Growth Fund Special Fund
------------------------- -------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
1997(1) 1996 1997(1) 1996 1997(1) 1996
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 1,185,130 $ 2,838,573 $ (128,071) $ (236,460) $ (535,120) $ (1,247,177)
Net realized gain (loss) on investments 2,082,290 8,721,311 1,209,363 4,346,067 (6,087,315) (5,942,811)
Net realized gain (loss) on foreign
currency 0 0 (251) (52) 0 1,712
Net change in unrealized appreciation
(depreciation) of investments 2,651,840 (4,632,099) 20,792,383 9,888,907 29,254,694 15,617,585
Net change in unrealized appreciation of
foreign currency 0 0 3 0 0 0
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets resulting from
operations 5,919,260 6,927,785 21,873,427 13,998,462 22,632,259 8,429,309
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (21,752) (46,606) 0 0 0 0
Class B (72,209) (125,106) 0 0 0 0
Class C (11,208) (12,103) 0 0 0 0
Class T (1,011,557) (2,650,498) 0 0 0 0
Net realized gain from investments 0 (7,268,332) 0 (3,484,245) 0 0
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total distributions (1,116,726) (10,102,645) 0 (3,484,245) 0 0
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 881,020 3,914,850 146,807,811 8,022,620 66,884,712 263,413,495
Net asset value of shares issued to
shareholders in reinvestment of
dividends 915,134 8,513,000 0 3,217,412 0 0
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1,796,154 12,427,850 146,807,811 11,240,032 66,884,712 263,413,495
Cost of shares redeemed (11,014,616) (19,784,271) (64,316,271) (21,542,815) (41,006,647) (43,756,330)
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net increase (decrease) in net assets
derived from capital share transactions (9,218,462) (7,356,421) 82,491,540 (10,302,783) 25,878,065 219,657,165
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net increase (decrease) in net assets (4,415,928) (10,531,281) 104,364,967 211,434 48,510,324 228,086,474
NET ASSETS:
Beginning of period 64,726,986 75,258,267 79,964,487 79,753,053 265,531,464 37,444,990
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
End of period $60,311,058 $64,726,986 $184,329,454 $79,964,487 $314,041,788 $265,531,464
<CAPTION>
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Undistributed (overdistributed) net
investment income: $ 72,665 $ 4,260 $ (128,071) $ 0 $ (535,120) $ 0
<CAPTION>
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</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
Net Asset & unrealized declared Distributions
Value, Net gain (loss) Total from from net declared from
Period beginning investment on investment investment net realized Distributions
ended of period income investments operations income gains from Capital
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Government Securities Fund,
Class A
-------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) $ 9.48 $ 0.31 ($0.17) $ 0.14 ($0.31) -- --
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) -- --
<CAPTION>
Government Securities Fund,
Class B
-------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) 9.48 0.27 (0.15) 0.12 (0.28) -- --
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) -- --
<CAPTION>
Government Securities Fund,
Class C
-------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) 9.47 0.27 (0.15) 0.12 (0.28) -- --
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) -- --
<CAPTION>
Government Securities Fund,
Class T
-------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) 9.48 0.30 (0.16) 0.14 (0.30) -- --
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>
Strategic
Income Fund,
Class A
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) 12.67 0.54 (0.15) 0.39 (0.47) -- --
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) -- --
<CAPTION>
Strategic
Income Fund,
Class B
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) 12.67 0.51 (0.16) 0.35 (0.43) -- --
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) -- --
<CAPTION>
Strategic
Income Fund,
Class C
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) 12.65 0.51 (0.16) 0.35 (0.43) -- --
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) -- --
<CAPTION>
Strategic
Income Fund,
Class T
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) 12.67 0.56 (0.20) 0.36 (0.44) -- --
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)
<CAPTION>
High Yield
Fund, Class A
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) 8.94 0.36 0.11 0.47 (0.38) -- --
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) -- --
<CAPTION>
High Yield
Fund, Class B
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) 8.95 0.33 0.10 0.43 (0.35) -- --
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) -- --
<CAPTION>
High Yield
Fund, Class C
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2 ) 8.95 0.33 0.10 0.43 (0.35) -- --
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) -- --
<CAPTION>
High Yield
Fund, Class T
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 8.94 0.35 0.11 0.46 (0.37) -- --
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) -- --
<CAPTION>
Ratio of
Asset Assets, to expense income to
Value, end of average reimbursement average
Period Total end of Total period net to average net Portfolio
ended Distributions period Return (000's) assets(1) net assets(1) assets(1) turnover
<S> <C>
- -----------
<S> <C>
6/30/97 (2) ($ 0.31) $ 9.31 1.54% $12,247 1.13% 0.20% 6.55% 35%
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
<S> <C>
6/30/97 (2) (0.28) 9.32 1.29 10,413 1.84 0.20 5.82 35
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
<S> <C>
6/30/97 (2) (0.28) 9.31 1.31 1,277 1.80 0.20 5.82 35
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
<S> <C>
6/30/97 (2) (0.30) 9.32 1.54 96,482 1.33 0.25 5.85 35
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
<S> <C>
6/30/97 (2) (0.47) 12.59 3.22 13,435 1.41 0.06 8.09 115
12/31/96 (1.01) 12.67 10.88 17,293 1.40 0.05 7.55 130
6/05/95-
12/31/95 (0.60) 12.40 6.40 21,790 1.36 0.07 7.03 153
<S> <C>
6/30/97 (2) (0.43) 12.59 2.86 31,340 2.12 0.04 7.42 115
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
<S> <C>
6/30/97 (2) (0.43) 12.57 2.86 4,388 2.12 0.04 7.43 115
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
<S> <C>
6/30/97 (2) (0.44) 12.59 2.94 23,531 1.93 0.09 7.56 115
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
<S> <C>
6/30/97 (2) (0.38) 9.03 5.38 14,240 1.08 -- 8.22 57
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
<S> <C>
6/30/97 (2) (0.35) 9.03 4.91 96,280 1.78 -- 7.53 57
12/31/96 (0.76) 8.95 13.93 79,199 1.81 -- 7.88 128
12/31/95 (0.46) 8.57 4.17 29,063 1.71 -- 9.18 103
<S> <C>
6/30/97 (2) (0.35) 9.03 4.90 17,107 1.66 -- 6.94 57
12/31/96 (0.76) 8.95 13.94 14,275 1.82 -- 7.85 128
12/31/95 (0.46) 8.57 4.17 3,410 1.72 -- 9.29 103
<S> <C>
6/30/97 (2) (0.37) 9.03 5.26 116,917 1.34 -- 7.95 57
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
<CAPTION>
Average
Commissions
Period Per
ended Share(3)
- -----------
6/30/97 (2) --
12/31/96 --
6/05/95-
12/31/95 --
6/30/97 (2) --
12/31/96 --
6/05/95-
12/31/95 --
6/30/97 (2) --
12/31/96 --
6/05/95-
12/31/95 --
6/30/97 (2) --
12/31/96 --
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
6/30/97 (2) --
12/31/96 --
6/05/95-
12/31/95 --
6/30/97 (2) --
12/31/96 --
6/05/95-
12/31/95 --
6/30/97 (2) --
12/31/96 --
6/05/95-
12/31/95 --
6/30/97 (2) --
12/31/96 --
12/31/95 --
7/01/94-
12/31/94 --
6/30/97 (2) --
12/31/96 $0.0777
12/31/95 --
6/30/97 (2) --
12/31/96 0.0777
12/31/95 --
6/30/97 (2) --
12/31/96 0.0777
12/31/95 --
6/30/97 (2) --
12/31/96 0.0777
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
</TABLE>
(1) Annualized
(2) Unaudited
(3) For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
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)
(Northstar logo appears here)
<TABLE>
<CAPTION>
Net realized Dividends
Net Asset & unrealized declared Distributions
Value, Net gain (loss) Total from from net declared from
Period beginning investment on investment investment net realized Distributions
ended of period income investments operations income gains from Capital
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Balance Sheet Opportunities
Fund, Class A
-------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) $ 11.78 $ 0.25 $ 0.97 $ 1.22 ($0.25) -- --
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) --
<CAPTION>
Balance Sheet Opportunities
Fund, Class B
-------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 11.74 0.21 0.97 1.18 (0.21) -- --
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) --
<CAPTION>
Balance Sheet Opportunities
Fund, Class C
-------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 11.75 0.21 0.97 1.18 (0.22) -- --
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) --
<CAPTION>
Balance Sheet Opportunities
Fund, Class T
-------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 11.79 0.25 0.96 1.21 (0.23) -- --
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>
Growth Fund,
Class A
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 17.92 0.00 2.53 2.53 -- -- --
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) --
<CAPTION>
Growth Fund,
Class B
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 17.76 (0.07) 2.51 2.44 -- -- --
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) --
<CAPTION>
Growth Fund,
Class C
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 17.76 (0.06) 2.49 2.43 -- -- --
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) --
<CAPTION>
Growth Fund,
Class T
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 17.82 (0.09) 2.55 2.46 -- -- --
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)
<CAPTION>
Growth Fund,
Class I
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/31/97-
6/30/97 (2) 17.90 0.04 2.54 2.58 -- -- --
<CAPTION>
Special Fund,
Class A
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 24.72 0.09 1.91 2.00 -- -- --
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) --
<CAPTION>
Special Fund,
Class B
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 24.46 (0.07) 1.96 1.89 -- -- --
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) --
<CAPTION>
Special Fund,
Class C
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 24.46 (0.08) 1.96 1.88 -- -- --
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) --
<CAPTION>
Special Fund,
Class T
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/97 (2) 24.48 (0.18) 2.10 1.92 -- -- --
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) -- -- --
<CAPTION>
Ratio of
Asset Assets, to expense income to
Value, end of average reimbursement average
Period Total end of Total period net to average net Portfolio
ended Distributions period Return (000's) assets(1) net assets(1) assets(1) turnover
<S> <C>
- -----------
<S> <C>
6/30/97 (2) ($ 0.25) $12.75 10.46% $1,127 1.41% 0.04% 4.21% 81%
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
<S> <C>
6/30/97 (2) (0.21) 12.71 10.08 4,272 2.10 0.03 3.35 81
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
<S> <C>
6/30/97 (2) (0.22) 12.71 10.11 668 2.10 0.02 3.59 81
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
<S> <C>
6/30/97 (2) (0.23) 12.77 10.34 54,244 1.72 0.07 3.90 81
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
<S> <C>
6/30/97 (2) -- 20.45 14.12 39,327 1.32 -- 0.16 10
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
<S> <C>
6/30/97 (2) -- 20.20 13.74 6,428 2.12 -- (0.72) 10
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
<S> <C>
6/30/97 (2) -- 20.19 13.68 676 2.10 -- (0.73) 10
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
<S> <C>
6/30/97 (2) -- 20.28 13.80 74,438 1.97 -- (0.57) 10
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
<S> <C>
3/31/97-
6/30/97 (2) -- 20.48 14.41 63,461 1.01 -- 0.31 86
<S> <C>
6/30/97 (2) -- 26.72 8.09 80,039 1.39 -- 0.15 85
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
<S> <C>
6/30/97 (2) -- 26.35 7.73 152,748 2.11 -- (0.57) 85
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
<S> <C>
6/30/97 (2) -- 26.34 7.69 46,717 2.16 -- (0.62) 85
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
<S> <C>
6/30/97 (2) -- 26.40 7.84 34,538 1.94 -- (0.41) 85
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
<CAPTION>
Average
Commissions
Period Per
ended Share(3)
- -----------
6/30/97 (2) $0.0574
12/31/96 0.0690
6/05/95-
12/31/95 --
6/30/97 (2) 0.0574
12/31/96 0.0690
6/05/95-
12/31/95 --
6/30/97 (2) 0.0574
12/31/96 0.0690
6/05/95-
12/31/95 --
6/30/97 (2) 0.0574
12/31/96 0.0690
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
6/30/97 (2) 0.0600
12/31/96 0.0593
6/05/95-
12/31/95 --
6/30/97 (2) 0.0600
12/31/96 0.0593
6/05/95-
12/31/95 --
6/30/97 (2) 0.0600
12/31/96 0.0593
6/05/95-
12/31/95 --
6/30/97 (2) 0.0600
12/31/96 0.0593
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
3/31/97-
6/30/97 (2) 0.0600
6/30/97 (2) 0.0339
12/31/96 0.0392
6/05/95-
12/31/95 --
6/30/97 (2) 0.0339
12/31/96 0.0392
6/05/95-
12/31/95 --
6/30/97 (2) 0.0339
12/31/96 0.0392
6/05/95-
12/31/95 --
6/30/97 (2) 0.0339
12/31/96 0.0392
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
</TABLE>
(1) Annualized
(2) Unaudited
(3) For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
See accompanying notes to financial statements.
37
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1997
(UNAUDITED)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization -- Northstar Government Securities Fund, Northstar Strategic
Income Fund, Northstar High Yield Fund, Northstar Balance Sheet Opportunities
Fund, Northstar Growth Fund and Northstar Special 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 GOVERNMENT SECURITIES FUND ("Government Securities Fund") seeks to
achieve a high level of current income and to conserve principal by investing in
debt obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities.
NORTHSTAR STRATEGIC INCOME FUND ("Strategic Income Fund") seeks to achieve
high current income and a net asset value with limited volatility by allocating
substantially all of its investments among the following four 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 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 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 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.
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 Trust. The books and records
of the Funds are maintained in U.S. dollars. Securities quoted in foreign
currencies are translated into in 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.
The Funds may periodically make reclassifications among certain of their
capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance with
federal tax regulations which may differ from generally accepted accounting
principals.
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:
38
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1997
(UNAUDITED)
(Northstar logo appears here)
(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.
The Funds write and purchase put and call options on foreign currencies. The
premium paid by the Funds for the purchase of a call or put option is recorded
as an investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the Funds have purchased expires
on the stipulated expiration date, the Funds realize a loss in the amount of the
cost of the option.
The amount of potential gain or loss to the Funds upon exercise of a written
call option is the value (in U.S. dollars) of the currency sold, less the value
of the U.S. dollars received in exchange. The amount of potential gain or loss
to the Funds upon exercise of a written put option is the value (in U.S.
dollars) of the currency received, less the value of the U.S. dollars paid in
exchange.
Risks may arise upon entering these contracts from the potential inability
of counterparties to meet the terms of their contract and from unanticipated
movement in the value of a foreign currency relative to the U.S. dollar.
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.
NOTE 2. INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
Northstar, Inc. (and its wholly owned operating subsidiaries, Northstar
Investment Management Corp., Northstar Distributors, Inc. and Northstar
Administrator Corp.) is an 80% 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 0.45% 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 0.20%
of its advisory fee for the Government Securities Fund through June 2, 1997 and
0.15% of its fee from June 3, 1997 through December 31, 1997 therefore the rate
paid equals 0.45% and 0.50% of average daily net assets, respectively. For the
six months ended June 30, 1997, the Adviser waived $121,609 of advisory fees for
the Government Securities Fund. For the six months ended June 30, 1997, the
Funds paid advisory fees to Northstar Investment Management Corp. of $3,062,565.
Navellier Fund Management, Inc.("Navellier"), a registered investment adviser,
serves as subadviser to the Special Fund pursuant to a Subadvisory Agreement
dated February 1, 1996, 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 months ended June 30, 1997, Navellier received $680,047
in subadvisory fees from the Adviser.
39
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1997
(UNAUDITED)
The Adviser has voluntarily undertaken to limit the expenses through June 2,
1997 of the Government Securities Fund 1.20% (Class A), 1.90% (Class B & C), and
1.30% (Class T); Strategic Income Fund 1.40% (Class A), 2.10% (Class B & C), and
1.90% (Class T); Balance Sheet Opportuities Fund 1.40% (Class A), 2.10% (Class B
& C), and 1.69% (Class T); Growth Fund 1.50% (Class A), 2.20% (Class B & C),
2.00% (Class T), and 1.20% (Class I), and Special Fund 1.50% (Class A), 2.20%
(Class B & C), and 2.16% (Class T) of each respective class's average net
assets. The Adviser will reimburse the Funds for amounts in excess of such
limits, up to the total amount of fees received during the period. At June 30,
1997, the Advisor's reimbursements aggregated $25,940, $21,320, and $20,690 for
the Government Securities, Strategic Income, and Balance Sheet Opportunities,
respectively.
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 months ended June 30, 1997,
the Administrator earned $75,834 in administrative and account servicing fees.
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, 1997, the Funds owed the Distributor
$590,285 in service and distribution fees.
The Distributor also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares, and the contingent deferred
sales charge paid by shareholders upon certain redemptions of Class A, Class B,
Class C, and Class T shares. For the year ended June 30, 1997, the Distributor
earned the following amounts in sales charges:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
SHARES SHARES SHARES SHARES
------- -------- ------- --------
<S> <C> <C> <C> <C>
Initial Sales Charges $97,259 $ 0 $ 0 $ 0
Contingent Deferred
Sales Charges $19,613 $562,760 $48,875 $194,817
</TABLE>
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 months ended June 30, 1997, were
as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
----------- ----------- ------------
<S> <C> <C> <C>
Aggregate Purchases $40,945,615 $80,061,407 $144,929,568
Aggregate Sales $54,388,586 $87,135,014 $121,046,634
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<S> <C> <C> <C>
Aggregate Purchases $40,945,615 $14,390,548 $ 0
Aggregate Sales $54,388,586 $14,455,282 $ 0
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET
OPPORTUNITIES GROWTH SPECIAL
FUND FUND FUND
------------- ----------- ------------
<S> <C> <C> <C>
Aggregate Purchases $45,908,922 $90,927,122 $249,897,084
Aggregate Sales $43,685,167 $15,149,610 $232,599,219
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<S> <C> <C> <C>
Aggregate Purchases $ 0 $ 537,250 $ 0
Aggregate Sales $ 0 $ 0 $ 3,899,697
</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, 1997 were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC BALANCE SHEET
SECURITIES INCOME HIGH YIELD OPPORTUNITIES GROWTH SPECIAL
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cost (tax basis) $116,003,221 $ 66,679,831 $217,359,472 $ 50,980,509 $138,798,513 $251,426,030
------------ ------------ ------------ ------------- ------------ ------------
Appreciated Securities 2,421,336 2,839,979 11,959,537 6,372,226 40,183,775 55,011,658
Depreciated Securities 514,939 69,490 352,622 1,578,350 2,533,995 2,754,623
------------ ------------ ------------ ------------- ------------ ------------
Net Unrealized Appreciation $ 1,906,395 $ 2,770,489 $ 11,606,915 $ 4,793,876 $ 37,649,780 $ 52,257,035
------------ ------------ ------------ ------------- ------------ ------------
</TABLE>
40
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1997
(UNAUDITED)
(Northstar logo appears here)
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the six months ended June
30, 1997, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
--------------------- ---------------------- --------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ----------- --------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 39,193 $ 366,612 240,796 $ 2,247,079 17,519 $ 162,772 1,800
Reinvested dividends 36,620 339,115 25,828 239,213 185 1,714 226,940
Shares redeemed (258,014) (2,394,081) (112,786) (1,050,206) (1,619) (15,042) (1,704,612)
-------- ----------- --------- ----------- -------- ----------- ----------
Net increase (decrease) (182,201) ($1,688,354) 153,838 $ 1,436,086 16,085 $ 149,444 (1,475,872)
-------- ----------- --------- ----------- -------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 17,027
Reinvested dividends 2,101,267
Shares redeemed (15,884,971)
------------
Net increase (decrease) ($13,766,677)
------------
</TABLE>
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
--------------------- ---------------------- --------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ----------- --------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 303,860 $ 3,801,572 278,708 $ 3,493,577 53,409 $ 670,040 8,283
Reinvested dividends 27,606 344,039 27,862 347,048 3,357 41,764 35,259
Shares redeemed (629,388) (7,939,718) (242,297) (3,015,373) (41,290) (510,050) (333,643)
-------- ----------- --------- ----------- -------- ----------- ----------
Net increase (decrease) (297,922) ($3,794,107) 64,273 $ 825,252 15,476 $ 201,754 (290,101)
-------- ----------- --------- ----------- -------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 105,298
Reinvested dividends 439,507
Shares redeemed (4,204,823)
------------
Net increase (decrease) ($ 3,660,018)
------------
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD FUND
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
--------------------- ---------------------- --------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ----------- --------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 350,970 $ 3,150,275 2,312,294 $20,789,290 567,787 $ 5,112,939 201,430
Reinvested dividends 32,446 290,566 103,902 931,442 12,314 110,334 292,731
Shares redeemed (276,011) (2,467,640) (609,361) (5,460,049) (281,733) (2,519,477) (1,457,562)
-------- ----------- --------- ----------- -------- ----------- ----------
Net increase (decrease) 107,405 $ 973,201 1,806,835 $16,260,683 298,368 $ 2,703,796 (963,401)
-------- ----------- --------- ----------- -------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 1,810,410
Reinvested dividends 2,621,553
Shares redeemed (13,072,503)
------------
Net increase (decrease) ($ 8,640,540)
------------
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET OPPORTUNITIES FUND
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
--------------------- ---------------------- --------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ----------- --------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 6,069 $ 74,143 41,927 $ 502,598 21,131 $ 251,999 4,223
Reinvested dividends 1,438 17,548 4,462 54,279 877 10,655 68,386
Shares redeemed (12,490) (150,494) (30,774) (369,646) (1,096) (13,244) (869,178)
-------- ----------- --------- ----------- -------- ----------- ----------
Net increase (decrease) (4,983) ($ 58,803) 15,615 $ 187,231 20,912 $ 249,410 (796,569)
-------- ----------- --------- ----------- -------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 52,280
Reinvested dividends 832,652
Shares redeemed (10,481,232)
------------
Net increase (decrease) ($ 9,596,300)
------------
</TABLE>
<TABLE>
<CAPTION>
GROWTH FUND
-------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T CLASS I
------------------------ ------------------- ---------------- --------------------- ---------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ------------ ------- ---------- ------ -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 4,851,638 $ 88,033,971 88,080 $1,656,012 15,900 $297,061 71,841 $ 1,356,838 3,098,543
Shares redeemed (3,193,863) (57,280,405) (20,085) (378,119) (2,934) (55,473 ) (351,748) (6,602,274) (0)
---------- ------------ ------- ---------- ------ -------- -------- ----------- ---------
Net increase (decrease) 1,657,775 $ 30,753,566 67,995 $1,277,893 12,966 $241,588 (279,907) ($5,245,436) 3,098,543
---------- ------------ ------- ---------- ------ -------- -------- ----------- ---------
<CAPTION>
AMOUNT
-----------
<S> <C>
Shares sold $55,463,929
Shares redeemed (0)
-----------
Net increase (decrease) $55,463,929
-----------
</TABLE>
<TABLE>
<CAPTION>
SPECIAL FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
------------------------ ------------------------ ----------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ------------ ---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 930,149 $ 23,145,745 1,200,904 $ 29,812,156 534,619 $13,232,348 27,786
Shares redeemed (591,011) (14,878,336) (590,205) (14,621,502) (287,911) (7,114,793) (176,265)
---------- ------------ ---------- ------------ ---------- ----------- ----------
Net increase (decrease) 339,138 $ 8,267,409 610,699 $ 15,190,654 246,708 $ 6,117,555 (148,479)
---------- ------------ ---------- ------------ ---------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 694,463
Shares redeemed (4,392,016)
------------
Net increase (decrease) ($ 3,697,553)
------------
</TABLE>
Transactions in capital shares of each Fund for the twelve months ended
December 31, 1996, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
------------------------ ------------------------ ----------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ------------ ---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,173,549 $ 10,970,069 741,529 $ 6,986,079 130,474 $ 1,220,625 42,726
Reinvested dividends 69,846 652,825 30,877 290,097 308 2,892 538,420
Shares redeemed (67,570) (639,341) (85,933) (814,043) (10,459) (98,119) (3,742,558)
---------- ------------ ---------- ------------ ---------- ----------- ----------
Net increase (decrease) 1,175,825 $ 10,983,553 686,473 $ 6,462,133 120,323 $ 1,125,398 (3,161,412)
---------- ------------ ---------- ------------ ---------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 399,726
Reinvested dividends 5,067,558
Shares redeemed (35,616,667)
------------
Net increase (decrease) $(30,149,383)
------------
</TABLE>
41
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
------------------------ ------------------------ ----------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ------------ ---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 474,942 $ 5,738,010 1,003,182 $ 12,151,460 212,149 $ 2,571,465 45,952
Reinvested dividends 50,560 625,158 54,402 672,776 5,092 62,954 90,573
Shares redeemed (918,406) (11,512,407) (418,455) (5,172,202) (59,061) (727,367) (416,724)
---------- ------------ ---------- ------------ ---------- ----------- ----------
Net increase (decrease) (392,904) $ (5,149,239) 639,129 $ 7,652,034 158,180 $ 1,907,052 (280,199)
---------- ------------ ---------- ------------ ---------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 569,294
Reinvested dividends 1,119,728
Shares redeemed (5,150,096)
------------
Net increase (decrease) $ (3,461,074)
------------
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
------------------------ ------------------------ ----------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ------------ ---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 827,729 $ 7,207,156 5,911,912 $ 51,482,500 1,413,571 $12,306,310 248,508
Reinvested dividends 62,173 539,834 168,302 1,463,685 17,304 150,556 733,966
Shares redeemed (291,691) (2,549,211) (621,900) (5,398,570) (233,244) (2,046,070) (3,384,341)
---------- ------------ ---------- ------------ ---------- ----------- ----------
Net increase (decrease) 598,211 $ 5,197,779 5,458,314 $ 47,547,615 1,197,631 $10,410,796 (2,401,867)
---------- ------------ ---------- ------------ ---------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 2,151,630
Reinvested dividends 6,372,482
Shares redeemed (29,390,057)
------------
Net increase (decrease) $(20,865,945)
------------
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET OPPORTUNITIES FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
------------------------ ------------------------ ----------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ------------ ---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 31,867 $ 409,691 161,646 $ 2,068,438 13,747 $ 174,866 99,979
Reinvested dividends 11,446 136,696 34,438 407,500 4,068 48,215 663,010
Shares redeemed (13,528) (172,359) (16,102) (205,751) (4,631) (59,861) (1,498,511)
---------- ------------ ---------- ------------ ---------- ----------- ----------
Net increase (decrease) 29,785 $ 374,028 179,982 $ 2,270,187 13,184 $ 163,220 (735,522)
---------- ------------ ---------- ------------ ---------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 1,261,855
Reinvested dividends 7,920,589
Shares redeemed (19,346,300)
------------
Net increase (decrease) ($10,163,856)
------------
</TABLE>
<TABLE>
<CAPTION>
GROWTH FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
------------------------ ------------------------ ----------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ------------ ---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 215,652 $ 3,898,525 145,699 $ 2,385,877 17,690 $ 291,243 90,737
Reinvested dividends 10,967 198,714 8,536 152,930 723 12,843 158,321
Shares redeemed (48,822) (803,512) (32,185) (531,632) (2,328) (39,672) (1,215,332)
---------- ------------ ---------- ------------ ---------- ----------- ----------
Net increase (decrease) 177,797 $ 3,293,727 122,050 $ 2,007,175 16,085 $ 264,414 (966,274)
---------- ------------ ---------- ------------ ---------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 1,446,975
Reinvested dividends 2,852,925
Shares redeemed (20,167,999)
------------
Net increase (decrease) $(15,868,099)
------------
</TABLE>
<TABLE>
<CAPTION>
SPECIAL FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
------------------------ ------------------------ ----------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ------------ ---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 3,480,949 $ 84,633,270 5,433,970 $131,453,623 1,739,092 $42,056,956 222,847
Shares redeemed (935,948) (22,565,835) (318,902) (7,614,905) (215,261) (5,187,697) (376,467)
---------- ------------ ---------- ------------ ---------- ----------- ----------
Net increase (decrease) 2,545,001 $ 62,067,435 5,115,068 $123,838,718 1,523,831 $36,869,259 (153,620)
---------- ------------ ---------- ------------ ---------- ----------- ----------
<CAPTION>
AMOUNT
------------
<S> <C>
Shares sold $ 5,269,646
Shares redeemed (8,387,893)
------------
Net increase (decrease) $ (3,118,247)
------------
</TABLE>
42
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1997
(UNAUDITED)
(Northstar logo appears here)
NOTE 6. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Yield and
Strategic Income Funds had 91.6% and 60.1%, 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, 1997, the Funds
did not have any securities in default.
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 Deceember 31, 1996, the Government Securities Fund had capital loss
carryforwards expiring December 31, 1997, 1998, and 2002 of $2,940,526,
$1,442,754, and $16,737,216, respectively. The Strategic Income Fund had capital
loss carryforwards expiring December 31, 2002 and 2003 of 1,293,025 and
$1,301,325, respectively. The High Yield Fund had capital loss carryforwards
expiring December 31, 2002, 2003, and 2004 of $3,158,623, $5,577,338, and
$570,896, respectively. The Special Fund had capital loss carryforwards expiring
December 31, 2004 of $2,281,884.
NOTE 8. COMPENSATING BALANCE ARRANGEMENT
The Funds have an informal compensating balance with State Street Bank and
Trust, 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, 1997, the Funds did not have any compensating balances.
NOTE 9. MANAGEMENT USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
PROXY RESULTS
During the six months ended June 30, 1997, High Yield Fund shareholders
voted on the following proposals. The Proposals were approved at a special
meeting of shareholders on June 20, 1997.
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED
FOR AGAINST ABSTENTIONS
---------- --------- -----------
<S> <C> <C> <C> <C>
1. Proposal to elect the
Board of Trustees 13,606,953 438,495 713,137
2. Proposal to approve a
new investment advisory
agreement for the Fund
with Northstar
Investment Management
Corporation that
increases the advisory
fee. 10,755,805 2,356,826 964,382
3. Proposal to ratify the
selection of Coopers &
Lybrand as independent
accountants for the
Fund. 13,661,656 283,164 813,766
</TABLE>
43
<PAGE>
Northstar
(Northstar logo appears here)
FUNDS
