NORTHSTAR ADVANTAGE TRUST, 485APOS, 1995-12-29

NORTHSTAR ADVANTAGE TRUST
485APOS, 1995-12-29

Previous: NORTHSTAR ADVANTAGE TRUST, NSAR-B, 1995-12-29

Next: HERITAGE US GOVERNMENT INCOME FUND, NT-NSAR, 1995-12-29

<PAGE>

File No. 33-67852
811-7978
As filed with the Securities and Exchange Commission on December 29, 1995

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form N1-A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No. ___
Post-Effective Amendment No. 7

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 9

NORTHSTAR ADVANTAGE TRUST
-------------------------
(Exact name of Registrant as specified in charter)

Two Pickwick Plaza, Greenwich, CT 06830
---------------------------------------
(Address of Principal Executive Offices)

(203) 863-6200
--------------
(Registrant's telephone number)

Mark L. Lipson
c/o Northstar Investment Management Corporation
Two Pickwick Plaza, Greenwich, Connecticut 06830
------------------------------------------------
(Name and address of agent for service)

Copies of all correspondence to:
Lisa Hurley, Esq.
Northstar Investment Management Corp.
Two Pickwick Plaza
Greenwich, CT 06830

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:

immediately upon filing pursuant to paragraph (b)
----
on [date] pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(1)
----
X on February 29, 1996 pursuant to paragraph (a)(1)
----
75 days after filing pursuant to paragraph (a)(2)
----
on [date] pursuant to paragraph (a)(2) of Rule 485.
----

If appropriate, check the following box:

this post-effective amendment designates a new effective
----
date for a previously filed post-effective amendment.
- -------------------------------------------------------------------------------
* Registrant has registered an Indefinite number of shares of beneficial
interest by its initial Registration Statement pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended, which became effective
November 5, 1993. Registrant filed the notice required by Rule 24f-2 with
respect to its most recent fiscal year on December 8, 1995.

<PAGE>

CROSS REFERENCE SHEET
Pursuant to Rule 404(a)
Under the Securities Act of 1933
PART A

FORM N-1A PROSPECTUS CAPTION

1. Cover Page Cover Page

2. Synopsis Expense Information

3. Condensed Financial Information Financial Highlights

4. General Description of Registrant Cover Page; Investment Objectives
and Policies of the Funds; Other
Investment Techniques; Risk
Factors; General Information

5. Management of the Fund Management of the Funds

6. Capital Stock and Other How Net Asset Value is
Securities Determined; How to Purchase Shares;
Alternative Sales Arrangements;
Investor Services and Account
Policies; Dividends, Distribution
and Taxes; General Information

7. Purchases of Securities Being How to Purchase Shares; Alternative
Offered Sales Arrangments; Investor
Services and Account Policies;
Distribution Plans; How Net Asset
Value is Determined.

8. Redemption or Repurchase How to Sell Shares; How Net Asset
Value is Determined;

9. Pending Legal Proceedings Not Applicable

<PAGE>

CROSS REFERENCE SHEET
PART B

FORM N-1A CAPTION IN STATEMENT OF
ADDITIONAL INFORMATION

10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information & History Cover Page; Other Information

13. Investment Objectives & Policies Cover Page; Investment
Restrictions; Other Investment
Techniques

14. Management of the Fund Trustees and Officers

15. Control Persons and Principal N/A
Holders of Securities

16. Investment Advisory and Services of the Adviser and
Other Services Administrator; Other Information

17. Brokerage Allocation and Portfolio Transactions and
Other Practices Brokerage Allocation

18. Capital Stock and Other Purchases and Redemptions
Securities

19. Purchases, Redemptions and Net Asset Value; Purchases and
Pricing Redemptions of Shares.

20. Tax Status Dividends, Distributions and Taxes

21. Underwriter Underwriter and Distribution
Services

22. Calculation of Performance Data Performance Information

23. Financial Statements Financial Statements

PART C
The information required to be included in Part C is set forth under the
eappropriate Item, so numbered, in Part C of the Registration Statement.
<PAGE>

[LOGO]

TWO PICKWICK PLAZA (203) 863-6200
GREENWICH, CONNECTICUT, 06830 (800) 595-7827

COMBINED PROSPECTUS FEBRUARY 29, 1996

The Northstar Advantage Funds (the "Funds") are a group of open-end
diversified management investment companies. Each has its own investment
objective and specific investment goals. Shares of the Funds are offered by this
joint Prospectus. Northstar Investment Management Corporation (the "Adviser") is
the investment adviser for each Fund, and its professional staff selects and
supervises the investments in each Fund's portfolio. Northstar Distributors,
Inc. ("Underwriter") is the underwriter of the Funds' shares, and Northstar
Administrators Corporation ("Northstar" or "Administrators") serves as
administrator to each Fund. Distributors and Administrators are each affiliates
of the Adviser. See "Management of the Funds."

This Prospectus sets forth concisely the information about the Funds
that prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
February 29, 1996, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statement of Additional Information
is available without charge upon request to Northstar at the address or
telephone number given above.

* NORTHSTAR ADVANTAGE SPECIAL FUND ("Special Fund") seeks to achieve
capital appreciation through investment in a diversified portfolio of equity
securities selected for their potential for growth, primarily in small- and
mid-capitalization companies that may be subject to greater price volatility
than more mature companies.

* NORTHSTAR ADVANTAGE GROWTH FUND ("Growth Fund") seeks to achieve
long-term growth of capital by investing principally in common stocks.

* NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND, ("Income and Growth
Fund") seeks current income balanced with the objective of achieving capital
appreciation through investments in common and preferred stocks, corporate debt
and convertible securities, and government securities, selected for their
prospects of producing income and/or capital appreciation.

* NORTHSTAR ADVANTAGE INCOME FUND ("Income Fund") seeks to realize
income and, secondarily, capital appreciation through investments in a balance
of debt securities, common and preferred stocks, and debt securities and
preferred stocks convertible into common stock.

* NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND ("Government
Securities Fund") seeks to achieve a high level of current income and to
conserve principal by investing in debt obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities.

* NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND ("Strategic Income Fund")
seeks to achieve high current income by allocating its investments among the
following three sectors of the fixed income securities markets: debt obligations
of the U.S. Government, its agencies and instrumentalities; high yield, high
risk, lower-rated and nonrated U.S. and foreign fixed income securities; and
foreign currency denominated investment grade debt obligations of foreign
governments, their agencies and instrumentalities. At least 20% shall, and up to
60% of the Fund's assets may, be invested in each sector.

* NORTHSTAR ADVANTAGE HIGH YIELD FUND ("High Yield Fund") seeks to
achieve high current income primarily through investments in long-term and
intermediate-term fixed income securities, with emphasis on high yield, high
risk, lower-rated and nonrated corporate debt instruments.

* NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND ("High Total Return
Fund") seeks to achieve high income by investing predominantly in high yield,
high risk, lower-rated and non-rated U.S. dollar-denominated debt securities. It
is the Fund's policy also to seek a high rate of total return, consistent with
the Fund's objective, by taking advantage of market developments, yield
disparities, and variations in the creditworthiness of issuers.

UNDER NORMAL MARKET CONDITIONS THE HIGH YIELD FUND AND HIGH TOTAL
RETURN FUND WILL INVEST AT LEAST 65% OF THEIR ASSETS, AND THE STRATEGIC INCOME
FUND MAY INVEST UP TO 60% (AND NO LESS THAN 20% OF ITS ASSETS) IN LOWER RATED
AND NONRATED BONDS, COMMONLY KNOWN AS "JUNK BONDS," THAT ENTAIL GREATER RISKS,
INCLUDING DEFAULT RISKS, THAN THOSE FOUND IN HIGHER RATED SECURITIES, AND ARE
CONSIDERED SPECULATIVE WITH REGARD TO PAYMENT OF INTEREST AND RETURN OF
PRINCIPAL. INVESTMENT IN THESE FUNDS MAY NOT BE APPROPRIATE FOR ALL INVESTORS.
INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. SEE "RISK
FACTORS -- HIGH YIELD SECURITIES."

WHILE MUTUAL FUNDS OFFER SIGNIFICANT INVESTMENT OPPORTUNITIES AND ARE
PROFESSIONALLY MANAGED, THEY ALSO CARRY RISKS THAT COULD POSSIBLY RESULT IN LOSS
OF PRINCIPAL. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------

EXPENSE INFORMATION

The tables and examples below are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as an
investor in the Funds. Shareholder Transaction Expenses are fees charged
directly to your individual account when you buy, sell or exchange shares.
Annual Operating Expenses are paid out of each Fund's assets and include fees
for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting, legal and other services. Class A, Class B, and Class C
shares were first offered to investors in the Government Securities Fund, High
Yield Fund, Income Fund, Growth Fund, Special Fund and Strategic Income Fund on
June 5, 1995. Class T shares are no longer offered to new investors in these
Funds. The rules of the Securities and Exchange Commission require that maximum
sales charges be reflected in the table; however, certain investors may qualify
for reduced or no sales charges. See "How to Purchase Shares."

- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE SPECIAL FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase
of Shares (as % of Offering Price)............. 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale
of Shares (as a % of the lesser of original
price or redemption proceeds).................. None(1) 5.00%(2) 1.00% 4.00%(2)
Exchange Fee....................................
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fee.................................. .75% .75% .75% .75%
12b-1 Fee....................................... .30% 1.00%(3) 1.00%(3) .95%(3)
Other Expenses.................................. % % % %
Total Fund Operating Expenses................... % % % %
</TABLE>

- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE GROWTH FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase
of Shares (as % of Offering Price)............. 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale
of Shares (as a % of the lesser of original
price or redemption proceeds).................. None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fee.................................. .75% .75% .75% .75%
12b-1 Fee....................................... .30% 1.00%(3) 1.00%(3) .95%(3)
Other Expenses.................................. % % % %
Total Fund Operating Expenses................... % % % %
</TABLE>

2
<PAGE>
- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase
of Shares (as % of Offering Price)............. 4.75% None None
Maximum Contingent Deferred Sales Load on Sale
of Shares (as a % of the lesser of original
price or redemption proceeds).................. None(1) 5.00%(2) 1.00%
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fee.................................. .75% .75% .75%
12b-1 Fee....................................... .30% 1.00%(3) 1.00%(3)
Other Expenses.................................. .46% .48% .47%
Total Fund Operating Expenses................... 1.51% 2.23% 2.22%
</TABLE>

- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE INCOME FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase of Shares
(as % of Offering Price)................................. 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale of Shares
(as a % of the lesser of original price or redemption
proceeds)................................................ None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET
ASSETS)
Management Fee............................................ .65% .65% .65% .65%
12b-1 Fee................................................. .30% 1.00%(3) 1.00%(3) .75%(3,4)
Other Expenses............................................ % % % %
Total Fund Operating Expenses............................. % % % %
</TABLE>

- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase of Shares
(as a % of Offering Price)................................................... 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale of Shares (as a % of the lesser
of original price or redemption proceeds).................................... None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management Fee (after expense reimbursement)(5)............................... .45% .45% .45% .45%
12b-1 Fee..................................................................... .30% 1.00%(3) 1.00%(3) .65%(3,4)
Other Expenses................................................................ % % % %
Total Fund Operating Expenses................................................... % % % %
</TABLE>

3
<PAGE>
- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase of Shares
(as % of Offering Price)................................. 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale of Shares
(as a % of the lesser of original price or redemption
proceeds)................................................ None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET
ASSETS)
Management Fee............................................ .65% .65% .65% .65%
12b-1 Fee................................................. .30% 1.00%(3) 1.00%(3) .95%(3,4)
Other Expenses (after expense reimbursement)(6)........... % % % %
Total Fund Operating Expenses............................. % % % %
</TABLE>

- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE HIGH YIELD FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase of Shares (as % of Offering
Price)....................................................................... 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale of Shares (as a % of the lesser
of original price or redemption proceeds).................................... None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management Fee................................................................ .45% .45% .45% .45%
12b-1 Fee..................................................................... .30% 1.00%(3) 1.00%(3) .65%(3,4)
Other Expenses................................................................ % % % %
Total Fund Operating Expenses................................................. % % % %
</TABLE>

- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase
of Shares (as % of Offering Price)............. 4.75% None None
Maximum Contingent Deferred Sales Load on Sale
of Shares (as a % of the lesser of original
price or redemption proceeds).................. None(1) 5.00%(2) 1.00%
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fee.................................. .75% .75% .75%
12b-1 Fees...................................... .30% 1.00%(3) 1.00%(3)
Other Expenses.................................. .50% .50% .52%
Total Fund Operating Expenses................... 1.55% 2.25% 2.27%
<FN>
- ------------------------
(1) Purchases of $1 million or more are not subject to an initial sales charge;
however, a CDSC of up to 1% will be imposed on such purchases in the event
of certain redemption transactions within 18 months following the date of
purchase.

(2) The Class B CDSC on redemptions decreases 1% annually after year one to 2%
in years four and five and to 0% after year five. The Class T CDSC on
redemptions decreases 1% annually after year one to 0% after year four.

(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc. ("NASD") rules regarding investment companies.
</TABLE>

4
<PAGE>

<TABLE>
<S> <C>
(4) Although the Trustees have set 12b-1 fees at the levels indicated, under
the shareholder-approved 12b-1 plans for Class T shares and applicable
rules of the NASD, the Trustees of each Fund, except for Strategic Income
Fund, may increase these fees to an aggregate of up to 0.95% annually
without further shareholder approval. The Trustees of Strategic Income
Fund, may increase these 12b-1 fees for Class T Shares to an aggregate of
up to 1.00% annually without further shareholder approval.

(5) After waiver of 0.20% effective January 1, 1989. Without such a fee waiver,
the Management Fees would be 0.65% of average daily net assets.

(6) Absent the expense reimbursement by the Adviser, Other Expenses and Total
Fund Operating Expenses would have been % and %, respectively.
</TABLE>

EXAMPLES: An investor in each of the Funds would pay the following expenses on
a $1,000 investment assuming a 5% annual return throughout the period, and,
unless otherwise noted, redemption at the end of each period.

<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE SPECIAL FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 62 $ 72 $ $ 32 $ $ 62 $
3 Years................................. 93 99 69 88
5 Years................................. 125 138 118 116
10 Years................................ 218 253 253 233

NORTHSTAR ADVANTAGE GROWTH FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 62 $ 72 $ $ 32 $ $ 60 $
3 Years................................. 93 99 69 83
5 Years................................. 125 138 118 108
10 Years................................ 218 253 253 220
</TABLE>

<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
--------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2)
------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
1 year............................................ $ 62 $ 73 $ 23 $ 33 $ 23
3 years........................................... 93 100 70 69 69
5 years........................................... 126 139 119 119 119
10 years.......................................... 219 256 256 255 255
</TABLE>

<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE INCOME FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 61 $ 71 $ $ 31 $ $ 57 $
3 Years................................. 90 96 66 73
5 Years................................. 120 133 113 92
10 Years................................ 207 243 243 192

NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 59 $ 69 $ $ 29 $ $ 53 $
3 Years................................. 84 90 60 61
5 Years................................. 110 123 103 71
10 Years................................ 186 222 222 153
<CAPTION>

NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 61 $ 71 $ $ 31 $ $ 59 $
3 Years................................. 90 96 66 80
5 Years................................. N/A N/A N/A N/A
10 Years................................ N/A N/A N/A N/A
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
1 Year.................................. $ 59 $ 69 $ $ 29 $ $ 54 $
<S> <C> <C> <C> <C> <C> <C> <C>
3 Years................................. 84 90 60 62
5 Years................................. 110 123 103 73
10 Years................................ 186 222 222 157
<CAPTION>

NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
--------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2)
------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year............................................ $ 63 $ 73 $ 23 $ 33 $ 23
3 years........................................... 94 100 70 71 71
5 years........................................... 128 140 120 121 121
10 years.......................................... 223 258 258 261 261
</TABLE>

- ------------------------

(1) Class B and Class T shares convert to Class A shares eight years after
purchase in the case of B Shares and on the later of eight years after
purchase or May 31, 1998 in the case of T Shares; therefore, Class A
expenses are used after year eight.

(2) Assumes no redemption.

The examples above assume the reinvestment of all dividends and distributions
and that the percentage amounts listed under "Annual Operating Expenses" remain
the same each year. The examples should not be considered to be indicative of
actual or expected performance or expenses, both of which will vary.

6
<PAGE>

FINANCIAL HIGHLIGHTS

- -----------------------------------------------------------------------------
The financial highlights set forth below present certain information and
ratios as well as performance information for a share of each Class outstanding
throughout each year or portion thereof. Except where indicated, percentages for
periods of less than one year have been annualized. The financial highlights for
fiscal years ended in 1995 (and for all prior periods in the case of the Income
and Growth and High Total Return Funds) have been examined by ,
independent accountants, whose unqualified report thereon is incorporated by
reference in the Statement of Additional Information and should be read in
conjunction with the related audited financial statements and notes thereto
which are contained in the Annual Report for each Fund. Further information
about performance of each Fund is also contained in the Annual Report, a copy of
which may be obtained without charge from Northstar. The financial highlights
for the Growth, Special, Income, Strategic Income, High Yield and Government
Securities Funds for the periods prior to 1995 were examined by other
independent accountants.

- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE SPECIAL FUND

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995
---------------------------------------------
CLASS A CLASS B CLASS C CLASS T
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Asset Value beginning of
period.....................
Income from investment
operations:
Net investment income
(loss)...................
Net realized and
unrealized gain (loss)...
--------- --------- --------- ---------
Total from investment
operations...............
--------- --------- --------- ---------
Less distributions:
Dividends from net
realized gain............
--------- --------- --------- ---------
Total distributions.......
--------- --------- --------- ---------
Net Asset Value end of
period.....................
--------- --------- --------- ---------
--------- --------- --------- ---------
Total Return (excluding
sales charges)(1)..........
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratios/supplemental data:
Net assets end of period
(thousands)..............
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of expenses to
average net assets.......
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of expenses to
average net assets before
waiver or
reimbursement(3).........
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of net investment
income to average net
assets...................
--------- --------- --------- ---------
--------- --------- --------- ---------
Portfolio Turnover Rate...
--------- --------- --------- ---------
--------- --------- --------- ---------

CLASS T SHARES
------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 20.79 $ 17.40 $ 15.74 $ 10.64 $ 11.67 $ 9.55 $ 7.90 $ 8.92 $ 10.00
Income from investment
operations:
Net investment income
(loss)................... (0.25) (0.32) (0.33) (0.21) (0.20) (0.06) (0.13) (0.14) (0.06)
Net realized and
unrealized gain (loss)... (0.76) 3.83 2.61 6.24 (0.83) 2.18 1.78 (0.88) (1.02)
-------- -------- -------- ------- ------- ------- ------- ------- -------
Total from investment
operations............... (1.01) 3.51 2.28 6.03 (1.03) 2.12 1.65 (1.02) (1.08)
-------- -------- -------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
realized gain............ (0.14) (0.12) (0.62) (0.93) -- -- -- -- --
-------- -------- -------- ------- ------- ------- ------- ------- -------
Total distributions....... (0.14) (0.12) (0.62) (0.93) -- -- -- -- --
-------- -------- -------- ------- ------- ------- ------- ------- -------
Net Asset Value end of
period..................... $ 19.64 $ 20.79 $ 17.40 $ 15.74 $ 10.64 $ 11.67 $ 9.55 $ 7.90 $ 8.92
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Total Return (excluding
sales charges)(1).......... (4.86)% 20.16% 14.54% 57.27% (8.83)% 22.20% 20.89% (11.43)% (10.80)%
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 38,848 $ 28,838 $ 11,336 $ 5,480 $ 3,024 $ 3,958 $ 3,330 $ 3,078 $ 3,823
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets....... 2.16% 2.34% 2.84% 2.95% 2.95% 2.95% 2.96% 2.94% 2.90%
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets before
waiver or
reimbursement(3)......... -- -- -- 3.69% 4.98% 4.89% 6.01% 4.52% 4.82%
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................... (1.25)% (1.66)% (2.12)% (1.57)% (0.97)% (0.44)% (1.06)% (1.22)% (0.76)%
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Portfolio Turnover Rate... 39.43% 34.57% 39.62% 85.43% 71.79% 85.36% 39.88% 57.08% 27.86%
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
</TABLE>

7
<PAGE>
- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE GROWTH FUND

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995
-----------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ $ $ $
Income from investment
operations:
Net investment income
(loss)...................
Net realized and
unrealized gain (loss)...
-------- -------- -------- --------
Total from investment
operations...............
-------- -------- -------- --------
Less distributions:
Dividends from net
investment income........
Dividends from net
realized gain............
Dividends from capital....
-------- -------- -------- --------
Total distributions.......
-------- -------- -------- --------
Net Asset Value end of
period.....................
-------- -------- -------- --------
-------- -------- -------- --------
Total Return (excluding
sales charges)(1)..........
-------- -------- -------- --------
-------- -------- -------- --------
Ratios/supplemental data:
Net assets end of period
(thousands)..............
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of expenses to
average net assets.......
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of net investment
income to average net
assets...................
-------- -------- -------- --------
-------- -------- -------- --------
Portfolio Turnover Rate...
-------- -------- -------- --------
-------- -------- -------- --------

CLASS T SHARES
------------------------------------------------------------------------------------------------

1994 1993 1992 1991 1990 1989 1988 1987 1986

-------- -------- -------- -------- -------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 17.33 $ 16.36 $ 16.37 $ 12.49 $ 13.85 $ 11.96 $ 10.47 $ 10.54 $ 10.00

Income from investment
operations:
Net investment income
(loss)................... 0.08 0.02 0.02 0.09 0.10 0.20 0.16 0.09 0.03

Net realized and
unrealized gain (loss)... (1.41) 1.67 1.30 4.62 (0.83) 2.66 1.58 (0.07) 0.87

-------- -------- -------- -------- -------- -------- -------- -------- --------

Total from investment
operations............... (1.33) 1.69 1.32 4.71 (0.73) 2.86 1.74 0.02 0.90

-------- -------- -------- -------- -------- -------- -------- -------- --------

Less distributions:
Dividends from net
investment income........ (0.08) (0.04) (0.02) (0.08) (0.10) (0.20) (0.17) (0.08) (0.03)

Dividends from net
realized gain............ (0.15) (0.67) (1.31) (0.75) (0.51) (0.76) (0.08) -- (0.33)

Dividends from capital.... (0.02) (0.01)(2) -- -- (0.02) (0.01) -- (0.01) --

-------- -------- -------- -------- -------- -------- -------- -------- --------

Total distributions....... (0.25) (0.72) (1.33) (0.83) (0.63) (0.97) (0.25) (0.09) (0.36)

-------- -------- -------- -------- -------- -------- -------- -------- --------

Net Asset Value end of
period..................... $ 15.75 $ 17.33 $ 16.36 $ 16.37 $ 12.49 $ 13.85 $ 11.96 $ 10.47 $ 10.54

-------- -------- -------- -------- -------- -------- -------- -------- --------

Total Return (excluding
sales charges)(1).......... (7.66)% 10.36% 8.05% 38.10% (5.24)% 24.25% 16.70% 0.11% 8.91%

-------- -------- -------- -------- -------- -------- -------- -------- --------

Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 76,391 $ 80,759 $ 56,759 $ 40,884 $ 24,927 $ 29,842 $ 25,359 $ 27,493 $ 17,013

-------- -------- -------- -------- -------- -------- -------- -------- --------

Ratio of expenses to
average net assets....... 2.00% 2.04% 2.15% 2.25% 2.33% 2.33% 2.46% 2.29% 2.77%

-------- -------- -------- -------- -------- -------- -------- -------- --------

Ratio of net investment
income to average net
assets................... 0.49% 0.13% 0.09% 0.66% 0.80% 1.39% 1.40% 0.83% 0.37%

-------- -------- -------- -------- -------- -------- -------- -------- --------

Portfolio Turnover Rate... 53.76% 42.27% 46.77% 63.56% 54.22% 74.56% 58.73% 54.72% 32.66%

-------- -------- -------- -------- -------- -------- -------- -------- --------

</TABLE>

- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------------
1994
---------------------------------------
1995 CLASS A CLASS B CLASS C
--------------------------------------- FROM FROM FROM
CLASS A CLASS B CLASS C 11/8/93 2/9/94 3/21/94
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value
beginning of
period........... $ 10.00 $ 9.99 $ 9.99 $ 10.00 $ 10.64 $ 10.37
Income from
investment
operations:
Net investment
income......... .35 .27 .27 0.30 0.20 0.20
Net realized and
unrealized gain
(loss)......... .84 .85 .85 (0.05) (0.65) (0.38)
----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations..... 1.19 1.12 1.12 0.25 (0.45) (0.18)
----------- ----------- ----------- ----------- ----------- -----------
Less
distributions:
Dividends (from
net investment
income)........ (0.33) (0.27) (0.28) (0.25) (0.20) (0.20)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value
end of period.... $ 10.86 $ 10.84 $ 10.83 $ 10.00 $ 9.99 $ 9.99
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Total Return
(excluding sales
charge).......... 13.19% 12.31% 12.33% 2.48% (4.20)% (1.75)%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Ratios/Supplemental
Data:
Net assets end
of period (in
thousands)..... 76,031 60,347 53,661 72,223 37,767 4,823
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Ratio of
expenses to
average net
assets......... 1.51% 2.23% 2.22% 1.50% 2.20% 2.20%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Ratio of expense
reimbursement
to average net
assets......... 0% 0% 0% 0.06% 0.16% 0.47%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Ratio of net
investment
income to
average net
assets......... 3.39% 2.66% 2.67% 3.73% 3.00% 2.87%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Portfolio
Turnover
Rate........... 91% 91% 91% 26% 26% 26%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>

8
<PAGE>
- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE INCOME FUND

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995
-----------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ $ $ $
Income from investment
operations:
Net investment income
(loss)...................
Net realized and
unrealized gain (loss)...
-------- -------- -------- --------
Total from investment
operations...............
-------- -------- -------- --------
Less distributions:
Dividends from net
investment income........
Dividends from net
realized gain............
Dividends from capital....
-------- -------- -------- --------
Total distributions.......
-------- -------- -------- --------
Net Asset Value end of
period..................... $ $ $ $
-------- -------- -------- --------
-------- -------- -------- --------
Total Return (excluding
sales charges)(1)..........
-------- -------- -------- --------
-------- -------- -------- --------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ $ $ $
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of expenses to
average net assets.......
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of net investment
income to average net
assets...................
-------- -------- -------- --------
-------- -------- -------- --------
Portfolio Turnover Rate...
-------- -------- -------- --------
-------- -------- -------- --------

CLASS T SHARES
------------------------------------------------------------------------------------------------

1994 1993 1992 1991 1990 1989 1988 1987 1986

-------- -------- -------- -------- -------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 12.94 $ 12.05 $ 11.66 $ 10.13 $ 10.71 $ 9.71 $ 9.11 $ 10.39 $ 10.00

Income from investment
operations:
Net investment income
(loss)................... 0.57 0.49 0.55 0.57 0.61 0.68 0.62 0.56 0.40

Net realized and
unrealized gain (loss)... (1.25) 1.20 0.36 1.53 (0.54) 1.00 0.58 (1.04) 0.67

-------- -------- -------- -------- -------- -------- -------- -------- --------

Total from investment
operations............... (0.68) 1.69 0.91 2.10 0.07 1.68 1.20 (0.48) 1.07

-------- -------- -------- -------- -------- -------- -------- -------- --------

Less distributions:
Dividends from net
investment income........ (0.54) (0.49) (0.52) (0.57) (0.63) (0.68) (0.60) (0.57) (0.40)

Dividends from net
realized gain............ (0.16) (0.31) -- -- -- -- -- (0.22) (0.28)

Dividends from capital.... (0.02)(2) -- -- -- (0.02) -- -- (0.01) --

-------- -------- -------- -------- -------- -------- -------- -------- --------

Total distributions....... (0.72) (0.80) (0.52) (0.57) (0.65) (0.68) (0.60) (0.80) (0.68)

-------- -------- -------- -------- -------- -------- -------- -------- --------

Net Asset Value end of
period..................... $ 11.54 $ 12.94 $ 12.05 $ 11.66 $ 10.13 $ 10.71 $ 9.71 $ 9.11 $ 10.39

-------- -------- -------- -------- -------- -------- -------- -------- --------

Total Return (excluding
sales charges)(1).......... (5.33)% 14.08% 8.06% 21.17% 0.78% 17.70% 13.39% (5.35)% 10.74%

-------- -------- -------- -------- -------- -------- -------- -------- --------

Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 73,764 $ 80,841 $ 56,823 $ 49,367 $ 44,750 $ 58,006 $ 57,425 $ 58,722 $ 49,332

-------- -------- -------- -------- -------- -------- -------- -------- --------

Ratio of expenses to
average net assets....... 1.69% 1.77% 2.02% 2.06% 2.10% 2.04% 2.10% 1.98% 2.15%

-------- -------- -------- -------- -------- -------- -------- -------- --------

Ratio of net investment
income to average net
assets................... 4.36% 3.99% 4.73% 5.21% 5.73% 6.38% 6.30% 5.70% 5.72%

-------- -------- -------- -------- -------- -------- -------- -------- --------

Portfolio Turnover Rate... 59.26% 38.26% 58.96% 76.87% 57.39% 56.15% 24.57% 45.91% 78.71%

-------- -------- -------- -------- -------- -------- -------- -------- --------

</TABLE>

- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995
---------------------------------------------
CLASS A CLASS B CLASS C CLASS T
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ $ $ $
Income from investment
operations:
Net investment income
(loss)...................
Net realized and
unrealized gain (loss)...
--------- --------- --------- ---------
Total from investment
operations...............
--------- --------- --------- ---------
Less distributions:
Dividends from net
investment income........
Dividends from net
realized gain............
Dividends from capital....
--------- --------- --------- ---------
Total distributions.......
--------- --------- --------- ---------
Net Asset Value end of
period..................... $ $ $ $
--------- --------- --------- ---------
--------- --------- --------- ---------
Total Return (excluding
sales charges)(1)..........
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ $ $ $
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of expenses to
average net assets.......
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of expenses to
average net assets before
waiver or
reimbursement(3).........
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of net investment
income to average net
assets...................
--------- --------- --------- ---------
--------- --------- --------- ---------
Portfolio Turnover Rate...
--------- --------- --------- ---------
--------- --------- --------- ---------

CLASS T SHARES
-----------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986
--------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 10.32 $ 9.22 $ 8.99 $ 8.47 $ 8.47 $ 8.26 $ 8.80 $ 9.94 $ 10.00
Income from investment
operations:
Net investment income
(loss)................... 0.56 0.59 0.61 0.67 0.68 0.72 0.75 0.64 0.54
Net realized and
unrealized gain (loss)... (1.56) 1.09 0.23 0.52 -- 0.21 (0.48) (1.10) 0.27
--------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............... (1.00) 1.68 0.84 1.19 0.68 0.93 0.27 (0.46) 0.81
--------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income........ (0.57) (0.58) (0.61) (0.67) (0.68) (0.72) (0.75) (0.64) (0.54)
Dividends from net
realized gain............ -- -- -- -- -- -- -- -- (0.33)
Dividends from capital.... (0.01) -- -- -- -- -- (0.06) (0.04) --
--------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions....... (0.58) (0.58) (0.61) (0.67) (0.68) (0.72) (0.81) (0.68) (0.87)
--------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value end of
period..................... $ 8.74 $ 10.32 $ 9.22 $ 8.99 $ 8.47 $ 8.47 $ 8.26 $ 8.80 $ 9.94
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Total Return (excluding
sales charges)(1).......... (9.82)% 18.48% 9.77% 14.73% 8.57% 11.73% 2.97% (4.72)% 8.50%
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 152,608 $184,156 $144,144 $121,389 $108,420 $123,735 $169,421 $237,190 $223,598
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of expenses to
average net assets....... 1.29% 1.31% 1.39% 1.44% 1.43% 1.45% 1.88% 1.79% 1.89%
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of expenses to
average net assets before
waiver or
reimbursement(3)......... 1.49% 1.51% 1.59% 1.64% 1.63% 1.65% -- -- --
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of net investment
income to average net
assets................... 6.00% 5.83% 6.81% 7.68% 8.23% 8.57% 8.47% 7.02% 6.38%
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Portfolio Turnover Rate... 314.91% 81.41% 120.08% 87.00% 16.77% 73.94% 494.05% 412.29% 241.73%
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>

9
<PAGE>
- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1994
-------
1995 CLASS T
------------------------------------- FROM
CLASS A CLASS B CLASS C CLASS T 7/1/94
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value beginning of period.......... $12.00
Income from investment operations:
Net investment income (loss)............... 0.51
Net realized and unrealized gain (loss).... (0.25)
------- ------- ------- ------- -------
Total from investment operations........... 0.26
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income....... (0.49)
Dividends from net realized gain........... (0.05)
Dividends from capital..................... (0.01)(2)
------- ------- ------- ------- -------
Total distributions........................ (0.55)
------- ------- ------- ------- -------
Net Asset Value end of period................ $11.71
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total Return (excluding sales charges)(1).... 2.14%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/supplemental data:
Net assets end of period (thousands)....... $25,252
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of expenses to average net assets.... 1.90%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of expenses to average net assets
before waiver or reimbursement (3)........ 2.53%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of net investment income to average
net assets................................ 7.92%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Portfolio Turnover Rate.................... 156.34%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>

- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE HIGH YIELD FUND

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------
1995 CLASS T SHARES
----------------------------------------- ------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value
beginning of
period........... $ $ $ $ $ 9.31 $ 9.09 $ 7.94 $ 6.27 $ 8.55 $ 10.00
Income from
investment
operations:
Net investment
income
(loss)......... 0.81 0.85 0.92 1.08 1.12 0.60
Net realized and
unrealized gain
(loss)......... (0.99) 0.80 1.19 1.67 (2.30) (1.45)
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Total from
investment
operations..... (0.18) 1.65 2.11 2.75 (1.18) (0.85)
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Less
distributions:
Dividends from
net investment
income......... (0.83) (0.83) (0.94) (1.08) (1.10) (0.60)
Dividends from
net realized
gain........... (0.01) (0.60) (0.02) -- -- --
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Total
distributions... (0.84) (1.43) (0.96) (1.08) (1.10) (0.60)
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Net Asset Value
end of period.... $ $ $ $ $ 8.29 $ 9.31 $ 9.09 $ 7.94 $ 6.27 $ 8.55
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Total Return
(excluding sales
charges)(1)...... (2.18)% 18.89% 27.57% 46.49% (14.59)% (8.81)%
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Ratios/supplemental
data:
Net assets end
of period
(thousands).... $ $ $ $ $ 136,426 $ 125,095 $ 64,063 $ 25,651 $ 11,342 $ 11,045
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Ratio of
expenses to
average net
assets......... 1.34% 1.40% 1.50% 1.50% 1.44% 1.35%
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Ratio of
expenses to
average net
assets before
waiver or
reimbursement(3)... -- -- 1.55% 1.96% 2.25% 2.65%
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Ratio of net
investment
income to
average net
assets......... 9.08% 8.84% 10.30% 14.84% 15.15% 11.44%
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Portfolio
Turnover
Rate........... 86.20% 176.40% 121.51% 57.48% 156.23% 39.63%
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
</TABLE>

10
<PAGE>
- --------------------------------------------------------------------------------

NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------
1994
----------------------------
1995 CLASS A CLASS B CLASS C
--------------------------- FROM FROM FROM
CLASS A CLASS B CLASS C 11/8/93 2/9/94 3/21/94
------- ------- ------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value beginning of period..... $ 4.41 $ 4.41 $ 4.41 $ 5.00 $ 5.20 $ 5.06
Income from investment operations:
Net investment income (loss).......... .48 .45 .44 0.41 0.33 0.26
Net realized and unrealized gain
(loss)............................... .07 .06 .09 (0.60) (0.80) (0.65)
------- ------- ------- ------ ------ ------
Total from investment operations...... .55 .51 .53 (0.19) (0.47) (0.39)
------- ------- ------- ------ ------ ------
Less distributions:
Dividends (from net investment
income).............................. (0.48) (0.45) (0.45) (0.40) (0.32) (0.26)
------- ------- ------- ------ ------ ------
Net Asset Value end of period........... $ 4.48 $ 4.47 $ 4.49 $ 4.41 $ 4.41 $ 4.41
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Total Return (excluding sales charge)... 13.02% 11.97% 12.44% (4.11)% (9.30)% (7.21)%
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Ratios/Supplemental Data:
Net assets end of period (in
thousands)........................... 88,552 96,362 11,011 50,797 25,880 2,330
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Ratio of expenses to average net
assets............................... 1.55% 2.25% 2.27% 1.50% 2.20% 2.20%
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Ratio of expense reimbursement to
average net assets................... 0% 0% 0% 0.11% 0.20% 0.99%
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Ratio of net investment income to
average net assets................... 10.90% 10.20% 10.18% 10.09% 9.72% 9.46%
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Portfolio Turnover Rate............... 145% 145% 145% 163% 163% 163%
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
<FN>
- ------------------------------
(1) Total returns for 1986 for the Government Securities, Growth, Income, and
Special Funds (1989 for the High Yield Fund and 1994 for Strategic Income
Fund) represent actual, not annualized, percentages. Unaudited prior to
1992.

(2) Represents distribution in excess of net investment income due to
differences in book and tax income.

(3) Reflects ratio that would have existed, in the case of the Government
Securities Fund, had the former Adviser not elected to waive 0.20% of its
investment advisory fee effective January 1, 1989, and, in the case of the
High Yield, Special and Strategic Income Funds, had the former Adviser or
its affiliates not reimbursed such Funds for a portion of their expenses.
</TABLE>

11
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS

- ----------------------------------------------------------------------
Each Fund has its own investment objective and policies, and each utilizes
specific investment techniques to achieve its objective. Each of the Funds is
diversified, which is a means of reducing risk by investing the Fund's assets in
a broad range of securities designed to meet the Fund's objectives. The
objectives and policies of each Fund can be expected to affect the investment
return of such Fund and the degree of market and financial risk to which such
Fund is exposed. The percentage limitations included in these policies apply
only at the time of purchase. Policies and objectives that are noted as
"fundamental" cannot be changed without a shareholder vote. All other policies,
including the investment objective for each Fund other than the Income and
Growth Fund and High Total Return Fund are not fundamental and may be changed by
the Fund's Trustees without shareholder approval. Shareholders of those Funds
will be notified at least thirty days in advance of a change in the investment
objective of a Fund, and will be notified of any other material changes. If
there is a change to a Fund's investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial goals. Shareholders may incur a contingent deferred sales
charge if shares are redeemed in response to a change in objective. There can,
of course, be no guarantee that the investment objective of any of the Funds
will be achieved, due to the uncertainty inherent in all investments.

NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND. The investment objective of
the Fund is to achieve a high level of current income and to conserve principal
by investing primarily in debt obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities ("U.S. Government Securities").

U.S. Government Securities include U.S. Treasury obligations and obligations
of agencies and instrumentalities of the U.S. Government. The Fund may at
various times have all or substantially all of its assets in U.S. Government
Securities issued by a single agency or instrumentality. Some U.S. Government
Securities, such as U.S. Treasury obligations, are supported by the full faith
and credit of the United States; others, such as securities of Federal Home Loan
Banks, are supported by the right of the issuer to borrow from the U.S.
Treasury; still others, such as bonds issued by the Federal National Mortgage
Association, a private corporation, are supported only by the credit of the
instrumentality. Securities of an instrumentality are not insured by the U.S.
Government and there can be no assurance that the U.S. Government will support
an instrumentality it sponsors. Because the U.S. Government is not obligated by
law to provide support to an instrumentality it sponsors, the Government
Securities Fund will invest in the securities issued by such an instrumentality
only when the Adviser determines that the credit risk with respect to the
instrumentality does not make the securities of the instrumentality unsuitable
investments. The Adviser does not intend to invest in excess of 35% of the
Fund's assets in securities not supported by the full faith and credit of the
United States, nor does it intend to invest more than 20% of the portfolio in
securities issued by any single instrumentality not supported by the full faith
and credit of the United States.

Securities of the sort owned by the Fund generally possess a high degree of
dependability with respect to timely payment of principal and interest. However,
such securities fluctuate in market price (but not in ultimate repayment
amount), primarily with interest rate levels and trends, rising when interest
rates decline and declining when interest rates rise. Consequently, the Fund's
net asset value will fluctuate in response to changing interest rates. The Fund
may invest in U.S. Government Securities of varying maturities and duration, and
the portfolio at times may hold a significant portion of its assets in
securities with longer durations. Long duration securities have greater price
movements in response to interest rate changes than movements in shorter
duration securities and may impact the Fund's net asset value accordingly. The
Adviser's determination of average duration reflects its outlook on interest
rates as well as its determination of best relative value in making investments.

The Fund may invest in mortgage-backed securities not issued or guaranteed by
an agency of the U.S. Government, but for which the underlying mortgages are
guaranteed by an Agency. Mortgage-backed securities have yield and maturity
characteristics corresponding to the underlying mortgage loans. Fluctuating
prepayments of principal may result from the refinancing or foreclosure of the
underlying mortgage loans. Because of the prepayment risks, these securities may
have less potential for capital appreciation during periods of declining
interest rates than other investments of comparable maturities, while having a
comparable risk of decline during periods of rising interest rates.

The Fund may invest in zero coupon treasury securities which consist of
stripped interest or principal components of U.S. Treasury bonds or notes
("STRIPs"). STRIPs involve the separation of the corpus (face amount) of the
bond or note from the coupon (interest portion). The U.S. Treasury redeems the
bond or note corpus (zero coupon bond or note) for the face value thereof at
maturity and redeems the stripped coupon (interest portion) beginning at the
date specified thereon. Zero coupon Treasury securities pay no interest to
holders during their life and usually trade at a deep discount from their face
or par value. They are subject to greater

12
<PAGE>

fluctuations of market value in response to changing interest rates than debt
obligations of comparable maturities which make periodic distributions of
interest. On the other hand, zero coupon securities eliminate reinvestment risk
and lock in a rate of return to maturity. Stripped interests in U.S. Treasury
securities that are not issued through the U.S. Treasury's STRIPs program are
not considered to be U.S. Government Securities. The Fund will accrue and
distribute income from zero coupon securities on a current basis and may have to
sell securities to generate cash for distributions.

The Fund's assets will be managed so that the Fund is a permissible investment
for federal credit unions under the Federal Credit Union Act and rules and
regulations established by the National Credit Union Administration. To the
extent that any investment or investment practice under the Fund's investment
policies described herein or in the Statement of Additional Information are not
permissible for federal credit unions, the Fund shall refrain from purchasing
such investment or engaging in such practice. The Fund will notify shareholders
60 days before making any change to this policy. THE GOVERNMENT SECURITIES
FUND'S SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR ITS
AGENCIES OR INSTRUMENTALITIES, OR BY ANY OTHER PERSON OR ENTITY.

NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND. The Fund seeks high current
income. The Fund will, under normal market conditions, allocate its investments
among the three fixed income securities markets described below. The Adviser
believes that allocation of the Fund's investments among the three sectors will
better enable the Fund to achieve its objective and may reduce investment risk
and volatility. The Fund will, under normal market conditions, maintain at least
20% of its total assets in each of the three sectors and may not invest more
than 60% of its total assets in any one sector, and have substantially all of
the Fund's assets invested in the three market sectors. No more than 60% of the
Fund's assets may be invested in foreign issuers across all sectors. In the
past, the markets for U.S. Government Securities, high yield corporate fixed
income securities and debt securities of foreign issuers have tended to move
independently of each other and have at times moved in opposite directions.
There is no assurance that they will continue to do so in the future. The
Adviser believes that when financial markets exhibit a lack of correlation, the
ability to respond strategically to market forces by allocating the Fund's
assets among the sectors should result in lower price volatility than would be
experienced by investing exclusively in any one of the markets. See "Risk
Factors -- High Yield Securities and Foreign Investments."

The Adviser will determine the amount of assets to be allocated to each sector
based on its assessment of the maximum level of current income that can be
achieved without incurring undue risks to principal value. In making this
allocation, the Adviser will rely on its analysis of economic conditions,
interest rate risk, currency risk and its analysis of opportunities in each
sector based on current and historical market data. The Adviser will
continuously review its allocations and make adjustments as it deems
appropriate. The Fund's assets allocated to each sector will be managed in
accordance with the investment policies described below.

THE U.S. GOVERNMENT SECURITIES SECTOR. U.S. Government Securities are
considered among the most creditworthy of fixed income securities. For a
description of U.S Government Securities and their characteristics, including
mortgage-backed securities, see "Northstar Advantage Government Securities
Fund." The Fund may invest all or substantially all of this sector's assets in
U.S. Government Securities issued by a single agency or instrumentality. The
Fund may invest in varying maturities and may adjust the average maturity of the
investments held by the Fund from time to time based upon the Adviser's
assessment of relative yields of securities of different maturities and its
expectations of future changes in interest rates.

THE HIGH YIELD SECTOR. The High Yield sector will invest predominantly in
high yielding, higher risk, lower-rated or nonrated foreign government fixed
income securities and corporate fixed income securities traded in the U.S. high
yield corporate market. These securities are rated below investment grade (I.E.,
rated below Baa by Moody's or below BBB by S&P). The Fund may invest without
limitation in securities rated as low as Ca by Moody's or CC by S&P (or in
nonrated securities deemed to be of equivalent standing by the Adviser) and up
to 10% of the Fund's assets allocated to this sector may be in the lowest rating
categories (C by Moody's and D by S&P). The lowest rating categories include
bonds which are in default. High yield securities are subject to greater market
fluctuations, and may be less liquid and subject to greater risk of loss of
income and principal due to default by the issuer than are investments in lower
yielding, higher-rated debt instruments. Investment in these securities involves
special risks. See, "Risk Factors -- High Yield Securities" and the Appendix.

The Adviser will attempt to maximize income and reduce risk within the High
Yield sector through diversification of the sector's portfolio investments and
by credit analysis of each issuer, as well as by monitoring broad economic
trends and corporate developments. The Fund will not necessarily invest in the
highest yielding securities available if, in the Adviser's view, the differences
in yield are not sufficient to justify the accompanying higher risks, and may
invest in securities rated investment grade at the time of purchase.

13
<PAGE>

The foreign government securities in which the Fund invests include securities
issued or guaranteed by foreign national, provincial, state or other governments
with taxing power, or their agencies or instrumentalities, and include
securities issued by developing countries and issuers located in developing
countries. Such foreign government securities may be denominated in U.S. dollars
or other currencies. In selecting and allocating assets among the countries in
which the Fund will invest, the Adviser will develop a long-term view of those
countries and will engage in an analysis of sovereign risk by focusing on
factors such as a country's public finances, monetary policy, external accounts,
financial markets, stability of exchange rate policy and labor conditions.

The high yield securities in which the Fund may invest will consist
predominantly of bonds, but may include to a lesser extent preferred stocks and
securities convertible into or exchangeable for equity securities, or which
carry the right, in the form of a warrant or as part of a unit with the
security, to acquire equity securities. The Fund intends to purchase such
securities for their yield characteristics rather than for the purpose of
exercising the associated rights to obtain equity securities. The Fund may
invest in debt securities of any maturity that pay fixed, floating or adjustable
interest rates. The Fund also may invest in debt securities issued at a discount
to face value, including zero coupon securities, and securities that pay
interest, at the issuer's option, in additional securities (pay-in-kind
securities). The values of debt securities generally fluctuate inversely with
changes in interest rates. This is less likely to be true for adjustable or
floating rate securities, since interest rate changes are more likely to be
reflected in changes in the rates paid on the securities. However, reductions in
interest rates also may translate into lower distributions paid by the Fund.
Additionally, because zero coupon and pay-in-kind securities do not pay interest
but the Fund nevertheless must accrue and distribute the income deemed to be
earned on a current basis, the Fund may have to sell other investments to raise
the cash needed to make income distributions.

The High Yield sector may also invest in participations in (i) entities
organized and operated for the purpose of restructuring the investment
characteristics of instruments issued or guaranteed by foreign governments of
emerging market countries ("Sovereign Debt Obligations"), and (ii) loans between
foreign governments and financial institutions. Sovereign Debt Obligations held
by the Fund generally will not be traded on securities exchanges. The Fund may
invest in Sovereign Debt Obligations customarily referred to as "Brady Bonds,"
which are created through the exchange of existing commercial bank loans to
foreign entities for new obligations in connection with debt restructuring.
Brady Bonds may be collateralized or uncollateralized and issued in various
currencies (although most are dollar denominated), and they are actively traded
in the over-the-counter secondary market. Dollar-denominated, collateralized
Brady Bonds, which may be fixed rate par bonds or floating rate discount bonds,
are generally collateralized in full as to principal due at maturity by U.S.
Treasury zero coupon obligations which have the same maturity as the Brady
Bonds.

The Fund's investments in loans are expected in most instances to be in the
form of loan participations and loan assignments from third parties. The Fund
may invest up to 15% of its net assets in participations, assignments and other
illiquid investments. See "Illiquid Securities." Both the government that is the
borrower on the loan and the bank selling the participation or assignment will
be considered to be the issuer of the participation or assignment, and the Fund
will acquire participations only if the lender has total assets of more than $25
billion and its senior unsecured debt is rated Baa or higher by Moody's or BBB
or higher by S&P.

THE INTERNATIONAL SECTOR. The International Sector will invest in investment
grade (I.E . rated Baa or better by Moody's or BBB or better by S&P) or in
unrated securities that the Adviser determines to be of equivalent quality) debt
obligations and other fixed income securities denominated predominantly in
currencies (i) issued or guaranteed by foreign national, provincial, state, or
other governments with taxing authority, or by their agencies or
instrumentalities; and (ii) of supranational entities (described below). The
Fund may invest in any country where the Adviser believes there is the potential
for income.

Debt obligations may or may not be supported by the full faith and credit of a
foreign government. Supranational entities include international organizations
designated or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and related
government agencies. Examples of supranational entities include the World Bank,
the Inter-American Development Bank and the European Bank for Reconstruction and
Development.

NORTHSTAR ADVANTAGE HIGH YIELD FUND. The investment objective of the Fund is
high current income. The Fund normally will be invested substantially in
long-term and intermediate-term fixed income securities, with emphasis on higher
yielding, higher risk, lower-rated or nonrated corporate debt instruments of
U.S. and foreign issuers. Under normal market conditions, at least 65% of the
Fund's total assets will be invested in high yield bonds. The Fund may invest
without limitation in securities rated as low as Ca by Moody's or CC by S&P (or
in securities which are not rated but are considered to be of equivalent quality
by the Adviser), and may invest up to 1% of its assets in the lowest rating
categories (C for Moody's and D for S&P). The lowest rating categories include
bonds which are in default. High yield securities are subject to special risks,
typically are subject to greater market fluctuations and

14
<PAGE>

may be less liquid and subject to greater risk of loss of income and principal
due to default by the issuer. See, "Risk Factors -- High Yield Securities" and
the Appendix. The Adviser will attempt to maximize income and reduce risk
through diversification of the portfolio and by credit analysis of each issuer,
as well as by monitoring broad economic trends and corporate developments.

The Fund may invest up to 35% of its assets in securities of foreign issuers,
10% of which may be of issuers which are not traded on a U.S. securities
exchange. See "Risk Factors -- Foreign Investments." The Fund may invest up to
25% of its assets in equity or equity-related securities, such as preferred
stocks (which may or may not have a dividend yield), convertible securities or
rights or warrants associated with debt instruments.

NORTHSTAR ADVANTAGE INCOME FUND. The Fund's primary investment objective is
income. As a secondary objective, the Fund seeks capital appreciation. The Fund
invests in debt securities and equity securities of companies which are listed
or traded on domestic securities exchanges or in the over-the-counter market,
but may to a limited extent, invest in securities traded in markets outside the
U.S. Under normal market conditions, at least 65% of the Fund's total assets
will be invested in income-producing securities. Up to 25% of the Fund's assets
may be invested in debt securities rated below investment grade by a nationally
recognized rating service (ie. rated lower than Baa by Moody's or BBB by S&P),
or are not rated but normally will not invest in securities rated below B by
Moody's or S&P. These securities are considered speculative investments and
generally involve greater risk, including the risk of loss of income and
principal, than higher-rated securities. In addition, the yield and price of a
lower-rated security may tend to fluctuate more than the yield and price of a
higher-rated security. Investment in these securities involves special risks
outlined below under the heading "Risk Factors -- High Yield Securities" and in
the Appendix. The Fund may invest up to 20% of its net assets in securities of
foreign issuers, not more that 10% of which may be invested in issuers that are
not listed on a U.S securities exchange. See "Risk Factors -- Foreign
Investments."

Equity securities include common and preferred stocks, warrants or rights to
purchase such stock, and securities convertible into such stock. Debt securities
may be of any maturity and pay fixed, floating or adjustable interest rates. The
Fund also may invest in discount obligations, including zero coupon securities,
that do not pay interest but rather are issued at a significant discount to
their maturity values, or securities that pay interest, at the issuer's option,
in additional securities instead of cash (pay-in-kind securities). The values of
debt securities generally fluctuate inversely with changes in interest rates.
This is less likely to be true for adjustable or floating rate securities, since
interest rate changes are more likely to be reflected in changes in the rates
paid on the securities. However, reductions in interest rates also may translate
into lower distributions paid by the Fund. Additionally, because zero coupon and
pay-in-kind securities do not pay interest but the Fund nevertheless must accrue
and distribute the income deemed to be earned on a current basis, the Fund may
have to sell other investments to raise the cash needed to make income
distributions.

NORTHSTAR ADVANTAGE GROWTH FUND. The Fund's investment objective is long-term
growth of capital. Under normal conditions, at least 65% of the Fund's total
assets will be invested in securities purchased for their prospect of capital
appreciation. The Fund invests principally in common stocks of companies which
are listed on the domestic securities exchanges or are traded in the domestic
over-the-counter markets, but may, to a limited extent, invest in securities
traded in markets outside the U.S. The Fund also may invest in preferred stocks
and convertible securities issued by such companies.

The Fund invests in industries and companies which, in the opinion of the
Adviser, have potential for capital growth and selects securities of companies
with records of above-average earnings growth or companies which, in its view,
are substantially undervalued in relation to assets. Some of the equity
securities in which the Fund invests may be speculative and involve substantial
risk, since they may experience significant price fluctuations in both rising
and declining markets. The Fund may invest up to 10% of its net assets in
securities of foreign issuers, not more than 10% of which may be invested in
issuers that are not listed on a U.S. securities exchange. See "Risk Factors --
Foreign Investments."

NORTHSTAR ADVANTAGE SPECIAL FUND. The Fund's investment objective is capital
appreciation. The Fund invests in a diversified portfolio of equity securities
selected on the basis of their potential for growth. The Fund invests in equity
securities of

15
<PAGE>

companies which are listed on domestic securities exchanges or are traded in the
over-the-counter markets. However, the Fund may, to a limited extent, invest in
securities traded in markets outside the U.S. Securities purchased by the Fund
are primarily issues of smaller, lesser-known companies. While the Fund does not
limit itself to smaller companies, many of its investments are in small,
emerging growth companies. Small companies are those, for example, with annual
revenues of less than $500 million. Emerging growth companies are those that,
while still in the developmental stage, have demonstrated, or are expected to
achieve, growth of earnings over major business cycles. Smaller, less
established companies may offer greater opportunities for capital appreciation
than larger, better established companies, but may also involve certain special
risks. Such companies often have limited product lines, markets or financial
resources and depend heavily on a small management group. Their securities may
trade less frequently, in smaller volumes, and fluctuate more sharply in value
than exchange listed securities of larger companies.

Equity securities in which the Fund may invest consist of common stocks,
preferred stocks, convertible securities, warrants and other stock purchase
rights, private placements and other restricted equity securities, equity
interests in trusts, limited partnerships and joint ventures and interests in
real estate investment trusts. The Fund may invest up to 20% of its net assets
in the securities of foreign issuers, not more than 10% of which may be in
issuers whose securities are not listed on a U.S. securities exchange. See "Risk
Factors -- Foreign Investments."

NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND. The Fund's investment objective
is to seek current income balanced with the objective of achieving capital
appreciation. Under normal market conditions, the Fund will invest at least 65%
of its total assets in income-producing securities. In seeking to achieve its
objective, the Fund will invest in equity securities of domestic and foreign
issuers that have prospects for dividend income and growth of capital, and
selected fixed-income securities of domestic and foreign private and government
issuers. These securities would include U.S. Government Securities (see the
"Northstar Advantage Government Securities Fund" above for a description of
these securities), foreign and domestic investment grade bonds, and bonds issued
by foreign governments considered stable by the Adviser and supported through
the authority to levy taxes by national state or provincial governments or
similar political subdivisions. The proportion of holdings in common stocks,
other equity-related securities, and debt securities will vary in accordance
with the level of return that can be achieved from these various types of
securities. Securities are also purchased on the basis of fundamental attraction
regarding capital appreciation prospects. In this way, income is "balanced" with
capital. The Fund invests in equity securities that are listed primarily on the
New York Stock Exchange or American Stock Exchange or that are traded on the
over-the-counter market. The common and preferred stocks purchased by the Fund
will typically be of large well-established companies, but may also include to a
lesser extent small capitalization companies selected for their growth
potential. Fixed income securities purchased by the Fund will only be securities
rated investment grade (I.E., in the top four rating categories of Moodys or
S&P) at the time of purchase. Securities that are in the lowest investment grade
debt category may have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than in the case with higher grade
securities. In the event that an existing holding is downgraded to below
investment grade, the Fund may nevertheless retain the security.

The Fund may invest up to 20% of its net assets in the securities of foreign
issuers, not more than 10% of which shall be in issuers whose securities are not
listed on a U.S. securities exchange. See "Risk Factors -- Foreign Investments."

NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND. The investment objective of the
Fund is to seek high income. As an investment policy, the Fund, consistent with
its objective, purchases and sells portfolio securities in the pursuit of
capital appreciation. The Fund, therefore, also seeks to maximize the total
return on its portfolio by taking advantage of market developments, yield
disparities and variations in the creditworthiness of issuers.

Under normal market conditions, the Fund will seek to achieve its investment
objective by investing at least 65% of its total assets in higher-yielding,
lower-rated U.S. dollar-denominated debt securities of U.S. and foreign issuers,
which involve special risks and are predominantly speculative in character.
Investments in securities offering the high current income sought by the Fund,
while generally providing greater income and potential opportunity for gain than
investments in higher rated securities, also entail greater risk. The value of
high yield securities (and therefore the net asset value per share of the Fund)
can be expected to increase or decrease in response to changes in interest
rates, real or perceived changes in the credit risks associated with its
portfolio investments, and other factors affecting the credit markets generally.
The Fund may invest up to 35% of its assets in non-U.S. Dollar denominated
securities, but is subject to a limit of 50% of its assets in securities of
foreign issuers, including a limit of 35% of assets in emerging market debt,
regardless of the currency in which such securities are denominated. The Fund
intends to restrict it investments in emerging markets to those with sound
economies that are expected to experience strong growth, and therefore higher-
than-average returns, over time. See "Risk Factors -- Foreign Investments."

16
<PAGE>

Most of the debt securities in which the Fund invests are lower rated, and may
include bonds in the lowest rating categories (C for Moody's and D for S&P) and
unrated bonds. Most of the securities will be rated at least Caa by Moody's or
at least CCC by S&P, or if not rated, are of equivalent quality in the opinion
of the Adviser. The Fund may invest up to 10%, and hold up to 25%, of its assets
in securities rated below Caa in the case of Moody's or CCC by S&P. Such debt
securities are highly speculative and may be in default of payment of interest
and/or repayment of principal may be in arrears. The issuers of such debt
securities may be involved in bankruptcy or reorganization proceedings and/or
may be restructuring outstanding debt. Investing in bankrupt and troubled
companies involves special risks. See "Risk Factors -- High Yield Securities"
and the Appendix.

The Fund may invest in debt securities of any maturity that pay fixed,
floating or adjustable interest rates. The Fund also may invest in discount
obligations, including zero-coupon securities, which do not pay interest but,
rather, are issued at a significant discount to their maturity values, or
securities that pay interest, at the issuer's option, in additional securities
instead of cash (pay-in-kind securities). The values of debt securities
generally fluctuate inversely with changes in interest rates. This is less
likely to be true for adjustable or floating rate securities, since interest
rate changes are more likely to be reflected in changes in the rates paid on the
securities. However, reductions in interest rates also may translate into lower
distributions paid by the Fund. Additionally, because zero coupon and
pay-in-kind securities do not pay interest but the Fund nevertheless must accrue
and distribute the income deemed to be earned on a current basis, the Fund may
have to sell other investments to raise the cash needed to make income
distributions. To a lesser extent the Fund may invest in equity or
equity-related securities, including common stock, preferred stock, convertible
securities and rights and warrants attached to debt instruments. Typically the
Fund would purchase a high yield security that is convertible or exchangeable
for equity securities, or which carries the right in the form of a warrant or as
part of a unit with the security to acquire equity securities. The Fund would
ordinarily purchase these securities for their yield characteristics or capital
appreciation potential.

RISK FACTORS

- ----------------------------------------------------------------------

HIGH YIELD SECURITIES. Each of the Strategic Income Fund, High Yield Fund,
Income Fund and High Total Return Fund may invest in higher yielding securities
that carry lower investment grade ratings. These high yield high-risk securities
are rated below investment grade by the primary rating agencies (Moody's and
S&P). See Appendix A for a description of bond rating categories. The value of
lower rated securities generally is more dependent on the ability of the company
to meet interest and principal payments than is the case for higher rated
securities. Conversely, the value of higher rated securities may be more
sensitive to interest rate movements than lower rated securities. Companies
issuing high yield securities may not be as strong financially as those issuing
bonds with higher credit ratings. Investments in such companies are considered
to be more speculative than higher quality investments. In addition, the market
for lower rated securities is generally less liquid than the market for higher
rated securities, and adverse publicity and investor perceptions may also have a
greater negative impact on the market for these securities.

Companies issuing high yield bonds are more vulnerable to real or perceived
economic changes (such as rising interest rates), political changes or adverse
developments specific to the company. Adverse economic, political or other
developments may impair the company's ability to service principal and interest
obligations, to meet projected business goals and to obtain additional
financing, particularly if the company is highly leveraged. In the event of a
default, a Fund would experience a reduction of its income and could expect a
decline in the market value of the defaulted securities.

17
<PAGE>

Weighted average composition of the following Funds' portfolios at the end of
their 1995 fiscal year was:

<TABLE>
<CAPTION>
STRATEGIC HIGH TOTAL
INCOME HIGH YIELD RETURN INCOME
--------------- ----------- ---------- ----------

<S> <C> <C> <C> <C>
Investment Grade
BB..................................................... 21.8
B...................................................... 51.3
CCC.................................................... 7.7
CC..................................................... --
C...................................................... --
D...................................................... --
Nonrated............................................... 15.2
U.S. Governments, equities, and other.................. 4.0
TOTAL.................................................. 100% 100% 100% 100%
------ ----------- ---------- ----------
------ ----------- ---------- ----------
</TABLE>

This table does not reflect the current or future composition of any of the
Fund's portfolios.

FOREIGN INVESTMENTS. Each Fund, except the U.S. Government Securities Fund,
may invest in securities of foreign issuers. Securities of some foreign
companies and governments may be traded in the U.S., but many foreign securities
are traded primarily in foreign markets. In addition to generally higher
transaction costs associated with foreign investing, risks of foreign investing
include:

CURRENCY RISKS. A Fund must buy the local currency when its buys a foreign
security, and it sells local currency when it sells the security. The value of a
foreign security held by the Fund will be affected by the value of the local
currency relative to the U.S. dollar, causing the Fund to lose money at times,
despite an increase in the value of the security.

POLITICAL AND ECONOMIC RISK. Political and economic risks may exist,
particularly in underdeveloped or developing countries which may have relatively
unstable governments and economies based on only a few industries. In some
countries, there is the risk that the government may take over the assets or
operations of a company or that the government may impose taxes or limits on the
removal of a Fund's assets from that country.

REGULATORY RISK. There is generally less government supervision of foreign
markets, and issuers are not subject to the uniform accounting, auditing and
financial reporting standards and practices applicable to domestic issuers.
There also may be less publicly available information about foreign issuers.

OTHER INVESTMENT TECHNIQUES

- ----------------------------------------------------------------------
Unless otherwise stated, each of the following strategies and techniques may
be utilized by each of the Funds. The Funds may, but do not currently intend to,
engage in certain additional investment techniques not described in this
Prospectus. These techniques and additional information on the securities and
techniques described in the Prospectus are contained in the Statement of
Additional Information.

OPTIONS AND FUTURES TRANSACTIONS. Each Fund may enter into futures contracts
on securities, financial indices and foreign currencies and options on such
contracts and may invest in options on securities, financial indices and foreign
currencies, and forward contracts (collectively "derivative instruments"). The
Funds intend to use derivative instruments primarily to hedge the value of their
portfolios against potential adverse movements in securities price, foreign
currency markets or interest rates. To a limited extent, the Funds may also use
derivative instruments for non-hedging purposes such as increasing a Fund's
income or otherwise enhancing return. When a Fund invests in a derivative
instrument, it may be required to segregate cash and other high-grade liquid
assets or portfolio securities to "cover" the Fund's position. Assets segregated
or set aside may limit the Fund's portfolio management activities while the Fund
maintains the positions, which could diminish the Fund's return due to foregoing
other potential investments with such assets.

The use of options and futures strategies involves certain other risks,
including the risk that no liquid market will exist and that the Fund will be
unable to effect closing transactions at any particular time or at an acceptable
price, and the risk of imperfect correlation between movements in options and
futures prices and movements in the price of securities which are the subject of
the hedge. The

18
<PAGE>

successful use of options and futures strategies depends on the ability of the
Adviser to forecast correctly rate movements and general stock market price
movements. Expenses and losses incurred as a result of these hedging strategies
will reduce the current return of the Fund. See the Statement of Additional
Information.

REPURCHASE AGREEMENTS. A Fund may invest in repurchase agreements, either for
temporary defensive purposes or to generate income from its cash balances. Under
a repurchase agreement, the Fund buys a security from a bank or dealer, which is
obligated to buy it back at a fixed price and time. The security is held in a
separate account at the Fund's custodian and constitutes the Fund's collateral
for the bank's or dealer's repurchase obligation. Additional collateral may be
added so that the obligation will at all times be fully collateralized. However,
if the bank or dealer defaults or enters into bankruptcy, the Fund may
experience costs and delays in liquidating the collateral, and may experience a
loss if it is unable to demonstrate its right to the collateral in a bankruptcy
proceeding. Repurchase agreements maturing more than seven days in the future
are considered illiquid, and a Fund will invest no more than 5% of its net
assets in such repurchase agreements at any time.

WHEN ISSUED SECURITIES. The Funds may acquire securities on a "when-issued"
basis by contracting to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until settlement. If
made through a dealer, the contract is dependent on the dealer completing the
sale. The dealer's failure could deprive the Fund of an advantageous yield or
price. These contracts may be considered securities and involve risk to the
extent that the value of the underlying security changes prior to settlement. A
Fund may realize short-term profits or losses if the contracts are sold.
Transactions in when-issued securities may be limited by certain Internal
Revenue Code requirements.

ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
illiquid securities, including restricted securities or private placements. An
illiquid security is a security that cannot be sold quickly in the normal course
of business. Some securities cannot be sold to the U.S. public because of their
terms or because of SEC regulations. The Adviser may determine that securities
that cannot be sold to the U.S. public, but that can be sold to institutional
investors ("Rule 144A" securities) or on foreign markets, are liquid, following
guidelines established by the Trustees of each Fund.

TRADING AND PORTFOLIO TURNOVER. Each Fund generally intends to purchase
securities for long-term investment. However, short-term transactions may result
from liquidity needs, securities having reached a price or yield objective,
changes in interest rates or the credit standing of an issuer, or by reason of
economic or other developments not foreseen at the time of the initial
investment decision. Portfolio turnover rates are usually not a factor in making
buy and sell decisions. Although infrequent, a Fund may purchase a security in
anticipation of relatively short-term price gains. A Fund may also sell one
security and simultaneously purchase the same or comparable security to take
advantage of short-term differentials in yield or price. Increased portfolio
turnover may result in higher costs for brokerage commissions, dealer mark-ups
and other transaction costs and may also result in taxable capital gains. Short
term trading may also be restricted by certain tax rules.

TEMPORARY INVESTMENTS. In periods of unusual market conditions, for temporary
and defensive purposes, when the Adviser considers it appropriate, a Fund may
invest part or all of its assets in cash, U.S. government securities, commercial
paper, bankers' acceptances, repurchase agreements and certificates of deposit.

PERFORMANCE INFORMATION

- ----------------------------------------------------------------------
The Funds may, from time to time, include their yield and total returns in
advertisements or reports to shareholders or prospective investors. Both yield
and total return figures are computed separately for each class of shares of
each Fund in accordance with formulas specified by the Securities and Exchange
Commission. Both yield and total return figures are based on historical earnings
and are not intended to indicate future performance. The yield for each class of
a Fund (which shows the rate of income a Fund earned on its investment as a
percentage of a Fund's share price) will be computed by dividing (a) net
investment income over a 30-day period by (b) an average value of invested
assets (using the average number of shares entitled to receive dividends and the
maximum offering price per share or the maximum redemption price per share) at
the end of the period, as appropriate, all in accordance with applicable
regulatory requirements. Such amounts will be compounded for six months and then
annualized for a twelve-month period to derive the yield of each class.

Standardized quotations of average annual total return for each class of
shares will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in the class of shares over a period of 1, 5
and 10 years (or up to the life of the class of shares). Total return is the
percentage increase or decrease in the value of an investment over a stated
period of time. Standardized total return quotations reflect the deduction of a
proportional share of expenses (on an annual basis) of a class,

19
<PAGE>

deduction of the maximum initial sales load or the maximum CDSC applicable to a
complete redemption of the investment, as appropriate, and assume that all
dividends and distributions are reinvested when paid. The Funds also may quote a
supplementary rate of total return over different periods of time or by
non-standardized means.

Performance for Class B and Class C shares typically will be less favorable
than that for Class A and Class T shares due to the higher expense ratios for
Class B and Class C shares. Performance for Class T shares will be less
favorable than Class A shares due to higher distribution and service fees. For a
complete description of the methods used to determine yield and total return for
the Funds, see the Statement of Additional Information.

HOW NET ASSET VALUE IS DETERMINED

- ----------------------------------------------------------------------
All purchases, redemptions and exchanges are processed at the net asset value
("NAV") per share next calculated after your request is received and approved.
In order to receive a day's price, your order must be received by 4:00 p.m. EST.
NAV fluctuates and is determined separately for each class as of the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m. EST) each day
the Exchange is open. NAV is computed by dividing the total value of a Fund's
securities and other assets, less all liabilities, by the total number of shares
outstanding. The specific expenses borne by each class of shares will be
deducted from that class and will result in different NAVs and dividend
payments. The NAV of a Class B, Class C or Class T share will generally be lower
than that of a Class A share because of the higher distribution fees or certain
other class specific expenses borne by these classes. However, the net asset
value per share of each class will tend to converge immediately after the
payment of dividends.

Under normal market conditions, daily prices for securities are obtained from
independent pricing services determined by them in accordance with the
Registration Statement for each Fund. Securities are valued at market value or,
if a market quotation is not readily available, at their fair value determined
in good faith under procedures established by and under the supervision of the
Trustees. Money market instruments maturing within 60 days are valued at
amortized cost, which approximates market value. See the Statement of Additional
Information.

MANAGEMENT OF THE FUNDS

- ----------------------------------------------------------------------
THE TRUSTEES. The Trustees of each Fund ("Trustees") oversee the operations
of the Fund and perform the various duties imposed on trustees by the laws of
the Commonwealth of Massachusetts and the 1940 Act. The Trustees meet quarterly
to review the Funds' investment policies, performance, expenses and other
business affairs and elect the officers of each Fund annually. The Trustees
delegate day to day management of the Funds to the officers of the respective
Funds.

THE ADVISER AND AFFILIATED SERVICE PROVIDERS. Pursuant to an Investment
Advisory Agreement with each Fund, Northstar Investment Management Corporation
acts as the investment adviser to each Fund. In this capacity, the Adviser,
subject to the authority of the Trustees, is responsible for furnishing
continuous investment supervision to the Funds and is responsible for the
management of the Funds' portfolios. Northstar Administrators Corporation, an
affiliate of the Adviser, furnishes certain administrative, compliance and
accounting services to each Fund. Employees of the Adviser and Administrator
serve as officers of the Funds, and the Adviser provides office space for the
Funds and pays the salaries of all Fund officers and Trustees who are affiliated
with the Adviser. Northstar Distributors, Inc., also an affiliate of the
Adviser, serves as principal underwriter of the shares of each Fund, conducting
a continuous offering pursuant to a "best efforts" arrangement requiring it to
take and pay for only such securities as may be sold to the public through
investment dealers.

The Adviser and its affiliates are indirect, majority owned subsidiaries of
ReliaStar Financial Corp. ("ReliaStar"). Combined minority interests held by
members of senior management currently equal 20%. ReliaStar is a publicly traded
holding company whose subsidiaries specialize in the life and health insurance
businesses. Through Northwestern National Life Insurance Company and other
subsidiaries, ReliaStar issues and distributes individual life insurance,
annuities and mutual funds, group life and health insurance and life and health
reinsurance, and provides related investment management services. Prior to June
2, 1995, the Northstar Advantage Special, Growth, Income, High Yield, Strategic
Income and Government Securities Funds were managed by Boston Security
Counsellors, Inc. ("BSC").

The Adviser's fee is accrued daily against the value of each Fund's net assets
and is payable by each Fund monthly at an annual rate of 0.75% on the first $250
million of each Fund's average daily net assets in the case of the Northstar
Advantage Income and Growth and High Total Return Funds, scaled down to 0.55%
for assets over $1 billion, and at the following rates for the other Northstar

20
<PAGE>

Advantage Funds: Government Securities Fund -- 0.45%; High Yield Fund -- 0.45%;
Income Fund -- 0.65%; Growth Fund -- 0.75%; Special Fund -- 0.75%; Strategic
Income Fund -- 0.65% (each of which may be subject to voluntary waiver or
reimbursement by the Adviser). The investment advisory fees paid by Income and
Growth Fund, High Total Return Fund, Growth Fund and Special Fund are higher
than the fees paid by most mutual funds. The Administrator's fee is accrued
daily against the value of each Fund's net assets and is payable monthly at an
annual rate of .10% of each Fund's average daily net assets. The Administrator
also charges an annual account service fee of $5.00 for each account of
beneficial holders of shares in a Fund for providing certain shareholder
services and assisting broker-dealers in servicing Fund accounts. Until June 2,
1997 the Administrator will receive no administrative or account fees from the
Special, Growth, Income, High Yield, Strategic Income and Government Securities
Funds.

The Adviser places all orders for the purchase and sale of portfolio
securities. In selecting brokers, the Adviser may consider research and
brokerage services furnished to it. The Adviser also advises other accounts that
may purchase and hold securities in which the Funds may invest and certain
persons affiliated with the Adviser may purchase and hold, directly or
indirectly, securities in which the Funds or other accounts invest, subject to
internal guidelines regarding conflicts of interest.

INVESTMENT PERSONNEL OF ADVISER. Thomas Ole Dial has served as portfolio
manager of the High Total Return Fund since its inception in November 1993, and,
since October 1995 as co-manager of the Strategic Income Fund. Mr. Dial is a
Vice President of each Fund and Executive Vice President and Chief Investment
Officer -- Fixed Income of the Adviser. Mr. Dial also serves as manager of the
Northstar High Yield Bond Fund and Northstar Multi-Sector Bond Fund, series of a
separate open-end management investment company sponsored by the Adviser. Prior
to employment by the Adviser in October 1993, Mr. Dial served as Executive Vice
President and Chief Investment Officer -- Fixed Income of National Securities &
Research Corporation, and as portfolio manager for National Bond Fund, National
Asset Reserve, and National Multi-Sector Fixed Income Fund. Prior to National,
Mr. Dial managed high yield securities portfolios through Dial Capital
Management and Gibraltar Savings. Mr. Dial also manages investments for T.D.
Partners, a limited partnership for which the Adviser serves as subadviser.

Ernest Mysogland has served as portfolio manager of the Income and Growth Fund
since its inception in November 1993, and as portfolio manager of the Growth
Fund since October 1995. Mr. Mysogland is a Vice President of the Funds and
Executive Vice President and Chief Investment Officer -- Equities of the
Adviser. Mr. Mysogland also serves as a manager of the Northstar Income and
Growth Fund, a series of a separate open-end management investment company
sponsored by the Adviser. Prior to employment by the Adviser, Mr. Mysogland
served as Senior Vice President and Chief Investment Officer -- Equities for
National Securities and Research Corporation ("National"), and was portfolio
manager for National Income and Growth Fund, National Total Return Fund, and
National Worldwide Opportunities Fund. Prior to National, Mr. Mysogland served
as an investment manager for Reinoso Asset Management, Gintel Equity Management,
L.F. Rothschild Asset Management, Wertheim Asset Management and Kemper Financial
Services. Mr. Wadsworth is a Vice President and has served as co-manager of
these Funds with Mr. Mysogland over the same periods. Mr. Wadsworth was formerly
a Vice President of National, serving as portfolio manager of the National Stock
Fund, and assistant manager of National's other equity funds.

Margaret D. Patel is the portfolio manager of the Government Securities Fund
and the Income Fund. Ms. Patel is a Vice President of the Funds and of the
Adviser and, prior to June 2, 1995, was Senior Vice President of BSC. She has
been primarily responsible for the day-to-day management of the Government
Securities Fund since 1988, and of the Income Fund since October 1995.

Prescott B. Crocker, C.F.A., is the portfolio manager of the High Yield Fund
and co-manager of the Strategic Income Fund. Mr. Crocker is a Vice President of
the Funds and of the Adviser and, until June 2, 1995, was Senior Vice President
and Director of Fixed Income Investments at BSC. Prior to joining BSC in 1993,
Mr. Crocker served for eighteen years in various capacities, including Group
Head for corporate and international fixed income, at Colonial Management
Associates, Inc. He has been primarily responsible for the day-to-day management
of the High Yield Fund since December 1993, and for the Strategic Income Fund
since its inception in 1994.

SUBADVISER; INVESTMENT PERSONNEL OF SUBADVISER. Navellier Fund Management,
Inc. ("Navellier"), a registered investment adviser, serves as subadviser to the
Special Fund pursuant to a Subadvisory Agreement dated February , 1996, between
the Adviser and Navellier. Navellier is a newly-formed company which is
wholly-owned by Louis G. Navellier. The principal address of Navellier is 920
Incline Way, Incline Village, NV 89450. Mr. Navellier, who has managed
investments since 1986, is also the sole shareholder of two other registered
investment advisory firms which, on a combined basis, manage approximately $1.2
billion of assets for individuals, institutions and a Navellier-sponsored
open-end management investment company, the Navellier Series Fund. Louis G.
Navellier will serve as portfolio manager for the Fund, with primary
responsibility for the day-to-day investment management. For its services,
Navellier will receive a fee equal to 0.48% of the average daily net assets of
the Fund. The Adviser is responsible for overseeing the investment management
provided by Navellier, and assumes all costs and expenses of the subadvisory
arrangement.

21
<PAGE>

OTHER SERVICE PROVIDERS. The custodian for the Income and Growth and High
Total Return Funds is Custodial Trust Company, a bank organized under the laws
of New Jersey, located at 101 Carnegie Center, Princeton, New Jersey 08540-6231.
The custodian and fund accounting agent for the Special, Growth, Income, High
Yield, Strategic Income and Government Securities Funds is State Street Bank and
Trust Company, located at 225 Franklin Street, Boston, Massachusetts 02110. The
transfer agent and Blue Sky administrator for all Funds, and the fund accounting
agent for the Income and Growth and High Total Return Funds, is First Data
Investor Services Group ("First Data" or the "Transfer Agent"), located at One
Exchange Place, Boston, Massachusetts, 02109. Advest Transfer Services, Inc.,
One Commercial Plaza, 280 Trumbull Street, Hartford, Connecticut 06103, serves
as the sub-transfer agent for the Funds offering Class T shares.

HOW TO PURCHASE SHARES

- ----------------------------------------------------------------------
Each Fund continuously offers three classes of shares. Each class is described
below under "Alternative Purchase Arrangements." Shares of each Fund, excluding
Class T shares, may be purchased from the Fund or from investment dealers having
a sales agreement with the Underwriter. Orders received in good form prior to
4:00 p.m. Eastern time or placed with a financial service firm before such time
and transmitted before the Fund processes that day's share transactions, will be
processed at that day's closing NAV, plus any applicable sales charge. The
minimum initial purchase is $2,500, except IRA accounts, for which the minimum
is $250; additional investments for as little as $100 ($25 for IRA accounts) may
be made at any time through an investment dealer or by sending a check payable
to The Northstar Advantage Funds, c/o First Data Investor Services, P.O. Box
9756, Providence, RI 02940, for the purchase of full and fractional shares. Most
shareholders choose not to hold their shares in certificate form because account
transactions such as exchanges and redemptions cannot be completed until the
certificate has been returned to the Funds and certificate holders may not
participate in certain shareholder services, such as telephone exchanges and
redemptions, check-writing and the withdrawal program. Certificates will be
issued only upon written request. Shareholders requesting certificates may incur
a fee for lost or stolen certificates and no certificates are issued for
fractional shares (which shares remain in the shareholder's account in book
entry form). The Fund or the Underwriter may refuse any purchase order for
shares.

At various times, the Underwriter implements programs under which (a) a
dealer's sales force may be eligible to win cash or material awards for certain
sales efforts or under which (b) the Underwriter will reallow an amount not
exceeding the total applicable sales charges on the sales generated by the
dealer during such programs to any dealer that (i) sponsors sales contests or
recognition programs conforming to criteria established by the Underwriter or
(ii) participates in sales programs sponsored by the Underwriter. Pursuant to a
Purchase Agreement that was entered into in connection with the assumption of
management of the Funds by the Adviser, the Underwriter has agreed to provide
Advest, Inc. ("Advest") with certain additional compensation until June 2, 1998.
Any additional compensation is payable annually and is based upon (a)(i) the
level of sales by Advest of shares of the Funds during each year and (ii) the
rate of redemption of Class T shares during such year and (b) the level of sales
of those Funds previously distributed through Advest by persons other than
Advest. Such compensation, which is paid out of the assets of the Underwriter
and not the Funds, is in addition to the compensation otherwise payable to a
dealer in connection with sale of the Funds' shares. Sales personnel of
broker-dealers distributing shares of the Funds may receive differing
compensation for selling different classes of shares.

ALTERNATIVE SALES ARRANGEMENTS

- ----------------------------------------------------------------------
The alternative purchase arrangements permit an investor to choose among three
methods (each a class) of purchasing shares. Each class is described below.
Which class is more beneficial to an investor depends on the amount and intended
length of the investment. Large investments qualifying for a reduced Class A
sales charge avoid the higher distribution fee. Investments in Class B and Class
C shares have 100% of the purchase invested immediately. Purchases of $250,000
or more must be for Class A shares. Please consult your financial service firm.

Prior to June 5, 1995, the Growth, Special, Income, Government Securities,
High Yield and Strategic Income Funds each offered only one Class of shares,
currently designated as "Class T" shares. Class T shares are no longer offered
for sale by a Fund, except in connection with reinvestment of dividends and
other distributions, upon exchanges of Class T shares of another Fund, and upon
exchange of shares from the Class T Account of the Money Market Portfolio. When
Class T shares are redeemed within four years after their purchase, a contingent
deferred sales load will be imposed at rates declining from a maximum of 4% of
the lesser of the net asset value or total cost of shares redeemed within a year
of purchase to 1% of such amount for shares redeemed after three years.

22
<PAGE>

All contingent deferred sales charges are deducted from the redemption
proceeds, not the amount remaining. No contingent deferred sales charge is
imposed on shares acquired through reinvestment of dividends and distributions,
or on amounts representing appreciation. In determining whether a contingent
deferred sales charge is applicable to a redemption, the calculation will be
determined in the manner that results in the lowest possible rate being charged.
Accordingly, in determining whether a contingent deferred sales charge will be
payable and, if so, the percentage charge applicable, shares acquired through
reinvestment and then shares held the longest will be considered the first to be
redeemed.

Class B and Class T shares automatically convert to Class A shares after eight
years from purchase in the case of Class B shares, and on the later of May 31,
1998 or eight years after purchase in the case of Class T shares. The purpose of
the conversion is to relieve the holders from the burden of higher distribution
fees once the Underwriter had been reimbursed for most of its distribution
related expenses. For purposes of conversion to Class A shares, shares purchased
through the reinvestment of dividends and distributions paid in respect of Class
B or Class T shares in a shareholder's Fund account will be considered to be
held in a separate subaccount. Each time any Class B or Class T shares in the
shareholder's Fund account (other than those in the subaccount) convert to Class
A, an equal pro rata portion of the Class B or Class T shares in the subaccount
will also convert to Class A.

Initial or contingent deferred sales charges may be reduced or eliminated for
certain persons or organizations purchasing Fund shares alone or in combination
with other Northstar Advantage Funds. See the Statement of Additional
Information for more details.

CLASS A SHARES. Class A shares are offered at net asset value plus an initial
or a contingent deferred sales charge as set forth below. Class A shares bear a
0.25% annual service fee and a .05% annual distribution fee.

<TABLE>
<CAPTION>
% OF NET % OF AMOUNT RETAINED BY
AMOUNT OFFERING DEALERS AS A % OF
AMOUNT PURCHASED INVESTED PRICE OFFERING PRICE
- ----------------------------------------------------------------------------- ----------- ----------- ---------------------
<S> <C> <C> <C>
Up to $99,999................................................................ 4.99% 4.75% 4.00%
$100,000 to 249,999.......................................................... 3.9 3.75 3.1
250,000 to 499,999........................................................... 2.83 (2.75) 2.3
500,000 to 999,999........................................................... 2.04 2 1.7
*1,000,000 and above......................................................... -- -- --
</TABLE>

- ------------------------

* The Underwriter pays investment dealers or financial service firms a
commission from its own resources of up to 1.00% of the amount invested for
amounts from $1,000,000 to $2,499,999, up to 0.50% on amounts of $2,500,000 to
$4,999,999 and up to 0.25% on amounts of $5 million and above. Purchases of
over $1 Million are subject to a maximum contingent deferred sales charge of
1% (scaled down to 0.50% for amounts of $2.5 million or more, and 0.25% on
amounts over $5 million) on redemptions made within eighteen months.

CLASS B SHARES. Class B shares are offered at net asset value, without an
initial sales charge, subject to a .75% annual distribution fee for
approximately 8 years (at which time they convert to Class A shares bearing only
a .05% annual distribution fee), a 0.25% annual service fee and a contingent
deferred sales charge if shares are redeemed within five years after purchase.
As set forth below, the amount of the deferred sales charge varies depending on
the number of years after purchase that the redemption occurs. For determining
the date of purchase, all payments during a month will be aggregated and deemed
to have been made on the last day of the month. The deferred sales charge will
be assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed.

The Underwriter currently pays investment dealers a sales commission of 4% of
the sale price of Class B shares sold by the dealers, subject to future
amendment or termination. The Underwriter will retain all or a portion of the
continuing distribution fee assessed to

23
<PAGE>

Class B shareholders and will receive the entire amount of the contingent
deferred sales charge paid by shareholders on the redemption of shares to
reimburse the Underwriter in whole or in part for the payment of such sales
commission, plus financing costs and related marketing expenses.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- ------------------------------------------------------------------------------------------------- -------------------
<S> <C>
First............................................................................................ 5%
Second........................................................................................... 4%
Third............................................................................................ 3%
Fourth........................................................................................... 2%
Fifth............................................................................................ 2%
Thereafter....................................................................................... 0%
</TABLE>

To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares upon dividend reinvestment. If, at such time the investor
makes his first redemption of 50 shares (proceeds of $600), 10 shares will not
be subject to charge because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 4% (the
applicable rate in the second year after purchase).

CLASS C SHARES. Investors choosing Class C shares purchase shares at net
asset value without a sales charge at the time of purchase, subject to a 0.75%
annual distribution fee, a 0.25% annual service fee, and a 1.00% contingent
deferred sales charge on redemptions made within one year from the first day of
the month after purchase.

The Underwriter currently pays investment dealers a sales commission of 1% of
the sale price of Class C shares sold by such dealers, subject to future
amendment or termination. The Underwriter will retain the distribution fee
assessed against Class C shareholders in the first year of investment, and the
entire amount of the contingent deferred sales charge paid by Class C
shareholders upon redemption in year one, in order to compensate the Underwriter
for providing distribution related services to the Funds in connection with the
sale of Class C shares, and to reimburse the Underwriter in whole or in part for
the commissions (and any related financing costs) paid to dealers at the time of
purchase. There is no conversion feature associated with Class C shares;
therefore, Class C shareholders will be subject to the higher distribution fee
associated with such shares for the life of the shareholder's investment.

INVESTOR SERVICES AND ACCOUNT POLICIES

- ----------------------------------------------------------------------
An account will be opened for each investor after an initial investment is
made. Account services are described below. Class T shareholders wishing to add
to their investment or to purchase shares of another Fund must opt to purchase
Class A, Class B or Class C shares of the Fund, and the Transfer Agent will
establish a new account for the shareholder in another Class of a Fund selected
by the shareholder. Shares purchased will be held in the shareholder's account
by the Transfer Agent. Requests for account assistance or additional information
should be directed to the Transfer Agent or to Northstar at (800) 595-7827.

The Funds will send you a confirmation statement after every transaction that
affects your account balance or your account registration. Information regarding
the tax status of income dividends and capital gains distribution will be mailed
to shareholders on or before January 31st of each year. Account tax information
will also be sent to the IRS. Financial reports for the Funds will be mailed
semiannually to shareholders. To reduce expenses, only one copy of most Fund
reports will be mailed to accounts listed under the same social security number
or to households for multiple accounts with the same surname. Please contact
Northstar to request additional copies of shareholder reports.

DIVIDEND AND DISTRIBUTION REINVESTMENT OPTIONS. Shareholders of Class A,
Class B and Class C shares may direct that income dividends and capital gain
distributions be paid to them through any one of the following options: income
dividends and capital gain distributions both paid in additional shares of the
same class of a designated Fund at net asset value; income dividends paid in
cash and capital gain distributions paid in additional shares of the same class
of a designated Fund at net asset value; or income dividends and capital gain
distributions both paid in cash. If a shareholder does not indicate which option
is preferred upon

24
<PAGE>

the opening of an account, both income dividends and capital gain distributions
will be paid in additional shares of the Fund from which the investor earned
such distributions. Class T shareholders may elect only to receive all
distributions in cash or to reinvest in additional shares, regardless of whether
such distribution is an income dividend or a capital gains distribution. In
addition, Class T shareholders opting to reinvest dividends and capital gains
may only invest such proceeds in the Fund making the distribution. Payment
options may be changed at any time by notifying Northstar in writing.

AUTOMATIC INVESTMENT PLAN. Shareholders may elect to purchase shares through
the establishment of an Automatic Investment Plan, in which case the minimum
investment in order to open an account is $25. An Automatic Investment
Authorization Form (available on request from Northstar) provides for funds to
be automatically drawn on a shareholder's bank account and deposited in his or
her Fund account ($25 per month minimum). The shareholder's bank may charge a
nominal fee in connection with the establishment and use of automatic deposit
services. The Automatic Investment Plan is not available for Class T share
accounts.

WITHDRAWAL PROGRAM. A shareholder owning $5,000 or more worth of shares of a
Fund in book-entry form may establish a withdrawal program with the Fund and
provide for the payment monthly or quarterly of any requested dollar amount ($50
minimum per payment) from the account to his or her order. Withdrawal programs
are not available for Class T share accounts. A sufficient number of full and
fractional shares will be redeemed to make the designated payment. The purchase
of shares while participating in a withdrawal program will ordinarily be
disadvantageous to the investor, since a sales charge will be paid by the
investor on the purchase of shares at the same time the shares are being
redeemed in the case of Class A shares. For this reason, shareholders may not
maintain an Automatic Investment Plan while participating in the withdrawal
program. In the case of shares subject to a contingent deferred sales charge,
unless the investor qualifies for a waiver, the investor may incur a sales
charge at the time of each withdrawal. A Fund may terminate an investor's
withdrawal program if the account value falls below $5,000 due to the transfer
or redemption of shares from the account. See the enclosed application form.

TAX-SHELTERED RETIREMENT PLANS. Shares of the Funds may be offered in
connection with the following qualified prototype retirement plans: IRA and
Rollover IRA, SEP-IRA, Profit-Sharing and Money Purchase Pension Plans which can
be adopted by self-employed persons ("Keogh") and by corporations. Call or write
Northstar for further information.

EXCHANGE PRIVILEGES. Shareholders may exchange shares of a Fund for the same
class of shares of another Fund or for shares of The Cash Management Fund of
Salomon Brothers Investment Series (an open-end management investment company
comprised of various portfolios, hereafter referred to as "Money Market
Portfolio," that is not one of the Funds, but is available by purchase or
exchange through the Underwriter). Exchange requests in proper form will be
honored prior to 4:00 p.m. Eastern time. For telephone exchanges or
authorization forms, contact Northstar at 1-800-595-7827. Exchanges will be
based upon each Fund's NAV per share next computed following receipt of a
properly executed exchange request, without a sales charge; provided, however,
in the case of exchanges after a direct purchase into the Money Market Portfolio
from Class A shares of a Fund, a sales charge will be imposed in accordance with
the sales charge table that is applicable to direct purchases. Collection of the
contingent deferred sales charge will be deferred on shares subject to a charge
that are exchanged for shares of the same class of another Fund, or converted to
shares of the Money Market Portfolio. Under these circumstances, the combined
holding period of shares in each Fund, or in a Fund and the Money Market
Portfolio, shall be used to calculate the conversion period, if applicable, and
to determine the deferred sales charge due upon redemption, if any. The exchange
of shares from one Fund to another is treated as a sale of the exchanged shares
and a purchase of the acquired shares for Federal income tax purposes.
Shareholders may, therefore, realize a taxable gain or loss. See Dividends,
Distributions and Taxes" in the Statement of Additional Information.

Each Fund reserves the right to terminate or modify its exchange privileges at
any time upon prominent notice to shareholders. Such notice will be given at
least 60 days in advance. Each Fund and the Money Market Portfolio has different
investment objectives and policies. Shareholders should obtain and review the
prospectus of the Fund into which the exchange is to be made before any exchange
requests are made.

TELEPHONE TRANSACTIONS. Shareholders holding shares in book-entry form may
authorize the Funds to accept telephone redemptions and exchanges. Telephone
transactions are not available for Class T share accounts. Shareholders may
redeem up to $50,000 worth of their shares by telephoning Northstar prior to
4:00 p.m. Eastern time. Redemption proceeds must be payable to the record holder
of the shares and mailed to the shareholder's address of record or wire
transferred to the shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System, normally within one business day, but in
no event longer than three days after the request. The minimum amount for a wire
transfer is $1,000. If at any time the Funds shall determine that it is
necessary to terminate or modify telephone transaction privileges, shareholders
would be promptly notified. Information on these services is included in the
Application and is available from Northstar. Neither the Adviser, the
Underwriter nor the Funds will be liable

25
<PAGE>

for any loss, damages, expense or cost arising out of any telephone transaction
effected in accordance with the Funds' procedures, upon instructions believed to
be genuine. Shareholders who utilize telephone privileges bear the risk of any
loss, damages, expense or cost arising from their election, including risk of
unauthorized use; provided, however that the Funds shall employ reasonable
procedures to confirm that all telephone instructions are genuine. For this
purpose, the Fund or its agent will require all individuals delivering telephone
instructions to provide specific information to identify themselves as the
account holder, such as the name in which the account is registered, the account
holder's social security number, account number, and broker of record. In the
absence of such procedures, or should the Fund or its agents for any reason fail
to follow such procedures, the Fund or its agents may be liable for losses due
to unauthorized or fraudulent telephone instructions.

INVOLUNTARY REDEMPTIONS. Due to the high cost of maintaining accounts with
small account values, each Fund reserves the right to close all accounts that
have been in existence for at least one year and have a value that is less than
$500. Shareholders will receive 60 days' written notice during which time they
may bring the value up to $500 or more. If the account value is not raised
during that time, the Fund will redeem all shares in the account and send the
proceeds to the shareholder's address of record.

Each Fund reserves the right to close all accounts of a shareholder who has
failed to provide a social security number or other taxpayer identification
number and certification (if required) that such number is correct, or if a
shareholder is deemed to engage in activities which are illegal or otherwise
detrimental to the Funds.

REINSTATEMENT PRIVILEGE. Shareholders have a one time privilege of
reinstating their investment into any of the Funds, subject to the terms of
exchange (see "Exchange Privileges") at the NAV next determined after the
request for reinstatement is made. For Federal income tax purposes, a redemption
and reinstatement will be treated as a sale and purchase of shares; special
rules may apply in computing the amount of gain or loss in these situations. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
A written request for reinstatement must be received by the Underwriter within
30 days of the redemption accompanied by payment for the shares (not in excess
of the redemption). Shareholder accounts will be credited with an amount equal
to the deferred sales charge (or pro rata portion thereof) paid upon redemption.

HOW TO SELL SHARES

- ----------------------------------------------------------------------
Shareholders may sell their shares back to the Fund at the NAV next determined
after the Fund receives a redemption request with any other required
documentation in proper form. Investors will be subject to the applicable
deferred sales charge, if any, for such shares. The Transfer Agent requires a
written request, with the signature guaranteed by a bank, a national stock
exchange member or other eligible guarantor institution. The Transfer Agent may
waive the signature guarantee requirement in the case of book-entry share
redemption requests of less than $50,000 if the proceeds are payable to the
account as registered and mailed to the address of record. Redemption requests
must be signed by each person in whose name the account is registered.
Shareholders may also sell shares back to a Fund through dealers who are members
of the selling group. The redemption price in such a case will be the price as
of the close of the New York Stock Exchange on that day, provided the order is
received by the dealer prior to the close of the Exchange and is transmitted to
the Underwriter prior to the close of its business. The dealer is responsible
for the timely transmission of orders to the Underwriter. No service charge is
made by a Fund on redemptions, but shares tendered through investment dealers
may be subject to a service charge by such dealers. Payment for shares redeemed
is normally made within three days. However, for shares recently purchased by
check, the Fund cannot send proceeds until the check has cleared, which may take
up to 15 days.

Redemptions by corporations, partnerships or other organizations, executors,
administrators, trustees, custodians, guardians, or from IRA's or other
retirement plans may require additional documentation. To avoid delay in
redemption or transfer, shareholders having questions about specific
requirements, including eligible guarantor institutions, should contact the
Transfer Agent or Northstar at (800) 595-7827. Redemption requests will not be
honored until all required documents in the proper form have been received.

DISTRIBUTION PLANS

- ----------------------------------------------------------------------
Each Fund has adopted a distribution plan under Rule 12b-1 of the 1940 Act for
each class of shares of that Fund (collectively, the "Plans"). The Plans permit
each Fund to compensate the Underwriter in connection with activities intended
to promote the sale of shares of each class of shares of the Fund. Pursuant to
the Plans, each Fund shall pay the Underwriter 0.30% annually of the average
daily net assets of each Fund's Class A shares, 1.00% annually of the average
daily net assets of each Fund's Class B and Class C shares, and 0.95% annually
of the average daily net assets of each Fund's Class T shares in the case of the
Growth Fund, Special Fund

26
<PAGE>

and Strategic Income Fund, 0.75% annually of the average daily net assets of the
Class T shares in the case of the Income Fund and 0.65% annually of the average
daily net assets of the Class T shares in the case of the Government Securities
Fund and High Yield Fund. Under the NASD rules, fees of this type are limited to
0.75% annually for distribution fees and 0.25% annually for service fees,
subject to aggregate limits. The Underwriter uses the fee to defray the costs of
commissions and service fees paid to financial service firms which have sold
Fund shares, and to defray other expenses such as sales literature, prospectus
printing and distribution, shareholder servicing costs and compensation to
wholesalers. Should the fees exceed the Underwriter's expenses in any year, the
Underwriter would realize a profit. With respect to the Class T Plan, it is
anticipated that all of the payments received by the Underwriter under the Plan
will be paid to Advest as compensation for servicing Class T shareholder
accounts and reimbursement for its prior distribution and shareholder servicing
activities in connection with Class T shares.

DIVIDENDS, DISTRIBUTIONS AND TAXES

- ----------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS INTENDED FOR GENERAL INFORMATION ONLY. EACH
INVESTOR SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE TAX
CONSEQUENCES OF AN INVESTMENT IN A FUND.

Each Fund intends to continue to qualify annually and elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). To qualify, each Fund must meet certain income, distribution and
diversification requirements. In any year in which a Fund qualifies as a
regulated investment company and timely distributes all of its taxable income,
the Fund generally will not pay any U.S. federal income or excise tax.

Each Fund intends to distribute to shareholders substantially all of its net
investment income and any net capital gains at least annually. It is intended
that dividends from net investment income will be paid monthly on the High Total
Return Fund, the Government Securities Fund, the High Yield Fund and the
Strategic Income Fund, annually on the Special Fund, and quarterly on the Income
and Growth, Growth, and Income Funds' shares.

Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to a
shareholder as ordinary income. If a portion of the Fund's income consists of
dividends paid by U.S. corporations, a portion of the dividends paid by the Fund
may be eligible for the corporate dividends-received deduction. Distributions of
net capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, designated as capital gain dividends are taxable as
long-term capital gains, regardless of how long the shareholder has held the
Fund's shares. Dividends are taxable to shareholders in the same manner whether
received in cash or reinvested in additional Fund shares.

Each year the Fund will notify shareholders of the tax status of dividends and
distributions. Each Fund may be required to withhold U.S. federal income tax at
the rate of 31% of all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the IRS that they are
subject to backup withholding.

Investors who purchase shares of a Fund just before the distribution will pay
full price for the shares and receive a portion of the purchase price back as a
taxable distribution. Unless your account is set up as a tax-deferred account,
dividends paid to you would be included in your gross income for tax purposes
even though you may not have participated in the increase in the net asset value
of the Fund. Further information relating to tax consequences is contained in
the Statement of Additional Information. Fund distributions also may be subject
to state, local and foreign taxes. Fund distributions that are derived from
interest on obligations of the U.S. Government and certain of its agencies,
authorities and instrumentalities may be exempt from state and local taxes in
certain states.

A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by a Fund in October, November or December with a record
date in such a month and paid by the Fund during January of the following
calendar year. Such distributions will be taxable to shareholders in the
calendar year in which the distributions are declared, rather than the calendar
year in which the distributions are received.

Investments in zero coupon securities will result in income to a Fund each
year equal to a portion of the excess of the face value of the securities over
their issue price, even though the Fund receives no cash interest payments from
the securities.

Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss which will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares.

27
<PAGE>

GENERAL INFORMATION

- ----------------------------------------------------------------------

ORGANIZATION OF THE FUNDS. The Northstar Advantage Trust (the "Trust") and
each separate Fund is organized under Massachusetts law as a business trust. The
Trust was organized in 1993; the Special, Growth, Income and Government
Securities Funds in 1986; the High Yield Fund in 1989; and the Strategic Income
Fund in 1994. The Trust's Declaration of Trust, as amended, and each Fund's
Amended and Restated Declaration of Trust provides that the Trustees are
authorized to create an unlimited number of series and, with respect to each
series, to issue an unlimited number of full and fractional shares of one or
more classes and to divide or combine the shares into a greater or lesser number
of shares without thereby changing the proportionate beneficial interests in the
series. All shares have equal voting rights, except that only shares of the
respective series or separate classes within a series are entitled to vote on
matters concerning only that series or class. As of the date of this Prospectus,
each Fund within the Trust has three classes of shares; each of the remaining
Funds has four classes of shares.

Neither the Trust nor the Funds are required to hold shareholder meetings, but
special meetings may be called under certain circumstances. Meetings of the
shareholders will be called upon written request of shareholders holding in the
aggregate not less than 10% of the outstanding shares of the affected Fund or
class having voting rights.

REGISTRATION STATEMENT. This prospectus does not contain all the information
included in the Registration Statement filed for each Fund with the Securities
and Exchange Commission under the Securities Act of 1933 and the 1940 Act, with
respect to the securities offered hereby, certain portions of which have been
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Each Registration Statement, including the exhibits filed therewith,
may be examined at the office of the Securities and Exchange Commission in
Washington, D.C.

28
<PAGE>
<TABLE>

<S><C>

[NORTHSTAR LOGO]

New Account Application
------------------------------------------------------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION
------------------------------------------------------------------------------------------------------------------------------
Type of Account (Choose One Only):
/ / INDIVIDUAL / / JOINT ACCOUNT / / FOR A MINOR / / TRUST, CORPORATION, PARTNERSHIP OR OTHER ENTITY
USE LINE A USE LINES A & B USE LINE C USE LINE D

Print name exactly as account is to be registered:

A. - -
----------------------------------------------------------- -----------
NAME (FIRST, MIDDLE, LAST) SOCIAL SECURITY NUMBER

B. - -
----------------------------------------------------------- -----------
NAME (FIRST, MIDDLE, LAST) SOCIAL SECURITY NUMBER

C.
-----------------------------------------------------------
CUSTODIAN'S NAME (FIRST, MIDDLE, LAST)

- -
----------------------------------------------------------- -----------
MINOR'S NAME (FIRST, MIDDLE, LAST) MINOR'S SOCIAL SECURITY NUMBER

-
----------------------------------------------------------- -----------
TAX I.D. NUMBER

UNDER THE UNIFORM GIFTS/TRANSFERS TO MINORS ACT
------------- OR
NAME OF STATE

D.
----------------------------------------------------------- -----------
NAME (IF A TRUST, INCLUDE DATE OF AGREEMENT) - -
SOCIAL SECURITY NUMBER

------------------------------------------------------------------------------------------------------------------------------
2 MAILING ADDRESS
------------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------
STREET

( )
-------------------------------------------------------------
DAYTIME PHONE NUMBER

-------------------------------------------------------------
CITY STATE ZIP

------------------------------------------------------------------------------------------------------------------------------

3 PURCHASE OF SHARES
------------------------------------------------------------------------------------------------------------------------------

MINIMUM INITIAL INVESTMENT $2,500 / / MAKE CHECK PAYABLE TO NORTHSTAR ADVANTAGE FUNDS. Check enclosed for $
------------------
/ / Shares purchased and paid for through my/our investment dealer.
Trade Date Order#
---------- ----------

Number of Shares: Class A Class B Class C
---------- ---------- ----------

Please check the box beside the name of each Northstar Advantage Fund being purchased and enter the dollar amount of each
purchase. All distributions will be reinvested in additional shares unless instructed otherwise.

/ / INCOME FUND $ / / GROWTH FUND $ / / STRATEGIC INCOME FUND $
---------- ---------- ----------
Class A / / Class B / / Class C / / Class A / / Class B / / Class C / / Class A / / Class B / / Class C / /

DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other*
CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other*
- -----------------------------------------------------------------------------------------------------------------------------------

/ / HIGH YIELD FUND $ / / GOVERNMENT SECURITIES FUND $ / / SPECIAL FUND $
---------- ---------- ----------
Class A / / Class B / / Class C / / Class A / / Class B / / Class C / / Class A / / Class B / / Class C / /

DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other*
CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other*

- -----------------------------------------------------------------------------------------------------------------------------------
/ / INCOME AND GROWTH FUND $ / / HIGH TOTAL RETURN FUND $ / / MONEY MARKET PORTFOLIO $
---------- ---------- ----------
Class A / / Class B / / Class C / / Class A / / Class B / / Class C / / (Money Market Account)
Class A / / Class B / / Class C / /
DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other*
CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other*
- -----------------------------------------------------------------------------------------------------------------------------------

*Please reinvest my dividends from to
------------------ --------------------
(Name of Fund) (Name of Fund)

<PAGE>

------------------------------------------------------------------------------------------------------------------------------
4 LETTER OF INTENT, RIGHT OF ACCUMULATION (CLASS A SHARES ONLY)
------------------------------------------------------------------------------------------------------------------------------
LETTER OF INTENT
Although I/we have made no commitment to do so, I/we intend to invest the dollar amount indicated below within a 13-month
period in shares of one or more of the eligible Northstar Advantage Funds.

/ / $100,000 / / $250,000 / / $500,000 / / $1,000,000

RIGHTS OF ACCUMULATION
If this account qualifies for a Reduced Sales Charge under the terms of the current Prospectus, please list account
numbers:

/ / $100,000 / / $250,000 / / $500,000 / / $1,000,000
- -
--- ---------- --- ----------

------------------------------------------------------------------------------------------------------------------------------
5 AGREEMENTS AND SIGNATURES
------------------------------------------------------------------------------------------------------------------------------

I/We am/are of legal age and wish to establish an account in accordance with the terms and conditions of the current applicable
Prospectus, a copy of which has been received and read. I/We understand and agree that neither First Data nor the Northstar
Advantage Funds shall be held liable for any loss, liability, cost or expense for acting in accordance with this application,
or any section thereof. I/We acknowledge that the account(s) established by this application will be subject to the telephone
exchange and redemption privileges described in this current prospectus, unless indicated otherwise, with the understanding
that the Fund, Northstar and the Transfer Agent will not be able to verify the authenticity of any telephone or redemption
order received from persons other than registered representatives of Northstar Distributors, Inc. and that they will not be
liable for following telephone exchange or redemption instructions that prove to be fraudulent. Shareholders would bear the
loss resulting from instructions entered by an unauthorized third party.

Under penalties of perjury, I certify (1) that the number shown on this form is my correct taxpayer identification number and
(2) that I am not* subject to backup withholding as a result of a failure to report all interest or dividends, or the Internal
Revenue Service has notified me that I am no longer subject to backup withholding.

*If you are subject to backup withholding, please cross through the word "not" in part (2) above.
------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL (OR CUSTODIAN) DATE

------------------------------------------------------------------------------------------------------------------------------
CO-OWNER (OR CORPORATE OFFICER, PARTNER OR TRUSTEE) DATE

------------------------------------------------------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE

------------------------------------------------------------------------------------------------------------------------------
6 FOR DEALER USE ONLY
------------------------------------------------------------------------------------------------------------------------------
We guarantee the signature(s) and legal capacity of the applicant(s) referred to herein, and in the case of a withdrawal
program we affirm that, in our opinion, the designated withdrawal is reasonable in view of the circumstances involved.

------------------------------------------------------------------------------------------------------------------------------
DEALER NAME (PLEASE PRINT CAREFULLY) DEALER NO.

------------------------------------------------------------------------------------------------------------------------------
AUTHORIZED SIGNATURE (MUST BE PROVIDED FOR WITHDRAWAL PROGRAMS, TELEPHONE REDEMPTIONS AND TELEPHONE EXCHANGES)

------------------------------------------------------------------------------------------------------------------------------
BRANCH NUMBER BRANCH ADDRESS

------------------------------------------------------------------------------------------------------------------------------

REP NAME (PLEASE PRINT CAREFULLY) FIRST AND LAST NAME PHONE NUMBER (IMPORTANT) REP NUMBER

( )
------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------
Upon completion of the application, please
return with a check made payable to:
NORTHSTAR ADVANTAGE FUNDS,
C/O FIRST DATA Box 9756 Providence, RI 02940
------------------------------------------------

<PAGE>

SPECIAL ACCOUNT OPTIONS

------------------------------------------------------------------------------------------------------------------------------
7 AUTOMATIC INVESTMENT PLAN
------------------------------------------------------------------------------------------------------------------------------
Attach a VOIDED CHECK from your bank account and a check for an initial deposit to establish this plan (minimum $25).
Please complete the following information to invest automatically the dollar amount stated below on approximately the 15th
/ /, 30th / / or the 15th and 30th / /, of the month.

The applicant authorizes the Northstar Advantage Funds to draw monthly drafts on your bank account number_____ and use the
proceeds ($25 minimum) therefrom to purchase shares of Northstar Advantage
------------------- --------------------------
FUND NAME $ AMOUNT

Registered in the name(s) of
---------------------------------------------------------------------------------------------
RESTRICTIONS

Each purchase of shares will be made at the current offering price determined as of the close of business on the day on
which such purchase is made. Automatic investments may be discontinued by either Northstar Advantage Funds or the
purchaser upon 30 days written notice to the other.

The Northstar Advantage Funds reserves the right to cancel any transaction which was executed in reliance on a draft
authorized where the bank upon which the draft was drawn refused to make payment thereon for any reason.

ATTACH VOID CHECK HERE
------------------------------------------------------------------------------------------------------------------------------
8 WITHDRAWAL PROGRAM
------------------------------------------------------------------------------------------------------------------------------
A Withdrawal Plan is available on Class A shares (non-certificated shares only) provided the Fund being purchased has a value
of $5,000 or more.

Withdrawals with respect to Class B and Class C shares are limited (see the Prospectus) and are conditional upon dividends and
capital gains being automatically reinvested.

1. The amount of each payment shall be ($25 minimum)
--------- -------- --------- ----------
FUND NAME $ AMOUNT FUND NAME $ AMOUNT

2. Payments are to be made / / Monthly / / Quarterly / / Semi-Annually / / Annually on the / / 1st or / / 15th of the month

Choose one of the following methods of distribution.

/ / ACH Please have my payments electronically transferred to my bank. I have attached the required voided check and I have
verified that my bank is a member of the Automated Clearing House (ACH).

/ / MAIL Please have my payments mailed. I understand that the payments will be made payable to me and mailed to my account
mailing address unless a special designation is referenced below:

------------------------------------------------------------------------------------------------------------------------------
NAME (PLEASE PRINT CAREFULLY.)

------------------------------------------------------------------------------------------------------------------------------
STREET

------------------------------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE YOUR BANK ACCOUNT NUMBER

------------------------------------------------------------------------------------------------------------------------------

ATTACH VOID CHECK HERE
------------------------------------------------------------------------------------------------------------------------------
9 TELEPHONE EXCHANGE REDEMPTION AND EXPEDITED TELEPHONE REDEMPTION
------------------------------------------------------------------------------------------------------------------------------
Signature guarantees are required if: 1. Redemption is over $50,000.
2. Proceeds are to be sent to address other than record.

ALL SHAREHOLDERS AND THEIR DEALER REPRESENTATIVES WILL AUTOMATICALLY RECEIVE TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES,
(NON-CERTIFICATED SHARES ONLY) UNLESS AN ELECTION NOT TO RECEIVE THESE PRIVILEGES IS EXERCISED BELOW.

/ / DO NOT CODE MY / / DO NOT CODE MY
ACCOUNT FOR TELEPHONE ACCOUNT FOR TELEPHONE
EXCHANGE PRIVILEGE. REDEMPTION PRIVILEGE.

/ / PLEASE WIRE REDEMPTION PROCEEDS TO MY BANK. (I UNDERSTAND THE MINIMUM FOR WIRES IS $1,000.) MY VOIDED CHECK IS
ATTACHED.
</TABLE>

<PAGE>
APPENDIX

- --------------------------------------------------------------------------------
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND
RATINGS

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally know as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Note: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

- --------------------------------------------------------------------------------

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S ("S&P") CORPORATE DEBT RATINGS

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

BBB: Debt rated BBB is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than for debt in higher-rated categories.

BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

CI: The rating CI is reserved for income bonds on which no interest is being
paid.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

A-1
<PAGE>
[LOGO]

PRINCIPAL UNDERWRITER
Northstar Distributors, Inc.
Two Pickwick Plaza
Greenwich, CT 06830

INVESTMENT ADVISER
Northstar Investment Management Corporation
Two Pickwick Plaza
Greenwich, CT 06830

TRANSFER AGENT
First Data Investor Services Group
53 State Street
Boston, MA 02109-2873

1-800-595-7827

No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and, if given or made, such information or representations must not
be relied upon. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
state in which, or to any person to whom it is unlawful to make such an offer.
Neither the delivery of this prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that information herein is correct at
any time subsequent to its date.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Expense Information............................. 2
Financial Highlights............................ 7
Investment Objectives and Policies of the
Funds.......................................... 12
Risk Factors.................................... 17
Other Investment Techniques..................... 18
Performance Information......................... 19
How Net Asset Value is Determined............... 20
Management of the Funds......................... 20

<CAPTION>
PAGE
---
<S> <C>
How to Purchase Shares.......................... 22
Alternative Sales Arrangements.................. 22
Investor Services and Account Policies.......... 24
How to Sell Shares.............................. 26
Distribution Plans.............................. 26
Dividends, Distributions and Taxes.............. 27
General Information............................. 28
Appendix........................................ A-1
</TABLE>

<PAGE>

FEBRUARY 29, 1996

NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
NORTHSTAR ADVANTAGE HIGH YIELD FUND
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
NORTHSTAR ADVANTAGE INCOME FUND
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
NORTHSTAR ADVANTAGE GROWTH FUND
NORTHSTAR ADVANTAGE SPECIAL FUND

Two Pickwick Plaza
Greenwich, Connecticut 06830
(203) 863-6200
(800) 595-7827

STATEMENT OF ADDITIONAL INFORMATION

Northstar Advantage Government Securities Fund, Northstar Advantage
Strategic Income Fund, Northstar Advantage High Yield Fund, Northstar Advantage
High Total Return Fund, Northstar Advantage Income Fund, Northstar Advantage
Income and Growth Fund, Northstar Advantage Growth Fund and Northstar Advantage
Special Fund (the "Funds") are open-end diversified management investment
companies, each with its own investment objective(s) and specific investment
goals. Each Fund is a separate investment company, except for the Northstar
Advantage High Total Return Fund and Northstar Advantage Income and Growth Fund,
each of which is a series of Northstar Advantage Trust, which is a separate
investment company.

NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND ("GOVERNMENT SECURITIES FUND")
seeks to achieve a high level of current income and to conserve principal by
investing in debt obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities.

NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND ("STRATEGIC INCOME FUND") seeks to
achieve high current income by allocating its investments among the following
three sectors of the fixed income securities markets: debt obligations of the
U.S. Government, its agencies and instrumentalities; high yield, high risk,
lower-rated and nonrated U.S. and foreign fixed-income securities; and
foreign currency denominated investment grade debt obligations of foreign
governments, their agencies and instrumentalities. At least 20% shall, and
up to 60% of the Fund's assets may, be invested in each sector.

NORTHSTAR ADVANTAGE HIGH YIELD FUND ("HIGH YIELD FUND") seeks to achieve high
current income, primarily through investing in long-term and intermediate-term
fixed income securities, with emphasis on high yield, high risk, lower rated and
nonrated corporate debt instruments.

<PAGE>

NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND ("HIGH TOTAL RETURN FUND") seeks to
achieve high income by investing primarily in high yield, lower rated U.S.
dollar-denominated debt securities. It is the Fund's policy also to seek a high
rate of total return, consistent with the Fund's objective, by taking advantage
of market developments, yield disparities and variations in the creditworthiness
of issuers.

NORTHSTAR ADVANTAGE INCOME FUND ("INCOME FUND") seeks to realize income and,
secondarily, capital appreciation through investing in a balance of debt
securities, common and preferred stocks, and debt securities and preferred
stocks convertible into common stock.

NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND ("INCOME AND GROWTH FUND") seeks
current income and capital appreciation through investing in a diversified group
of securities selected for their prospects of current yield and capital
appreciation.

NORTHSTAR ADVANTAGE GROWTH FUND ("GROWTH FUND") seeks to achieve long-term
growth of capital by investing principally in common stocks.

NORTHSTAR ADVANTAGE SPECIAL FUND ("SPECIAL FUND") seeks to achieve capital
appreciation through investment in a diversified portfolio of equity
securities selected for their potential for growth, primarily in small and
mid-capitalization companies which are less known companies that may be
subject to greater price volatility than more mature companies.

There can be no assurance that a Fund will achieve its investment
objective(s). In general, the assets of each Fund are kept fully invested in
securities selected to meet the investment objective(s) of each Fund; however,
for temporary defensive purposes, any part of a Fund's assets may be held from
time to time in cash or cash equivalents. At such times when a Fund's assets
are invested for temporary defensive purposes, the Fund will not be investing in
accordance with its investment objective(s). THE HIGH TOTAL RETURN, HIGH YIELD
AND STRATEGIC INCOME FUNDS MAY NOT BE APPROPRIATE FOR ALL INVESTORS. (SEE "RISK
FACTORS" IN THE CURRENT PROSPECTUS.)

Northstar Investment Management Corporation (the "Adviser") is the
investment adviser for each Fund. Navellier Fund Management, Inc. (the
"Subadviser") is the subadviser for Special Fund. Northstar Distributors,
Inc. (the "Underwriter") is the underwriter to the Funds, and Northstar
Administrators Corporation is the Funds' administrator (the "Administrator").
The Underwriter and Administrator are affiliates of the Adviser.

This document is not the Prospectus of the Funds, but is incorporated
therein by reference and should be read in conjunction with the Prospectus,
dated February 29, 1996. Copies of the Prospectus may be obtained upon
request and without charge by contacting the Adviser at the address or phone
number above.

<PAGE>

TABLE OF CONTENTS

INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Northstar Advantage Trust . . . . . . . . . . . . . . . . . . . . . . . 5
Northstar Advantage Government Securities, Strategic Income, High
Yield, Income, Growth and Special Funds . . . . . . . . . . . . . . . . 7

OTHER INVESTMENT TECHNIQUES. . . . . . . . . . . . . . . . . . . . . . . . . 9
Derivative Instruments. . . . . . . . . . . . . . . . . . . . . . . . . 9
Privately Issued Collateralized Mortgage-Backed Obligations, Interest
Obligations and Principal Obligations . . . . . . . . . . . . . . 23
Index Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Additional Investment Techniques. . . . . . . . . . . . . . . . . . . . 25

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION. . . . . . . . . . . . . . . 31

SERVICES OF THE ADVISER AND ADMINISTRATOR. . . . . . . . . . . . . . . . . . 34

NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

PURCHASES AND REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 39
How to Obtain Reduced Sales Charges on Class A Shares . . . . . . . . . 40
Rights of Accumulation . . . . . . . . . . . . . . . . . . . . . . . . 40
Letter of Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
The Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . 41
Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Conversion Feature. . . . . . . . . . . . . . . . . . . . . . . . . . . 43

DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . . . 43

UNDERWRITER AND DISTRIBUTION SERVICES. . . . . . . . . . . . . . . . . . . . 49

TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . 60
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Reports to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 60
Organizational and Related Information. . . . . . . . . . . . . . . . . 61

<PAGE>

PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Total Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Non-Standardized Total Return . . . . . . . . . . . . . . . . . . . . . 63

OTHER INFORMATION CONCERNING FUND PERFORMANCE. . . . . . . . . . . . . . . . 65

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

4
<PAGE>

INVESTMENT RESTRICTIONS

The investment objective(s) and certain of the investment restrictions of
the Funds are fundamental and cannot be changed without the approval of the
holders of a majority of the Funds' outstanding voting securities (defined in
the Investment Company Act of 1940 (the "1940 Act") as the lesser of (a) more
than 50% of the outstanding shares or (b) 67% or more of the shares represented
at a meeting at which more than 50% of the outstanding shares are represented).
All other investment policies or practices are considered by the Funds to be
non-fundamental and, accordingly, may be changed without shareholder approval.
If a percentage restriction on investments or use of assets set forth below is
adhered to at the time a transaction is effected, later changes in percentage
resulting from changing market values will not be considered a deviation from
this policy.

NORTHSTAR ADVANTAGE TRUST

FUNDAMENTAL INVESTMENT POLICIES. Each of these Funds may not: (i) borrow
money, issue senior securities, or pledge, mortgage or hypothecate its assets,
except that it may: (a) borrow from banks or enter into reverse repurchase
agreements, or employ similar investment techniques, but only if immediately
after such borrowing, there is asset coverage of 300%, and (b) enter into
transactions in options, futures, and options on futures (see "Other Investment
Techniques" in the Fund's Prospectus and in this Statement of Additional
Information ("SAI")) (the deposit of assets in escrow in connection with the
writing of covered put and call options and the purchase of securities on a
when-issued or delayed delivery basis and collateral arrangements with respect
to initial or variation margin deposits for futures contracts will not be deemed
to be pledges of the Fund's assets); (ii) underwrite the securities of others;
(iii) purchase or sell real property, including real estate limited partnerships
(each of these Funds may purchase marketable securities of companies that deal
in real estate or interests therein, including real estate investment trusts);
(iv) deal in commodities or commodity contracts, except in the manner described
in the current Prospectus and SAI of the Fund; (v) make loans to other persons
(but each of these Funds may, however, lend portfolio securities, up to 33% of
net assets at the time the loan is made, to brokers or dealers of other
financial institutions not affiliated with the Fund or the Adviser, subject to
conditions established by the Adviser (See "Lending Portfolio Securities" in
this SAI), and may purchase or hold participations in loans, in accordance with
the investment objectives and policies of the Fund, as described in the current
Prospectus and SAI of the Fund; (vi) participate in any joint trading accounts;
(vii) purchase on margin (except that for purposes of this restriction, the
deposit or payment of initial or variation margin in connection with futures
contracts will not be deemed to be purchases of securities on margin); (viii)
sell short, except that these Funds may enter into short sales against the box
in the manner described in the current Prospectus and SAI for the Fund; (ix)
invest more than 25% of its assets in any one industry or related group of
industries; (x) purchase a security (other

5
<PAGE>

than U.S. Government obligations) if, as a result, more than 5% of the value of
total assets of the Fund would be invested in securities of a single issuer; or
(xi) purchase a security if, as a result, more than 10% of any class of equity
securities, or more than 10% of the outstanding voting securities of an issuer,
would be held by the Fund.

NON-FUNDAMENTAL INVESTMENT POLICIES. These policies may be changed without
shareholder approval. These Funds may not: (i) invest in a security if, as a
result of such investment, more than 5% of its total assets (taken at market
value at the time of such investment) would be invested in securities of issuers
(other than issuers of federal agency obligations) having a record, together
with predecessors or unconditional guarantors, of less than three years of
continuous operation; (ii) purchase securities of other investment companies,
except in connection with a merger, consolidation or sale of assets, and except
that these Funds may purchase shares of other investment companies, subject to
such restrictions as may be imposed by the 1940 Act and rules thereunder or by
any state in which shares of the Fund are registered; (iii) purchase or retain
securities of any issuer if 5% of the securities of such issuer are owned by
those officers and directors or trustees of the Fund or of the Adviser who each
own beneficially more than 1/2 of 1% of its securities; (iv) make an investment
for the purpose of exercising control over management; (v) invest more than 15%
of its net assets (determined at the time of investment) in illiquid securities,
including securities subject to legal or contractual restrictions on resale
(which may include private placements and those 144A securities for which the
Trustees, pursuant to procedures adopted by the Fund, have determined there is
no liquid secondary market), repurchase agreements maturing in more than seven
days, options traded over the counter that a Fund has purchased, securities
being used to cover options a Fund has written, securities for which market
quotations are not readily available, or other securities that, legally or in
the Adviser's or Trustees' opinion, may be deemed illiquid; or (vi) invest in
interests in oil, gas or other mineral exploration development programs
(including oil, gas or other mineral leases).

These Funds, notwithstanding any other investment policy or limitation
(whether or not fundamental) set forth herein, may invest all of its assets in
the securities or beneficial interests of a singly-pooled investment fund having
substantially the same objective(s), policies and limitations as these Funds.

As a Fundamental policy, these Funds may borrow money from banks to the
extent permitted under the 1940 Act. As an operating (non-fundamental) policy,
these Funds do not intend to borrow any amount in excess of 10% of their
respective assets, and would do so only for temporary emergency or
administrative purposes. In addition, to avoid the potential leveraging of
assets, neither of these Funds will make additional investments when its
borrowings are in excess of 5% of total assets. If either of these Funds should
determine to expand its ability to borrow beyond the current operating policy,
the Fund's Prospectus would be amended and shareholders would be notified. This
operating policy applies only to unsecured bank borrowings by each of these
Funds, and not to the use of certain investment techniques, such as reverse
repurchase

6
<PAGE>

agreements and dollar rolls, which are generally regarded as a form of
borrowing.

In addition to the restrictions described above, each of these Funds may,
from time to time, agree to additional investment restrictions for purposes of
compliance with the securities laws of those state and foreign jurisdictions
where that Fund intends to offer or sell its shares. Any such additional
restrictions that would have a material bearing on either of these Fund's
operations will be reflected in the Prospectus or a Prospectus supplement and
may require shareholder approval. In particular, the Trust has undertaken to
South Dakota to abide by certain limitations. Specifically, for those Fund(s)
in the Northstar Advantage Trust that do not invest more than 80% of assets in
debt securities, such Fund(s) shall not have more than 10% of total assets in
restricted securities (which, for purposes hereof, shall not include 144A
securities), or more than 10% of total assets in real estate investment trusts
or investment companies. Furthermore, these Funds will not invest in real
estate or interests therein, excluding readily marketable securities, or in
commodities futures or options.

NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES, STRATEGIC INCOME, HIGH YIELD, INCOME,
GROWTH AND SPECIAL FUNDS

FUNDAMENTAL INVESTMENT POLICIES. These policies, which are identical for
each of these Funds, provide that these Funds may not: (i) borrow money, except
from a bank and as a temporary measure for extraordinary or emergency purposes,
provided the Fund maintains asset coverage of 300% for all borrowings; (ii)
purchase securities of any one issuer (except Government securities) if, as a
result, more than 5% of the Fund's total assets would be invested in that
issuer, or the Fund would own or hold more than 10% of the outstanding voting
securities of the issuer; PROVIDED, HOWEVER, that up to 25% of the Fund's total
assets may be invested without regard to these limitations; (iii) underwrite the
securities of other issuers, except to the extent that in connection with the
disposition of portfolio securities, the Fund may be deemed to be an
underwriter; (iv) concentrate its assets in the securities of issuers all of
which conduct their principal business activities in the same industry (this
restriction does not apply to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities); (v) make any investment in real
estate, commodities or commodities contracts, except that these Funds may: (a)
purchase or sell readily marketable securities that are secured by interest in
real estate or issued by companies that deal in real estate, including real
estate investment and mortgage investment trusts; and (b) engage in financial
futures contracts and related options, as described herein and in the Fund's
Prospectus; (vi) make loans, except that these Funds may: (a) invest in
repurchase agreements, and (b) loan its portfolio securities in amounts up to
one-third of the market or other fair value of its total assets; and (vii) issue
senior securities, except as appropriate to evidence indebtedness that it is
permitted to incur, provided that the deposit or payment by the Fund of initial
or maintenance margin in connection with futures contracts and related options
is not considered the issuance of senior securities.

7
<PAGE>

NON-FUNDAMENTAL INVESTMENT POLICIES. Each of these Funds has adopted
certain investment restrictions that may be changed at any time by the Trustees
without a vote of shareholders.

These non-fundamental limitations provide that these Funds may not: (i)
borrow money in excess of 5% of its total assets (taken at market value); (ii)
pledge, mortgage or hypothecate in excess of 5% of its total assets (the deposit
or payment by a Fund of initial or maintenance margin in connection with futures
contracts and related options is not considered a pledge or hypothecation of
assets); (iii) purchase more than 10% of the voting securities of any one
issuer, except U.S. Government Securities; (iv) invest more than 15% of its net
assets in illiquid securities, including repurchase agreements maturing in more
than 7 days, that cannot be disposed of within the normal course of business at
approximately the amount at which the Fund has valued the securities, excluding
restricted securities that have been determined by the Trustees of the Fund (or
the persons designated by them to make such determinations) to be readily
marketable; (v) purchase securities of any issuer with a record of less than 3
years of continuous operations, including predecessors, except U.S. Government
Securities and obligations issued or guaranteed by any foreign government or its
agencies or instrumentalities, if such purchase would cause the investments of a
Fund in all such issuers to exceed 5% of the total assets of the Fund taken at
market value; (vi) purchase securities on margin, except these Funds may obtain
such short-term credits as may be necessary for the clearance of purchases and
sales of securities (the deposit or payment by a Fund of initial or maintenance
margin in connection with futures contracts or related options is not considered
the purchase of a security on margin); (vii) write put and call options, unless
the options are covered and the Fund invests through premium payments no more
than 5% of its total assets in options transactions, other than options on
futures contracts; (viii) purchase and sell futures contracts and options on
futures contracts, unless the sum of margin deposits on all futures contracts
held by the Fund, and premiums paid on related options held by the Fund, does
not exceed more than 5% of the Fund's total assets, unless the transaction meets
certain "bona fide hedging" criteria (in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
computing the 5%); (ix) invest in securities of any issuer if any officer or
trustee of the Fund or any officer or director of the Fund's investment adviser
owns more than 1/2 of 1% of the outstanding securities of the issuer, and such
officers, directors and trustees own in the aggregate more than 5% of the
securities of such issuer; (x) invest in interests in oil, gas or other mineral
exploration or development programs (although it may invest in issuers that own
or invest in such interests); (xi) purchase securities of any investment
company, except by purchase in the open market where no commission or profit to
a sponsor or dealer results from such purchase, or except when such purchase,
though not made in the open market, is part of a plan of merger, consolidation,
reorganization or acquisition of assets; (xii) purchase more than 3% of the
outstanding voting securities of another investment company, invest more than 5%
of its total assets in another investment company, or invest more than 10% of
its total assets in other investment companies; (xiii) purchase warrants if, as
a result,

<PAGE>

warrants taken at the lower of cost or market value would represent more than 5%
of the value of the Fund's net assets or if warrants that are not listed on the
New York or American Stock Exchanges or on an exchange with comparable listing
requirements, taken at the lower of cost or market value, would represent more
than 2% of the value of the Fund's net assets (for this purpose, warrants
attached to securities will be deemed to have no value); or (xiv) make short
sales, unless, by virtue of its ownership of other securities, the Fund has the
right to obtain securities equivalent in kind and amount to the securities sold
and, if the right is conditional, the sale is made upon the same conditions,
except in connection with arbitrage transactions. The Strategic Income Fund,
additionally, may not invest in interests of real estate limited partnerships.

OTHER INVESTMENT TECHNIQUES

DERIVATIVE INSTRUMENTS

OPTIONS AND FUTURES STRATEGIES. The Adviser may at times seek to hedge
against a decline in the value of securities included in a Fund's portfolio or
an increase in the price of securities that it plans to purchase for a Fund
through the writing and purchase of options and the purchase and sale of
financial futures contracts and related options. Expenses and losses incurred
as a result of such hedging strategies will reduce the current return of the
Funds employing these hedging strategies. In addition, the Adviser may seek to
increase the current return of a Fund's portfolio by writing covered call or
secured put options.

The ability of the Funds to engage in options and futures strategies
described below will depend on the availability of liquid markets in such
instruments. Accordingly, no assurances can be given that the Funds will be
able to use these instruments effectively for the purposes stated below.
Options and futures transactions will involve certain risks that are described
below under "Risk Factors in Options Transactions" and "Risks of Transactions in
Futures Contracts and Related Options." The Funds will not engage in options
and futures transactions for leveraging purposes.

WRITING COVERED OPTIONS ON SECURITIES. Each Fund may write covered call
options and secured put options on securities of the types in which it is
permitted to invest from time to time as the Adviser determines is appropriate
in seeking to attain its investment objectives. Call options written by a Fund
give the holder the right to buy the underlying security from the Fund at a
stated exercise price; put options written by a Fund give the holder the right
to sell the underlying security to the Fund at a stated price.

Each of High Total Return Fund and Income and Growth Fund will not write
call options on when-issued securities. In addition, each of High Total Return
Fund and Income and Growth Fund will not write a covered call option if, as a
result, the aggregate market value of all portfolio securities of the Fund
covering call options or subject to put options exceeds 10% of the market value
of the Fund's net assets.

9
<PAGE>

Each of the Funds may only write call options on a covered basis or for
cross-hedging purposes. A call option is covered if the Fund owns or has the
right to acquire the underlying securities subject to the call option (or
comparable securities satisfying the cover requirements of securities exchanges)
at all times during the option period. A call option is for cross-hedging
purposes if it is not covered, but is designed to provide a hedge against
another security that the Fund owns or has the right to acquire. In the case of
a call written for cross-hedging purposes or a put option, the Fund will
maintain, in a segregated account at its custodian bank, cash or short-term U.S.
Government Securities, or, in the case of the Strategic Income Fund, short-term
debt obligations, with a value equal to or greater than the Fund's obligation
under the option. Each of the Funds may also write combinations of secured puts
and covered calls on the same underlying security.

A Fund will receive a premium from writing an option, which increases the
Fund's return in the event the option expires unexercised, or is terminated at a
profit. The amount of the premium will reflect, among other things, the
relationship of the market price of the underlying security to the exercise
price of the option, the term of the option, and the volatility of the market
price of the underlying security. By writing a call option, a Fund will limit
its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, a Fund will assume the risk that it may be required to purchase the
underlying security for an exercise price higher than its then-current market
price, resulting in a potential capital loss if the purchase price exceeds the
market price plus the amount of the premium received.

A Fund may terminate an option that it has written prior to its expiration
by entering into a closing purchase transaction in which it purchases an option
having the same terms as the option written. The Fund will realize a profit (or
loss) from such transaction if the cost of such transaction is less (or more)
than the premium received from the writing of the option. Because increases in
the market price of a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from the repurchase of a
call option may be offset in whole or in part by unrealized appreciation of the
underlying security owned by the Fund.

When a Fund writes a call option but does not own the underlying security,
and when it writes a put option, the Fund may be required to deposit cash or
securities with its broker as "margin", or collateral, for its obligation to buy
or sell the underlying security. As the value of the underlying security
varies, the Fund may have to deposit additional margin with the broker.

PURCHASING PUT AND CALL OPTIONS ON SECURITIES. Each Fund may purchase put
options to protect its portfolio holdings in an underlying security against a
decline in market value. This protection is provided during the life of the put
option since the Fund, as holder of the put, is able to sell the underlying
security at the exercise price

10
<PAGE>

regardless of any decline in the underlying security's market price. For the
purchase of a put option to be profitable, the market price of the underlying
security must decline sufficiently below the exercise price to cover the premium
and transaction costs. By using put options in this manner, any profit that the
Fund purchasing the put option might otherwise have realized on the underlying
security will be reduced by the premium paid for the put option and by
transaction costs.

A Fund may also purchase a call option to hedge against an increase in
price of a security that it intends to purchase. This protection is provided
during the life of the call option since the Fund, as holder of the call, is
able to buy the underlying security at the exercise price regardless of any
increase in the underlying security's market price. For the purchase of a call
option to be profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and transaction
costs. By using call options in this manner, any profit that the Fund
purchasing the call option might have realized had it bought the underlying
security at the time it purchased the call option will be reduced by the premium
paid for the call option and by transaction costs.

Each Fund, except for High Total Return Fund and Income and Growth Fund, is
restricted from purchasing put or call options if, as a result of any such
transaction, the aggregate cost of options held by a Fund at the time of such
transaction would exceed 5% of the total assets of such Fund.

SHORT SALES. Each of High Total Return Fund and Income and Growth Fund may
make short sales "against the box." A short-sale is a transaction in which a
party sells a security it does not own in anticipation of decline in the market
value of that security. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short.

When a Fund makes a short sale, it must borrow the security sold short and
deliver it to the broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities, and is
often obligated to pay over any accrued interest on such borrowed securities.

OVER-THE-COUNTER OPTIONS. Over-the-counter ("OTC") options are purchased
from or sold to dealers or financial institutions that have entered into direct
agreements with a Fund. The Staff of the Division of Investment Management of
the Securities and Exchange Commission (the "SEC") has taken the position that
OTC options purchased by a Fund are illiquid securities. Although the Staff has
indicated that it is continuing to evaluate this issue, pending further
developments, the Funds intend to enter into OTC options transactions only with
primary dealers in U.S. Government Securities and, in the case of OTC options
written by a Fund, only pursuant to an agreement that will assure that the Fund
will at all times have the right to repurchase the option written by it from the
dealer at a specified formula price. The Fund will treat the amount by which
such

11
<PAGE>

formula price exceeds the amount, if any, by which the option may be
"in-the-money" as an illiquid investment. The Adviser monitors the
creditworthiness of dealers with whom a Fund enters into OTC option transactions
under the general supervision of the Trustees of the Funds. If the transaction
dealer fails to make or take delivery of the U.S. Government securities
underlying an option it has written in accordance with the terms of the option
as written, the Funds would lose the premium paid for the option as well as any
anticipated benefit of the transaction. It is the present policy of the Funds
not to enter into any OTC option transaction if, as a result, more than 15% of
the Fund's net assets would be invested in (i) illiquid investments (determined
under the foregoing formula) relating to OTC options written by the Fund, (ii)
OTC options purchased by the Fund, (iii) securities that are not readily
marketable, and (iv) repurchase agreement maturing in more than seven days.

STOCK INDEX OPTIONS. Each of High Total Return Fund and Income and Growth
Fund may purchase stock index options to hedge against risks of broad price
movements in the equity markets that, in some market environments, may correlate
more closely with movements in the value of lower rated bonds than with changes
in interest rates. When a Fund sells an option on a stock index, it will have to
establish a segregated account with its custodian in which the Fund will deposit
cash or cash equivalents or a combination of both in an amount equal to the
market value of the option, and will have to maintain the account while the
option is open. For some options, no liquid secondary market may exist or the
market may cease to exist.

RISK FACTORS IN OPTIONS TRANSACTIONS. The successful use of a Fund's
options strategies depends in large part on the ability of the Adviser to
forecast correctly interest rate and market movements. For example, if a Fund
were to write a call option based on the Adviser's expectation that the price of
the underlying security would fall, but the price rose instead, the Fund could
be required to sell the security upon exercise at a price below the current
market price. Similarly, if a Fund were to write a put option based on the
Adviser's view that the price of the underlying security would rise, but the
price fell instead, the Fund could be required to purchase the security upon
exercise at a price higher than the current market price.

When a Fund purchases an option, it runs the risk that it will lose its
entire investment in the option in a relatively short period of time, unless the
Fund exercises the option or enters into a closing sale transaction before the
option's expiration. If the price of the underlying security does not rise (in
the case of a call) or fall (in the case of a put) to an extent sufficient to
cover the option premium and transaction costs, the Fund will lose part or all
of its investment in the option. This contrasts with an investment by the Fund
in the underlying security, since the Fund will not realize a loss if the
security's price does not change.

The effective use of options also depends on a Fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so. There
is no assurance

12
<PAGE>

that a Fund will be able to effect closing transactions at any particular time
or at an acceptable price.

If a secondary market in options were to become unavailable, the Funds
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A market may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if
unusual events, such as volume in excess of trading or clearing capability, were
to interrupt its normal operations.

A market may at times find it necessary to impose restrictions on
particular types of options transactions, such as opening transactions. For
example, if an underlying security ceases to meet qualifications imposed by the
market or the Options Clearing Corporation, new series of options on that
security will no longer be opened to replace expiring series, and opening
transactions in existing series may be prohibited. If an options market were to
become unavailable, a Fund, as a holder of an option would be able to realize
profits or limit losses only by exercising the option, and the Fund, as option
writer, would remain obligated under the option until expiration or exercise.

Disruptions in the markets for the securities underlying options purchased
or sold by a Fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the Fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with considerable losses in trading if the security reopens
at a substantially different price. In addition, the Options Clearing
Corporation, or other options markets, may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the Fund, as purchaser or writer of an option, will be locked
into its position until one of the two restrictions has been lifted. If the
Options Clearing Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by the writers of
all outstanding calls in the event of exercise, it may prohibit indefinitely the
exercise of put options. The Fund, as holder of such a put option, could lose
its entire investment if the prohibition remained in effect until the put
option's expiration.

Special risks are presented by internationally-traded options. Because of
time differences between the United States and various foreign countries, and
because different holidays are observed in different countries, foreign options
markets may be open for trading during hours or on days when United States
markets are closed. As a result, option premiums may not reflect the current
prices of the underlying interest in the United States.

FUTURES CONTRACTS. Each Fund may enter into futures contracts. The Funds
will enter into these transactions solely for the purpose of hedging against the
effects of changes in the value of its portfolio securities or those it intends
to purchase due to

13
<PAGE>

anticipated changes in interest rates and currency values, and not for the
purpose of speculation. A futures contract to sell, for example, a debt
security or foreign currency (a "Short" futures position), creates an obligation
by the seller to deliver a specified amount of the underlying security at a
certain future time and price. A futures contract to purchase a debt security
or foreign currency (a "long" futures position) creates an obligation by the
purchaser to take delivery of a specified amount of the underlying security at a
certain future time and price. The specific instruments delivered or taken,
respectively, at the settlement date are not determined until on or near that
date. The determination is made in accordance with the rules of the exchange on
which the futures contract sale or purchase was made. Futures contracts are
traded in the United States only on commodity exchanges or boards of trade,
known as "contract markets," approved for such trading by the Commodity Futures
Trading Commission (the "CFTC"), and must be executed through a futures
commission merchant or brokerage firm that is a member of the relevant contract
market.

Although futures contracts by their terms call for actual delivery or
acceptance of commodities or securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a futures contract
for the same aggregate amount of the specific type of financial instrument or
commodity with the same delivery date. If the price of the initial sale of the
futures contract exceeds the price of the offsetting purchase, the seller is
paid the difference and realizes a gain. Conversely, if the price of the
offsetting purchase exceeds the price of the initial sale, the seller realizes a
loss. Similarly, the closing out of a futures contract purchase is effected by
the purchaser's entering into a futures contract sale. If the offsetting sale
price exceeds the purchase price, the purchaser realizes a gain, and if the
purchase price exceeds the offsetting sale price, he realizes a loss. In
general, 40% of the gain or loss arising from the closing out of a futures
contract traded on an exchange approved by the CFTC is treated as short-term
gain or loss, and 60% is treated as long-term gain or loss.

A Fund may sell, for example, interest rate futures contracts in
anticipation of an increase in the general level of interest rates. Generally,
as interest rates rise, the market value of the securities held by the Funds
will fall, thus reducing their net asset value. This interest rate risk can be
reduced without employing futures as a hedge by selling such securities and
either reinvesting the proceeds in securities with shorter maturities or by
holding assets in cash. However, this strategy entails increased transaction
costs in the form of dealer spreads and brokerage commissions and would
typically reduce the Fund's average yield as a result of the shortening of
maturities.

The sale of interest rate futures contracts provides a means of hedging
against rising interest rates. As rates increase, the value of a Fund's short
position in the futures contracts will also tend to increase, thus offsetting
all or a portion of the depreciation in the market value of the Fund's
investments that are being hedged. While the Fund will incur commission
expenses in selling and closing out futures positions (which is done by

14
<PAGE>

taking an opposite position in the futures contract), commissions on futures
transactions tend to be lower than transaction costs incurred in the purchase
and sale of portfolio securities.

INTEREST RATE FUTURES CONTRACTS. Each Fund may enter into interest rate
futures contracts. An interest rate futures contract provides for the future
sale and purchase of a specified amount of a certain debt security at a stated
date, place and price. The Funds may enter into interest rate futures contracts
to protect against fluctuations in interest rates affecting the value of debt
securities that a Fund either holds or intends to acquire. Interest rate
futures contracts currently are based on long-term Treasury Bonds, Treasury
Notes, three-month Treasury Bills and Government National Mortgage Association
modified pass-through mortgage-backed securities ("GNMA pass-through
securities"), and 90-day commercial paper. If a Fund invests in tax-exempt
securities issued by a governmental entity, the Fund may purchase and sell
futures contracts and related options on U.S. Treasury securities when, in the
opinion of the Adviser, price movements in Treasury security futures and related
options will correlate closely with price movements in the tax-exempt securities
that are the subject of the hedge.

INDEX FUTURES CONTRACTS. Each Fund may enter into stock index futures
contracts. An index futures contract is a contract to buy or sell units of an
index at a specified future date at a price agreed upon when the contract is
made. Entering into a contract to buy units of an index is commonly referred to
as buying or purchasing a contract or holding a long position in the index.
Entering into a contract to sell units of an index is commonly referred to as
selling a contract or holding a short position. A unit is the current value of
the index. A Fund may enter into stock index futures contracts, debt index
futures contracts, or other index futures contracts appropriate to its
objective. A Fund may also purchase and sell options on index futures
contracts.

For example, the Standard & Poor's ("S&P") Composite 500 Stock Price Index
("S&P 500") is composed of 500 selected common stocks, most of which are listed
on the New York Stock Exchange. The S&P 500 assigns relative weightings to the
common stocks included in the Index, and the value fluctuates with changes in
the market values of those common stocks. In the case of the S&P 500, contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500 were $150, one
contract would be worth $75,000 (500 units x $150). The stock index futures
contract specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract, with the settlement being the difference between the contract
price and the actual level of the stock index at the expiration of the contract.
For example, if a Fund enters into a futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price of $150 and the S&P 500
is at $154 on that future date, the Fund will gain $2,000 (500 units x gain of
$4). If a Fund enters into a futures contract to sell 500 units of the stock
index at a specified future date at a contract price of $150 and the S&P 500 is
at $152 on that future date, the Fund will lose $1,000 (500 units x loss of $2).

15
<PAGE>

FOREIGN CURRENCY FUTURES CONTRACTS. High Total Return Fund and Income and
Growth Fund may enter into foreign currency futures contracts on domestic and
foreign exchanges. A foreign currency futures contract provides for the future
sale and purchase of a specified amount of a certain foreign currency at a
stated date, place and price. The Funds may enter into foreign currency futures
contracts to attempt to establish the rate at which it would be entitled to make
a future exchange of United States dollars for another currency. At present,
foreign currency futures contracts are based on British pounds, German
deutschmarks, Canadian dollars, Japanese yen, French francs, Swiss francs, and
ECUs.

OPTIONS ON INTEREST RATE FUTURES CONTRACTS. The Funds may purchase and
sell put and call options on interest rate futures contracts as a hedge against
changes in interest rates, in lieu of purchasing and writing options directly on
the underlying security or purchasing and selling the underlying futures
contracts. The purchase of an option on an interest rate futures contract will
give the Funds the right to enter into a futures contract to purchase (in the
case of a call option) or to enter into a futures contract to sell (in the case
of a put option) a particular debt security at a specified exercise price at any
time prior to the expiration date of the option.

OPTIONS ON FOREIGN CURRENCY FUTURES. High Total Return Fund, Income and
Growth Fund and Strategic Income Fund may purchase and sell put and call options
on foreign currency futures. The purchase of options on foreign currency
futures contracts gives each Fund the right to enter into a futures contract to
purchase (in the case of a call option) or to sell (in the case of a put option)
a particular currency at a specified price at any time during the period before
the option expires. Options on foreign currency futures currently are available
with respect to British pounds, German deutsche marks and Swiss francs. The
Funds may purchase options on foreign currency futures as a hedge against
fluctuating currency values. A Fund may use options on futures contracts in
lieu of purchasing or writing options directly on the underlying securities or
purchasing and selling the underlying futures. For example, to hedge against a
possible decrease in the value of its portfolio securities, a Fund may purchase
put options or write call options on futures contracts rather than sell futures
contracts. Similarly, a Fund may purchase call options or write put options on
futures contracts, rather than purchase such futures, to hedge against possible
increases in the price of debt securities that the Fund intends to purchase.
Such options generally operate in the same manner as options purchased or
written directly on the underlying investments. The potential loss related to
the purchase of an option on a futures contract is limited to the premium paid
for the option plus related transaction costs. A call option sold by a Fund
exposes the Fund during the term of the option to the possible loss of an
opportunity to realize appreciation in the market price of the underlying
security or to the possible continued holding of a security that might otherwise
have been sold to protect against depreciation in the market price of the
security. In selling puts, there is a risk that a Fund may be required to buy
the underlying security at a disadvantageous price. Options on interest rate
futures contracts currently are available with respect to Treasury Bonds,
Treasury

16
<PAGE>

Notes, and Eurodollars.

OPTIONS ON INDEX FUTURES. Options on index futures are similar to options
on securities except that options on index futures give the purchaser the right,
in return for the premium paid, to assume a position in an index futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. The delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the index futures contract, at exercise, exceeds (in
the case of a call) or is less than (in the case of a put) the exercise price of
the option on the index futures. If an option is exercised on the last trading
day prior to its expiration date, the settlement will be made entirely in cash
equal to the difference between the exercise price of the option and the closing
level of the index of options. Those who fail to exercise their options prior
to the exercise date suffer a loss of the premium paid.

OPTIONS ON INDICES. As an alternative to purchasing call and put options
on index futures, a Fund may purchase and sell call and put options on the
underlying indices themselves. Such options would be used in a manner identical
to the use of options on index futures.

LIMITATIONS AND OTHER REQUIREMENTS RELATING TO FUTURES AND RELATED OPTIONS.
A Fund will not purchase or sell futures contracts or options on futures
contracts or indices if, as a result, the sum of the margin deposits on its
existing futures contracts and related options positions and premiums paid for
options on futures contracts would exceed 5% of the Fund's total assets. For
each long position that High Total Return Fund, Income and Growth Fund or
Strategic Income Fund enters into, it will segregate cash or cash equivalents
having a value equal to the market value of the contract as collateral with the
custodian of the Fund. For the remaining Funds, with respect to each futures
contract purchased or long position in an option, the Fund will set aside in a
segregated account at its custodian bank an amount of cash or short term U.S.
Government Securities equal to the total market value of such contracts less the
initial margin deposited therefor.

The High Total Return Fund and Income and Growth Fund will not use leverage
when entering into long futures contracts or related options. Each of the
remaining Funds will sell futures contracts only to offset expected declines in
the value of portfolio securities, and the value of such futures contracts will
not exceed the total market value of those securities (plus such additional
amount as may be necessary because of differences in the volatility factor of
the portfolio securities vis-a-vis the futures contracts).

Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Upon
entering into a contract, the Fund is required to deposit with its custodian in
a segregated account in the name of the

17
<PAGE>

futures broker an amount of cash and/or U.S. Government Securities, equal to
approximately 1% to 5% of the contract price, which amount is subject to change
by the exchange on which the contract is traded or by the broker. This amount
is known as "initial margin." The nature of initial margin in futures
transactions is different from that of margin in securities transactions in that
futures contract margin does not involve the borrowing of funds to finance the
transactions. Rather, initial margin is similar to a performance bond or good
faith deposit that is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied. Futures
contracts also involve brokerage costs.

Subsequent payments, called "variation margin" or "maintenance margin" to
and from the broker (or the custodian) are made on a daily basis as the price of
the underlying security or commodity fluctuates, making the long and short
positions in the futures contract more or less valuable. This is known as
"marking to the market." For example, when a Fund has purchased a futures
contract on a security and the price of the underlying security has risen, that
position will have increased in value and the Fund will receive from the broker
a variation margin payment based on that increase in value. Conversely, when a
Fund has purchased a security futures contract and the price of the underlying
security has declined, the position would be less valuable and the Fund would be
required to make a variation margin payment to the broker. Similar requirements
relating to the payment of initial and variation margin apply to parties
engaging in options on futures transactions.

A Fund may elect to close some or all of its futures positions at any time
prior to their expiration in order to reduce or eliminate a hedge position then
currently held by the Fund. The Fund may close its positions by taking opposite
positions, which will operate to terminate the Fund's position in the futures
contracts. Final determinations of variation margin are then made; additional
cash is required to be paid by or released to the Fund, and the Fund realizes a
loss or a gain. Such closing transactions involve additional commission costs.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. Successful
use of futures contracts by a Fund is subject to the Adviser's ability to
predict movements in the direction of interest rates and other factors affecting
securities markets. For example, if a Fund has hedged against the possibility
of decline in the values of its investments and the values of its investments
increase instead, the Fund will have lost part or all of the benefit of the
increase through payments of daily maintenance margin. A Fund may have to sell
investments at a time when it may be disadvantageous to do so in order to meet
margin requirements.

The use of options and futures involves the risk of imperfect correlation
between movements in options and futures prices and movements in the price of
securities that are the subject of the hedge. The successful use of these
strategies also depends on the ability of the Adviser to forecast correctly
interest rate movements and general stock

18
<PAGE>

market price movements. The risk increases as the composition of the portfolio
of a Fund using these strategies diverges from the composition of the relevant
option or futures contract.

Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to a Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to a Fund when
the purchase or sale of a futures contract would not, such as when there is no
movement in the prices of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.

There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain market clearing
facilities inadequate, and thereby result in the institution by exchanges of
special procedures that may interfere with the timely execution of customer
orders.

The effective use of options and futures strategies by a Fund depends,
among other things, on the Fund's ability to terminate options and futures
positions at times when the Adviser deems it desirable to do so. Although a
Fund will not enter into an option or futures position unless the Adviser
believes that a liquid market exists for such option or future, there can be no
assurance that the Fund will be able to effect closing transactions at any
particular time or at an acceptable price. The Funds generally expect that
their options and futures transactions will be conducted on recognized
securities exchanges. In certain instances, however, a Fund may purchase and
sell options in the over-the-counter market. The Staff of the SEC considers
over-the-counter options and securities underlying them to be illiquid. A
Fund's ability to terminate option positions established in the over-the-counter
market may be more limited than in the case of exchange-traded options and may
also involve the risk that securities dealers participating in such transactions
would fail to meet their obligations to the Fund.

For instance, to reduce or eliminate a hedge position held by a Fund, the
Fund may seek to close out a position. The ability to establish and close out
positions will be subject to the development and maintenance of a liquid
secondary market. It is not certain that this market will develop or continue
to exist for particular futures contracts or options. Reasons for the absence
of a liquid secondary market on an exchange include the following: (i) there may
be insufficient trading interest in certain contracts or options; (ii)
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of contracts or options,
or underlying securities; (iv) unusual or unforeseen circumstances may interrupt
normal operations on an exchange; (v) the facilities of an exchange or a
clearing corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges

19
<PAGE>

could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of contracts or options (or a particular class or
series of contracts or options), in which event the secondary market on that
exchange for such contracts or options (or in the class or series of contracts
or options) would cease to exist, although outstanding contracts or options on
the exchange that had been issued by a clearing corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Each of High Total Return Fund,
Income and Growth Fund and Strategic Income Fund may engage in foreign currency
exchange transactions to hedge against uncertainty in the level of future
exchange rates. The Funds may conduct currency exchange transactions on a
"spot" (i.e., cash) basis at the rate then prevailing in the currency exchange
market, or on a forward basis, by entering into futures or forward contracts to
purchase or sell currency. A Fund's dealings in foreign currency exchange
contracts is limited to hedging.

FORWARD FOREIGN CURRENCY CONTRACTS. A forward foreign currency contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract as agreed
upon by the parties, at a price set at the date of the contract. Forward
currency contracts are entered into in the interbank market on a principal basis
directly between currency dealers, which usually are large commercial banks and
brokerage houses, and their customers, and, therefore, generally involve no
margin, commissions or other fees. Forward currency contracts will establish a
rate of exchange that can be achieved in the future and thus involve the risk of
loss due to a decline in the value of the hedged currency increases.

OPTIONS ON FOREIGN CURRENCY. Each of High Total Return Fund, Income and
Growth Fund and Strategic Income Fund may also purchase and sell put and call
options for the purpose of hedging against changes in future currency exchange
rates. An option on a foreign currency gives the purchasers, in return for a
premium paid plus related transaction costs, the right to sell (in the case of a
put option) or to buy (in the case of a call option) the underlying currency at
a specified price until the option expires. The value of an option on foreign
currency depends upon the value of the foreign currency when compared to the
value of the United States dollar.

Currency options traded on United States or other exchanges may be subject
to position limits, which may affect the ability of the Fund to hedge its
positions. The Funds will purchase and sell options on foreign exchanges to the
extent permitted by the CFTC.

20
<PAGE>

The Funds may purchase or sell options on currency only when the Adviser
believes that a liquid secondary market exists for these options; however, no
assurance can be given that a liquid secondary market will exist for a
particular option at any specific time.

RISKS OF FOREIGN CURRENCY TRANSACTIONS. Foreign currency futures contracts
and related options, forward foreign currency contracts and options on foreign
currency may be traded on foreign exchanges. The regulation of transactions on
these exchanges may be less extensive than the regulation of United States
exchanges. The funds will trade only those options approved by the CFTC.
Transactions on foreign exchanges also may not involve a clearing mechanism and
related guarantees, and may be subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities. The value of such
positions also could be affected adversely by: (1) foreign, political, legal and
economic factors; (2) a lack of information on which to make trading decisions
compared to that which is available in the United States; (3) a delay in the
ability to act on significant events occurring in the foreign markets during
non-business hours in the United States, (4) different exercise and settlement
terms from those imposed in the United States; and (5) less trading volume than
occurs on United States exchanges.

In addition, foreign exchanges offer less protection against defaults in
the forward trading of currencies than is available on United States exchanges.
Because a forward foreign currency contract is not guaranteed by an exchange or
clearinghouse, a default on the contract would deprive the Fund of unrealized
profits or would force the Fund to cover its commitments for purchase of resale,
if any, at the current market price.

The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved is not generally
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature.

It is impossible to forecast precisely the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, it may be necessary for a Fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security or securities being hedged is less than the amount
of foreign currency the Fund is obligated to deliver and a decision is made to
sell the security or securities and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security or securities if the
market value of such security or securities exceeds the amount of foreign
currency the Fund is obligated to deliver.

A Fund's currency hedging transactions may call for the delivery of one
foreign currency in exchange for another foreign currency and may at times not
involve

21
<PAGE>

currencies in which its Portfolio securities are then denominated. The Adviser
will engage in such "cross hedging" activities when it believes that such
transactions provide significant hedging opportunities for the Fund. Cross
hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to which such transactions
relate and changes in the value of the currency or other asset or liability that
is the subject of the hedge.

A holder of a put option on a currency has the right, on or before a
specified date, to sell to the other party to the contract a specified amount of
a currency for a specified price measured in another currency. A holder of a
call option on a currency has a similar right to buy a specified amount of a
currency from the other party. The Fund pays a purchase price (called a
"premium") when it initially acquires the currency option. Currency options
are traded primarily in the over-the-counter market, although options on foreign
currencies have recently been listed on several exchanges. Options are traded
not only on the currencies of individual countries, but also on the European
Currency Unit ("ECU"). The ECU is composed of amounts of a number of
currencies, and is the official medium of exchange of the European Union's
European Monetary System.

Currency options involve a number of risks. These include the risk, in the
case of over-the-counter options, that the other party will default on its
obligations. Such a default could deprive the Strategic Income Fund of the
expected benefits of the hedging transaction and could result in expenses and
delays if the Fund seeks to pursue remedies against the defaulting party.

Another risk associated with options is that, if anticipated currency price
movements do not occur, the Strategic Income Fund may never exercise its rights
under the option, in which case the option will expire worthless and the Fund
will not recover the value of the premium it paid to acquire the option.

Options on currencies are affected by many of the same factors that
influence exchange rates and investments generally. The value of any currency,
including U.S. dollars and foreign currencies, may be affected by political and
economic factors applicable to the issuing country. The exchange rates of
foreign currencies (and therefore the values of foreign currency options) may be
affected significantly, fixed, or supported directly or indirectly by U.S. and
foreign government actions. Government intervention may increase the risk
involved in purchasing or selling foreign currency options, since exchange rates
may not be free to fluctuate in response to other market forces.

The value of a foreign currency option reflects the value of an exchange
rate, which in turn reflects the relative values of two currencies, the U.S.
dollar and the particular foreign currency involved. Because foreign currency
transactions occurring in the interbank market involve substantially larger
amounts than those that may be

22
<PAGE>

involved in the exercise of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market for the underlying foreign
currencies in connection with options at prices that are less favorable than for
round lots. Foreign government restrictions or taxes could result in adverse
changes in the cost of acquiring or disposing of foreign currencies.

There is no systematic reporting or last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
round-lot transactions in the interbank market and thus may not reflect exchange
rates for smaller odd-lot transactions (less than $1 million) where rates may be
less favorable. The interbank market in foreign currencies is a 24-hour a day,
global market. To the extent the options markets are closed while the markets
for the underlying currencies are open, significant price and rate movements may
take place in the underlying markets that cannot be reflected in the options
markets.

PRIVATELY ISSUED COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS, INTEREST
OBLIGATIONS AND PRINCIPAL OBLIGATIONS

Each of High Total Return Fund and Income and Growth Fund may invest up to
5% of its net assets in Privately Issued Collateralized Mortgage-Backed
Obligations ("CMOs"), Interest Obligations ("IOs") and Principal Obligations
("POs") when the Adviser believes that such investments are consistent with the
Fund's investment objective. Collateralized mortgage obligations or "CMOs" are
debt obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, privately issued CMOs are collateralized by Ginnie Mae,
Fannie Mae or Freddie Mac Certificates, but also may be collateralized by whole
loans or private pass-throughs (such collateral collectively hereinafter
referred to as "Mortgage Assets"). Privately issued CMOs are per se illiquid.
Multi-class pass-through securities are equity interest in a trust composed of
Mortgage Assets. Unless the context indicates otherwise, all references herein
to CMOs include multi-class pass-thorough securities. Payments of principal of
and interest on the Mortgage Assets, and any reinvestment income thereon, are
the source of funds used to pay debt service on the CMOs or make scheduled
distribution on the multi-class pass-through securities.

On a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche", is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. The principal of and interest on the Mortgage Assets may be allocated
among the several classes of a series of a CMO in innumerable ways. The Funds
may also invest in, among others, parallel pay CMOs and Planned Amortization
Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments
of principal on each payment date to more than one class. These

23
<PAGE>

simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally call for payments of a
specified amount of principal on each payment date.

Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities. SMBS may be issued by agencies or instrumentalities of the
U.S. government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.

SMBS are structured with two or more classes of securities that receive
different proportions of the interest and principal distributions on a pool of
Mortgage Assets. A common type of SMBS will have at least one class receiving
only a small portion of the interest and a larger portion of the principal from
the Mortgage Assets, while the other classes will receive primarily interest and
only a small portion of the principal. In the most extreme case, one class will
receive all of the interest (the interest-only or "IO" class), while the other
class will receive all of the principal (the principal-only or "PO" class). The
yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying Mortgage Assets, and
a rapid rate of principal payments may have a material adverse effect on such
security's yield to maturity. If the underlying Mortgage Assets experience
greater than anticipated prepayments of principal, a Fund may fail to recoup
fully its initial investment in these securities. The determination of whether
a particular government-issued IO or PO backed by fixed-rate mortgage is liquid
is made by the Adviser under guidelines and standards established by the Board
of Trustees. Such a security may be deemed liquid if it can be disposed of
promptly in the ordinary course of business at a value reasonably close to that
used in the calculation of net asset value per share.

INDEX WARRANTS

The Strategic Income Fund may purchase put warrants and call warrants whose
values vary depending on the change in the value of one or more specified
securities indices ("index warrants"). Index warrants are generally issued by
banks or other financial institutions and give the holder the right, at any time
during the term of the warrant, to receive upon exercise of the warrant a cash
payment from the issuer, based on the value of the underlying index at the time
of exercise. In general, if the value of the underlying index rises above the
exercise price of the index warrant, the holder of a call warrant will be
entitled to receive a cash payment from the issuer upon exercise, based on the
difference between the value of the index and the exercise price of the warrant;
if the value of the underlying index falls, the holder of a put warrant will be
entitled to receive a cash payment from the issuer upon exercise, based on the
difference between the exercise price of the warrant and the value of the index.
The holder of a

24
<PAGE>

warrant would not be entitled to any payments from the issuer at any time when,
in the case of a call warrant, the exercise price is greater than the value of
the underlying index, or, in the case of a put warrant, the exercise price is
less than the value of the underlying index. If the Strategic Income Fund were
not to exercise an index warrant prior to its expiration, then the Fund would
lose the amount of the purchase price paid by it for the warrant. The Strategic
Income Fund will normally use index warrants in a manner similar to its use of
options on securities indices. The risks of the Fund's use of index warrants
are generally similar to those relating to its use of index options. Unlike
most index options, however, index warrants are issued in limited amounts and
are not obligations of a regulated clearing agency, but are backed only by the
credit of the bank or other institution that issues the warrant. Also, index
warrants generally have longer terms than index options. Although the Strategic
Income Fund will normally invest only in exchange-listed warrants, index
warrants are not likely to be as liquid as certain index options backed by a
recognized clearing agency. In addition, the terms of index warrants may limit
the Fund's ability to exercise the warrants at such time, or in such quantities,
as the Fund would otherwise wish to do.

ADDITIONAL INVESTMENT TECHNIQUES

REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a
Fund buys a money market instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified time and at an agreed-
upon yield. The Adviser will use standards set by the relevant Fund's Trustees
in reviewing the creditworthiness of parties to repurchase agreements with such
Fund. In addition, no more than an aggregate of 15% of a Fund's net assets, at
the time of investment, will be invested in illiquid investments, including
repurchase agreements having maturities longer than seven days. In the event of
failure of the executing bank or broker-dealer, a Fund could experience some
delay in obtaining direct ownership of the underlying collateral and might incur
a loss if the value of the security should decline, as well as costs in
disposing of the security.

Pursuant to an Exemptive Order under Section 17(d) and Rule 17d-1 obtained
by the Funds, excluding the Strategic Income Fund and the Northstar Advantage
Trust, on March 5, 1991, such Funds may deposit uninvested cash balances into a
single joint account to be used to enter into repurchase agreements.

As an alternative to using repurchase agreements, a Fund may, from time to
time, invest up to 5% of its assets in money market investment companies
sponsored by a third party for short-term liquidity purposes. Such investments
are subject to the non-fundamental investment limitations described herein.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS. Each Fund may
enter into reverse repurchase agreements and dollar roll agreements, although it
is not anticipated that such investment techniques will be used. Under a
reverse repurchase

25
<PAGE>

agreement or a dollar roll agreement, a Fund sells securities and agrees to
repurchase them, or substantially similar securities in the case of a dollar
roll agreement, at a mutually agreed upon date and price. Such agreements are
considered to be a form of borrowing and a Fund is required to have asset
coverage of 300% immediately after entering into any such transaction. At the
time the Fund enters into a reverse repurchase agreement or a dollar roll
agreement, it will establish and maintain a segregated account with its
Custodian, containing cash, U.S. government securities, or other liquid assets
from its portfolio, having a value not less than the repurchase price (including
accrued interest). A Fund's ability to enter into reverse repurchase agreements
and dollar roll agreements is limited by restrictions on borrowings, by the
requirement to maintain assets in segregated accounts, and by requirements
relating to the Fund's status as a regulated investment company under the
Internal Revenue Code (the "Code").

These agreements may involve the risk that the market value of the
securities to be repurchased by a Fund may decline below the price at which the
Fund is obligated to repurchase. Also, in the event the buyer of securities
under a reverse repurchase agreement or a dollar roll agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's
obligation to repurchase the securities, and the Fund's use of the proceeds of
the reverse repurchase agreement or the dollar roll agreement may effectively be
restricted pending such a decision.

LENDING PORTFOLIO SECURITIES. A Fund may lend portfolio securities to
broker-dealers and other financial institutions in an amount up to one-third of
the value of its total assets, provided that such loans are callable at any time
by the Fund and are at all times secured by collateral held by the Fund at least
equal to the market value, determined daily, of the loaned securities. A Fund
will continue to receive any income on the loaned securities, while
simultaneously earning interest on cash collateral (which will be invested in
short-term debt obligations) or a securities lending fee (in the case of
collateral in the form of U.S. Government Securities).

There may be risks of delay in recovery of the loaned securities and, in
some cases, loss of rights in the collateral should the borrower of the
securities fail financially. Loans of portfolio securities will only be made to
firms considered by the Adviser to be creditworthy under guidelines adopted by
the Trustees.

FIRM COMMITMENTS AND WHEN-ISSUED SECURITIES. Each Fund may enter into firm
commitment agreements to purchase securities at an agreed-upon price on a
specified future date. An amount of cash or short-term U.S. Government
Securities equal to the Fund's commitment will be deposited in a segregated
account at the Fund's custodian bank to secure the Fund's obligation. Although
a Fund will generally enter into firm commitments to purchase securities with
the intention of actually acquiring the securities for its portfolio (or for
delivery pursuant to options contracts it has entered into), the

26
<PAGE>

Fund may dispose of a security prior to settlement if the Adviser deems it
advisable to do so. A Fund entering into the forward commitment may realize
short-term gains or losses in connection with such sales.

A Fund may enter into To Be Announced ("TBA") sale commitments wherein the
unit price and the estimated principal amount are established upon entering into
the contract, with the actual principal amount being within a specified range of
the estimate. A Fund will enter into TBA sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
arrangements. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, the Fund will maintain, in a segregated account, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price. Unsettled
TBA sale commitments are valued at current market value of the underlying
securities. If the TBA sale commitment is closed through the acquisition of an
offsetting purchase commitment, the Fund realizes a gain or loss on the
commitment without regard to any unrealized gain or loss on the underlying
security. If the Fund delivers securities under the commitment, the Fund
realizes a gain or loss from the sale of the securities, based upon the unit
price established at the date the commitment was entered into.

A Fund may also purchase securities on a when-issued or delayed delivery
basis. In such transactions, the price is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place at a
later date, normally within one month. The value of the security on the
settlement date may be more or less than the price paid as a result of, among
other things, changes in the level of interest rates or other market factors.
Accordingly, there is a risk of loss, which is in addition to the risk of
decline in the value of the Fund's other assets. The Fund will establish a
segregated account with its custodian in which it will maintain cash and
marketable securities equal in value to commitments for when-issued or delayed
delivery securities. While when-issued or delayed delivery securities may be
sold prior to the settlement date, it is intended that a Fund will purchase such
securities with the purpose of actually acquiring them, unless a sale appears
desirable for investment reasons.

FLOATING OR VARIABLE RATE INSTRUMENTS. The Funds may purchase floating or
variable rate bonds, which normally provide that the holder can demand payment
of the obligation on short notice at par with accrued interest. Such bonds are
frequently secured by letters of credit or other credit support arrangements
provided by banks. Floating or variable rate instruments provide for
adjustments in the interest rate at specified intervals (weekly, monthly,
semiannually, etc.). A Fund would anticipate using these bonds as cash
equivalents, pending longer term investment of its funds. Other longer term
fixed-rate bonds, with a right of the holder to request redemption at certain
times (often annually, after the lapse of an intermediate term), may also be
purchased by a Fund. These bonds are more defensive than conventional long-term
bonds (protecting to some degree against a rise in interest rates), while
providing greater opportunity than

27
<PAGE>

comparable intermediate term bonds since the Fund may retain the bond if
interest rates decline. By acquiring these kinds of bonds, a Fund obtains the
contractual right to require the issuer of the security, or some other person
(other than a broker or dealer), to purchase the security at an agreed upon
price, which right is contained in the obligation itself rather than in a
separate agreement with the seller or some other person.

ZERO COUPON SECURITIES. Zero coupon securities are fixed income securities
that have been stripped of their unmatured interest coupons. Zero coupon
securities are sold at a (usually substantial) discount and redeemed at face
value at their maturity date without interim cash payments of interest or
principal. The amount of this discount is accredited over the life of the
security, and the accretion constitutes the income earned on the security for
both accounting and tax purposes. Because of these features, the market prices
of zero coupon securities are generally more volatile than the market prices of
securities that have a similar maturity but that pay interest periodically.
Zero coupon securities are likely to respond to a greater degree to interest
rate changes than are non-zero coupon securities with similar maturity and
credit qualities. Each Fund may invest a portion of its total assets in "zero
coupon" Treasury securities, which consist of Treasury bills or stripped
interest or principal components of U.S. Treasury bonds or notes.

Zero coupon Treasury bonds or notes consist of stripped interest or
principal components held in STRIPS form issued through the U.S. Treasury's
STRIPS program, which permits the beneficial ownership of the component to be
recorded directly in the Treasury book-entry system. The Funds may also
purchase custodial receipts evidencing beneficial ownership of direct interests
in component parts of U.S. Treasury bonds or notes held by a bank in a custodian
or trust account.

ADDITIONAL INFORMATION ON GNMAS. The Funds may invest in U.S. Government
securities, which are obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. A substantial portion of the assets of the
Government Securities Fund have, at various times, been invested in obligations
of the Government National Mortgage Association (popularly called GNMAs or
Ginnie Maes). All of the other Funds may also invest in GNMAs from time to
time.

GNMAs are mortgage backed securities representing part ownership of a pool
of mortgage loans, in which the timely payment of principal and interest is
guaranteed by the full faith and credit of the U.S. Government. GNMA may borrow
U.S. Treasury funds to the extent needed to make payments under the guarantee.
The Funds purchase "modified pass-through" type GNMA Certificates for which
principal and interest are guaranteed, rather than the "straight pass through"
Certificates for which such guarantee is not available. The Funds also purchase
"variable rate" GNMA Certificates and may purchase other types that may be used
with GNMA's guarantee.

When mortgages in the pool underlying a GNMA Certificate are prepaid by

28
<PAGE>

mortgagors or when foreclosure occurs, such principal payments are passed
through to the Certificate holders (such as a Fund). Accordingly, the life of
the GNMA Certificate is likely to be substantially shorter than the stated
maturity of the mortgages in the underlying pool, which will have maturities of
up to 30 years. Because of such variation in prepayment rights, it is not
possible to accurately predict the life of a particular GNMA Certificate.

Payments to holders of GNMA Certificates consist of the monthly
distributions of interest and principal, less the GNMA and issuer's fees. The
portion of the monthly payment that represents a return of principal may be
reinvested by a Fund holding the GNMA in then-available GNMA obligations, which
may bear interest at a rate higher or lower than the obligation from which the
payment was received, or in a differing security. The actual yield to be earned
by the holder of a GNMA Certificate is calculated by dividing such payments by
the purchase price paid for the GNMA Certificate (which may be at a premium or a
discount from the face value of the Certificate). Unpredictable prepayments of
principal, however, can greatly change realized yields. In a period of
declining interest rates it is more likely that mortgages contained in GNMA
pools will be prepaid, thus reducing the effective yield. Moreover, any premium
paid on the purchase of a GNMA Certificate will be lost if the obligation is
prepaid. In periods of falling interest rates, this potential for prepayment
may reduce the general upward price increase of GNMA Certificates that might
otherwise occur. As with other debt instruments, the price of GNMA Certificates
is likely to decrease in times of rising interest rates. Price changes of the
GNMA Certificates held by a Fund have a direct impact on the net asset value per
share of the Fund.

When interest rates rise, the value of a GNMA Certificate will generally
decline. Conversely, when rates fall, the GNMA Certificate value may rise,
although not as much as other debt issues, due to the prepayment feature. As a
result, the price per share the shareholder receives on redemption may be more
or less than the price paid for the shares. The dividends per share paid by the
Government Securities Fund may also vary.

ADDITIONAL INFORMATION ON FOREIGN SECURITIES. Each Fund, except
Government Securities Fund, may invest in securities of foreign issuers.
Each of these Funds other than High Total Return, High Yield and Strategic
Income may invest up to 20% of its net assets in foreign securities, of which
10% of its net assets may be invested in foreign securities that are not
listed on a U.S. securities exchange. High Total Return may invest up to 50%
of its assets in securities of foreign issuers, High Yield up to 35%,
and Strategic Income Fund may invest up to 60% of its total assets.
Eurodollar certificates of deposit are excluded for purposes of this
limitation for Strategic Income.

ADDITIONAL INFORMATION ON HIGH YIELD SECURITIES. Strategic Income Fund,
High Yield Fund, High Total Return Fund, and Income Fund each may invest in
lower-rated fixed income securities to the extent described in the
Prospectus. The lower ratings of certain securities held by these Funds
reflect a greater possibility that adverse changes in the financial condition
of the issuer or economic conditions in general, or

29
<PAGE>

both, or an unanticipated rise in interest rates, may impair the ability of the
issuer to make payments of interest and principal. The inability (or perceived
inability) of issuers to make timely payment of interest and principal would
likely make the values of securities held by these Funds more volatile and could
limit a Fund's ability to sell its securities at prices approximating the values
the Fund had placed on such securities. In the absence of a liquid trading
market for the securities held by it, a Fund may be unable at times to establish
the fair value of such securities. The rating assigned to a security by Moody's
Investors Service, Inc. or S & P (or by any other nationally recognized
securities rating organization) does not reflect an assessment of the volatility
of the security's market value or the liquidity of an investment in the
security. See Appendix A to the Prospectus for a description of security
ratings.

Like those of other fixed income securities, the values of lower-rated
securities fluctuate in response to changes in interest rates. Thus, a decrease
in interest rates will generally result in an increase in the value of a Fund's
assets. Conversely, during periods of rising interest rates, the value of a
Fund's assets will generally decline. In addition, the values of such
securities are also affected by changes in general economic conditions and
business conditions affecting the specific industries of their issuers. Changes
by recognized rating services in their ratings of any fixed income security and
in the ability of an issuer to make payments of interest and principal may also
affect the value of these investments. Changes in the value of portfolio
securities generally will not affect cash income derived from such securities,
but will effect a Fund's net asset value. A Fund will not necessarily dispose
of a security when its rating is reduced below its rating at the time of
purchase, although the Adviser will monitor the investment to determine whether
its retention will assist in meeting a Fund's investment objective.

Certain securities held by a Fund may permit the issuer at its option to
call, or redeem, its securities. If an issuer were to redeem securities held by
a Fund during a time of declining interest rates, the Fund may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.

LOAN PARTICIPATIONS AND ASSIGNMENTS. A Fund's investment in Loan
Participations (as defined in the Prospectus) typically will result in the Fund
having a contractual relationship only with the Lender and not with the
borrower. The Fund will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participations and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, the Fund generally will
have no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the Loan, nor any right of set-off against the borrower,
and the Fund may not directly benefit from any collateral supporting the Loan in
which it has purchased the Participation. As a result, the Fund may be subject
to the credit risk of both the borrower and the Lender that is selling the
Participation. In the event of the insolvency of the Lender selling a
Participation, the Fund may be treated as a general creditor of the Lender and
may not benefit from any set-off between the Lender and the

30
<PAGE>

borrower.

When a Fund purchases Loan Assignments (as defined in the Prospectus) from
Lenders, it will acquire direct rights against the borrowers on the Loan.
Because Assignments are arranged through private negotiations between potential
assignees and potential assignors, however, the rights and obligations acquired
by the Fund as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender. Because there is no liquid
market for such securities, the Funds anticipate that such securities could be
sold only to a limited number of institutional investors. The lack of a liquid
secondary market may have an adverse impact on the value of such securities and
a Fund's ability to dispose of particular Assignments or Participations when
necessary to meet redemptions of Fund shares, to meet the Fund's liquidity needs
or when necessary in response to a specific economic event, such as
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for a Fund to value these securities for purposes of calculating its
net asset value.

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

The Adviser, and Subadviser in the case of Special Fund, places orders for
the purchase and sale of the Funds' securities, supervises their execution and
negotiates brokerage commissions on behalf of each Fund. For purposes of the
remainder of this section, "Portfolio Transactions and Brokerage Allocation,"
discussion of the Adviser includes the Subadviser, but only with respect to
Special Fund. It is the practice of the Adviser to seek the best prices and
best execution of orders and to negotiate brokerage commissions that in the
Adviser's opinion, are reasonable in relation to the value of the brokerage
services provided by the executing broker. Brokers who have executed orders for
the Funds are asked to quote a fair commission for their services. If the
execution is satisfactory and if the requested rate approximates rates currently
being quoted by the other brokers selected by the Adviser, the rate is deemed by
the Adviser to be reasonable. Brokers may ask for higher rates of commission if
all or a portion of the securities involved in the transaction are positioned by
the broker, if the broker believes it has brought a Fund an unusually favorable
trading opportunity, or if the broker regards its research services as being of
exceptional value and payment of such commissions is authorized by the Adviser
after the transaction has been consummated. If the Adviser more than
occasionally differs with the broker's appraisal of opportunity or value, the
broker would not be selected to execute trades in the future. The Adviser
believes that each Fund benefits with a securities industry comprised of many
and diverse firms and that the long-term interest of shareholders of the Funds
is best served by its brokerage policies that include paying a fair commission,
rather than seeking to exploit its leverage to force the lowest possible
commission rate. The primary factors considered in determining the firms to
which brokerage orders are given are the Adviser's appraisal of the firm's
ability to execute the order in the desired manner, the value of research
services provided by the firm, and the firm's attitude toward and interest in
mutual funds

31
<PAGE>

in general, including the sale of mutual funds managed and sponsored by the
Adviser. The Adviser does not offer or promise to any broker an amount or
percentage of brokerage commissions as an inducement or reward for the sale of
shares of the Funds. Over-the-counter purchases and sales are transacted
directly with principal market-makers, except in those circumstances where, in
the opinion of the Adviser, better prices and execution are available elsewhere.

A change in securities held in the portfolio of a Fund is known as
"Portfolio Turnover" and may involve the payment by a Fund of dealer mark-ups or
brokerage or underwritings commissions and other transaction costs on the sale
of securities, as well as on the reinvestment of the proceeds in other
securities. Portfolio turnover rate for a fiscal year is the percentage
determined by dividing the lesser of the cost of purchases or proceeds from
sales of portfolio securities by the average of the value of portfolio
securities during such year, all excluding securities whose maturities at
acquisition were one year or less. Each Fund cannot accurately predict its
portfolio turnover rate, but the Adviser anticipates that each Fund's rate will
not exceed 100% under normal market conditions. A 100% annual turnover rate
would occur, for example, if all the securities in the portfolio were replaced
once in a period of one year. A Fund's portfolio turnover rate may be higher
than that described above if a Fund finds it necessary to significantly change
its portfolio to adopt a temporary defensive position. A high turnover rate
would increase commission expenses and may involve realization of gains that
would be taxable to shareholders. The ability of a Fund to make purchases and
sales of securities and to engage in options and futures transactions will be
limited by certain requirements of the Code, including a requirement that less
than 30% of the Fund's annual gross income be derived from gains on the sale of
securities and certain other assets held for less than three months.

In general terms, the nature of research services provided by brokers
encompasses statistical and background information, and forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income markets and equity markets, specific industry groups
and individual issues. Research services will vary from firm to firm, with
broadest coverage generally from the large full-line firms. Smaller firms, in
general, tend to provide information and interpretations on a smaller scale,
frequently with a regional emphasis. In addition, several firms monitor
federal, state, local and foreign political developments; many of the brokers
also provide access to outside consultants. The outside research assistance is
particularly useful to the Adviser's staff, since the brokers, as a group, tend
to monitor a broader universe of securities and other matters than the Adviser's
staff can follow. In addition, the outside research provides the Adviser with a
diverse perspective on financial markets. Research and investment information
is provided by these and other brokers at no cost to the Adviser and is
available for the benefit of other accounts advised by the Adviser and its
affiliates; and not all of this information will be used in connection with the
Funds. While this information may be useful in varying degrees and may tend to
reduce the Adviser's expenses, it is not possible to estimate its value, and, in
the opinion of the Adviser, it

32
<PAGE>

does not reduce the Adviser's expenses by a determinable amount. The extent to
which the Adviser makes use of statistical, research and other services
furnished by brokers is considered by the Adviser in the allocation of brokerage
business, but there is no formula by which such business is allocated. The
Adviser does so in accordance with its judgment of the best interests of the
Funds and their shareholders.

Purchases and sales of fixed income securities will usually be principal
transactions. Such securities often will be purchased or sold from or to
dealers serving as market makers for the securities at a net price. Each Fund
will also purchase such securities in underwritten offerings and will, on
occasion, purchase securities directly from the issuer. Generally, fixed income
securities are traded on a net basis and do not involve brokerage commissions.
The cost of executing fixed income securities transactions consists primarily of
dealer spreads and underwriting commissions.

In purchasing and selling fixed income securities, it is the policy of each
Fund to obtain the best results, while taking into account the dealer's general
execution and operational facilities, the type of transaction involved and other
factors, such as the dealer's risk in positioning the securities involved.
While the Adviser generally seeks reasonably competitive spreads or commissions,
the Funds will not necessarily pay the lowest spread or commission available.

Each Fund may, under circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer that has
provided statistical or other research services to the Funds. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of other securities firms. During the
fiscal years ended October 31, 1995 and December 31, 1995, respectively, each of
the Funds listed below paid the total brokerage commissions indicated below,
including, in the case of the Government, High Yield, Income, Growth, Special
and Strategic Income Funds, commissions to Advest, Inc. ("Advest"), an affiliate
of the Funds' former investment adviser.

BROKERAGE COMMISSIONS PAID DURING
FISCAL YEAR ENDED OCTOBER 31, 1995

Income and Growth Fund $249,474

High Total Return Fund $0

33
<PAGE>

BROKERAGE COMMISSIONS
PAID DURING FISCAL YEAR ENDED
DECEMBER 31, 1995

Percent of Percent of
Aggregate Dollar
Fund Total Advest Commissions Amount
- ---- ----- ------ ----------- ------

Government Fund $_____ $_____ _____% _____%
High Yield Fund $ _____ $_____ _____% _____%
Income Fund $ _____ $_____ _____% _____%
Growth Fund $_____ $_____ _____% _____%
Special Fund $ _____ $_____ _____% _____%
Strategic Income Fund $______ $_____ _____% _____%

SERVICES OF THE ADVISER AND ADMINISTRATOR

Pursuant to an Investment Advisory Agreement with each Fund, Northstar
Investment Management Corporation acts as the investment adviser to each Fund.
In this capacity, the Adviser, subject to the authority of the Trustees of the
Funds, is responsible for furnishing continuous investment supervision to the
Funds and is responsible for the management of each Fund's portfolio.

The Adviser is an indirect, majority-owned subsidiary of ReliaStar
Financial Corp. ("ReliaStar"). Combined minority interests in the Adviser held
by members of senior management of ReliaStar currently equal 20%. ReliaStar is
a publicly traded holding company whose subsidiaries specialize in the life
insurance business. Through Northwestern National Life Insurance Company
("Northwestern") and other subsidiaries, ReliaStar issues and distributes
individual life insurance and annuities, group life and health insurance and
life and health reinsurance, and provides related investment management
services. The address of the Adviser is Two Pickwick Plaza, Greenwich,
Connecticut 06830. The address of ReliaStar is 20 Washington Avenue South,
Minneapolis, Minnesota 55401.

The Adviser charges a fee under each advisory agreement to Government
Securities Fund, High Yield Fund, Income Fund, Growth Fund, Special Fund and
Strategic Income Fund at an annual rate, after voluntary waivers or expense
reimbursements, of 0.45%, 0.45%, 0.65%, 0.75%, 0.75% and 0.65% of such Fund's
average daily net assets, respectively. This fee is accrued daily and payable
monthly.

The Adviser charges a fee to the High Total Return Fund and Income and
Growth Fund at the annual rate of 0.75% on the first $250,000,000 of aggregate
average daily net assets of each Fund, 0.70% on the next $250,000,000 of such
assets, 0.65% on the next $250,000,000 of such assets; 0.60% on the next
$250,000,000 of such assets, and

34
<PAGE>

0.55% on the remaining aggregate daily net assets of each Fund in excess of $1
billion.

The Adviser has agreed that if, in any fiscal year, the aggregate expenses
of a Fund, exclusive of taxes, distribution fees, brokerage, interest and (with
the prior consent of any necessary state securities commissions) extraordinary
expenses, but including the management fee, exceed the most restrictive expense
limitations applicable to the Fund under state securities laws or published
regulations thereunder, the Adviser will refund on a proportionate basis to the
Fund whose expenses exceeded such limitation the excess over such amount up to
the total fee received by the Adviser. Currently, the most restrictive of such
limitations would require the Adviser to reimburse such a Fund to the extent
that in any fiscal year such aggregate expenses exceed 2.5% of the first
$30,000,000 of the average net assets, 2.0% of the next $70,000,000 of the
average net assets and 1.5% of any amount of the average net assets in excess of
$100,000,000.

The Investment Advisory Agreement for the Income and Growth Fund and
High Total Return Fund was approved by the Trustees of the Northstar
Advantage Trust on October 23, 1993, and by the sole Shareholder of the
Northstar Income and Growth Fund, and High Total Return Fund on November 8,
1993. The Investment Advisory Agreement continued in effect for a period of
two years and was renewed by the Trustees for one year on October 31, 1995.
It will continue in effect from year to year if specifically approved
annually by (a) the Trustees, acting separately on behalf of each Fund,
including a majority of the Disinterested Trustees, or (b) a majority of the
outstanding voting securities of each class of each Fund as defined in the
1940 Act.

Each Investment Advisory Agreement for the remaining Funds was approved by
the Trustees of the affected Fund on March 1, 1995 and by the shareholders of
such Fund on June 2, 1995. Each such Investment Advisory Agreement will
continue in effect until June 2, 1997, and thereafter, will continue in effect
from year to year if specifically approved annually by (a) the Trustees, acting
separately on behalf of the particular Fund, including a majority of the
Disinterested Trustees, or (b) a majority of the outstanding voting securities
of each class of such Fund as defined in the 1940 Act.

A Fund's Investment Advisory Agreement may be terminated as to any class,
without penalty and at any time, by a similar vote upon not more than 60 days'
nor less than 30 days' written notice by the Adviser, the Trustees, or a
majority of the outstanding voting securities of such class of such Fund as
defined in the 1940 Act. Such agreement will automatically terminate in the
event of its assignment, as defined in Section 2(a)(4) of the 1940 Act.

Pursuant to a Subadvisory Agreement between the Adviser and the
Subadviser, effective February 1, 1996, Navellier acts as subadviser to
Special Fund. In this capacity, Navellier Fund Management, Inc.,
subject to the supervision and control of the Adviser and the Trustees of
Special Fund, will manage Special Fund's portfolio investments, consistently
with such

35
<PAGE>

Fund's investment objective, and will execute any of Special Fund's
investment policies that it deems appropriate to utilize from time to time.
Fees payable under the Subadvisory Agreement will accrue daily and be paid
monthly by the Adviser. As compensation for its services, the Adviser will
pay the Subadviser at the annual rate of 0.48 of 1% of the average daily net
assets of Special Fund. The Subadviser is wholly-owned and controlled by its
sole stockholder, Louis G. Navellier. The Subadviser's address is: Call Box
10012, Incline Village, Nevada 89450-1012. The Subadvisory Agreement was
approved by the Trustees of the Fund on December 1, 1995, and by vote of the
Shareholders of the Fund on January 30, 1996. The Subadvisory Agreement may
be terminated without payment of any penalty by the Adviser, the Subadviser,
the Trustees of such Fund, or the shareholders of such Fund on
not more than 60 days' and not less than 30 days' prior written notice.
Otherwise, the Subadvisory Agreement will remain in effect for two years and
will, thereafter, continue in effect from year to year, subject to the annual
approval of the Trustees of Special Fund, or the vote of a majority of the
outstanding voting securities of Special Fund, and the vote, cast in person
at a meeting duly called and held, of a majority of the Trustees of Special
Fund who are not parties to the Subadvisory Agreement or "interested persons"
(as defined in the 1940 Act) of any such Party.

Northstar Administrators Corporation serves as administrator for the Funds,
pursuant to an Administrative Services Agreement with each Fund. Subject to the
supervision of the Board of Trustees, the Administrator provides the overall
business management and administrative services necessary to the proper conduct
of the Funds' business, except for those services performed by the Adviser under
the Investment Advisory Agreements, the custodian for the Funds under the
Custodian Agreements, the transfer agent for the Funds under the Transfer Agency
Agreements, and such other service providers as may be retained by the Funds
from time to time. The Administrator acts as liaison among these service
providers to the Funds. The Administrator is also responsible for ensuring that
the Funds operate in compliance with applicable legal requirements and for
monitoring the Adviser for compliance with requirements under applicable law and
with the investment policies and restrictions of the Funds. The Administrator
is an affiliate of the Adviser. The address of the Administrator is: Two
Pickwick Plaza, Greenwich, Connecticut 06830.

The Administrative Services Agreement was approved by the Trustees of
the Trust on behalf of the Income and Growth Fund and High Total Return Fund
on October 23, 1993, and continued in effect for a period of two years. The
Agreement was renewed by the Trustees for one year on October 31, 1995 and
will continue in effect from year to year thereafter, provided such
continuance is approved annually by a majority of the Trustees of the Trust.
The Administrator's fee is accrued daily against the value of each Fund's net
assets and is payable by each Fund monthly at an annual rate of .10% of each
Fund's average daily net assets. In addition, the Administrator charges an
annual account fee of $5.00 for each account of beneficial owners of shares
in a Fund for providing certain shareholder services and assisting
broker-dealer shareholder accounts.

Each Administrative Services Agreement for the remaining Funds was approved

36
<PAGE>

by the Trustees of the particular Fund on March 1, 1995. The Agreements provide
that until June 2, 1997, the Administrator will not receive any compensation
under such agreements and thereafter shall receive such compensation as the
Board of Trustees of the Funds may determine. The Agreements will continue in
effect until June 2, 1997, and from year to year thereafter, provided such
continuance is approved annually by a majority of the Disinterested Trustees of
the affected Fund.

During the fiscal year ended October 31, 1995, the Funds listed below paid
the Adviser and Administrator the following investment advisory and
administrative fees, respectively:

FISCAL YEAR ENDED OCTOBER 31, 1995

Advisory Fees Administrative Fees

Income and Growth Fund (1) $1,258,432 $154,457

High Total Return Fund (2) $941,310 $125,508

(1) There was no expense reimbursement.

(2) There was no expense reimbursement.

Prior to June 5, 1995, the Government Securities, Strategic Income, High
Yield, Income, Growth and Special Funds were managed by Boston Security
Counsellors, Inc. ("BSC") and did not utilize the services of an administrator.
During the fiscal years ended December 31, 1994, 1993 and 1992, the Funds listed
below paid BSC the following investment advisory fees:

TOTAL ADVISORY FEES PAID
DURING YEAR ENDED DECEMBER 31,

Fund 1995 1994 1993

Government Fund (1) $747,846 $767,370
High Yield Fund $622,761 $432,063
Income Fund $519,729 $447,631
Growth Fund $604,576 $517,203
Special Fund $268,139 $145,178
Strategic Income Fund $57,726(3) --

(1) Net of waiver of investment advisory fees of $______, $332,370 and
$341,054 for the years ended December 31, 1995, 1994 and 1993,
respectively. BSC elected to waive 0.20% of its investment advisory
fee,

37
<PAGE>

effective January 1, 1989 for the Government Securities Fund.

(2) For the period July 1, 1994 (commencement of the Strategic Income
Fund's operations) through December 31, 1994, Advest, an affiliate of
BSC, voluntarily reimbursed the Strategic Income Fund for $57,336 in
expenses. Accordingly, expenses borne by Strategic Income Fund for
the six-month period ended December 31, 1994, amounted to $170,198,
representing 1.90% of the Strategic Income Fund's average net assets.

NET ASSET VALUE

For each Fund in the Northstar Advantage Trust, equity securities are
valued at the last sale price on the exchange or in the principal OTC market in
which such securities are being valued, 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 obtained from a quotation reporting system or from established
market makers, or at prices for securities of comparable maturity, quality and
type. For the Northstar Advantage Special, Growth, Income, High Yield,
Strategic Income, and Government Securities Funds, portfolio securities, options
and futures contracts and options thereon that are traded on national exchanges
or in the NASDAQ System are valued at the last sale or settlement price on the
exchange or market where primarily traded or, if none that day, at the mean of
the last reported bid and asked prices, using prices as of the close of trading
on the applicable exchange or market. Securities and options that are traded in
the OTC market (other than on the NASDAQ System) are valued at the mean of the
last available bid and asked prices. Such valuations are based on quotations of
one or more dealers that make markets in the securities as obtained from such
dealers or from a pricing service. Securities (including OTC options) for which
market quotations are not readily available (which may constitute a major
portion of the High Yield Fund's portfolio) and other assets are valued at their
fair value as determined by or under the direction of the Trustees. Such fair
value may be determined by various methods, including utilizing information
furnished by pricing services that determine calculations for such securities
using methods based, among other things, upon market transactions for comparable
securities and various relationships between securities that are generally
recognized as relevant.

The net asset value of each Fund's shares fluctuates and is determined
separately for each class as of the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m. EST), on each business day that the Exchange
is open. Net asset value per share is computed by determining the value of a
Fund's assets (securities held plus cash and other assets, including dividend
and interest accrued but not received) less all liabilities of the Fund
(including accrued expenses other than class specific expenses), and dividing
the result by the total number of shares outstanding at such time. The specific
expenses borne by each class of shares will be deducted from that class and will

38
<PAGE>

result in different net asset values and dividends. The net asset value per
share of the Class B, Class C and Class T shares of each Fund will generally be
lower than that of the Class A shares because of the higher class-specific
expenses borne by each of the Class B, Class C and Class T shares. Class A
shares of the Funds may be purchased at net asset value, through a dealer, where
the amount invested represents redemption proceeds from another open-ended fund
with the same or similar investment objective, and PROVIDED the following
conditions are met: such redemption occurred no more than 60 days prior to the
purchase of shares of a Northstar Fund, the redeemed shares were held for at
least six months prior to redemption, and the proceeds of the redemption are
sent directly to Northstar or its agent, or maintained in cash or a money market
fund. No commissions will be paid to dealers in connection with such purchases.
Under normal market conditions, daily prices for securities are obtained from
independent pricing services, determined by them in accordance with the
registration statement for each Fund. Securities are valued at market value or,
if a market quotation is not readily available, at their fair value, determined
in good faith under procedures established by and under the supervision of the
Trustees. Money market instruments maturing within 60 days are valued using the
amortized cost method of valuation. This involves valuing a security at cost on
the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price a Fund
would receive if it sold the instrument. See "How Net Asset Value is
Determined" in the Prospectus.

PURCHASES AND REDEMPTIONS

Shares issued pursuant to the automatic reinvestment of income dividends
or capital gains distributions are not subject to a front-end or contingent
deferred sales load. There is no sales charge for qualified persons.
"Qualified Persons" are the following (a) active or retired Trustees,
Directors, Officers, Partners or Employees (including immediate family) of
(i) the Adviser or any of its affiliated companies, (ii) the Funds or any
Northstar affiliated investment company or (iii) dealers having a sales
agreement with the Underwriter, (b) trustees or custodians of any qualified
retirement plan or IRA established for the benefit of a person in (a) above;
(c) dealers, brokers or registered investment advisers that have entered into
an agreement with the Underwriter providing for the use of shares of the
Funds in particular investment products such as "wrap accounts" or other
similar managed accounts for the benefit of the clients of such brokers,
dealers and registered investment advisers, and (d) pension, profit sharing
or other benefit plans created pursuant to a plan qualified under Section 401
of the Code or plans under Section 457 of the Code, provided that such shares
are purchased by an employer sponsored plan with at least 100 eligible
employees. Class A shares of the Funds may be purchased at net asset value,
through a dealer, where the amount invested represents redemption proceeds
from another open-end fund with the same or similar investment objective, and
PROVIDED the following conditions are met: such redemption occurred no more
than 60 days prior to the purchase of shares of a Northstar Fund, the
redeemed shares were held for at least six months prior to redemption, and
the proceeds of the redemption are sent directly to Northstar or its agent,
or maintained in cash or a money market fund. No commissions will be paid to
dealers in connection with such purchases. There is also no initial sales
charge for "Purchasers" (defined below) if the initial amount invested in the
Funds) is at least $1,000,000 or the Purchaser signs a $1,000,000 Letter of
Intent, as hereinafter defined.

<PAGE>

HOW TO OBTAIN REDUCED SALES CHARGES ON CLASS A SHARES

Investors choosing the initial sales alternative may under certain
circumstances be entitled to pay reduced sales charges. The sales charge varies
with the size of the purchase and reduced charges apply to the aggregate of
purchases of a Fund made at one time by any "Purchaser," which term includes (i)
an individual and his/her spouse and their children under the age of 21, (ii) a
trustee or fiduciary purchasing for a single trust, estate or single fiduciary
account (including IRAs, pension, profit-sharing or other employee benefit
trusts created pursuant to a plan qualified under Section 401 of the Code, a
Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension Accounts ("SARSEP")) and 403(b) and 457 plans,
although more than one beneficiary or participant is involved; and (iii) any
other organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some purpose
other than the purchase at a discount of redeemable securities of a registered
investment company. The circumstances under which "Purchasers" may pay reduced
sales charges are described below.

RIGHTS OF ACCUMULATION

A Purchaser may qualify for reduced initial sales charges based upon the
Purchaser's existing investment in shares of the Funds at the time of purchase.
The applicable sales charge is determined by aggregating the dollar amount of
the new purchase and the greater of the Purchaser's total (i) net asset value or
(ii) cost of all shares owned in the Funds sold subject to a front-end sales
charge and/or designated as "Class A" shares then held by such Purchaser, and
applying the sales charge applicable to such aggregate.

In order to obtain this discount, the Underwriter (if a purchase is made
through an investment dealer) or Transfer Agent (if made by mail) must be
provided with sufficient information, including the Purchaser's total cost at
the time of purchase, to permit verification that the Purchaser qualifies for a
cumulative quantity discount, and confirmation of the order is subject to such
verification. The privilege of cumulative quantity discounts may be modified or
discontinued at any time.

LETTER OF INTENT

Purchasers may also qualify for reduced sales charges by signing a Letter
of Intent ("LOI"). This enables the Purchasers to aggregate purchases over a
13-month period of all Funds sold subject to a front-end sales charge and/or
designated as "Class A" shares. The sales charge is based on the total amount
invested during the 13-month period. A 90-day back-dated period can be used to
include earlier purchases (with a partial retroactive downward adjustment in an
amount equal to the commission paid to the broker-dealer); the 13-month period
would then begin on the date of the first purchase during the 90-day period. No
retroactive adjustment will be made if purchases exceed

40
<PAGE>

the amount indicted in the LOI. A shareholder must notify the Transfer Agent
whenever a purchase is being made pursuant to a LOI.

The LOI is not a binding obligation on the investor to purchase the full
amount indicated; however, on the initial purchase, if required (or on
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in shares registered in
the shareholder's name in order to assure payment of the proper sales charge.
If total purchases pursuant to the LOI (less any dispositions and exclusive of
any distributions on such shares automatically reinvested) are less than the
amount specified, the investor will be requested to remit to the Underwriter an
amount equal to the difference between the sales charge paid and the sales
charge applicable to the aggregate purchases actually made. If not remitted
within 20 days after written request, an appropriate number of escrowed shares
will be redeemed in order to realize the difference.

THE RIGHT OF REDEMPTION

The right to redeem shares may be suspended and payment therefor postponed
during periods when the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or, if permitted by rules of the SEC, during
periods when trading on the Exchange is restricted, or during any emergency that
makes it impracticable for any Fund to dispose of its securities or to determine
fairly the value of its net assets or during any other period permitted by order
of the SEC for the protection of investors. Furthermore, the Transfer Agent
will not mail redemption proceeds until checks received for shares purchased
have cleared, but payment will be forwarded immediately upon the funds becoming
available. Class B, Class C and Class T shareholders will be subject to the
applicable deferred sales charge, if any, for their shares at the time of
redemption.

The contingent deferred sales load will be waived with respect to Class T
shares in the following instances: (i) any partial or complete redemption of
shares of a shareholder who dies or becomes disabled, so long as the redemption
is requested within one year of death or the initial determination of
disability; (ii) any partial or complete redemption in connection with
distributions under Individual Retirement Accounts ("IRAs") or other qualified
retirement plans in connection with a lump-sum or other form of distribution
following retirement within the meaning of Section 72(t)(2)(A)(iv) or (v) of the
Code, disability or death, or after attaining the age of 59 1/2 in the case of
an IRA, Keogh Plan or custodial account pursuant to Section 403(b)(7) of the
Code, or on any redemption that results from a tax-free return of an excess
contribution pursuant to Section 408(d)(4) or (5) of the Code or Section 4979(f)
of the Code; (iii) redemptions effected pursuant to the Funds' right to
liquidate a shareholder's account if the aggregate net asset value of the shares
held in the account is less than $500; (iv) redemptions effected by (A)
employees of The Advest Group, Inc. ("AGI") and its subsidiaries, (B) IRAs,
Keogh plans and employee benefit plans for those employees, and (C) spouses and

41
<PAGE>

minor children of those employees, so long as orders for shares are placed on
behalf of the spouses or children by the employees; (v) redemptions effected by
accounts managed by investment advisory subsidiaries of AGI registered under the
Investment Advisers Act of 1940; and (vi) redemptions in connection with
exchanges of Fund Class T shares, including shares of the Class T account of the
Money Market Portfolio. Class T Shares convert to Class A shares at the end of
the month that is the later of (i) eight years after the Class T Shares were
purchased or (ii) May 31, 1998. The holding period for determining the
preferred sale load, if any, of Class T shares purchased with proceeds from
Advantage Insured Account shares includes any holding period applicable to the
withdrawal charge on such account.

The contingent deferred sales charge is waived on redemptions of shares (a)
following the death or disability, as defined in Section 72(m)(7) of the Code,
of a shareholder if redemption is made within one year of the death or
disability of the shareholder, as relevant; (b) in connection with redemptions
of shares made pursuant to a shareholder's participation in any systematic
withdrawal plan adopted by the Funds provided, however, that such withdrawals
shall not exceed in any calendar year 7% (9% in the case of the High Total
Return Fund and the High Yield Fund) of the original principal amount invested
(any excess being assessed the applicable deferred sales charge, if any), and
provided further that the redeeming shareholder reinvests all dividends and
capital gain distributions during his/her participation in the withdrawal plan;
(c) in connection with a partial or complete redemption in connection with
distributions under IRAs or other qualified retirement plans in connection with
a lump-sum or other form of distribution following retirement within the meaning
of Section 72(t)(2)(A)(iv) or (v) of the Code, disability or death, or after
attaining the age of 59 1/2 in the case of an IRA, Keogh plan or custodial
account pursuant to Section 403(b)(7) of the Code, or on any redemption
resulting from the tax-free return of an excess contribution pursuant to Section
408(d)(4) or (5) of the Code or Section 4979(f) of the Code; and (d) in
connection with the exercise of certain exchange privileges among Class B shares
of the Funds, including shares of the Class B Account of the Money Market
Portfolio.

EXCHANGES

The following conditions must be met for all exchanges among the Funds and
the Money Market Portfolio: (1) the shares that will be acquired in the exchange
(the "Acquired Shares") are available for sale in the shareholder's state of
residence; (2) the Acquired shares will be registered to the same shareholder
account as the shares to be surrendered (the "Exchanged Shares"); (3) the
Exchanged Shares must have been held in the shareholder's account for at least
30 days prior to the exchange; (4) except for exchanges into the Money Market
Portfolios, the account value of the Fund whose shares are to be acquired must
equal or exceed the minimum initial investment amount required by that Fund
after the exchange is implemented; and (5) a properly executed exchange request
has been received by the Transfer Agent.

42
<PAGE>

Each Fund reserves the right to delay the actual purchase of the Acquired
Shares for up to five business days if it determines that it would be
disadvantaged by an immediate transfer of proceeds from the redemption of
Exchanged Shares. Normally, however, the redemption of Exchanged Shares and the
purchase of Acquired Shares will take place on the day that the exchange request
is received in proper form. Each Fund reserves the right to terminate or
modify its exchange privileges at any time upon prominent notice to
shareholders. Such notice will be given at least 60 days in advance. It is
the policy of the Adviser to discourage and prevent frequent trading by
shareholders among the Funds in response to market fluctuations.
Accordingly, in order to maintain a stable asset base in each Fund and to
reduce administrative expenses borne by each Fund, the Adviser generally
restricts shareholders to a maximum of six exchanges out of a Fund each
calendar year. If a shareholder exceeds this limit, future exchange requests
may be denied.

CONVERSION FEATURE

Class B shares of each Fund will automatically convert to Class A shares
without a sales charge at the relative net asset values of each of the classes
after eight years from the acquisition of the Class B shares, and as a result,
will thereafter be subject to the lower distribution fee (but same service fee)
under the Class A Rule 12b-1 plan for each Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order to so qualify, the Fund must, among
other things, (i) derive each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, gains
from the sale of securities or foreign currencies, or other income (including
but not limited to gains from options, futures or forward contracts) derived
with respect to its business of investing in stock, securities or currencies;
(ii) derive less than 30% of its gross income each taxable year from the sale or
other disposition of certain assets, including securities, held for less than
three months (the "30% Limitation"; and (iii) at the end of each quarter of the
taxable year maintain at least 50% of the value of its total assets in cash,
government securities, securities of other regulated investment companies, and
other securities of issuers that represent, with respect to each issuer, no more
than 5% the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and with no more than 25% of its assets invested in
the securities (other than those of the U.S. Government or other regulated
investment companies) of any one issuer or of two or more issuers that the Fund
controls and that are engaged in the same, similar or related trades and
businesses. As a regulated investment company, each Fund generally will not be
subject to federal income tax on its income and gains that it distributes to
shareholders, if at

43
<PAGE>

least 90% of its investment company taxable income (which includes dividends,
interest and the excess of any short-term capital gains over long-term capital
losses) for the taxable year is distributed.

An excise tax at the rate of 4% will be imposed on the excess, if any, of a
Fund's "required distribution" over actual distributions in any calendar year.
Generally, the "required distribution" is 98% of a Fund's ordinary income for
the calendar year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 plus undistributed amounts from prior
years. Each Fund intends to make distributions sufficient to avoid imposition
of the excise tax. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by the Fund during October, November or
December of the year with a record date in such a month and paid by the Fund
during January of the following year. Such distributions will be taxable as if
received on December 31 in the year they are declared by the Fund, rather than
the year in which they are received.

The taxation of equity options and OTC options on debt securities is
governed by Code section 1234. Pursuant to Code section 1234, the premium
received by a Fund for selling a put or call option is not included in income at
the time of receipt. If the option expires, the premium is short-term capital
gain to the Fund. If the Fund enters into a closing transaction, the difference
between the amount paid to close out its position and the premium received is
short-term capital gain or loss. If a call option written by a Fund is
exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by a Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term,
depending upon the holding period of the option. If the option is exercised,
the cost of the option, in the case of a call option, is added to the basis of
the purchased security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.

Certain options, futures contracts and forward contracts in which a Fund
may invest are "section 1256 contracts." Gains or losses on section 1256
contracts are generally considered 60% long-term and 40% short-term capital
gains or losses ("60/40 gains or losses"); however, foreign currency gains or
losses (as discussed below) arising from certain section 1256 contracts may be
treated as ordinary income or loss. Also, section 1256 contracts held by a Fund
at the end of each taxable year (and, generally, for purposes of the 4% excise
tax, on October 31 of each year) are treated as sold on such date at fair market
value, resulting in unrealized gains or losses being treated as though they were
realized.

44
<PAGE>

Hedging transactions undertaken by a Fund may result in straddles for U.S.
federal income tax purposes. The straddle rules may accelerate income to a
Fund, defer losses to a Fund, and affect the character of gains (or losses)
realized by a Fund. Hedging transactions may increase the amount of short-term
capital gain realized by a Fund that is taxed as ordinary income when
distributed to shareholders. A Fund may make one or more of the various
elections available under the Code with respect to hedging transactions. If a
Fund makes any of the elections, the amount, character and timing of the
recognition of gains or losses from the affected positions will be determined
under rules that vary according to the elections made. The 30% limitation may
limit the extent to which a Fund will be able to engage in transactions in
options, futures contracts and forward contracts.

Under the Code, gains or losses attributable to fluctuations in exchange
rates that occur between the time a Fund accrues interest or other receivables,
or accrues expenses or other liabilities, denominated in a foreign currency and
the time the Fund actually collects such receivables, or pays such liabilities,
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and certain
options, futures and forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition also are treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, may increase or decrease the amount of a Fund's
investment company taxable income to be distributed to its shareholders as
ordinary income.

A Fund will not realize gain or loss on a short sale of a security until it
closes the transaction by delivering the borrowed security to the lender. All
or a portion of any gain arising from a short sale may be treated as short-term
capital gain, regardless of the period for which the Fund held the security used
to close the short sale. In addition, the Fund's holding period for any
security that is substantially identical to that which is sold short may be
reduced or eliminated as a result of the short sale.

Investments by a Fund in zero coupon securities will result in income to
the Fund equal to a portion of the excess of the face value of the securities
over their issue price (the "original issue discount") each year that the
securities are held, even though the Fund receives no cash interest payments.
This income is included in determining the amount of income that the Fund must
distribute to maintain its status as a regulated investment company and to avoid
the payment of federal income tax and the 4% excise tax. If a Fund invests in
certain high yield original issue discount obligations issued by corporations, a
portion of the original issue discount accruing on the obligations may be
eligible for the deduction for dividends received by corporations. In such
event, a portion of the dividends of investment company taxable income received
from the Fund by its corporate shareholders may be eligible for this deduction.

<PAGE>

Gain derived by a Fund from the disposition of any market discount bonds
(i.e., bonds purchased other than at original issue, where the face value of the
bonds exceeds their purchase price) held by the Fund will be taxed as ordinary
income to the extent of the accrued market discount on the bonds, unless the
Fund elects to include the market discount in income as it accrues.

If a Fund invests in stock of certain foreign corporations that generate
largely passive investment-type income, or which hold a significant percentage
of assets that generate such income (referred to as "passive foreign investment
companies" or "PFICs"), these investments would be subject to special tax rules
designed to prevent deferral of U.S. taxation of the Fund's share of the PFIC's
earnings. In the absence of certain elections to report these earnings on a
current basis, regardless of whether the Fund actually receives any
distributions from the PFIC, investors in the Fund would be required to report
certain "excess distributions" from, and any gain from the disposition of stock
of, the PFIC as ordinary income. This ordinary income would be allocated
ratably to the Fund's holding period for the stock. Any amounts allocated to
prior years would be taxable at the highest rate of tax applicable in that year,
increased by an interest charge determined as though the amounts were
underpayments of stock.

Income received by the Funds from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. If more than
50% of the value of a Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, the Fund will be eligible and
may elect to "pass through" to the Fund's shareholders the amount of foreign
taxes paid by the Fund. Pursuant to this election, a shareholder will be
required to include in gross income (in addition to dividends actually received)
its pro rata share of the foreign taxes paid by the Fund, and may be entitled
either to deduct its pro rata share of the foreign taxes in computing its
taxable income or to use the amount as a foreign tax credit against its U.S.
federal income tax liability, subject to limitations. Each shareholder will be
notified within 60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will "pass through" for that year. If a Fund is
not eligible to make the election to "pass through" to its shareholders its
foreign taxes, the foreign taxes it pays will reduce its investment company
taxable income and distributions by the Fund will be treated as U.S. source
income.

Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to its foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the Fund's income flows through to its shareholders. With respect to
the Funds, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation gains, including fluctuation gains
from foreign currency denominated debt securities, receivables and payables, and
options, futures and forward transactions, will be treated as ordinary income
derived from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income (as defined for purposes of the
foreign tax

46
<PAGE>

credit), including the foreign source passive income passed through by the
Funds.

The current position of the Internal Revenue Service (the "IRS") generally
is to treat a regulated investment company, such as the Special Fund, as owning
its proportionate share of the income and assets of any partnership in which it
is a partner, in applying the 90% qualifying income requirement, the 30%
Limitation and the asset diversification requirements that, as described above,
each Fund must satisfy to qualify as a regulated investment company under the
Code. These requirements may limit the extent to which the Special Fund may
invest in limited partnerships, especially in the case of limited partnerships
that do not primarily invest in a diversified portfolio of stocks and
securities.

Dividends paid out of a Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. If a portion of a Fund's
income consists of dividends paid by U.S. corporations, a portion of the
dividends paid by the Fund may be eligible for the corporate dividends-received
deduction. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, designated as capital
gain dividends are taxable as long-term capital gains, regardless of how long
the shareholder has held the Fund's shares, and are not eligible for the
dividends-received deduction. Shareholders receiving distributions in the form
of additional shares, rather than cash, generally will have a cost basis in each
such share equal to the net asset value of a share of the relevant Fund on the
reinvestment date. A distribution of an amount in excess of a Fund's current
and accumulated earnings and profits will be treated by a shareholder as a
return of capital that is applied against and reduces the shareholder's basis in
his or her shares. To the extent that the amount of any such distribution
exceeds the shareholder's basis in his or her shares, the excess will be treated
by the shareholder as gain from a sale or exchange of the shares. Shareholders
will be notified annually as to the U.S. federal tax status of distributions,
and shareholders receiving distributions in the form of additional shares will
receive a report as to the net asset value of those shares.

Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss that will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.

Under certain circumstances, the sales charge incurred in acquiring shares
of a Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund originally
acquired with a sales

47
<PAGE>

charge are disposed of within 90 days after the date on which they were acquired
and new shares of a regulated investment company are acquired without a sales
charge or at a reduced sales charge. In that case, the gain or loss realized on
the disposition will be determined by excluding from the tax basis of the shares
all or a portion of the sales charge incurred in acquiring those shares. This
exclusion applies to the extent that the otherwise applicable sales charge with
respect to the newly acquired shares is reduced as a result of the shareholder
having incurred a sales charge paid for the new shares. This rule may be
applied to successive acquisitions of shares of stock.

Distributions by a Fund reduce the net asset value of that particular
Fund's shares. Should a distribution reduce the net asset value of a share
below a shareholder's cost for the share, such a distribution nevertheless
generally would be taxable to the shareholder as ordinary income or long-term
capital gain, even though, from an investment standpoint, it may constitute a
partial return of capital. In particular, investors should be careful to
consider the tax implications of buying shares just prior to a distribution by a
Fund. The price of shares purchased at that time may include the amount of the
forthcoming distribution, but the distribution generally would be taxable to
them.

Some shareholders may be subject to withholding of Federal income tax on
dividends and redemption payments from a Fund ("backup withholding") at the rate
of 31%. Corporate shareholders and certain other shareholders specified in the
Code generally are exempt from such backup withholding. Generally, shareholders
subject to backup withholding will be (i) those for whom a certified taxpayer
identification number is not on file with a Fund, (ii) those about whom
notification has been received (either by the shareholder or by a Fund) from the
IRS that they are subject to backup withholding or (iii) those who, to a Fund's
knowledge, have furnished an incorrect taxpayer identification number.
Generally, to avoid backup withholding, an investor must, at the time an account
is opened, certify under penalties of perjury that the taxpayer identification
number furnished is correct and that he or she is not subject to backup
withholding.

The foregoing discussion relates solely to U.S. Federal income tax law.
Dividends and distributions also may be subject to state, local and foreign
taxes. Dividends paid by a Fund from income attributable to interest on
obligations of the U.S. Government and certain of its agencies and
instrumentalities may be exempt from state and local taxes in certain states.
Shareholders should consult their tax advisers regarding the possible exclusion
of this portion of their dividends for state and local tax purposes. Non-U.S.
investors also should consult their tax advisers concerning the tax consequences
of ownership of shares of a Fund, including the possibility that distributions
may be subject to a 30% United States withholding tax (or a reduced rate of
withholding provided by treaty).

Shareholders of Class A, Class B and Class C shares may direct that income

48
<PAGE>

dividends and capital gain distributions be paid to them through various options
listed in the "Dividends and Distributions Reinvestment Options" section of the
Funds' current Prospectus. If a shareholder selects either of two such options
(that: (a) income dividends be paid in cash and capital gain distributions be
paid in additional shares of the same class of a designated Fund at net asset
value; or (b) income dividends and capital gain distributions both be paid in
cash), and the dividend/distribution checks cannot be delivered, or, if such
checks remain uncashed for six months, each Fund reserves the right to reinvest
the dividend or distribution in the shareholder's account at the then-current
net asset value and to convert the shareholder's election to automatic
reinvestment in shares of the Fund from which the distributions were made.

UNDERWRITER AND DISTRIBUTION SERVICES

Each Fund has received from the IRS, rulings to the effect that (i) the
implementation of the multiple class purchase arrangement will not result in a
Fund's dividends or distributions constituting "preferential dividends" under
the Code, and (ii) that any conversion feature associated with a class of shares
does not constitute a taxable event under federal income tax law.

The shares of each Fund, when issued, will be fully paid and non-
assessable, have no preference, preemptive, or similar rights, and will be
freely transferable. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the election
of Trustees. Shareholders may, in accordance with the Declaration of Trust,
cause a meeting of shareholders to be held for the purpose of voting on the
removal of Trustees. Meetings of the shareholders will be called upon written
request of shareholders holding in the aggregate not less than 10% of the
outstanding shares of the affected Fund or class having voting rights. Except
as set forth above and subject to the 1940 Act, the Trustees will continue to
hold office and appoint successor Trustees.

Pursuant to Underwriting Agreements, Northstar Distributors, Inc. is the
Underwriter for each Fund and as such conducts a continuous offering pursuant to
a "best efforts" arrangement requiring it to take and pay for only such
securities as may be sold to the public. The Underwriter is an affiliate of the
Adviser and the Administrator.

Each Fund has adopted separate distribution plans under Rule 12b-1 of the
1940 Act for each class of shares of the Fund (collectively the "Plans"). The
Plans permit each Fund to compensate the Underwriter in connection with
activities intended to promote the sale of shares of each class of shares of
each Fund.

Pursuant to the Plan for Class A shares, each Fund may compensate the
Underwriter up to 0.30% of average daily net assets of such Fund's Class A
shares. Under the Plans for Class B and Class C shares, each Fund may
compensate the

49
<PAGE>

Underwriter up to 1.00% of the average daily net assets attributable to the
respective class of such Fund. Pursuant to the Plan for Class T shares, each
Fund compensates the Underwriter in an amount equal to 0.95% (in the case of
Growth Fund, Special Fund and Strategic Income Fund), 0.75% (in the case of
Income Fund) and 0.65% (in the case of Government Securities Fund and High Yield
Fund) of annual average daily net assets of such Fund's Class T shares.
However, each of the Class T Plans provides for compensation of up to 1.00% of
annual average daily net assets. Expenditures by the Underwriter under the
Plans shall consist of: (i) commissions to sales personnel for selling shares
of the Funds (including underwriting fees and financing expenses incurred in
connection with the sale of Class B and Class C shares); (ii) compensation,
sales incentives and payments to sales, marketing and service personnel; (iii)
payments to broker-dealers and other financial institutions that have entered
into agreements with the Underwriter in the form of a Dealer Agreement for
Northstar Advantage Funds for services rendered in connection with the sale and
distribution of shares of the Funds; (iv) payment of expenses incurred in sales
and promotional activities, including advertising expenditures related to the
Funds; (v) the costs of preparing and distributing promotional materials; (vi)
the cost of printing the Funds' Prospectus and SAI for distribution to potential
investors; and (vii) other activities that are reasonably calculated to result
in the sale of shares of the Funds. With respect to each Class T Plan, it is
anticipated that all of the payments received by the Underwriter under the Plan
will be paid to Advest as compensation for its prior distribution related and
current shareholder servicing related activities in connection with the Class T
Shares.

A portion of the fees paid to the Underwriter pursuant to the 12b-1 plans
not exceeding 0.25% annually of the average daily net assets of each Fund's
shares may be paid as compensation for providing services to each Fund's
shareholders, including assistance in connection with inquiries related to
shareholder accounts (the "Service Fee"). In order to receive Service Fees
under the Plans, participants must meet such qualifications as are established
in the sole discretion of the Underwriter, such as services to each Fund's
shareholders; or services providing each Fund with more efficient methods of
offering shares to coherent groups of clients, members or prospects of a
participant; or services permitting purchases or sales of shares, or
transmission of such purchases or sales by computerized tape or other electronic
equipment; or other processing.

If the Plans are terminated in accordance with their terms, the obligations
of a Fund to compensate the Underwriter for distribution related services
pursuant to the Plans will cease; however, subject to approval by the Trustees,
including a majority of the independent Trustees, a Fund may continue to make
payments past the date on which each Plan terminates up to the annual limits set
forth in each Plan for the purpose of compensating the Underwriter for services
that were incurred during the term of the Plan.

In addition to the amount paid to dealers pursuant to the sales charge
table in the

50
<PAGE>

Prospectus, the Underwriter from time to time pays, from its own resources or
pursuant to the Plans, a bonus or other incentive to dealers (other than the
Underwriter) that employ a registered representative who sells a minimum dollar
amount of the shares of a Fund during a specific period of time. Dealers may
not use sales of any of the Fund's shares to qualify for or participate in such
programs to the extent such may be prohibited by a dealer's internal procedures
or by the laws of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. Such bonuses or other incentives take
the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or without the United States, or other
bonuses such as certificates for airline tickets, dining establishments or the
cash equivalent of such bonuses. The Underwriter, from time to time, reallows
all or a portion of the sales charge on Class A shares, which it normally
reallows to individual selling dealers. However, such additional reallowance
generally will be made only when the selling dealer commits to substantial
marketing support such as internal wholesaling through dedicated personnel,
internal communications and mass mailings. The Underwriter has also agreed to
pay Advest, which through June 2, 1995 acted as principal underwriter to the
Funds, certain additional contingent compensation until June 2, 1998, based upon
a formula that takes into account both the sale by Advest of shares of the Funds
and other Northstar affiliated investment companies, the length of times of
investment and the annual redemption rates of the Funds' shares sold by Advest.
Such incentive compensation is in addition to the dealers' reallowance to which
Advest would otherwise be entitled.

The Trustees have concluded that there is a reasonable likelihood that the
Plans will benefit each Fund and its shareholders and that the Plans should
result in greater sales and/or fewer redemptions of Fund shares. On a quarterly
basis, the Trustees will review a report on expenditures under the Plans and the
purposes for which expenditures were made. The Trustees will conduct an
additional, more extensive review annually in determining whether the Plans
shall be continued. By their terms, continuation of the Plans from year to year
is contingent on annual approval by a majority of the Trustees acting separately
on behalf of each Fund and by a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Plans or any related agreements (the
"Plan Trustees"). The Plans provide that they may not be amended to increase
materially the costs that a Fund may bear pursuant to the applicable Plan
without approval of the shareholders of the affected Fund and that other
material amendments to the Plans must be approved by a majority of the Plan
Trustees acting separately on behalf of each Fund, by vote cast in person at a
meeting called for the purpose of considering such amendments. The Plans
further provide that while each plan is in effect, the selection and nomination
of Trustees who are not "interested persons" shall be committed to the
discretion of the Trustees who are not "interested persons." A Plan may be
terminated at any time by vote of a majority of the Plan Trustees or a majority
of the outstanding Class of shares of the affected Fund to which the Plan
relates.

51
<PAGE>

During their fiscal year-ended October 31, 1995, each class of shares of
the Funds listed below paid the following 12b-1 distribution and service fees
pursuant to the Plan of Distribution for each class:

12 b-1 FEES

CLASS A CLASS B CLASS C

Income and Growth Fund $_____ $_____ $_____

High Total Return Fund $_____ $_____ $_____

For the year ended October 31, 1995, expenses incurred by the Distributor
for distribution related activities with respect to each class of shares of each
Fund listed below were as follows:

INCOME AND GROWTH

CLASS A CLASS B CLASS C

Salaries/Overrides $_____ $_____ $_____
Regional Marketing Manager $_____ $_____ $_____
Expenses/Convention Expense $_____ $_____ $_____
Commissions Paid $_____ $_____ $_____
Marketing Expense $_____ $_____ $_____

Total $_____ $_____ $_____

HIGH TOTAL RETURN FUND

CLASS A CLASS B CLASS C

Total $_____ $_____ $_____

52
<PAGE>

For the following Funds' fiscal year ended October 31, 1995, the
Distributor received the following amounts in sales charges, after reallowance
to Dealers.

UNDERWRITING FEES

CLASS A CLASS B CLASS C

Income and Growth Fund $_____ $_____ $_____

High Total Return Fund $_____ $_____ $_____

During their fiscal year ended December 31, 1994, expenses incurred by
Advest for certain distribution related activities with respect to each of the
Funds listed below in the following two tables were as follows:

GOVERNMENT HIGH STRATEGIC
SECURITIES YIELD INCOME
EXPENSE FUND FUND FUND

Salaries/Overrides _______ _______ _______
Regional Marketing Manager _______ _______ _______
Expenses/Convention Expense _______ _______ _______
Commissions Paid _______ _______ _______
Marketing Expense _______ _______ _______

GROWTH SPECIAL INCOME
EXPENSE FUND FUND FUND

The Underwriting Agreements may be terminated at any time on not more than
60 days' written notice, without payment of a penalty, by the Underwriter, by
vote of a majority of the outstanding class of voting securities of the affected
Fund, or by vote of a majority of the Trustees of such Fund, who are not
"interested persons" of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements. The Underwriting
Agreements will terminate automatically in the event of

53
<PAGE>

their assignment.

TRUSTEES AND OFFICERS

The Trustees and principal Officers of each Fund and their business
affiliations for the past five years are set forth below. Unless otherwise
noted, the mailing address of the Trustees and Officers of the Northstar
Advantage Trust and each Northstar Advantage Fund is c/o the particular Fund,
Two Pickwick Plaza, Greenwich, CT 06830. The current Trustees were elected by
shareholders of the Fund, effective June 2, 1995:

- --------------------------------------------------------------------------------

POSITION
WITH THE TRUST/ BUSINESS AFFILIATIONS
NAME, ADDRESS FUNDS AND PRINCIPAL OCCUPATIONS
- --------------------------------------------------------------------------------

Robert B. Goode, Jr. Trustee Retired. From 1990 to 1991,
27 Rushleigh Road Chairman of The First Reinsurance
West Hartford, CT 06117 Company of Hartford. From 1987 to
1989, President and Director of
American Skandia Life Assurance
Company. Since October 1993,
Trustee of the Northstar affiliated
investment companies.

Paul S. Doherty Trustee President, Doherty, Wallace,
One Monarch Place Pillsbury and Murphy, P.C.,
Springfield, MA 01144 Attorneys. Director, Tambrands,
Inc. Since October 1993, Trustee
of the Northstar affiliated
investment companies.

David W. Wallace Trustee Chairman of Putnam Trust Company,
33 Midwood Road Lone Star Industries and FECO
Deer Park, Greenwich, CT Engineered Systems, Inc. He is
also President and Trustee of
Robert R. Young Foundation and
Governor of the New York Hospital.
Director of UMC Electronics and
Zurn Industries, Inc. Former
Chairman and Chief Executive
Officer, Todd Shipyards and Bangor
Punta Corporation, and former
Chairman and Chief Executive
Officer of National Securities &
Research Corporation. Since October
1993, Trustee of the Northstar
affiliated investment companies.

Mark L. Lipson* Trustee and Director, Chairman and Chief
President Executive Officer of Northstar and
NWNL Northstar Inc. Director and
President of Northstar
Administrators Corporation and
Director and Chairman of NWNL
Northstar Distributors, Inc.,
President and Trustee of the
Northstar affiliated investment
companies since October 1993.
Prior to August, 1993, Director,
President and Chief Executive
Officer of National Securities &
Research Corporation and President
and Director/Trustee of the
National Affiliated Investment
Companies and certain of National's
subsidiaries.

<PAGE>

- --------------------------------------------------------------------------------

POSITION
WITH THE TRUST/ BUSINESS AFFILIATIONS
NAME, ADDRESS FUNDS AND PRINCIPAL OCCUPATIONS
- --------------------------------------------------------------------------------

John G. Turner* Trustee and Since May 1991, Chairman and CEO of
20 Washington Avenue Chairman of ReliaStar. Since October 1993,
Minneapolis, MN 55401 the Board Director of Northstar and
affiliates and Chairman and Trustee
of the Northstar affiliated
investment companies. Prior to May
1991, President and CEO of the NWNL
Companies, Inc.

Alan L. Gosule Trustee Partner, Rogers & Wells
200 Park Avenue
New York, NY 10166

David W.C. Putnam Trustee President, Clerk and Director of
10 Langeley Place F.L. Putnam Securities Company,
Newton Center, MA 02159 Incorporated, F.L. Putnam
Investment Management Company,
Incorporated, Interstate Power
Company, Inc., Trust Realty Corp.
and Bow Ridge Mining Co.; Director
of Anchor Investment Management
Corporation; President and Trustee
of Anchor Capital Accumulation
Trust, Anchor International Bond
Trust, Anchor Gold and Currency
Trust, Anchor Resources and
Commodities Trust and Anchor
Strategic Assets Trust.

John R. Smith Trustee Financial Vice President of Boston
67 Windsor Street College (1970-1991); President
Sudbury, MA 01776 (since 1991) of New England
Fiduciary Company (financial
planning); Chairman (since 1987) of
Massachusetts Educational Financing
Authority; Vice Chairman of
Massachusetts Health and Education
Authority.

Ernest N. Mysogland Vice (Income and Growth Fund, Growth
President Fund, Income Fund, Special Fund).
Executive Vice President and Chief
Investment Officer-Equities of
Northstar. From 1992 to August
1993, Senior Vice President and
Chief Investment Officer-Equities
of National Securities & Research
Corporation and Vice President of
National Affiliated Investment
Companies. Prior to joining
National in 1992, Mr. Mysogland was
the President & Chief Investment
Officer of Reinoso Asset
Management. From 1988 to 1991, Mr.
Mysogland was Executive Vice
President and Chief Investment
Officer of Gintel Equity
Management.

55
<PAGE>

- --------------------------------------------------------------------------------

POSITION
WITH THE TRUST/ BUSINESS AFFILIATIONS
NAME, ADDRESS FUNDS AND PRINCIPAL OCCUPATIONS

- --------------------------------------------------------------------------------

Thomas Ole Dial Vice (High Total Return Fund, Income
President Fund, Strategic Income Fund, High
Yield Fund, Government Securities
Fund). Executive Vice President
and Chief Investment Officer-Fixed
Income of Northstar and Principal,
T.D. & Associates, Inc. From 1989
to August 1993, Executive Vice
President and Chief Investment
Officer-Fixed Income of National
Securities & Research Corporation,
Vice President of National
Affiliated Investment Companies,
and Vice President of NSR Asset
Management Corp. From 1988 to
1989, President, Dial Capital
Management.

Robert L. Thomas Vice President of Northstar. Former
President President of BSC (1989 to May
1995) and former Vice President of
Advest, Director of Advest Group,
Inc. and Advest; Former President
and Trustee of each of The
Advantage Funds, The Scottish
Widows International Fund and the
Advantage Municipal Bond Fund.

Margaret D. Patel Vice (Government Securities Fund, Income
President Fund, Strategic Income Fund). Vice
President and Managing Director of
Northstar. Former Senior Vice
President of BSC (1988 to May
1995); Former President and
Portfolio Manager at Fixed Income
Asset Management, Inc. (1986 to
1988); Former Portfolio Manager at
American Capital and Dreyfus
Corporation (prior to 1988).

Prescott B. Crocker CFA, (Strategic Income Fund, High Yield
Vice Fund). Vice President and Managing
President Director of Northstar. Former
Senior Vice President and Director,
Fixed Income Investments of BSC
(November 1993 to May 1995); Former
Senior Portfolio Manager at
Colonial Management Associates,
Inc. (1975-1993); prior to 1993,
Mr. Crocker served in various
senior investment management
positions at Colonial Management
Associates, Inc.

Geoffrey Wadsworth Vice (Income and Growth Fund, Growth
President Fund, Special Fund). Vice President
of Northstar. Co-Manager of
Northstar Advantage Income and
Growth Fund and other Northstar
affiliated equity funds. Former
Vice President and Portfolio
Manager with National Securities &
Research Corporation.

56
<PAGE>

- --------------------------------------------------------------------------------

POSITION
WITH THE TRUST/ BUSINESS AFFILIATIONS
NAME, ADDRESS FUNDS AND PRINCIPAL OCCUPATIONS

- --------------------------------------------------------------------------------

Agnes Mullady Vice Senior Vice President and Chief
President and Financial Officer of Northstar,
Treasurer Senior Vice President and Treasurer
of Northstar Administrators
Corporation, and Vice President and
Treasurer of NWNL Northstar
Distributors, Inc. From 1987 to
1993 Treasurer and Vice President
of National Securities & Research
Corporation.

Lisa M. Hurley Vice Senior Vice President, General
President and Counsel of Northstar. Executive
Secretary Vice President and Secretary of
Northstar Administrators
Corporation, and Vice President and
Secretary of NWNL Northstar
Distributors, Inc. Former Vice
President and General Counsel of
National Securities & Research
Corporation.

*Deemed to be an "interested person" of the Trust, as defined by the 1940 Act.

Mone Anathan, III, Dr. Loring E. Hart, Reverend Bartley MacPhaidin and
Edward T. Sullivan, each of whom were previously Trustees of the Funds, serve on
an Advisory Board. The Advisory Board is expected to provide advice to the Board
of Trustees in order to facilitate a smooth management transition regarding the
advisory services to be provided by Northstar and to provide such other advise
as the Board of Trustees may request from time to time. The Advisory Board will
have no authority or control over the Funds. It is expected that Advisory Board
members will receive the same fees they received as Trustees (see the
"Compensation Table" below). Northstar has agreed to reimburse the Funds for
the expenses associated with the Advisory Board for three years.

Northstar and Northstar Administrators Corporation make their personnel
available to serve as Officers and "Interested Trustees" of the Funds. All
Officers and Interested Trustees of the Funds are compensated by Northstar or
Northstar Administrators Corporation. Trustees who are not "interested persons"
of the Adviser are paid an annual retainer fee of $6,000 for their combined
services as Trustees to the Funds and to retail funds sponsored or advised by
the Adviser, and a per meeting fee of $1,500 for attendance at each joint
meeting of the Funds and the other Northstar retail funds. The Funds also
reimburse Trustees for expenses incurred by them in connection with such
meetings.

As of _____________, all Trustees and executive officers of each Fund as a
group owned beneficially or of record less than 1% of the outstanding securities
of such Fund.

To the knowledge of the Funds, as of ______________, 1995, no shareholder
owned beneficially or of record more than 5% of a Fund's outstanding shares,
except that _____________.

57
<PAGE>

COMPENSATION TABLE
Fiscal year Ended October 31, 1995
Northstar Advantage Trust

- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------

PENSION OR RETIREMENT TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION BENEFITS ACCRUED AS PART ESTIMATED ANNUAL ALL FUNDS CURRENTLY IN
NAME, FROM EACH FUND(a) OF FUND EXPENSES BENEFITS UPON NORTHSTAR FUNDS
POSITION RETIREMENT COMPLEX(b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alan L. Gosule, Esq. $1,417 N/A N/A $6,167
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Smith, Ph.D. $1,667 N/A N/A $6,167
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
David W.C. Putnam $1,417 N/A N/A $13,667
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert B. Goode, Jr. $4,083 N/A N/A $12,333
(Trustee)

- ------------------------------------------------------------------------------------------------------------------------------------
Paul S. Doherty $4,083 N/A N/A $12,333
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
David W. Wallace $4,083 N/A N/A $12,333
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark L. Lipson -0- N/A N/A -0-
(President and
Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
John G. Turner -0- N/A N/A -0-
(Chairman and Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

58
<PAGE>

COMPENSATION TABLE
Fiscal year Ended December 31, 1995
Government Securities, Strategic Income, High Yield, Income,
Growth and Special Funds

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------

PENSION OR RETIREMENT TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION BENEFITS ACCRUED AS ESTIMATED ANNUAL ALL FUNDS CURRENTLY IN
NAME, FROM EACH FUND(a) PART OF FUND EXPENSES BENEFITS UPON NORTHSTAR FUNDS
POSITION RETIREMENT COMPLEX(b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alan L. Gosule, Esq. ---- ---- ---- ----
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Smith, Ph.D. ---- ---- ---- ----
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
David W.C. Putnam ----(c) ---- ---- ----
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert B. Goode, Jr. ---- ---- ---- ----
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Paul S. Doherty ---- ---- ---- ----
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
David W. Wallace ---- ---- ---- ----
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark L. Lipson ---- ---- ---- ----
(President and
Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
John G. Turner ---- ---- ---- ----
(Chairman and Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Trustees and officers who are affiliated with the Adviser or
Underwriter or their affiliates ("interested persons" as defined under
the 1940 Act) do not receive any compensation for services rendered to
the Funds in addition to their compensation for services rendered to
the Adviser or affiliated companies. Prior to June 2, 1995 the
Trustees who were not interested persons were paid a per fund fee of
$500 for each full calendar year during which services were rendered
to the Funds. In addition, they were paid a per fund fee of $250 for
attending each of the Trustees' meetings, $100 per fund for attending
each audit committee meeting, $100 audit committee retainer per fund
and were reimbursed for out-of-pocket expenses.

(b) Compensation paid by six Advantage Fund trusts formerly advised by
BSC.

59
<PAGE>

(c) As Chairman, David Putnam received the amount listed above from the
six former BSC advised funds, which included compensation as a Trustee
(see (a) above), and for additional services. Each Fund is allocated
a proportionate share of the amount paid for additional services based
on net assets. Mr. Putnam resigned as Chairman effective June 2,
1995.

OTHER INFORMATION

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P. has been selected as the independent
accountants of the Northstar Advantage Trust and each Northstar Advantage
Fund. Coopers & Lybrand L.L.P. audits the Funds' annual financial statements
and expresses an opinion thereon.

CUSTODIAN

Custodial Trust Company, Princeton, New Jersey, acts as custodian for the
High Total Return and Income and Growth Funds, and First Data Investor Services,
Inc. ("First Data"), Boston, Massachusetts, serves as Fund Accounting Agent for
these Funds; State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, acts as custodian for the remaining Funds.

TRANSFER AGENT

Pursuant to a Transfer Agency Agreement with each Fund, First Data (the
"Transfer Agent") acts as the Transfer Agent for each Fund. Pursuant to a Sub-
Transfer Agreement between Advest Transfer Services, Inc. ("ATS") and First
Data, ATS serves as the sub-transfer agent for the Funds offering Class T
shares, and, prior to June 5, 1995, ATS acted as transfer agent to these Funds.
For calendar year 1995, fees and out-of-pocket costs payable to ATS under such
transfer agency agreements by each of those Funds were as follows:

FUND FEES COSTS

Government Fund $95,636 $2,526
High Yield Fund 87,663 2,762
Income Fund 55,748 1,866
Growth Fund 68,258 1,001
Special Fund 36,611 310
Strategic Income Fund 6,508 225

REPORTS TO SHAREHOLDERS

The fiscal year of the Northstar Advantage Trust ends on October 31. The
fiscal year of each other Fund ends on December 31. Each Fund will send
financial statements to its shareholders at least semi-annually. An annual
report containing financial statements audited by the independent

60
<PAGE>

accountants will be sent to shareholders each year.

ORGANIZATIONAL AND RELATED INFORMATION

Government Securities Fund (formerly The Advantage Government
Securities Fund) was organized in 1986; Strategic Income Fund (formerly The
Advantage Strategic Income Fund) was organized in 1994; High Yield Fund
(formerly The Advantage High Yield Bond Fund) was organized 1989; Income Fund
(formerly The Advantage Income Fund) was organized in 1986; Growth Fund
(formerly The Advantage Growth Fund) was organized in 1986; and Special Fund
(formerly The Advantage Special Fund) was organized in 1986. Northstar
Advantage Trust (formerly NWNL Northstar Series Trust), and two of its series
High Total Return Fund (formerly NWNL Northstar High Yield Bond Fund) and
Income and Growth Fund (formerly NWNL Northstar Income and Growth Fund), was
organized in 1993.

Under Massachusetts law, there is a remote possibility that shareholders of
a business trust could, under certain circumstances, be held personally liable
as partners for the obligations of such trust. The Amended and Restated
Declaration of Trust for each Fund contains provisions intended to limit such
liability and to provide indemnification out of Fund property of any shareholder
charged or held personally liable for obligations or liabilities of a Fund
solely by reason of being or having been a shareholder of a Fund and not because
of such shareholder's acts or omissions or for some other reason. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which a Fund itself would be unable to
meet its obligations.

PERFORMANCE INFORMATION

Performance information for the Funds may be compared in reports and
promotional literature to (1) the S&P 500, Dow Jones Industrial Average
("DJIA"), or other unmanaged indices, so that investors may compare each Fund's
results to those of a group of unmanaged securities that are widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm that ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications or persons who rank mutual funds on overall performance or other
criteria; (iii) the Consumer Price Index (measure for inflation) to assess the
real rate of return from an investment in a Fund; and (iv) well known monitoring
sources of CD performance rates, such as Solomon Brothers, Federal Reserve
Bulletin, American Bankers and Tower Data/The Wall Street Journal. Unmanaged
indices may assume the reinvestment of dividends, but generally do not reflect
deductions for administrative and management costs and expenses. Performance
rankings are based on historical information and are not intended to indicate
future performance.

In addition, the Funds may, from time to time, include various measures of
a Fund's performance, including the current yield, the tax-equivalent yield and
the average annual total return of shares of the Funds in advertisements,
promotional literature or reports to shareholders or prospective investors.
Such materials may occasionally cite statistics to reflect a Fund's volatility
risk.

61
<PAGE>

TOTAL RETURN

Standardized quotations of average annual total return ("Standardized
Return") for each class of shares will be expressed in terms of the average
annual compounded rate of return for a hypothetical investment in such class of
shares over periods of 1, 5 and 10 years or up to the life of the class of
shares, calculated for each class separately pursuant to the following formula:
P(1+T)TO THE POWER OF n = ERV (where P = a hypothetical initial payment of
$1,000, T = the average annual total return, n = the number of years, and ERV =
the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). All total return figures reflect the deduction of a
proportional share of each Class's expenses (on an annual basis), the deduction
of the maximum initial sales load (in the case of Class A shares) and the
maximum contingent deferred sales charge applicable to a complete redemption of
the investment (in the case of Class B, Class C and Class T shares), and assume
that all dividends and distributions are reinvested when paid.

YIELD

Quotations of yield for a specific class of shares of a Fund will be based
on all investment income attributable to that class earned during a particular
30-day (or one month) period (including dividends and interest), less expenses
accrued during the period ("net investment income"), and will be computed by
dividing the net investment income per share of that class earned during the
period by the maximum offering price per share on the last day of the month,
according to the following formula:

Yield = 2[(a-b + 1)TO THE POWER OF 6 -1]
---
cd
Where:

a = dividends and interest earned during the period attributable to a
specific class of shares

b = expenses accrued for the period attributable to that class (net of
reimbursements)

c = the average daily number of shares of that class outstanding during
the period that were entitled to receive dividends, and

d = the maximum offering price per share on the last day of the period

The maximum offering price includes a maximum contingent deferred sales
load of 4%, in the case of Class T shares, 5% for Class B shares, and 1%, for
Class C shares.

All accrued expenses are taken into account as follows. Accrued expenses
include all recurring expenses that are charged to all shareholder accounts in
proportion to the length of the base period, including but not limited to
expenses under the Funds' distribution plans. Except as noted, the performance
results take the contingent deferred sales load into account.

The yield for Class A, B, C and T shares of the Government Securities Fund,
the High Yield

62
<PAGE>

Fund, the Strategic Income Fund, and the Income Fund, and the yield for Class A,
B and C of the High Total Return Fund for the month ended January 1, 1996 was
as follows:

YIELD

FUND CLASS A CLASS B CLASS C CLASS T

Government Fund ____% ____% ____% ____%
High Yield Fund ____ ____ ____ ____
Strategic Income Fund ____ ____ ____ ____
Income Fund ____ ____ ____ ____
High Total Return Fund ____ ____ ____ N.A

NON-STANDARDIZED TOTAL RETURN

In addition to the performance information described above, the Funds may
provide total return information that is not calculated according to the formula
set forth above ("None-Standardized Return"). Neither initial nor contingent
deferred sales charges are taken into account in calculating Non-Standardized
Return. Excluding a Fund's sales charge from a total return calculation
produces a higher total return figure.

The following table summarizes the calculation of Standardized and Non-
Standardized Return for Class A, Class B and Class C shares of each Fund in
Northstar Advantage Trust and for Class A, Class B, Class C and Class T shares
of the other Funds for the periods indicated.

NORTHSTAR ADVANTAGE TRUST. The following table summarizes the calculation
of Total Return for the periods indicated through October 31, 1995, assuming the
contingent deferred sales load HAS been assessed.

SINCE
ONE YEAR INCEPTION*

HIGH TOTAL RETURN FUND

Class A 7.66% 2.14%
Class B 6.97% (1.05)%
Class C 11.44% 2.38%

INCOME AND GROWTH FUND

Class A 6.93% 4.68%
Class B 6.41% 1.57%
Class C 10.43% 5.79%

The following table summarizes the calculation of Total Return for the
periods indicated

63
<PAGE>

through October 31, 1995, assuming the contingent deferred sales load HAS NOT
been assessed.

SINCE
ONE YEAR INCEPTION*

HIGH TOTAL RETURN FUND

Class A 13.02% 4.68%
Class B 11.97% 0.94%
Class C 12.44% 2.38%

INCOME AND GROWTH FUND

Class A 13.19% 7.29%
Class B 12.31% 3.84%
Class C 12.33% 5.79%
___________________________

* The inception date for Class A, Class B and Class C shares of High Total
Return Fund and Income and Growth Fund is November 8, 1993, February 9,
1994 and March 21, 1994, respectively.

THE REMAINING FUNDS. The following table summarizes the calculation of
Total Return for Class T shares of the remaining Funds for the periods indicated
through December 31, 1995, assuming the maximum sales charge HAS been assessed.

SINCE
ONE YEAR FIVE YEARS INCEPTION*

Government Fund ____% ____% ____%
High Yield Fund ____% ____% ____%
Income Fund ____% ____% ____%
Growth Fund ____% ____% ____%
Special Fund ____% ____% ____%
Strategic Income Fund ____% ____% ____%

The following table summarizes the calculation of Total Return for Class T
shares of the remaining Funds for the periods indicated through December 31,
1995, assuming the maximum sales charge HAS NOT been assessed.

SINCE
ONE YEAR FIVE YEARS INCEPTION*

Government Fund ____% ____% ____%
High Yield Fund ____% ____% ____%

<PAGE>

Income Fund ____% ____% ____%
Growth Fund ____% ____% ____%
Special Fund ____% ____% ____%
Strategic Income Fund ____% N/A ____
___________________________

* The inception date for Class T shares of Government Securities, Income,
Growth and Special Funds was February 1, 1986. The inception date for
Class T shares of the High Yield Fund was July 5, 1989. The inception date
for Class T shares of the Strategic Income Fund was July 1, 1994.

The following table summarizes the calculation of Total Return for Class A,
Class B and Class C shares of the remaining Funds for the period from
commencement of operations of such classes (June 5, 1995) through December 31,
1995, assuming the maximum sales charge HAS been assessed.

CLASS A CLASS B CLASS C

Government Fund ____% ____% ____%
High Yield Fund ____% ____% ____%
Income Fund ____% ____% ____%
Growth Fund ____% ____% ____%
Special Fund ____% ____% ____%
Strategic Income Fund ____% ____% ____%

CLASS A CLASS B CLASS C

Government Fund ____% ____% ____%
High Yield Fund ____% ____% ____%
Income Fund ____% ____% ____%
Growth Fund ____% ____% ____%
Special Fund ____% ____% ____%
Strategic Income Fund ____% ____% ____%

OTHER INFORMATION CONCERNING FUND PERFORMANCE

A Fund may quote its performance in various ways, using various types of
comparisons to market indices, other funds or investment alternatives, or to
general increases in the cost of living. All performance information supplied
by the Funds in advertising is historical and is not intended to indicate future
returns. Each Fund's share prices and total returns fluctuate in response to
market conditions and other factors, and the value of the Fund's shares when
redeemed may be more or less

65
<PAGE>

than their original cost.

Evaluations of Fund performance made by independent sources may also be
used in advertisements concerning the Funds, including reprints of, or
selections from, editorials or articles about a Fund. These editorials or
articles may include quotations of performance from other sources, such as
Lipper or Morningstar. Sources for Fund performance information and articles
about the Fund may include the following: BANXQUOTE, BARRON'S, BUSINESS WEEK,
CDA INVESTMENT TECHNOLOGIES, INC., CHANGING TIMES, CONSUMER DIGEST, FINANCIAL
WORLD, FORBES, FORTUNE, IBC/DONOGHUES'S MONEY FUND REPORT, IBBOTSON ASSOCIATES,
INC., INVESTMENT COMPANY DATA, INC., INVESTOR'S DAILY, LIPPER ANALYTICAL
SERVICES, INC.'S MUTUAL FUND PERFORMANCE ANALYSIS, MONEY, MUTUAL FUND VALUES,
THE NEW YORK TIMES, PERSONAL INVESTING NEWS, PERSONAL INVESTOR, SUCCESS, USA
TODAY, U.S. NEWS AND WORLD REPORT, WALL STREET JOURNAL, WIESENBERGER INVESTMENT
COMPANIES SERVICES, WORKING WOMAN.

When comparing yield, total return and investment risk of shares of a Fund
with other investments, investors should understand that certain other
investments have different risk characteristics than an investment in shares of
the Fund. For example, certificates of deposit may have fixed rates of return
and may be insured as to principal and interest by the FDIC, while a Fund's
returns will fluctuate and its share values and returns are not guaranteed.
Money market accounts offered by banks also may be insured by the FDIC and may
offer stability of principal. U.S. Treasury securities are guaranteed as to
principal and interest by the full faith and credit of the U.S. government.
Money market mutual funds may seek to offer a fixed price per share.

The performance of a Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representative of performance of the
Fund for any period in the future. The performance of a Fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest, and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performance.

FINANCIAL STATEMENTS

The Northstar Advantage Trust's audited financial statements dated October
31, 1995 and the report of the independent accountants, Coopers & Lybrand
L.L.P. with respect to such financial statements, are hereby incorporated by
reference to the Annual Report to Shareholders of the Northstar Advantage Trust
for the fiscal year ended October 31, 1995.

The audited financial statements of Government Securities Fund, High Yield
Fund, Income Fund, Growth Fund, Special Fund and Strategic Income Fund as of and
for the fiscal period ended December 31, 1995 and the report of the independent
accountants, ____________, with respect to such financial statements are hereby
incorporated by reference to the Annual Report to Shareholders of The Advantage
Family of Funds for the fiscal year ended December 31, 1995.

<PAGE>

PART C
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements: Included in Part A:
NORTHSTAR ADVANTAGE TRUST - Financial Highlights for a share
outstanding throughout the period November 8, 1993 (Class A) February 9, 1994
(Class B) and March 21, 1994 (Class C) (commencement of offering of each Class)
through October 31, 1995.

GOVERNMENT SECURITIES, INCOME, GROWTH AND SPECIAL FUNDS:
Financial Highlights for a share outstanding throughout the period February 3,
1986 (commencement of operations) to December 31, 1994.

HIGH YIELD FUND: Financial Highlights for a share outstanding
throughout the period June 5, 1989 (commencement of operations) through December
31, 1994.

STRATEGIC INCOME FUND: Financial Highlights for a share outstanding
throughout the period July 1, 1994 (commencement of operations) to December 31,
1994.

Included in Part B: The audited financial statements for the year
ended October 31, 1995 for the Northstar Advantage Trust and for the year ended
December 31, 1994 for the Government Securities, Strategic Income, High Yield,
Income, Growth and Special Funds, and the report of the independent accountants
with respect to such financial statements are incorporated in the Statement of
Additional Information for the Trust and each Fund by reference to the annual
Report to Shareholders for the Trust and each Fund for the fiscal years ended
October 31, 1995 and December 31, 1994, respectively; however the material
appearing on the inside front and back covers and pages 1 and 36 of the December
31, 1994 Annual Report is not incorporated herein by reference. The
incorporated financial information for the years ended October 31, 1995 for the
Trust and December 31, 1994 for the other Funds includes the following:
Statement of Investments, Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights, Notes to
Financial Statements, and report of independent accountants.

(b) EXHIBITS - NORTHSTAR ADVANTAGE TRUST

(1) (a) Declaration of Trust (1)
(b) Amendment of Declaration of Trust (3)
(c) Amendment to Declaration of Trust (5)
(2) By-Laws (1)
(3)(4) N/A
(5) Investment Advisory Agreement (2)
(6) Underwriting Agreements (4)
(8) Custody Agreements (3)
(9) (a) Transfer Agency Agreement (3)

<PAGE>

(b) Administrative Services Agreement (3)
(c) Accounting Services Agreement (3)
(10) Inapplicable
(11) Consent of Independent Public Accountants*
(12) Annual Report to Shareholders*
(13) Subscription Agreement (3)
(15) Plans of Distribution pursuant to Rule 12b-1 (7)
(a) Class A Shares
(b) Class B Shares
(c) Class C Shares
(16) Performance Information*
(17) Powers of Attorney(8)
(18) Inapplicable
- ------------------------------------------------
1. Included in Registrant's Registration Statement filed August 24, 1993 and
incorporated herein by reference.
2. Included in Registrant's Pre-effective Amendment No. 1 filed October 7,
1993 and incorporated herein by reference
3. Included in Pre-Effective Amendment No. 2 filed November 3, 1993 and
incorporated herein by reference.
4. Included in Post-Effective Amendment No. 1 filed January 19, 1994 and
incorporated herein by reference.
5. Included in Post-Effective Amendment No. 2 filed March 19, 1994 and
incorporated herein by reference.
6. Not Applicable.
7. Included in Post-Effective Amendment No. 3 filed August 1, 1994 and
incorporated herein by reference
8. Included in Post-Effective Amendment No. 6 filed November 1, 1995 and
incorporated herein by reference.

<PAGE>

EXHIBITS - GOVERNMENT SECURITIES, INCOME, GROWTH, SPECIAL, HIGH YIELD AND
STRATEGIC INCOME FUNDS.

(1) Form of Amended and Restated Declaration of Trust*
(2) By-Laws *
(3)(4) Not Applicable
(5) Form of Investment Advisory Agreement *
(6) (a)Form of Underwriting Agreements for Classes A, B, C and T Shares*
(b)Form of Dealer Agreement for Northstar Affiliated Investment Cos.*
(c)Form of Special Dealer Agreement between Northstar Distributors and
Advest, Inc.*
(7) Not Applicable
(8) Form of Custody Agreement*
(9) (a)Form of Transfer Agency Agreement*
(b)Form of Sub-Transfer Agency Agreement *
(c)Form of Administrative Services Agreement*
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Form of Distribution Plan for Classes A, B, C and T Shares
(16) Not Applicable
(17) Powers of Attorney[1]
(18) Not Applicable

NOTES TO EXHIBIT LISTING

* Filled herewith
[1] Previously filed as an exhibit to the Registrants Post-Effective Amendments
as follows and incorporated herein by reference:
Government Securities Fund - PEA No. 15
Income Fund - PEA No. 14
Growth Fund - PEA No. 14
Special Fund - PEA No. 14
High Yield Fund - PEA No. 10
Strategic Income Fund - PEA No. 6

<PAGE>

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

There are no persons controlled by or under common control with Registrant.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

As of November 30, 1995, the Registrant had the following number of record
security holders:

Title of Class Fund Number of Shareholders
- -------------- ---- ----------------------

Shares of Income & Growth Fund (A) 1582 (B) 2257 (C)1575
Benefical High Total Return Fund (A) 3144 (B) 3557 (C) 458
Interest Government Securities (A) 91 (B) 275 (C) 3 (T) 7699
High Yield Bond (A) 396 (B) 396 (C) 53 (T) 9131
Income (A) 69 (B) 280 (C) 20 (T) 5821
Growth (A) 146 (B) 441 (C) 24 (T) 7581
Special (A) 152 (B) 353 (C) 10 (T) 4404
Strategic Income (A) 367 (B) 809 (C) 60 (T) 2082
<PAGE>

ITEM 27. INDEMNIFICATION - NORTHSTAR ADVANTAGE TRUST

Section 4.3 of Registrant's Declaration of Trust provides the following:

(a) Subject to the exceptions and limitations contained in paragraph (b) below:

(i) every person who is, or has been, a Trustee or officer of the Trust
shall be indemnified by the Trust to the fullest extent permitted by law
against all liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or having
been a Trustee or officer and against amounts paid or incurred by him in
the settlement thereof; and

(ii) the word "claim", "action", "suit" or "proceeding" shall apply to all
claims, actions or suits or proceedings (civil, criminal, administrative or
other in appeals), actual or threatened; and the words "liability" and
"expenses" shall include without limitation, attorneys fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.

(b) No indemnification shall be provided hereunder to a Trustee or officer:

(i) against any liability to the Trust, a series thereof, or the
Shareholders by reason of a final adjudication by a court or other body
before which a proceeding was brought or that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;

(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in reasonable belief that his
action was in the best interest of the Trust; and

(iii) in the event of a settlement or other disposition not involving a
final adjudication as provided in paragraph (b) (i) or (b) (ii) resulting
in a payment by a Trustee or officer, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office:

(A) by the court or other body approving the settlement or other disposition;
or

(B) based upon the review of readily available facts (as opposed to full
trial-type inquiry) by (x) vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter) or (y) written opinion of
independent legal counsel.

(C) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a person who has

<PAGE>

ceased to be such Trustee or officer and shall inure to the benefit of the
heirs, executors, administrators and assigns of such a person. Nothing
contained herein shall affect any rights to indemnification to which
personnel of the Trust other than Trustees and officers may be entitled by
contract or otherwise under law.

(D) Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay
such amount if it is ultimately determined that he is not entitled to
indemnification under this Section 4.3, provided that either:

(i) such undertaking is secured by a surety bond or some other appropriate
security provided by the recipient or the Trust shall be insured against
losses arising out of any such advances; or

(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on the matter)
or an independent legal counsel in a written opinion shall determine, based
upon a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient ultimately
will be found entitled to indemnification.

As used in this Section 4.3, a "Disinterested Trustee" is one who is not (i) an
Interested Person of the Trust (including anyone who has been exempted from
being an Interested Person by any rule, regulation or order of the Commission),
or (ii) involved in the claim, action, suit or proceeding.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in
connection with the successful defense of any action suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy, as expressed in the Act and be governed by final
adjudication of such issue.

<PAGE>

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

See "Management of the Funds" in the Prospectus and Services of the Adviser and
Affiliated Service Providers" and "Trustees and Officers" in the Statement of
Additional Information, each of which is included in the Registration Statement.

Set forth is a list of each officer and director of the Adviser indicating each
business, profession, vocation or employment of a substantial nature in which
each such person has been engaged since November 30, 1993.

POSITION WITH OTHER SUBSTANTIAL
INVESTMENT BUSINESS, PROFESSION
NAME ADVISER VOCATION OR EMPLOYMENT
- ---- ------- ----------------------
- ---- ------- ----------------------
John Turner Director Chairman and CEO,
ReliaStar Financial Corp.

John Flittie Director President,
ReliaStar Financial Corp.

Mark L. Lipson Chairman/CEO Director and Officer of Northstar
Director Distributors, Inc., Northstar
Administrators Corp. and NWNL Northstar,
Inc.

Robert Thomas President Former President of Boston Security
Counsellors, Inc. ("BSC"); former
Executive Vice President and Director of
Advest, Inc., former Director of the
Advest Group Inc. and former President
and Trustee of the Advest Advantage
Family of Funds.

Thomas Ole Dial Executive Vice Vice President, Northstar Affiliated
President - Chief Investment Companies, and Principal, TD
Investment Officer Associates Inc.
Fixed Income

Prescott Crocker Vice President/ Vice President, Northstar Affiliated
Managing Director Investment Cos. Former Vice President
and Portfolio Manager for BSC.

Margaret Patel Vice President/ Vice President, Northstar Affiliate
Managing Director Investment Cos. Former Vice President
and Portfolio Manager for BSC.

<PAGE>

Robert J. Adler Executive Vice President Northstar Distributors, Inc.
President, Sales &
Marketing
Agnes Mullady Sr. Vice President Vice President & Treasurer of Northstar
and CFO Affiliates and the Northstar Affiliated
Investment Companies.

Ernest Mysogland Exec.Vice President Vice President - Northstar Affiliated
Chief Investment Investment Companies.
Officer - Equities

Geoffrey Wadsworth Vice President/
Investments and
Portfolio Manager

Jeffrey Aurigemma Vice President -
Investments

Michael Graves Vice President
Investments

Lisa M. Hurley Sr. Vice President Executive Vice President, Northstar
General Counsel & Administrators Corp., Vice President
Secretary Northstar Distributors and Northstar
Affiliated Investment Companies.

Gertrude Purus Vice President Vice President Northstar Distributors
Operations and Northstar Administrators Corp.

Stephen Vondrak Vice President Former Regional Marketing
Sales & Marketing Manager with Roger Engemann
and Associates from 1991-1994.

Mark Sfarra Vice President -
Marketing

ITEM 29 . PRINCIPAL UNDERWRITER

(a) See "Management of the Funds - The Adviser and Affiliated Service Providers"
and "How to Purchase Shares" in the Prospectus and "Underwriter and Distribution
Services" in the Statement of Additional Information, both of which are included
in this Post-Effective Amendment to the Registration Statement. Unless
otherwise indicated, the principal business address for each person is c/o
Northstar, Two Pickwick Plaza, Greenwich, CT 06830.

<PAGE>

(b) (1) (2) (3)
Name and Principal Position and Offices Position and Offices
Address with Underwriter with Registrant

- ------------------ -------------------- --------------------
John Turner Director Trustee, Chairman
20 Washington Ave. South
Minneapolis, MN

John Flittie Director Trustee
20 Washington Ave. South
Minneapolis, MN

Mark L. Lipson Chairman & Director Trustee

Robert J. Adler President None

Mark Blinder Reg. Vice President None

Richard Frances Reg. Vice President None

Daniel Leonard Reg. Vice President None

Stephen O'Brien Reg. Vice President None

David Linton Reg. Vice President None

Charles Dolce Reg. Vice President None

Hyman Glasman Reg. Vice President None

Stephen Vondrak Vice President None

Mark Sfarra Vice President None

Gertrude Purus Vice President None

Agnes Mullady Vice President Vice President
& Treasurer & Treasurer

Lisa Hurley Vice President Vice President
& Secretary & Secretary

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

<PAGE>

Custodial Trust Company acts as Custodian and maintains the following records at
its principal office at 101 Carnegie Center, Princeton, New Jersey 08540-6231
for the Northstar Advantage Trust, and State Street Bank and Trust Co. maintains
such records as Custodian for the Government Securities, High Yield, Strategic
Income, Income, Growth, and Special Funds:

(1) Receipts and delivery of securities including certificate
numbers;
(2) Receipts and disbursement of cash;
(3) Records of securities in transfer, securities in physical
possession, securities owned and securities loaned.

First Data Investor Services Group, ("First Data") maintains the following
records at One Exchange Place, 11th Floor, Boston, Massachusetts, 02109, as
Transfer Agent for the Funds.

(1) Shareholder Records;
(2) Share accumulation accounts: Details as to dates and number of
shares of each accumulation, price of each accumulation.

All other records required by item 30(a) are maintained at the office of the
Administrator, Two Pickwick Plaza, Greenwich, CT 06830 or the offices of First
Data, as the Fund Accounting Agent for the Northstar Advantage Trust, or at
State Street Bank as the Fund Accounting Agent for the Government Securities,
High Yield, Strategic, Income, Growth and Special Funds.

ITEM 31. Management Services

Not Applicable

ITEM 32. Undertakings

(a) Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Trustees when
requested in writing to do so by the holders of at least 10% of the Trusts'
outstanding shares of beneficial interest and in connection with such meeting to
comply with the provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.

(b) Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request and without charge.
<PAGE>

SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Greenwich and the State of Connecticut on the 27th
day of December, 1995.

REGISTRANT

By: LISA HURLEY
-----------------------------
Lisa Hurley, Vice President

SIGNATURES TITLE DATE

JOHN G. TURNER Chairman and December 27, 1995
John G. Turner* Trustee

MARK L. LIPSON Trustee December 27, 1995
Mark L. Lipson*

JOHN R. SMITH Trustee December 27, 1995
John R. Smith*

PAUL S. DOHERTY Trustee December 27, 1995
Paul S. Doherty*

DAVID W. WALLACE Trustee December 27, 1995
David W. Wallace*

ROBERT B. GOODE, JR. Trustee December 27, 1995
Robert B. Goode, Jr.*

<PAGE>

SIGNATURES TITLE DATE

MARJORY WILLIAMS Trustee December 27, 1995
Marjory Williams

ALAN L. GOSULE Trustee December 27, 1995
Alan L. Gosule*

DAVID W.C. PUTNAM Trustee December 27, 1995
David W.C. Putnam*

AGNES MULLADY Principal December 27, 1995
Agnes Mullady Financial and
Accounting Officer

By: LISA HURLEY*
Lisa Hurley
Attorney-in-fact

* Executed pursuant to powers of attorney filed with PEA No. 6 (Northstar
Advantage Trust and Northstar Advantage Strategic Income Fund), PEA No.10
(Northstar Advantage High Yield Fund), PEA No. 15 (Northstar Advantage
Government Securities Fund), and PEA No. 14 (Northstar Advantage Income Fund,
Northstar Advantage Special Fund and Northstar Advantage Growth Fund).
<PAGE>

INDEX TO EXHIBITS

NORTHSTAR ADVANTAGE TRUST

Exhibit No. Under
Part C of Form N-1A Name of Exhibit Page Number Herein
------------------- --------------- ------------------

11 Consent of Independent
Accountants

12 Annual Report

16 Performance Calculations

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS
-----------------

We consent to the incorporation by reference in Post-Effective Amendment No.
7 to the Registration Statement of Northstar Advantage Trust (formerly NWNL
Northstar Series Trust) on Form N-1A of our report dated December 15, 1995 on
our audit of the financial statements and financial highlights of Northstar
Advantage Trust which report is included in its Annual Report to Shareholders
which is also incorporated by reference in this Post-Effective Amendment to
the Registration Statement. We also consent to the references to our Firm in
the Prospectus under the caption "Financial Highlights" and in the Statement
of Additional Information under the captions "Independent Accountants" and
"Financial Statements."

COOPERS & LYBRAND, L.L.P.

New York, New York
December 29, 1995

<PAGE>
NORTHSTAR ADVANTAGE TRUST
ANNUAL REPORT,
OCTOBER 31, 1995

Dear Shareholders:

We are pleased to provide you with the annual report of the Northstar Advantage
Trust for the year ended October 31, 1995. We are gratified with your decision
to entrust your assets to the Northstar Advantage Funds and are confident that
we can assist you in reaching your financial objectives. Our goal is to provide
you with long term, consistent, and superior investment results through
fundamental research, analysis, and traditional investment disciplines.
Following this letter is a summary of the results of each Fund by their
respective portfolio manager. We hope you will find it informative.

In the first three quarters of 1995, many favorable changes occurred which
benefited the stock and bond markets. Investors began the year with substantial
fears of further large increases in interest rates driven by rising inflation
and an overheated economy. These fears were quickly proven to be incorrect.
Although the Federal Reserve Board did raise short term interest rates slightly
on February 1st, that proved to be the last in a series of Fed tightening moves.
Economic growth in the U.S. slowed to a moderate 2 1/2% rate, and long term
interest rates fell sharply from over 8% last winter to 6.3% currently.

The result of this "soft landing" or moderate growth/moderate inflation
strategy by the Fed produced a solid rise in bond prices of about 13% or more
and a sharp rise in the major stock market indices of over 23% for the twelve
months ended 10/31/95. Stock prices again were supported by excellent gains in
corporate profits even as economic growth slowed somewhat. The efficiency,
productivity, and world class competitiveness of so many U.S. companies is
finally being recognized by investors despite so many "experts" who had forecast
recession, high inflation and a decline in corporate profits.

Our outlook for both the bond and stock markets in 1996 remains favorable.
Government bond prices have improved strongly while other segments, especially
high yield bonds, continue to perform well. Stock markets have remained
favorable during the fall. In coming months we expect the President and Congress
to hammer out a long term budget which will reduce sharply the federal deficit.
We also expect the Fed to follow with another interest rate cut. Based on these
actions and continued low inflation, we believe that both stock and bond markets
should produce positive returns in 1996.

We note with great conviction that attempts to "time" the market often prove
counterproductive. Investors are strongly urged to focus on the long term.
Consistent disciplined investing is the proven method of achieving attractive
returns and meeting your financial objectives. We continue to support this
philosophy and look forward to serving your investment needs in the future.

Sincerely,

[SIG]

Mark Lipson
President
December 4, 1995

<PAGE>
NORTHSTAR ADVANTAGE
INCOME AND GROWTH FUND
[PHOTO][PHOTO][LOGO]
ERNEST MYSOGLAND GEOFFREY WADSWORTH

INVESTMENT ENVIRONMENT

THE MARKETS

- The U.S. economy continued to grow at a moderate 2 1/2% rate in 1995
with low inflation. This is the "soft landing" scenario which the
Federal Reserve aimed for in 1994 when it raised short term interest
rates to slow the economy and restrain inflation.

- Stock and bond prices in the U.S. responded very favorably to this
environment. After a slow start last winter due to the uncertainty of
rising interest rates, the major stock indices rose over 20% aided by
continued strong corporate earnings. Investment grade bonds gained
over 13% on average with the longest maturities doing even better.

THE FUND

- In the last six months, the Fund enjoyed a sharp rise of 9.5% paced
by the 54% invested in common stocks which rose over 13% versus 10%
to 13% for the Dow Jones Industrials and the S&P 500 respectively.
Our investment grade bonds rose over 7%.

- This brought the Fund's results for the twelve months ended 10/31/95
to a gain of 12.4% versus 17.4% for the Lipper Balanced Fund index.
Our underperformance reflects the negative impact from cyclical and
Mexican holdings early in the fiscal year. Fund results have been
very strong since last February (up 16.3%) especially considering our
typically conservative asset mix of approximately 60% stocks and 40%
bonds and the fund's well above average yield. Fund assets have risen
from $114 million a year ago to over $190 million.

- During the year we placed the majority of our bond position in U.S.
Treasury and Agency issues which have fully participated in the rise
of the bond market.

- Equity positions were well diversified. Our largest exposure has been
in financial stocks which have performed exceptionally well.
Following the sharp rise in technology stocks in the summer, we took
substantial profits in several holdings. The equity holdings share
the common themes of very strong cash flow, sharply rising dividends
and large stock repurchases.

CURRENT STRATEGY

- We expect further stock market gains in 1996 aided by Fed actions to
cut short term rates. We continue to find selected high quality
stocks selling at very reasonable prices. Most managements are
already on record for forecasting improved earnings in 1996.

- While we expect the current slow pace of economic growth to result in
modest 1996 earnings growth, we again note that fears of recession or
declining earnings seem ill founded.

- We plan to maintain our classic 60%/40% stock-bond mix. Current
holdings are much less cyclical than a year ago. Emphasis is on
financials, health care, consumer staples, energy and selected
technology stocks. Bond holdings will remain mainly in governments.

---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA AS OF 10/31/95) NET ASSETS $190,038,626
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
TOP 10 EQUITY HOLDINGS
<C><S> <C>
COMPANY % FUND
1. Philip Morris 3.3 %
2. Intel 3.0
3. Xerox 2.4
4. Fed. Nat. Mortgage 2.3
5. Mellon Bank 2.2
6. Citicorp 2.0
7. WorldCom 2.0
8. Motorola 1.8
9. Computer Assoc. 1.7
10. Merck 1.7
----
22.4 %
</TABLE>

<TABLE>
<CAPTION>
TOP 5 BOND HOLDINGS
<C><S> <C>
BOND % FUND
1. U.S. Treasury 7.625% due 2025 8.7 %
2. U.S. Treasury 7.875% due 2001 4.0
3. GNMA 8.50% due 2025 3.1
4. U.S. Treasury 7.875% due 2004 2.4
5. U.S. Treasury 7.25% due 2004 2.3
----
20.5 %
</TABLE>

<TABLE>
<CAPTION>
TOP 5 SECTORS
<C><S> <C>
% FUND
1. Banking, Insurance, Financial Services 14.7 %
2. Technology 9.7
3. Energy 7.8
4. Health Care 6.2
5. Cons. Staples/Tobacco 5.2
----
43.6 %
</TABLE>

1
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND

COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE INCOME AND GROWTH FUND AND COMPARATIVE INDICES FROM INCEPTION
OF EACH CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.

In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended October 31,
1995, with all distributions reinvested in shares. The average annualized total
return for Class A shares of 4.68% for the period since the Fund's inception on
November 8, 1993 reflects payment of the maximum sales charge of 4.75%.
Cumulative total returns of 1.57% and 5.79% since inception for Class B and
Class C shares on February 9, 1994 and March 21, 1994, respectively, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B shares of 5.00% declines to 0% after five years; and maximum
charge for Class C shares is 1.00% during the first year of investment only).
All performance data shown represents past performance, and should not be
considered indicative of future performance.

NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND -- CLASS A

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Lehman Brothers Gov't/Corp. Lipper Balanced Fund
Bond S&P 500 Class A Index
11/08/93 $10,000 $10,000 $10,000 $9,525
11/30/93 $10,030 $9,871 $9,842 $9,667
12/31/93 $10,074 $10,037 $10,021 $9,805
01/31/94 $10,225 $10,363 $10,284 $10,225
02/28/94 $10,002 $10,051 $10,073 $9,938
03/31/94 $9,757 $9,659 $9,698 $9,536
04/30/94 $9,676 $9,771 $9,725 $9,488
05/31/94 $9,659 $9,892 $9,794 $9,536
06/30/94 $9,637 $9,701 $9,619 $9,432
07/31/94 $9,829 $10,008 $9,842 $9,645
08/31/94 $9,833 $10,382 $10,084 $9,936
09/30/94 $9,685 $10,175 $9,893 $9,819
10/31/94 $9,674 $10,387 $9,928 $9,751
11/30/94 $9,657 $9,977 $9,690 $9,448
12/31/94 $9,721 $10,173 $9,771 $9,455
01/31/95 $9,907 $10,420 $9,891 $9,416
02/28/95 $10,137 $10,796 $10,178 $9,643
03/31/95 $10,205 $11,160 $10,356 $9,808
04/30/95 $10,347 $11,472 $10,546 $9,997
05/31/95 $10,780 $11,889 $10,887 $10,364
06/30/95 $10,867 $12,222 $11,083 $10,527
07/31/95 $10,824 $12,610 $11,318 $10,758
08/31/95 $10,963 $12,606 $11,406 $10,888
09/30/95 $11,075 $13,190 $11,680 $11,039
10/31/95 $11,237 $13,125 $11,652 $10,948
Average Annual Total
Return
1-Year 6.93%
Since Inception 4.68%
</TABLE>

NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND -- CLASS B

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Lehman Brothers Gov't/Corp. Lipper Balanced Fund
Bond S&P 500 Class B Index
02/09/94 $10,000 $10,000 $10,000 $10,000
02/28/94 $9,921 $9,700 $9,784 $9,795
03/31/94 $9,678 $9,321 $9,388 $9,430
04/30/94 $9,598 $9,429 $9,340 $9,456
05/31/94 $9,580 $9,545 $9,388 $9,523
06/30/94 $9,558 $9,361 $9,278 $9,353
07/31/94 $9,749 $9,656 $9,488 $9,570
08/31/94 $9,753 $10,019 $9,773 $9,805
09/30/94 $9,606 $9,818 $9,647 $9,620
10/31/94 $9,596 $10,023 $9,580 $9,654
11/30/94 $9,578 $9,627 $9,283 $9,423
12/31/94 $9,641 $9,817 $9,275 $9,501
01/31/95 $9,827 $10,055 $9,236 $9,618
02/28/95 $10,055 $10,418 $9,439 $9,897
03/31/95 $10,122 $10,770 $9,598 $10,070
04/30/95 $10,263 $11,071 $9,782 $10,255
05/31/95 $10,693 $11,473 $10,132 $10,587
06/30/95 $10,778 $11,794 $10,289 $10,777
07/31/95 $10,736 $12,169 $10,505 $11,005
08/31/95 $10,874 $12,185 $10,603 $11,091
09/30/95 $10,984 $12,729 $10,771 $11,357
10/31/95 $11,146 $12,665 $10,673 $11,330
Average Annual Total
Return
1-Year 6.41%
Since Inception 1.57%
</TABLE>

NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND -- CLASS C

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Lehman Brothers Gov't/Corp. Lipper Balanced Fund
Bond S&P 500 Class C Index
03/21/94 $10,000 $10,000 $10,000 $10,000
03/31/94 $9,893 $10,070 $9,632 $10,000
04/30/94 $9,811 $10,187 $9,584 $10,027
05/31/94 $9,793 $10,313 $9,632 $10,099
06/30/94 $9,771 $10,114 $9,517 $9,918
07/31/94 $9,966 $10,432 $9,732 $10,148
08/31/94 $9,970 $10,824 $10,025 $10,398
09/30/94 $9,820 $10,608 $9,894 $10,201
10/31/94 $9,809 $10,829 $9,825 $10,237
11/30/94 $9,791 $10,401 $9,520 $9,992
12/31/94 $9,856 $10,606 $9,510 $10,075
01/31/95 $10,045 $10,863 $9,471 $10,199
02/28/95 $10,278 $11,255 $9,679 $10,495
03/31/95 $10,347 $11,635 $9,838 $10,678
04/30/95 $10,491 $11,961 $10,027 $10,875
05/31/95 $10,930 $12,395 $10,387 $11,226
06/30/95 $11,018 $12,743 $10,554 $11,428
07/31/95 $10,975 $13,147 $10,775 $11,670
08/31/95 $11,115 $13,143 $10,875 $11,761
09/30/95 $11,229 $13,752 $11,039 $12,044
10/31/95 $11,394 $13,684 $10,948 $12,015
Average Annual Total
Return
1-Year 10.43%
Since Inception 5.79%
</TABLE>

2
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
[LOGO]

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Industry $ Value % of Net Assets
<S> <C> <C> <C>
Aerospace & Defense $ 1,443,750 .......... 0.76%
Automotive 1,903,000 .......... 1.00
Banking 13,080,813 .......... 6.88
Computer Services 1,876,000 .......... 0.99
Consumer Staples 3,490,196 .......... 1.84
Containers 1,115,000 .......... 0.59
Electrical Equipment 4,418,875 .......... 2.32
Energy 14,848,746 .......... 7.82
Entertainment/Broadcasting 5,367,535 .......... 2.82
Financial Services 12,079,183 .......... 6.35
Gaming 2,452,650 .......... 1.29
Insurance 2,689,506 .......... 1.41
Lodging & Restaurants 1,253,750 .......... 0.66
Machinery 1,151,625 .......... 0.60
Metal 1,892,001 .......... 1.00
Office Equipment 4,489,350 .......... 2.36
Paper & Forest Products 2,704,500 .......... 1.42
Pharmaceutical/Healthcare 11,743,921 .......... 6.18
Real Estate Investment Trust 8,134,975 .......... 4.29
Retail 5,846,750 .......... 3.08
Technology 18,369,875 .......... 9.67
Telecommunications 3,729,038 .......... 1.96
Tobacco 6,337,500 .......... 3.34
Transportation 3,230,675 .......... 1.70
U.S. Government & Agencies 41,955,985 .......... 22.08
Repurchase Agreements 13,404,226 .......... 7.05
Other assets less liabilities 1,029,201 .......... 0.54
------------ -------
Net Assets $190,038,626 .......... 100.00%
------------ -------
------------ -------
</TABLE>

3
<PAGE>
NORTHSTAR ADVANTAGE
HIGH TOTAL RETURN FUND

[PHOTO][LOGO]
THOMAS OLE DIAL

INVESTMENT ENVIRONMENT

THE MARKETS

- It is widely agreed that the Federal Reserve's interest rate policies
helped the U.S. economy achieve a soft landing in 1995. Lower actual
inflation rates and expectations of continued declines in the CPI
helped push treasury bond prices up to the levels reached in early
1994. The yield on the long bond fell from 8% to 6.3%. Solid growth
in the U.S. economy and in corporate profits sent stock prices to
record levels throughout 1995.

- High yield bond prices marched up along with those of treasury bonds,
and were further boosted by higher stock valuations. However, spreads
of high yield bonds over treasury yields and spreads of B-rated
bonds' yields over BB-rated bonds widened as slower economic growth
in 1995 increased fears of a recession in 1996.

THE FUND

- From 11/01/94 to 10/31/95, the total return of the Fund's Class A
shares was 13.02%; the Lipper average was 12.73%. From January
through October in 1995, the Fund ranked 23rd out of 119 funds and
had a total return of 16.46% (based on Class A shares). That
improvement in the Fund's performance promoted sales that led to a
148% increase in its net assets which rose from $78.8MM to $195.9MM
in the last fiscal year.

- The Fund's performance was enhanced by changes in portfolio
allocations that anticipated changes in the markets. We underweighted
investments in the retail, gaming and cyclical industries (e.g.,
steel, transportation) to limit or avoid negative impacts on the
Fund's total return. On the other hand, we earned high returns on our
new investments in the telecommunications, cable and broadcasting
industries and in emerging markets.

- Bonds that were issued with equity securities or rights attached
("equity kickers") contributed significantly to the Fund's high
returns (e.g., Echostar, Thermoscan, Heartland Wireless and SHL
Systemhouse)

CURRENT STRATEGY

- Continue above-average exposure in non-cyclical industries and in
bonds that have equity kickers.

- Invest in companies that will benefit from deregulation, and very
cautiously invest in emerging markets and cyclicals with due regard
for the volatility in those market segments.

---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA AS OF 10/31/95) NET ASSETS $195,923,958
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
COMPANY TOP 10 HOLDINGS % FUND BOND TOP 5 INDUSTRIES % FUND RATING CREDIT QUALITY % FUND
<S> <C> <C> <C> <C> <C>
1. Echostar Communications 3.0% 1. Telecommunications 13.2% AAA-A 0.0%
2. Americo Life 2.9 2. Broadcasting 9.0 BBB 0.0
3. Heartland Wireless 2.6 3. Cable 8.4 BB 20.8
4. California Energy 2.3 4. Utilities 8.0 B 48.6
5. Pegasus Media 2.3 5. Paper 5.5 CCC 7.4
6. CAI Wireless 2.2 44.1% Not Rated 16.4
7. IXC Communications 2.1 - Internal BB 5.8
8. WinStar Communications 2.1 - Internal B 8.6
9. BCP/Essex Holdings 2.0 - Internal CCC/D 2.0
10. Duane Reade 2.0 Cash/Other Assets 6.8
------- ----
23.5% 100.0%
(Average Quality = B+)
</TABLE>

4
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND

[LOGO]

COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE HIGH
TOTAL RETURN FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS
OF SHARES THROUGH THE FUND'S FISCAL YEAR END.

In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended October 31,
1995, with all distributions reinvested in shares. The average annualized total
return for Class A shares of 2.14% for the period since the Fund's inception on
November 8, 1993 reflects payment of the maximum sales charge of 4.75%.
Cumulative total returns of (1.05)% and 2.38% since inception for Class B and
Class C shares on February 9, 1994 and March 21, 1994, respectively, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B shares of 5.00% declines to 0% after five years; and maximum
charge for Class C shares is 1.00% during the first year of investment only).
All performance data shown represents past performance, and should not be
considered indicative of future performance.

NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND -- CLASS A

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C>
(IN THOUSANDS)
Lehman Brothers Gov't/Corp. Lehman Brothers High
Bond Class A Yield
11/08/93 $10,000 $9,525 $10,000
11/30/93 $10,030 $9,605 $10,048
12/31/93 $10,074 $9,792 $10,173
01/31/94 $10,225 $10,077 $10,393
02/28/94 $10,002 $10,054 $10,366
03/31/94 $9,757 $9,716 $9,974
04/30/94 $9,676 $9,577 $9,907
05/31/94 $9,659 $9,475 $9,912
06/30/94 $9,637 $9,511 $9,942
07/31/94 $9,829 $9,390 $10,027
08/31/94 $9,833 $9,308 $10,098
09/30/94 $9,685 $9,247 $10,099
10/31/94 $9,674 $9,226 $10,123
11/30/94 $9,657 $9,038 $9,996
12/31/94 $9,721 $8,953 $10,070
01/31/95 $9,907 $9,059 $10,207
02/28/95 $10,137 $9,403 $10,557
03/31/95 $10,205 $9,558 $10,671
04/30/95 $10,347 $9,818 $10,942
05/31/95 $10,780 $9,950 $11,248
06/30/95 $10,867 $9,906 $11,320
07/31/95 $10,824 $10,221 $11,463
08/31/95 $10,963 $10,267 $11,498
09/30/95 $11,075 $10,381 $11,640
10/31/95 $11,237 $10,427 $11,712
Average Annual Total
Return
1-Year 7.66%
Since Inception 2.14%
</TABLE>

NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND -- CLASS B

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C>
(IN THOUSANDS)
Lehman Brothers Gov't/Corp. Lehman Brothers High
Bond Class B Yield
02/09/94 $10,000 $10,000 $10,000
02/28/94 $9,921 $9,937 $9,974
03/31/94 $9,678 $9,598 $9,597
04/30/94 $9,598 $9,455 $9,532
05/31/94 $9,580 $9,348 $9,536
06/30/94 $9,558 $9,379 $9,566
07/31/94 $9,749 $9,254 $9,647
08/31/94 $9,753 $9,169 $9,716
09/30/94 $9,606 $9,102 $9,717
10/31/94 $9,596 $9,076 $9,740
11/30/94 $9,578 $8,885 $9,617
12/31/94 $9,641 $8,796 $9,689
01/31/95 $9,827 $8,895 $9,820
02/28/95 $10,055 $9,206 $10,157
03/31/95 $10,122 $9,350 $10,267
04/30/95 $10,263 $9,601 $10,528
05/31/95 $10,693 $9,748 $10,822
06/30/95 $10,778 $9,699 $10,892
07/31/95 $10,736 $9,980 $11,029
08/31/95 $10,874 $10,018 $11,063
09/30/95 $10,984 $10,147 $11,199
10/31/95 $11,146 $10,163 $11,269
Average Annual Total
Return
1-Year 6.97%
Since Inception (1.05)%
</TABLE>

NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND -- CLASS C

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C>
(IN THOUSANDS)
Lehman Brothers Gov't/Corp. Lehman Brothers High
Bond Class C YIeld
3/21/94 $10,000 $10,000 $10,000
3/31/94 $9,893 $9,769 $9,622
4/30/94 $9,811 $9,623 $9,557
5/31/94 $9,793 $9,514 $9,561
6/30/94 $9,771 $9,545 $9,591
7/31/94 $9,966 $9,418 $9,673
8/31/94 $9,970 $9,331 $9,741
9/30/94 $9,820 $9,264 $9,742
10/31/94 $9,809 $9,237 $9,766
11/30/94 $9,791 $9,043 $9,642
12/31/94 $9,856 $8,952 $9,714
1/31/95 $10,045 $9,052 $9,846
2/28/95 $10,278 $9,412 $10,184
3/31/95 $10,347 $9,558 $10,294
4/30/95 $10,491 $9,815 $10,555
5/31/95 $10,930 $9,964 $10,851
6/30/95 $11,018 $9,915 $10,920
7/31/95 $10,975 $10,200 $11,058
8/31/95 $11,115 $10,239 $11,092
9/30/95 $11,229 $10,370 $11,228
10/31/95 $11,394 $10,386 $11,298
Average Annual Total
Return
1-Year 11.44%
Since Inception 2.38%
</TABLE>

5
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995

<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 54.28%
AEROSPACE & DEFENSE - 0.76%
Boeing Co. 22,000 $ 1,443,750
------------
AUTOMOTIVE - 1.00%
Magna International, Inc. 44,000 1,903,000
------------
BANKING - 6.88%
Ahmanson, (H. F.) & Co. 86,000 2,150,000
BankAmerica Corp. 52,000 2,990,000
Citicorp 57,500 3,730,313
Mellon Bank Corp. 84,000 4,210,500
------------
13,080,813
------------
CONSUMER STAPLES - 1.07%
Procter & Gamble Co. 25,000 2,025,000
------------
ELECTRICAL EQUIPMENT - 2.32%
AMP, Inc. 79,000 3,100,750
Emerson Electric Co. 18,500 1,318,125
------------
4,418,875
------------
ENERGY - 6.97%
Amoco Corp. 36,190 2,311,636
El Paso Natural Gas Co. 96,000 2,592,000
Halliburton Co. 31,000 1,286,500
Mobil Corp. (1) 23,700 2,387,775
Schlumberger LTD 20,000 1,245,000
Sonat, Inc. (1) 52,000 1,495,000
Texaco, Inc. 28,200 1,921,125
------------
13,239,036
------------
ENTERTAINMENT/BROADCASTING - 0.66%
British Sky Broadcasting Group PLC (2) 35,000 1,251,250
------------
FINANCIAL SERVICES - 4.57%
H&R Block, Inc. 43,000 1,773,750
Federal National Mortgage Association 41,000 4,299,875
MGIC Investment Corp. 46,000 2,616,250
------------
8,689,875
------------
LODGING & RESTAURANTS - 0.66%
Marriott International, Inc. 34,000 1,253,750
------------
MACHINERY - 0.60%
Kennametal, Inc. 37,000 1,151,625
------------
OFFICE EQUIPMENT - 2.36%
Xerox Corp. (1) 34,600 4,489,350
------------
PAPER & FOREST PRODUCTS - 1.42%
Georgia-Pacific Corp. (1) 16,000 1,320,000
Scott Paper Co. 26,000 1,384,500
------------
2,704,500
------------
</TABLE>

6
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995

[LOGO]

<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
PHARMACEUTICAL/HEALTHCARE - 5.08%
Bristol-Myers Squibb Co. 41,000 $ 3,126,250
Guidant Corp. 10 320
Lilly, (Eli) & Co. 12,613 1,218,731
Merck & Co., Inc. 55,000 3,162,500
Mylan Laboratories, Inc. 112,500 2,137,500
------------
9,645,301
------------
REAL ESTATE INVESTMENT TRUSTS - 3.15%
DeBartolo Realty Corp. 50,000 650,000
General Growth Properties, Inc. 70,000 1,408,750
Highwoods Properties, Inc. 52,000 1,384,500
OMEGA Healthcare Investors, Inc. 79,000 2,004,625
Security Capital Pacific Trust 30,000 536,250
------------
5,984,125
------------
RETAIL - 1.99%
Home Depot, Inc. 78,000 2,905,500
Pep Boys-Manny, Moe & Jack 40,000 875,000
------------
3,780,500
------------
TECHNOLOGY - 8.75%
Computer Associates International, Inc. 59,250 3,258,750
DSC Communications Corp. (3) 78,500 2,904,500
Intel Corp. 82,000 5,729,750
National Semiconductor Corp. (3) 55,000 1,340,625
Motorola, Inc. 51,600 3,386,250
------------
16,619,875
------------
TELECOMMUNICATIONS - 1.96%
WorldCom, Inc. 114,300 3,729,038
------------
TOBACCO - 3.34%
Philip Morris Companies, Inc. (1) 75,000 6,337,500
------------
TRANSPORTATION - 0.74%
Conrail, Inc. 20,500 1,409,375
------------
TOTAL COMMON STOCKS
(cost $92,322,819) 103,156,538
------------
CONVERTIBLE PREFERRED STOCKS - 3.20%
COMPUTER SERVICES - 0.99%
General Motors Corp.
$3.25, Class E 28,000 1,876,000
------------
INSURANCE - 0.66%
Allstate Corp.
6.76%, Exchangeable Notes, 4/15/98 (4) 29,000 1,261,500
------------
REAL ESTATE - 0.63%
Security Capital Pacific Trust
$1.75, Series A 50,000 1,187,500
------------
</TABLE>

7
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995

<TABLE>
<CAPTION>
Security
Shares/Principal Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY - 0.92%
National Semiconductor Corp.
$3.25 20,000 $ 1,750,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $5,186,481) 6,075,000
------------
</TABLE>

<TABLE>
<S> <C> <C>
CONVERTIBLE BONDS - 5.99%
ENTERTAINMENT - 1.01%
Time Warner, Inc.
8.75%, Sr. Notes, 1/10/15 $ 1,841,400 1,926,565
------------
FINANCIAL - 0.98%
American Travellers Corp.
6.50%, Subordinated Notes, 10/01/05 970,000 1,122,988
Old Republic International Corp.
5.75%, Subordinated Debentures, 8/15/02 650,000 737,445
------------
1,860,433
------------
GAMING - 1.29%
Argosy Gaming Co.
12.00%, Subordinated Notes, 6/01/01 2,490,000 2,452,650
------------
METAL - 1.00%
Inco LTD
5.75%, Debentures, 7/01/04 1,425,000 1,892,001
------------
REAL ESTATE INVESTMENT TRUST - 0.51%
Meditrust
7.50%, Debentures, 3/01/01 940,000 963,350
------------
RETAIL - 0.24%
Staples, Inc.
4.50%, Notes, 10/01/00 450,000 461,250
------------
TRANSPORTATION - 0.96%
Alaska Air Group, Inc.
6.50%, Debentures, 6/15/05 1,950,000 1,821,300
------------
TOTAL CONVERTIBLE BONDS
(cost $11,405,642) 11,377,549
------------
CORPORATE BONDS & NOTES - 6.86%
CONSUMER STAPLES - 0.77%
RJR Nabisco, Inc.
8.625%, Notes, 12/01/02 1,450,000 1,465,196
------------
CONTAINERS - 0.59%
Owens-Illinois, Inc.
11.00%, Debentures, 12/01/03 1,000,000 1,115,000
------------
ENERGY - 0.85%
Occidental Petroleum Corp.
8.50%, Notes, 9/15/04 1,500,000 1,609,710
------------
ENTERTAINMENT/BROADCASTING - 1.15%
News America Holdings, Inc.
8.625%, Sr. Notes, 2/01/03 2,000,000 2,189,720
------------
FINANCIAL - 0.80%
Electronic TransMaster Trust
9.35%, Sr. Notes, 5/03/99 1,500,000 1,528,875
------------
</TABLE>

8
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995

[LOGO]
<TABLE>
<CAPTION>
Security
Principal Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE - 1.10%
Columbia/HCA Healthcare
7.69%, Notes, 6/15/25 $ 2,000,000 $ 2,098,620
------------
INSURANCE - 0.75%
Leucadia National Corp.
8.25%, Sr. Subordinated Notes, 6/15/05 1,375,000 1,428,006
------------
RETAIL - 0.85%
Federated Department Stores, Inc.
10.00%, Sr. Notes, 2/15/01 1,500,000 1,605,000
------------
TOTAL CORPORATE BONDS & NOTES
(cost $12,412,040) 13,040,127
------------
U.S. GOVERNMENT & AGENCIES - 22.08%
Government National Mortgage Association
8.00%, 1/15/23 2,913,706 3,006,536
8.50%, 4/15/25 5,708,012 5,941,583
U.S. Treasury Notes and Bonds
7.25%, 5/15/04 4,000,000 4,327,240
7.625%, 2/15/25 14,200,000 16,488,756
7.875%, 8/15/01 7,000,000 7,684,390
7.875%, 11/15/04 4,000,000 4,507,480
------------
TOTAL U.S. GOVERNMENT & AGENCIES
(cost $39,730,290) 41,955,985
------------
TOTAL INVESTMENT SECURITIES - 92.41%
(Cost $161,057,272) 175,605,199
------------
REPURCHASE AGREEMENTS - 7.05%
Agreement with Bear Stearns bearing interest at
5.80% dated 10/31/95, to be repurchased 11/01/95
in the amount of $13,406,386 and collateralized
by $11,210,000 U.S. Treasury Bills due 3/07/96,
$821,000 U.S. Treasury Bills due 5/02/96,
$1,030,000 U.S. Treasury Bills due 5/30/96 and
$740,000 U.S. Treasury Bond due 2/15/21(cost
$13,404,226) 13,404,226 13,404,226
Other assets less liabilities - 0.54% 1,029,201
------------
Net Assets - 100.00% $190,038,626
------------
------------
</TABLE>

(1) Includes rights to purchase additional stock on the occurence of
certain events specified in the offering.

(2) American Depository Receipts.

(3) Non-income producing.

(4) Mandatory conversion at maturity into shares of PMI Group common stock.

9
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995

<TABLE>
<CAPTION>
Security
Principal Amount/Units Value
<S> <C> <C>
DOMESTIC CORPORATE BONDS &
NOTES - 69.97%
AUTOMOTIVE - 0.50%
Walbro Corp.
9.875%, Sr. Notes, 7/15/05 $ 1,000,000 $ 985,000
------------
BANKING - 1.27%
Berkeley Federal Bank and
Trust
12.00%, Subordinated
Debentures, 6/15/05 2,425,000 2,467,437
------------
BROADCASTING - 8.10%
Chancellor Broadcasting Co.
12.50%, Sr. Subordinated
Notes, 10/01/04 2,425,000 2,558,375
Commodore Media, Inc.
7.50/13.25%, Sr. Subordinated
Notes, 5/01/03 (1) 2,250,000 2,041,875
Paxson Communications Corp.
11.625%, Sr. Subordinated
Notes, 10/01/02 (2) 3,900,000 3,851,250
Pegasus Media &
Communications, Inc.
12.50%, Units, 7/01/05 (2)(3) 4,400 4,455,000
Spanish Broadcasting Systems,
Inc.
7.50/12.50%, Sr. Notes,
6/15/02 (1) 3,000,000 2,955,000
------------
15,861,500
------------
BUILDING/SUPPLIES - 0.80%
Waxman Industries, Inc.
0/12.75%, Sr. Notes, 6/01/04
(1) 3,712,000 1,559,040
------------
CABLE - 7.83%
American Telecasting, Inc.
0/14.50%, Units, 8/15/05
(1)(2)(4) 5,000 2,825,000
CAI Wireless Systems, Inc.
12.25%, Sr. Notes, 9/15/02 4,000,000 4,240,000
Echostar Communications Corp.
0/12.875%, Units, 6/01/04
(1)(5) 8,900 5,785,000
Wireless One, Inc.
13.00%, Units, 10/15/03 (7) 2,400 2,493,000
------------
15,343,000
------------
CHEMICALS - 1.95%
Pioneer Americas Acquisition
Corp.
13.375%, Sr. Notes, 4/01/05
(2) 3,700,000 3,829,500
------------
CONGLOMERATE - 1.53%
LaRoche Industries, Inc.
13.00%, Sr. Subordinated
Notes, 8/15/04 2,000,000 2,135,000
Terex Corp.
13.75%, Units, 5/15/02 (2)(8) 1,000 857,500
------------
2,992,500
------------
CONSUMER PRODUCTS - 2.42%
International Semi-Tech Corp.
0/11.50%, Sr. Secured Notes,
8/15/03 (1) 3,900,000 2,008,500
</TABLE>

10
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
[LOGO]

<TABLE>
<CAPTION>
Security
Principal Amount/Units Value
<S> <C> <C>
Thermoscan, Inc.
13.5625%, Units, 8/15/01
(2)(9)(10) 2,200 $ 2,730,200
------------
4,738,700
------------
ENTERTAINMENT - 0.21%
Sam Houston Race Park
11.75%, Notes, 7/15/99
(11)(12) $ 1,500,000 405,000
------------
FINANCE - 4.78%
Americo Life, Inc.
9.25%, Sr. Subordinated
Notes, 6/01/05 6,000,000 5,670,000
GPA Delaware, Inc.
9.50%, Medium Term Notes,
12/15/01 (2) 250,000 203,750
GPA Holland
9.75%, Sr. Medium Term Notes,
12/10/01 (2) 2,000,000 1,650,000
GPA Holland
10.20%, Sr. Medium Term
Notes, 8/05/98 (2) 2,000,000 1,842,500
------------
9,366,250
------------
FOOD/BEVERAGE - 0.40%
Beatrice Foods, Inc.
12.00%, Sr. Subordinated
Notes, 12/01/01 2,250,000 787,500
------------
FOOD SERVICE - 1.86%
American Restaurant Group,
Inc.
12.00%, Sr. Notes, 9/15/98 4,900,000 3,650,500
------------
FOOD WHOLESALER - 1.28%
Di Giorgio Corp.
12.00%, Sr. Notes, 2/15/03 3,225,000 2,515,500
------------
GROCERY - 4.34%
Dairy Mart Convenience
Stores, Inc.
10.25%, Sr. Subordinated
Notes, 3/15/04 2,600,000 2,223,000
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 4,000,000 3,380,000
Ralphs Grocery Co.
11.00%, Sr. Subordinated
Notes, 6/15/05 3,000,000 2,902,500
------------
8,505,500
------------
HOTELS & GAMING - 2.59%
GB Property Funding
10.875%, 1st Mortgage Notes,
1/15/04 2,950,000 2,470,625
Trump Castle Funding
11.75%, 1st Mortgage Notes,
11/15/03 1,000,000 810,000
Trump Plaza Funding
10.875%, Mortgage Notes,
6/15/01 1,900,000 1,790,750
------------
5,071,375
------------
METAL & METAL PRODUCTS -
1.82%
GS Technologies Operating Co.
12.25%, Sr. Notes, 10/01/05 2,000,000 2,025,000
</TABLE>

11
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995

<TABLE>
<CAPTION>
Security
Principal Amount/Units Value
<S> <C> <C>
Renco Metals, Inc.
12.00%, Sr. Notes, 7/15/00 $ 1,425,000 $ 1,546,125
------------
3,571,125
------------
PRINTING/PUBLISHING - 1.46%
Affiliated Newspapers
Investments, Inc.
0/13.25%, Sr. Discount Notes,
7/01/06 (1)(13) 4,900,000 2,866,500
------------
REAL ESTATE - 1.50%
Trizec Corp. LTD
10.875%, Sr. Notes, 10/15/05 2,900,000 2,939,875
------------
RETAIL - 2.94%
Central Rents, Inc.
12.875%, Sr. Notes, 12/15/03 1,000,000 1,002,500
Duane Reade Corp.
12.00%, Sr. Notes, 9/15/02 4,175,000 3,851,437
Wherehouse Entertainment,
Inc.
13.00%, Sr. Subordinated
Notes, 8/01/02 (11)(12) 3,000,000 900,000
------------
5,753,937
------------
STEEL - 2.87%
Carbide/Graphite Group, Inc.
11.50%, Sr. Notes, 9/01/03 1,200,000 1,302,000
NS Group, Inc.
13.50%, Units, 7/15/03 (14) 2,400 2,016,000
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes,
11/01/01 2,500,000 2,312,500
------------
5,630,500
------------
TELECOMMUNICATIONS - 13.22%
Cellular Communications
International, Inc.
0%, Units, 8/15/00 (15) 4,000 2,350,000
Dial Call Communications
0/10.25%, Sr. Discount Notes,
12/15/05 (1) 3,000,000 1,440,000
Dial Call Communications
0/12.25%, Sr. Discount Notes,
4/15/04 (1) 2,000,000 1,050,000
Geotek Communication, Inc.
0/15.00%, Units, 7/15/05
(1)(2)(16) 5,900 3,038,500
Heartland Wireless
Communications, Inc.
13.00%, Units, 4/15/03 (2)(6) 4,425 5,011,312
Intelcom Group (USA), Inc.
0/13.50%, Units, 9/15/05
(1)(2)(17) 200 1,130,000
IXC Communications, Inc.
12.50%, Sr. Notes, 10/01/05
(2) 4,000,000 4,090,000
Mobile Telecommunication
Technologies Corp.
13.50%, Sr. Notes, 12/15/02 2,000,000 2,265,000
Nextel Communications, Inc.
0/9.75%, Sr. Discount Notes,
8/15/04 (1) 3,000,000 1,537,500
</TABLE>

12
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
[LOGO]

<TABLE>
<CAPTION>
Security
Principal Amount/Units Value
<S> <C> <C>
WinStar Communications, Inc.
0/14.00%, Units, 10/15/05
(1)(2)(18) 2,550 $ 3,990,750
------------
25,903,062
------------
TEXTILE - 0.92%
JPS Textile Group, Inc.
10.25%, Subordinated Notes,
6/01/99 $ 2,000,000 1,810,000
------------
TRANSPORTATION - 3.06%
Burlington Motor Holdings,
Inc.
11.50%, Sr. Subordinated
Notes, 11/01/03 4,950,000 1,658,250
Great Dane Holdings, Inc.
12.75%, Sr. Subordinated
Debentures, 8/01/01 1,250,000 1,156,250
Great Dane Holdings, Inc.
14.50%, Subordinated
Debentures, 1/01/06 3,500,000 3,176,250
------------
5,990,750
------------
UTILITY - 2.32%
California Energy Co, Inc.
0/10.25%, Sr. Discount Notes,
1/15/04 (1) 5,000,000 4,537,500
------------
TOTAL DOMESTIC CORPORATE
BONDS & NOTES
(cost $141,546,620) 137,081,551
------------
FOREIGN BONDS & NOTES -
16.85%
BANKING - 2.18%
Banco De Galicia
9.00%, Notes, 11/01/03 1,000,000 763,750
Banco Nacional De Mexico
7.00%, Notes, 12/15/99 (19) 1,500,000 1,185,000
Banco Rio De La Plata
8.75%, Notes, 12/15/03 3,000,000 2,332,500
------------
4,281,250
------------
CABLE - 0.60%
TeleWest plc
0/11.00%, Debentures,
10/01/07 (1) 2,000,000 1,175,000
------------
FOOD/BEVERAGE - 0.95%
Gruma SA de CV
9.75%, Sr. Notes, 3/09/98 1,925,000 1,857,625
------------
FOREIGN GOVERNMENT - 2.01%
Federal Republic of Brazil
Capitalization Bonds
8.00%, Government Guaranty,
4/15/14 (20) 2,759,141 1,414,060
Federal Republic of Brazil
Eligible Interest Bonds
6.8125%, Debentures, 4/15/06
(10) 2,000,000 1,332,500
Republic Of Argentina
6.8125%, Debentures, 3/31/05
(10) 2,000,000 1,195,000
------------
3,941,560
------------
</TABLE>

13
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995

<TABLE>
<CAPTION>
Security
Principal Amount/Shares Value
<S> <C> <C>
PAPER - 5.45%
APP International Finance Co.
V.B.
11.75%, Guaranteed Sr.
Secured Notes, 10/01/05 $ 2,800,000 $ 2,870,000
Empaques Ponderosa SA
8.75%, Sr. Notes, 12/06/96 3,449,000 3,336,908
Grupo Industrial Durango
12.00%, Notes, 7/15/01 3,250,000 2,908,750
Indah Kiat International
Finance
12.50%, Guaranteed Sr.
Secured Notes, 6/15/06 1,500,000 1,552,500
------------
10,668,158
------------
UTILITIES - 5.66%
Invergas SA
12.50%, Sr. Notes, 12/16/99 3,925,000 3,787,625
MetroGas SA
12.00%, Sr. Notes, 8/15/00 2,000,000 1,945,000
Sodigas
10.50%, Sr. Notes, 7/06/99 2,500,000 2,356,250
Telecom Brazil
11.50%, Guaranteed Sr.
Secured Notes, 12/09/99 (10) 3,000,000 3,007,500
------------
11,096,375
------------
TOTAL FOREIGN BONDS & NOTES
(cost $31,917,198) 33,019,968
------------
DOMESTIC COMMON STOCK - 0.81%
(12)
ELECTRICAL EQUIPMENT - 0.69%
Berg Electronics Holding
Corp. 200,000 1,350,000
------------
GAMING - 0.00%
Capital Gaming International,
Inc. 26,835 6,226
------------
PRINTING/PUBLISHING - 0.08%
Affiliated Newspapers
Investments, Inc. (13) 4,900 147,000
------------
RETAIL - 0.04%
Thrifty Payless Holdings,
Inc. 19,000 80,750
------------
TOTAL DOMESTIC COMMON STOCK
(cost $1,557,251) 1,583,976
------------
DOMESTIC PREFERRED STOCK -
5.98%
BANKING - 0.98%
First Nationwide Bank 11.50% 17,000 1,929,500
------------
CONGLOMERATE - 2.01%
BCP/Essex Holdings 15.00% 151,595 3,941,470
------------
HEALTHCARE - 2.73%
Foxmeyer Health Corp. $4.20
(21) 99,966 3,711,237
Intracel Corp.
8.00%, Series A (19)(22) 200,409 1,628,323
------------
5,339,560
------------
</TABLE>

14
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
[LOGO]

<TABLE>
<CAPTION>
Security
Shares Value
- -----------------------------------------------------------
<S> <C> <C>
INDUSTRIAL - 0.23%
Telos Corp. 12.00% (21) 101,687 $ 457,592
------------
RETAIL - 0.03%
Color Tile
13.00%, Series A 20,000 50,000
------------
TOTAL DOMESTIC PREFERRED
STOCK
(cost $11,765,421) 11,718,122
------------
DOMESTIC WARRANTS - 1.06%
(12)
AEROSPACE - 0.00%
Sabreliner Corp.
(expires 9/01/99) 1,250 6,250
------------
BROADCASTING - 0.90%
Commodore Media, Inc.
(expires 5/01/00) 7,500 712,500
Spanish Broadcasting Systems,
Inc.
(expires 6/30/99) 5,000 1,050,000
------------
1,762,500
------------
BUILDING/SUPPLIES - 0.02%
Waxman Industries Inc.
(expires 6/01/04) (2) 118,000 29,500
------------
CONSUMER GROUP - 0.00%
Chattem, Inc.
(expires 6/17/99) (2) 1,300 4,225
------------
ENTERTAINMENT - 0.00%
Sam Houston Race Park
(expires 7/15/99) 6,000 0
------------
GAMING - 0.00%
Capital Gaming International,
Inc.
(expires 2/01/99) 20,250 608
------------
RETAIL - 0.11%
Central Rents, Inc.
(expires 2003) 3,900 214,500
------------
STEEL - 0.03%
Sheffield Steel Corp.
(expires 11/01/01) 12,500 62,500
------------
</TABLE>

15
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995

<TABLE>
<CAPTION>
Security
Principal Amount/Shares Value
- -----------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 0.00%
CHC Helicopter Corp.
(expires 10/29/98) 2,000 $ 2,000
------------
TOTAL DOMESTIC WARRANTS
(cost $1,781,495) 2,082,083
------------
TOTAL INVESTMENT SECURITIES -
94.67%
(Cost $188,567,985) 185,485,700
------------
REPURCHASE AGREEMENTS - 2.27%
Agreement with Bear Stearns
bearing interest at 5.80%
dated 10/31/95, to be
repurchased 11/01/95 in the
amount of $4,435,947 and
collateralized by $3,795,000
U.S. Treasury Bonds, 7.875%
due 2/15/21 (cost $4,435,232) $ 4,435,232 4,435,232
Agreement with Bear Stearns
bearing interest at 5.90%
dated 10/31/95, to be
repurchased 11/01/95 in the
amount of $3,293,340 and
collateralized by $1,239,000
U.S. Treasury Bonds, 7.875%
due 2/15/21 and $1,825,000
U.S. Treasury Notes, 6.25%
due 2/15/03 (cost $3,292,800) 3,292,800 3,292,800
OTHER ASSETS LESS LIABILITIES
- -3.06% 2,710,226
------------
NET ASSETS - 100.00% $195,923,958
------------
------------
</TABLE>

(1) Step bond.

(2) Sale restricted to qualified institutional investors.

(3) A unit consists of $1,000 par value 12.50%, Series A Notes, 7/01/03
and .10 share of common stock.

(4) A unit consists of $1,000 par value 14.50%, Sr. Discount Notes,
8/15/05 and 1 warrant.

(5) A unit consists of $1,000 par value 12.875%, Sr. Discount Notes,
6/01/04 and 6 warrants.

(6) A unit consists of $1,000 par value 13.00%, Sr. Notes, 4/15/03 and 6
warrants.

(7) A unit consists of $1,000 par value 13.00%, Sr. Notes, 4/15/03 and 3
warrants.

(8) A unit consists of $1,000 par value 13.75%, Sr. Secured Notes, 5/15/02
and 4 common stock Appreciation Rights.

(9) A unit consists of $1,000 par value Sr. Subordinated Notes, 8/15/01
and 13 shares class B stock.

(10) Floating Rate Bond. Rate as of October 31, 1995.

(11) Defaulted security.

(12) Non-income producing securities.

(13) Part or all of the security position has been loaned to brokers.

(14) A unit consists of $1,000 par value 13.50%, Sr. Secured Notes, 7/15/03
and 1 warrant.

(15) A unit consists of $1,000 par value, Sr. Discount Notes, 8/15/00 and 1
warrant.

(16) A unit consists of $1,000 par value 15.00%, Discount Notes, 7/15/05
and 30 warrants.

(17) A unit consists of $10,000 par value 13.50%, Sr. Discount Notes,
9/15/05 and 33 warrants.

(18) A unit consists of $2,000 par value 14.00%, Sr. Discount Notes,
10/15/05 and $1,000 par value Convertible Sr. Subordinated Notes.

(19) Convertible Bond.

(20) Interest paid partial cash/partial capitalization.

(21) Payment-in-kind security.

(22) Private placement.

See accompanying notes to financial statements.

16
<PAGE>
NORTHSTAR ADVANTAGE TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
[LOGO]

<TABLE>
<CAPTION>
Northstar Advantage Northstar Advantage
Income and Growth High Total Return
Fund Fund
------------------------------------------
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $161,057,272 and
$188,567,985, respectively) $175,605,199 $185,485,700
Repurchase agreements 13,404,226 7,728,032
Dividends and interest receivable 1,484,609 4,103,127
Receivable for shares of beneficial
interest sold 76,824 2,760,906
Receivable for investments sold 0 1,205,775
Prepaid expenses 33,909 32,715
------------------------------------------
Total Assets 190,604,767 201,316,255
------------------------------------------
LIABILITIES:
Payable for shares of beneficial
interest reacquired 192,272 142,816
Investment advisory fee payable 121,580 119,947
Distribution fee payable 116,416 108,258
Transfer agent fee payable 56,450 53,883
Administrative services fee payable 16,211 15,993
Accounting fee payable 15,519 16,383
Accrued expenses 47,693 63,571
Deposit for securities loaned 0 3,292,800
Payable for investments purchased 0 1,578,646
------------------------------------------
Total Liabilities 566,141 5,392,297
------------------------------------------
NET ASSETS $190,038,626 $195,923,958
------------------------------------------
------------------------------------------
NET ASSETS COMPOSED OF:
Shares of beneficial interest, $.01
par value outstanding (unlimited
shares authorized) Paid-in-Capital $176,931,093 $203,235,432
Undistributed net investment income 364,359 190,021
Accumulated net realized loss on
investments (1,804,753) (4,419,210)
Net unrealized appreciation
(depreciation) of investments 14,547,927 (3,082,285)
------------------------------------------
Net Assets $190,038,626 $195,923,958
------------------------------------------
------------------------------------------
CLASS A:
Net Assets $76,030,530 $88,551,558
------------------------------------------
Shares outstanding 7,001,607 19,776,065
------------------------------------------
Net asset value and redemption
value per share (net assets/shares
outstanding) $10.86 $4.48
------------------------------------------
Maximum offering price per share
(net asset value plus sales charge
of 4.75% of offering price) $11.40 $4.70
------------------------------------------
CLASS B:
Net Assets $60,346,907 $96,361,684
------------------------------------------
Shares outstanding 5,567,670 21,539,899
------------------------------------------
Net asset value and offering price
per share $10.84 $4.47
------------------------------------------
CLASS C:
Net Assets $53,661,189 $11,010,716
------------------------------------------
Shares outstanding 4,955,893 2,451,305
------------------------------------------
Net asset value and offering price
per share $10.83 $4.49
------------------------------------------
</TABLE>

See accompanying notes to financial statements.

17
<PAGE>
NORTHSTAR ADVANTAGE TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995

<TABLE>
<CAPTION>
Northstar Advantage Northstar Advantage
Income and Growth High Total Return
Fund Fund
-------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax
of $2,665 on Income and Growth
Fund) $3,160,689 $609,167
Interest 4,402,462 15,019,141
-------------------------------------
Total investment income 7,563,151 15,628,308
-------------------------------------
EXPENSES:
Investment advisory and management
fees 1,158,432 941,310
Distribution fees:
Class A 221,615 196,152
Class B 490,136 548,708
Class C 315,723 52,534
Transfer agent fees and expenses:
Class A 126,285 119,690
Class B 95,758 101,568
Class C 59,136 10,500
Administrative services fees 154,457 125,508
Fund accounting fees 111,437 93,094
Printing and postage expenses 46,202 41,946
Custodian fees and expenses 37,059 29,670
Registration fees 35,214 52,156
Miscellaneous expenses 59,562 57,269
-------------------------------------
Total expenses 2,911,016 2,370,105
-------------------------------------
NET INVESTMENT INCOME 4,652,135 13,258,203
-------------------------------------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized loss on investments (1,378,420) (2,572,908)
Net realized loss on foreign
currency (38,505) 0
Net change in unrealized
appreciation of investments 16,414,821 4,695,216
-------------------------------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 14,997,896 2,122,308
-------------------------------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $19,650,031 $15,380,511
-------------------------------------
</TABLE>

See accompanying notes to financial statements.

18
<PAGE>
NORTHSTAR ADVANTAGE TRUST
STATEMENT OF CHANGES IN NET ASSETS
[LOGO]

<TABLE>
<CAPTION>
Northstar Advantage Northstar Advantage
Income and Growth Fund High Total Return Fund
-------------------------- -----------------------------
For the year For the period For the year For the period
ended ended ended ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $4,652,135 $2,239,551 $13,258,203 $5,080,521
Net realized loss on investments (1,378,420) (426,333) (2,572,908) (1,846,302)
Net realized loss on foreign currency (38,505) 0 0 0
Net change in unrealized appreciation
(depreciation) of investments 16,414,821 (1,866,894) 4,695,216 (7,777,501)
----------------------------------------------------------------------
Increase (decrease) in net assets resulting
from operations 19,650,031 (53,676) 15,380,511 (4,543,282)

FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (2,390,482) (1,480,853) (7,078,564) (3,850,899)
Class B (1,286,761) (389,115) (5,602,745) (989,495)
Class C (885,802) (55,809) (544,101) (82,899)
----------------------------------------------------------------------
(4,563,045) (1,925,777) (13,225,410) (4,923,293)
----------------------------------------------------------------------

FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 79,489,052 124,617,812 128,604,858 102,945,785
Net asset value of shares issued to shareholders
in reinvestment of dividends 2,970,631 1,227,407 5,240,098 2,042,914
----------------------------------------------------------------------
82,459,683 125,845,219 133,844,956 104,988,699
Cost of shares redeemed (22,320,893) (9,132,916) (19,082,236) (16,525,987)
----------------------------------------------------------------------
Net increase in net assets derived from capital
share transactions 60,138,790 116,712,303 114,762,720 88,462,712
----------------------------------------------------------------------
Net increase in net assets 75,225,776 114,732,850 116,917,821 78,996,137
NET ASSETS:
Beginning of period 114,812,850 80,000 79,006,137 10,000
----------------------------------------------------------------------
End of period (including undistributed net
investment income at October 31, 1995 and
October 31, 1994 of $402,864, $190,021 and
$313,774, $157,228, respectively) $190,038,626 $114,812,850 $195,923,958 $79,006,137
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.

19
<PAGE>
NORTHSTAR ADVANTAGE TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD

<TABLE>
<CAPTION>
Ratio of
Net Ratio of net
realized & Dividends Net expenses investment
Net Asset unrealized declared Net Asset Assets, to income to
Value, Net gain (loss) Total from from net Value, end of average average
Period beginning investment on investment investment end of Total period net net Portfolio
ended of period income investments operations income period Return (000's) assets assets turnover
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Income and Growth Fund, Class A
- ---------------------------------------------------------------------------------------------------------------------------------
11/08/93-
10/31/94 $10.00 $0.30 ($0.05) $0.25 ($0.25) $10.00 2.48% $72,223 1.50% 3.73% 26%
10/31/95 10.00 0.35 0.84 1.19 (0.33) 10.86 13.19 76,031 1.51 3.39 91
Income and Growth Fund, Class B
- ---------------------------------------------------------------------------------------------------------------------------------
2/09/94-
10/31/94 10.64 0.20 (0.65) (0.45) (0.20) 9.99 (4.20) 37,767 2.20 3.00 26
10/31/95 9.99 0.27 0.85 1.12 (0.27) 10.84 12.31 60,347 2.23 2.66 91
Income and Growth Fund, Class C
- ---------------------------------------------------------------------------------------------------------------------------------
3/21/94-
10/31/94 10.37 0.20 (0.38) (0.18) (0.20) 9.99 (1.75) 4,823 2.20 2.87 26
10/31/95 9.99 0.27 0.85 1.12 (0.28) 10.83 12.33 53,661 2.22 2.67 91
High Total Return Fund, Class A
- ---------------------------------------------------------------------------------------------------------------------------------
11/08/93-
10/31/94 5.00 0.41 (0.60) (0.19) (0.40) 4.41 (4.11) 50,797 1.50 10.09 163
10/31/95 4.41 0.48 0.07 0.55 (0.48) 4.48 13.02 88,552 1.55 10.90 145
High Total Return Fund, Class B
- ---------------------------------------------------------------------------------------------------------------------------------
2/09/94-
10/31/94 5.20 0.33 (0.80) (0.47) (0.32) 4.41 (9.30) 25,880 2.20 9.72 163
10/31/95 4.41 0.45 0.06 0.51 (0.45) 4.47 11.97 96,362 2.25 10.20 145
High Total Return Fund, Class C
- ---------------------------------------------------------------------------------------------------------------------------------
3/21/94-
10/31/94 5.06 0.26 (0.65) (0.39) (0.26) 4.41 (7.21) 2,330 2.20 9.46 163
10/31/95 4.41 0.44 0.09 0.53 (0.45) 4.49 12.44 11,011 2.27 10.18 145
</TABLE>

See accompanying notes to financial statements

20
<PAGE>
NORTHSTAR ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 1995
[LOGO]

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization - The Northstar Advantage Trust, (formally the NWNL Northstar
Series Trust), a business trust, was organized under the laws of the
Commonwealth of Massachusetts on August 18, 1993, and is registered under the
Investment Company Act of 1940 as a diversified open-end management investment
company. The names of each of the two investment series which comprise the Trust
(the "Funds") and their respective investment objectives are set forth below.
Each Fund commenced its public offering of Class A shares on November 8, 1993.
The Class B and Class C share offerings commenced on February 9, 1994 and March
21, 1994, respectively.

Northstar Advantage Income and Growth Fund, (FORMALLY NWNL NORTHSTAR
INCOME AND GROWTH FUND), ("INCOME AND GROWTH FUND") is a diversified
portfolio with the investment objective of current income balanced with the
objective of achieving capital appreciation. The Fund seeks to achieve its
objective through investments in a diversified group of securities selected
for their prospects of current yield and capital appreciation.

Northstar Advantage High Total Return Fund, (FORMALLY NWNL NORTHSTAR
HIGH YIELD BOND FUND), ("TOTAL RETURN FUND") is a diversified portfolio
whose investment objective is to seek high income. The Fund invests
primarily in a diversified group of fixed income securities which are
selected for high income, including lower rated fixed income securities,
convertible securities, securities issued by U.S. companies in foreign
currencies, and securities issued by foreign governments and 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, Expenses and Distributions to
Shareholders - Security transactions are recorded on the trade date. Realized
gains or losses on sales of investments are calculated on the identified cost
basis. Interest income is recorded on the accrual basis except when collection
is not expected; discounts are accrued, and premiums amortized to par at
maturity; dividend income is recorded on the ex-dividend dates. Income, expenses
(except class specific expenses), and realized/unrealized gains/losses, are
allocated proportionately to each class of shares based upon the relative net
asset value of outstanding shares. Dividends from net investment income are
declared and paid monthly by the Total Return Fund, and declared and paid
quarterly by the Income and Growth Fund. Distributions of net realized capital
gains, if any, are declared annually; however, to the extent that a net realized
capital gain can be reduced by a capital loss carryover, such gain will not be
distributed.

Net realized and unrealized gain (loss) on foreign currency transactions
represents the foreign exchange.

(1) gains and losses from the sale of holdings of foreign currencies, (2)
gains and losses between trade date and settlement date on investment securities
transactions and forward exchange contracts, and (3) gains and losses from the
difference between amounts of interest and dividends recorded and the amounts
actually received.

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
principles.

Repurchase Agreements - The Funds' Custodian takes possession of collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a marked-to-market basis to assure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the Funds have the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Funds may be delayed or limited.

21
<PAGE>
NORTHSTAR ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 1995

Federal Income Taxes - The Trust intends 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 Costs - Costs incurred by the Trust in connection with its
organization of each Fund have been deferred and are being amortized over a
period of five years from the date the Funds commenced operations. Each Fund
offers three classes of shares.

NOTE 2. INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR

Northstar Investment Management Corporation (the "Adviser") serves as each
Fund's investment adviser. Each Fund pays the Adviser an investment advisory fee
calculated at an annual rate of .75% of each Fund's average daily net assets.
For the twelve months ended October 31, 1995, the Adviser earned $2,099,742 in
investment advisory fees. Northstar Administrators Corporation (the
"Administrator"), an affiliate of the Adviser, serves as each Fund's
administrator. The Funds pay the Administrator a fee calculated at an annual
rate of .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
beneficial owners of shares. For the twelve months ended October 31, 1995, the
Administrator earned $279,965 in administrative 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, and Class C shares, the Trust pays the
Distributor monthly service fees at an annual rate of .25% of the average daily
net assets in the case of Class A, Class B and Class C shares, and monthly
distribution fees at the annual rate of .05% of the average daily net assets of
Class A shares, and .75% of the average daily net assets of Class B and Class C
shares. At October 31, 1995 the Trust owed the Distributor $224,674 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 and Class C shares. For the twelve months ended October 31,
1995, the Distributor earned the following amounts in sales charges:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-------- -------- -------
<S> <C> <C> <C>
Initial Sales Charges $310,559 N/A N/A
Contingent Deferred Sales Charges $ 17,754 $372,834 $6,805
</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 twelve months ended October 31, 1995,
were as follows:

<TABLE>
<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
<S> <C> <C>
Aggregate Purchases $199,344,210 $281,322,220
Aggregate Sales $133,959,339 $174,808,342
</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 October 31, 1995 were as follows:

<TABLE>
<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
<S> <C> <C>
Cost (tax basis) $161,064,292 $188,659,480
Gross unrealized appreciated securities 17,041,061 7,607,693
Gross unrealized depreciated securities 2,500,154 10,781,473
------------- -------------
Net unrealized appreciation/depreciation $ 14,540,907 $ (3,173,780)
------------- -------------
</TABLE>

NOTE 5. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares of each class of shares of each Fund for the
twelve months ended October 31, 1995, were as follows:
<TABLE>
<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
<S> <C> <C>
I. CLASS A
Shares sold 1,096,176 10,429,281
Reinvested dividends 135,106 737,521
Shares redeemed (1,453,383) (2,896,286)
------------- -------------
Net increase (decrease) (222,101) 8,270,516
------------- -------------

<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
<S> <C> <C>
II. CLASS B
Shares sold 2,311,816 16,531,155
Reinvested dividends 72,181 397,287
Shares redeemed (597,155) (1,252,934)
------------- -------------
Net increase 1,786,842 15,675,508
------------- -------------
</TABLE>

22
<PAGE>
NORTHSTAR ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 1995
[LOGO]

<TABLE>
<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
III. CLASS C
<S> <C> <C>
Shares sold 4,511,380 2,002,533
Reinvested dividends 82,927 52,744
Shares redeemed (121,341) (131,827)
------------- -------------
Net increase 4,472,966 1,923,450
------------- -------------
</TABLE>

Transactions in capital shares of each class of shares of each Fund for the
period from inception of the class offering and ended October 31, 1994 were as
follows:

<TABLE>
<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
<S> <C> <C>
I. CLASS A
Shares sold 7,879,717 14,267,985
Reinvested dividends 95,456 363,205
Shares redeemed (759,465) (3,127,641)
------------- -------------
Net increase 7,215,708 11,503,549
------------- -------------
II. CLASS B
Shares sold 3,886,168 6,077,162
Reinvested dividends 22,686 63,887
Shares redeemed (128,026) (276,658)
------------- -------------
Net increase 3,780,828 5,864,391
------------- -------------
II. CLASS C
Shares sold 486,429 521,230
Reinvested dividends 5,029 8,953
Shares redeemed (8,536) (2,328)
------------- -------------
Net increase 482,922 527,855
------------- -------------
</TABLE>

NOTE 6. CREDIT RISK AND DEFAULTED SECURITIES

Although the Funds have a diversified portfolio, the Total Return Fund had
69.97% of its portfolio 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 October 31, 1995,
the Total Return Fund held Sam Houston Race Park and Wherehouse Entertainment,
Inc., securities in default. The aggregate value of these securities represented
$1,305,000 or .66% of the Total Return Fund's net assets. Subsequent to October
31, 1995, Burlington Motor Holdings, Inc. in the Total Return Fund defaulted.
The value of the security at October 31, 1995 represented $1,658,250 or .80% of
the Fund's net assets.

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. SECURITY LOANS

Each Fund may lend its securities to brokers, dealers and other financial
institutions in amounts up to one third of the value of its total assets. The
loans are fully collateralized at all times by cash or liquid high grade
securities. As with other extensions of credit, each Fund may bear the risk of
delay in recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. The Funds receive compensation for lending
its securities in the form of fees or from all or a portion of the income from
investment of the collateral. The Funds also continue to earn income on the
securities loaned. At October 31, 1995, the Total Return Fund had securities on
loan in aggregate value of $3,013,500 and collateral of $3,292,800.

NOTE 8. FEDERAL INCOME TAX - CAPITAL LOSS CARRYFORWARD

At October 31, 1995, Income and Growth Fund had capital loss carryforwards
expiring October 31, 2002 and 2003 of $426,333 and $1,371,400, respectively.
Total Return Fund had capital loss carryforwards expiring October 31, 2002 and
2003 of $1,846,302 and $2,478,205, respectively.

23
<PAGE>
NORTHSTAR ADVANTAGE TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]

To The Shareholders and Trustees of
Northstar Advantage Trust

We have audited the accompanying statement of assets and liabilities of the
Northstar Advantage Trust, (comprising the Northstar Advantage Income and Growth
Fund and the Northstar Advantage High Total Return Fund (the "Funds")) including
the portfolios of investments, as of October 31, 1995, and the related
statements of operations, the statement of changes in net assets and the
financial highlights for the year then ended and for the period November 8, 1993
(commencement of operations) to October 31, 1994. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting the Northstar Advantage Trust as of October
31, 1995, the results of their operations, the changes in their net assets, and
the financial highlights for each of the periods referred to above, in
conformity with generally accepted accounting principles.

Coopers & Lybrand L.L.P.
New York, New York
December 15, 1995

24
<PAGE>
[LOGO]

<TABLE>
<S> <C> <C>
TRUSTEES

Paul S. Doherty Mark L. Lipson John G. Turner
Robert B. Goode David W. C. Putnam David W. Wallace
Alan L. Gosule John R. Smith Marjory Williams
</TABLE>

<TABLE>
<S> <C>
PRINCIPAL OFFICERS

John G. Turner - Chairman Ernest N. Mysogland - Vice President
Mark L. Lipson - President Geoffrey Wadsworth - Vice President
Lisa Hurley - Vice President &
Robert Thomas - Vice President Secretary
Agnes Mullady - Vice President &
Thomas Ole Dial - Vice President Treasurer
</TABLE>

<TABLE>
<S> <C>
INVESTMENT ADVISER ADMINISTRATOR

NORTHSTAR INVESTMENT NORTHSTAR ADMINISTRATORS CORPORATION
MANAGEMENT CORPORATION Two Pickwick Plaza
Two Pickwick Plaza Greenwich, CT 06830
Greenwich, CT 06830

TRANSFER AGENT
DISTRIBUTOR FUND ACCOUNTANT

NORTHSTAR DISTRIBUTORS, INC. THE SHAREHOLDER SERVICES GROUP, INC.
Two Pickwick Plaza One Exchange Place
Greenwich, CT 06830 Boston, MA 02109

CUSTODIAN

CUSTODIAL TRUST COMPANY
101 Carnegie Center
Princeton, NJ 08540-6231
</TABLE>

25
<PAGE>
(This page has been left blank intentionally.)

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH A

3/31/94 10.1900 100.833 0.060 6.01 0.000 0.00 0.590 1,027.49
6/24/94 9.7200 101.683 0.082 8.26 0.000 0.00 0.850 988.36
9/26/94 9.9800 102.483 0.079 7.98 0.000 0.00 0.800 1,022.78
12/23/94 9.5700 103.526 0.097 9.98 0.000 0.00 1.043 990.74
12/31/94 9.5900 103.526 992.81

3/23/95 9.8000 104.234 0.067 6.94 0.000 0.00 0.708 1,021.49
6/22/95 10.6100 105.074 0.085 8.91 0.000 0.00 0.840 1,114.84
9/26/95 10.8700 105.851 0.080 8.45 0.000 0.00 0.777 1,150.60
10/31/95 10.8600 105.851 1,149.54

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T) TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 7.29%
ERV = Ending Redeemable Value $1,149.54 Overall Total Return 14.95%
n = Number of Time Periods 1.98
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH B

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 3.84%
ERV = Ending Redeemable Value $1,067.28 Overall Total Return 6.73%
n = Number of Time Periods 1.73
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH C

3/23/95 9.7800 99.875 0.070 6.91 0.000 0.00 0.707 976.78
6/22/95 10.5900 100.511 0.067 6.73 0.000 0.00 0.636 1,064.41
9/26/95 10.8400 101.091 0.063 6.29 0.000 0.00 0.580 1,095.83
10/31/95 10.8300 101.091 1,094.82

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 5.79%
ERV = Ending Redeemable Value $1,094.82 Overall Total Return 9.48%
n = Number of Time Periods 1.61
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R A

1/25/94 5.1800 203.478 0.038 7.68 0.000 0.00 1.483 1,054.02
2/22/94 5.1600 204.976 0.038 7.73 0.000 0.00 1.498 1,057.68
3/25/94 5.0300 206.525 0.038 7.79 0.000 0.00 1.549 1,038.82
4/25/94 4.7900 208.197 0.039 8.01 0.000 0.00 1.672 997.26
5/24/94 4.7600 209.894 0.039 8.08 0.000 0.00 1.697 999.10
6/24/94 4.7600 211.570 0.038 7.98 0.000 0.00 1.676 1,007.07
7/25/94 4.6200 213.401 0.040 8.46 0.000 0.00 1.831 985.91
8/25/94 4.5400 215.282 0.040 8.54 0.000 0.00 1.881 977.38
9/26/94 4.4800 217.204 0.040 8.61 0.000 0.00 1.922 973.07
10/25/94 4.4200 219.170 0.040 8.69 0.000 0.00 1.966 968.73
11/23/94 4.3200 221.200 0.040 8.77 0.000 0.00 2.030 955.58
12/23/94 4.2200 223.297 0.040 8.85 0.000 0.00 2.097 942.31
12/31/94 4.2100 223.297 940.08

1/25/95 4.2300 225.408 0.040 8.93 0.000 0.00 2.111 953.48
2/22/95 4.3100 227.501 0.040 9.02 0.000 0.00 2.093 980.53
3/23/95 4.3400 229.598 0.040 9.10 0.000 0.00 2.097 996.46
4/25/95 4.4300 231.670 0.040 9.18 0.000 0.00 2.072 1,026.30
5/24/95 4.5000 233.730 0.040 9.27 0.000 0.00 2.060 1,051.79
6/22/95 4.3800 235.865 0.040 9.35 0.000 0.00 2.135 1,033.09
7/25/95 4.4800 237.970 0.040 9.43 0.000 0.00 2.105 1,066.11
8/24/95 4.4900 240.090 0.040 9.52 0.000 0.00 2.120 1,078.00
9/26/95 4.4900 242.228 0.040 9.60 0.000 0.00 2.138 1,087.60
10/25/95 4.5000 244.381 0.040 9.69 0.000 0.00 2.153 1,099.71
10/31/95 4.4800 244.381 1,094.83

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 4.68%
ERV = Ending Redeemable Value $1,094.83 Overall Total Return 9.48%
n = Number of Time Periods 1.98
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R B

<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/ 9/94 1,000.00 5.2000 192.308 192.308 1,000.00
2/22/94 5.1600 192.957 0.017 3.35 0.000 0.00 0.649 995.66
3/25/94 5.0300 194.301 0.035 6.76 0.000 0.00 1.344 977.33
4/25/94 4.7900 195.754 0.036 6.96 0.000 0.00 1.453 937.66
5/24/94 4.7600 197.227 0.036 7.01 0.000 0.00 1.473 938.80
6/24/94 4.7600 198.710 0.036 7.06 0.000 0.00 1.483 945.86
7/25/94 4.6200 200.310 0.037 7.39 0.000 0.00 1.600 925.43
8/25/94 4.5400 201.951 0.037 7.45 0.000 0.00 1.641 916.86
9/26/94 4.4800 203.627 0.037 7.51 0.000 0.00 1.676 912.25
10/25/94 4.4200 205.340 0.037 7.57 0.000 0.00 1.713 907.60
11/23/94 4.3200 207.109 0.037 7.64 0.000 0.00 1.769 894.71
12/23/94 4.2200 208.934 0.037 7.70 0.000 0.00 1.825 881.70
12/31/94 4.2100 208.934 879.61

1/25/95 4.2300 210.771 0.037 7.77 0.000 0.00 1.837 891.56
2/22/95 4.3100 212.604 0.038 7.90 0.000 0.00 1.833 916.32
3/23/95 4.3400 214.438 0.037 7.96 0.000 0.00 1.834 930.66
4/25/95 4.4300 216.248 0.037 8.02 0.000 0.00 1.810 957.98
5/24/95 4.4900 218.079 0.038 8.22 0.000 0.00 1.831 979.17
6/22/95 4.3700 219.942 0.037 8.14 0.000 0.00 1.863 961.15
7/25/95 4.4800 221.772 0.037 8.20 0.000 0.00 1.830 993.54
8/24/95 4.4800 223.618 0.037 8.27 0.000 0.00 1.846 1,001.81
9/26/95 4.4900 225.478 0.037 8.35 0.000 0.00 1.860 1,012.40
10/25/95 4.4900 227.349 0.037 8.40 0.000 0.00 1.871 1,020.80
10/31/95 4.4700 227.349 1,016.25
</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 0.94%
ERV = Ending Redeemable Value $1,016.25 Overall Total Return 1.63%
n = Number of Time Periods 1.73
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R C

<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/21/94 1,000.00 5.0600 197.628 197.628 1,000.00
3/25/94 5.0300 197.745 0.003 0.59 0.000 0.00 0.117 994.66
4/25/94 4.7900 199.223 0.036 7.08 0.000 0.00 1.478 954.28
5/24/94 4.7600 200.721 0.036 7.13 0.000 0.00 1.498 955.43
6/24/94 4.7600 202.232 0.036 7.19 0.000 0.00 1.511 962.62
7/25/94 4.6200 203.860 0.037 7.52 0.000 0.00 1.628 941.83
8/25/94 4.5400 205.530 0.037 7.58 0.000 0.00 1.670 933.11
9/26/94 4.4800 207.238 0.037 7.65 0.000 0.00 1.708 928.43
10/25/94 4.4200 208.982 0.037 7.71 0.000 0.00 1.744 923.70
11/23/94 4.3200 210.781 0.037 7.77 0.000 0.00 1.799 910.57
12/23/94 4.2200 212.639 0.037 7.84 0.000 0.00 1.858 897.34
12/31/94 4.2100 212.639 895.21

1/25/95 4.2400 214.505 0.037 7.91 0.000 0.00 1.866 909.50
2/22/95 4.3200 216.366 0.038 8.04 0.000 0.00 1.861 934.70
3/23/95 4.3500 218.228 0.037 8.10 0.000 0.00 1.862 949.29
4/25/95 4.4500 220.062 0.037 8.16 0.000 0.00 1.834 979.28
5/24/95 4.5100 221.916 0.038 8.36 0.000 0.00 1.854 1,000.84
6/22/95 4.3900 223.804 0.037 8.29 0.000 0.00 1.888 982.50
7/25/95 4.5000 225.660 0.037 8.35 0.000 0.00 1.856 1,015.47
8/24/95 4.5000 227.529 0.037 8.41 0.000 0.00 1.869 1,023.88
9/26/95 4.5000 229.418 0.037 8.50 0.000 0.00 1.889 1,032.38
10/25/95 4.5100 231.314 0.037 8.55 0.000 0.00 1.896 1,043.23
10/31/95 4.4900 231.314 1,038.60
</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 2.38%
ERV = Ending Redeemable Value $1,038.60 Overall Total Return 3.86%
n = Number of Time Periods 1.61
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH A

3/23/95 9.8000 102.632 0.067 6.83 0.000 0.00 0.697 1,005.79
6/22/95 10.6100 103.459 0.085 8.77 0.000 0.00 0.827 1,097.70
9/26/95 10.8700 104.224 0.080 8.32 0.000 0.00 0.765 1,132.91
10/31/95 10.8600 104.224 1,131.87
</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 13.19%
ERV = Ending Redeemable Value $1,131.87 Overall Total Return 13.19%
n = Number of Time Periods 1.00
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH B

3/23/95 9.7900 102.325 0.053 5.44 0.000 0.00 0.556 1,001.76
6/22/95 10.6000 103.020 0.072 7.37 0.000 0.00 0.695 1,092.01
9/26/95 10.8600 103.607 0.062 6.38 0.000 0.00 0.587 1,125.17
10/31/95 10.8400 103.607 1,123.10
</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 12.31%
ERV = Ending Redeemable Value $1,123.10 Overall Total Return 12.31%
n = Number of Time Periods 1.00
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH C

3/23/95 9.7800 102.476 0.070 7.09 0.000 0.00 0.725 1,002.22
6/22/95 10.5900 103.129 0.067 6.91 0.000 0.00 0.653 1,092.14
9/26/95 10.8400 103.724 0.063 6.45 0.000 0.00 0.595 1,124.37
10/31/95 10.8300 103.724 1,123.33
</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 12.33%
ERV = Ending Redeemable Value $1,123.33 Overall Total Return 12.33%
n = Number of Time Periods 1.00
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R A

1/25/95 4.2300 232.683 0.040 9.22 0.000 0.00 2.180 984.25
2/22/95 4.3100 234.843 0.040 9.31 0.000 0.00 2.160 1,012.17
3/23/95 4.3400 237.007 0.040 9.39 0.000 0.00 2.164 1,028.61
4/25/95 4.4300 239.147 0.040 9.48 0.000 0.00 2.140 1,059.42
5/24/95 4.5000 241.274 0.040 9.57 0.000 0.00 2.127 1,085.73
6/22/95 4.3800 243.477 0.040 9.65 0.000 0.00 2.203 1,066.43
7/25/95 4.4800 245.651 0.040 9.74 0.000 0.00 2.174 1,100.52
8/24/95 4.4900 247.840 0.040 9.83 0.000 0.00 2.189 1,112.80
9/26/95 4.4900 250.047 0.040 9.91 0.000 0.00 2.207 1,122.71
10/25/95 4.5000 252.269 0.040 10.00 0.000 0.00 2.222 1,135.21
10/31/95 4.4800 252.269 1,130.17
</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 13.02%
ERV = Ending Redeemable Value $1,130.17 Overall Total Return 13.02%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R B

1/25/95 4.2300 232.229 0.037 8.56 0.000 0.00 2.024 982.33
2/22/95 4.3100 234.250 0.038 8.71 0.000 0.00 2.021 1,009.62
3/23/95 4.3400 236.271 0.037 8.77 0.000 0.00 2.021 1,025.42
4/25/95 4.4300 238.264 0.037 8.83 0.000 0.00 1.993 1,055.51
5/24/95 4.4900 240.280 0.038 9.05 0.000 0.00 2.016 1,078.86
6/22/95 4.3700 242.333 0.037 8.97 0.000 0.00 2.053 1,059.00
7/25/95 4.4800 244.351 0.037 9.04 0.000 0.00 2.018 1,094.69
8/24/95 4.4800 246.384 0.037 9.11 0.000 0.00 2.033 1,103.80
9/26/95 4.4900 248.433 0.037 9.20 0.000 0.00 2.049 1,115.46
10/25/95 4.4900 250.495 0.037 9.26 0.000 0.00 2.062 1,124.72
10/31/95 4.4700 250.495 1,119.71
</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 11.97%
ERV = Ending Redeemable Value $1,119.71 Overall Total Return 11.97%
n = Number of Time Periods 1.00
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R C

1/25/95 4.2400 232.224 0.037 8.56 0.000 0.00 2.019 984.63
2/22/95 4.3200 234.240 0.038 8.71 0.000 0.00 2.016 1,011.92
3/23/95 4.3500 236.256 0.037 8.77 0.000 0.00 2.016 1,027.71
4/25/95 4.4500 238.240 0.037 8.83 0.000 0.00 1.984 1,060.17
5/24/95 4.5100 240.247 0.038 9.05 0.000 0.00 2.007 1,083.51
6/22/95 4.3900 242.290 0.037 8.97 0.000 0.00 2.043 1,063.65
7/25/95 4.5000 244.299 0.037 9.04 0.000 0.00 2.009 1,099.35
8/24/95 4.5000 246.321 0.037 9.10 0.000 0.00 2.022 1,108.44
9/26/95 4.5000 248.365 0.037 9.20 0.000 0.00 2.044 1,117.64
10/25/95 4.5100 250.418 0.037 9.26 0.000 0.00 2.053 1,129.39
10/31/95 4.4900 250.418 1,124.38
</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 12.44%
ERV = Ending Redeemable Value $1,124.38 Overall Total Return 12.44%
n = Number of Time Periods 1.00
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R A

1/25/94 5.1800 193.788 0.038 7.31 0.000 0.00 1.411 1,003.82
2/22/94 5.1600 195.214 0.038 7.36 0.000 0.00 1.426 1,007.30
3/25/94 5.0300 196.689 0.038 7.42 0.000 0.00 1.475 989.35
4/25/94 4.7900 198.282 0.039 7.63 0.000 0.00 1.593 949.77
5/24/94 4.7600 199.898 0.039 7.69 0.000 0.00 1.616 951.51
6/24/94 4.7600 201.495 0.038 7.60 0.000 0.00 1.597 959.12
7/25/94 4.6200 203.240 0.040 8.06 0.000 0.00 1.745 938.97
8/25/94 4.5400 205.031 0.040 8.13 0.000 0.00 1.791 930.84
9/26/94 4.4800 206.861 0.040 8.20 0.000 0.00 1.830 926.74
10/25/94 4.4200 208.732 0.040 8.27 0.000 0.00 1.871 922.60
11/23/94 4.3200 210.665 0.040 8.35 0.000 0.00 1.933 910.07
12/23/94 4.2200 212.663 0.040 8.43 0.000 0.00 1.998 897.44
12/31/94 4.2100 212.663 895.31

1/25/95 4.2300 214.675 0.040 8.51 0.000 0.00 2.012 908.08
2/22/95 4.3100 216.668 0.040 8.59 0.000 0.00 1.993 933.84
3/23/95 4.3400 218.666 0.040 8.67 0.000 0.00 1.998 949.01
4/25/95 4.4300 220.641 0.040 8.75 0.000 0.00 1.975 977.44
5/24/95 4.5000 222.603 0.040 8.83 0.000 0.00 1.962 1,001.71
6/22/95 4.3800 224.635 0.040 8.90 0.000 0.00 2.032 983.90
7/25/95 4.4800 226.642 0.040 8.99 0.000 0.00 2.007 1,015.36
8/24/95 4.4900 228.662 0.040 9.07 0.000 0.00 2.020 1,026.69
9/26/95 4.4900 230.700 0.040 9.15 0.000 0.00 2.038 1,035.84
10/25/95 4.5000 232.751 0.040 9.23 0.000 0.00 2.051 1,047.38
10/31/95 4.4800 232.751 1,042.72
</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 2.14%
ERV = Ending Redeemable Value $1,042.72 Overall Total Return 4.27%
n = Number of Time Periods 1.98
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R B

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return -1.05%
ERV = Ending Redeemable Value $981.87 Overall Total Return -1.81%
n = Number of Time Periods 1.73
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R C

<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/21/94 1,000.00 5.0600 197.628 197.628 1,000.00
3/25/94 5.0300 197.745 0.003 0.59 0.000 0.00 0.117 994.66
4/25/94 4.7900 199.223 0.036 7.08 0.000 0.00 1.478 954.28
5/24/94 4.7600 200.721 0.036 7.13 0.000 0.00 1.498 955.43
6/24/94 4.7600 202.232 0.036 7.19 0.000 0.00 1.511 962.62
7/25/94 4.6200 203.860 0.037 7.52 0.000 0.00 1.628 941.83
8/25/94 4.5400 205.530 0.037 7.58 0.000 0.00 1.670 933.11
9/26/94 4.4800 207.238 0.037 7.65 0.000 0.00 1.708 928.43
10/25/94 4.4200 208.982 0.037 7.71 0.000 0.00 1.744 923.70
11/23/94 4.3200 210.781 0.037 7.77 0.000 0.00 1.799 910.57
12/23/94 4.2200 212.639 0.037 7.84 0.000 0.00 1.858 897.34
12/31/94 4.2100 212.639 895.21

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R A

1/25/95 4.2300 221.650 0.040 8.78 0.000 0.00 2.076 937.58
2/22/95 4.3100 223.708 0.040 8.87 0.000 0.00 2.058 964.18
3/23/95 4.3400 225.770 0.040 8.95 0.000 0.00 2.062 979.84
4/25/95 4.4300 227.808 0.040 9.03 0.000 0.00 2.038 1,009.19
5/24/95 4.5000 229.832 0.040 9.11 0.000 0.00 2.024 1,034.24
6/22/95 4.3800 231.930 0.040 9.19 0.000 0.00 2.098 1,015.85
7/25/95 4.4800 234.001 0.040 9.28 0.000 0.00 2.071 1,048.32
8/24/95 4.4900 236.086 0.040 9.36 0.000 0.00 2.085 1,060.03
9/26/95 4.4900 238.188 0.040 9.44 0.000 0.00 2.102 1,069.46
10/25/95 4.5000 240.306 0.040 9.53 0.000 0.00 2.118 1,081.38
10/31/95 4.4800 240.306 1,076.57
</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 7.66%
ERV = Ending Redeemable Value $1,076.57 Overall Total Return 7.66%
n = Number of Time Periods 1.00
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R B

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 6.97%
ERV = Ending Redeemable Value $1,069.71 Overall Total Return 6.97%
n = Number of Time Periods 1.00
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE HIGH T/R C

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 11.44%
ERV = Ending Redeemable Value $1,114.38 Overall Total Return 11.44%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH A

3/31/94 10.1900 96.032 0.060 5.73 0.000 0.00 0.562 978.57
6/24/94 9.7200 96.842 0.082 7.87 0.000 0.00 0.810 941.30
9/26/94 9.9800 97.604 0.079 7.60 0.000 0.00 0.762 974.09
12/23/94 9.5700 98.598 0.097 9.51 0.000 0.00 0.994 943.58
12/31/94 9.5900 98.598 945.55

3/23/95 9.8000 99.272 0.067 6.61 0.000 0.00 0.674 972.87
6/22/95 10.6100 100.072 0.085 8.49 0.000 0.00 0.800 1,061.76
9/26/95 10.8700 100.813 0.080 8.05 0.000 0.00 0.741 1,095.84
10/31/95 10.8600 100.813 1,094.83

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH B

3/23/95 9.7900 97.239 0.053 5.17 0.000 0.00 0.528 951.97
6/22/95 10.6000 97.899 0.072 7.00 0.000 0.00 0.660 1,037.73
9/26/95 10.8600 98.458 0.062 6.07 0.000 0.00 0.559 1,069.25
10/31/95 10.8400 98.458 1,067.28
10/31/95 Less: 4.000% Contingent Deferred Sales Charge 40.00
10/31/95 Net Ending Redeemable Value 1,027.28

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 1.57%
ERV = Ending Redeemable Value $1,027.28 Overall Total Return 2.73%
n = Number of Time Periods 1.73
</TABLE>

<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH C

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH A

3/23/95 9.8000 96.958 0.067 6.45 0.000 0.00 0.658 950.19
6/22/95 10.6100 97.739 0.085 8.29 0.000 0.00 0.781 1,037.01
9/26/95 10.8700 98.462 0.080 7.86 0.000 0.00 0.723 1,070.28
10/31/95 10.8600 98.462 1,069.30

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 6.93%
ERV = Ending Redeemable Value $1,069.30 Overall Total Return 6.93%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH B

3/23/95 9.7900 101.507 0.053 5.40 0.000 0.00 0.552 993.75
6/22/95 10.6000 102.197 0.072 7.31 0.000 0.00 0.690 1,083.29
9/26/95 10.8600 102.780 0.062 6.33 0.000 0.00 0.583 1,116.19
10/31/95 10.8400 102.780 1,114.14
10/31/95 Less: 5.000% Contingent Deferred Sales Charge 50.00
10/31/95 Net Ending Redeemable Value 1,064.14

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 6.41%
ERV = Ending Redeemable Value $1,064.14 Overall Total Return 6.41%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>

TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED

NORTHSTAR ADVANTAGE INC & GROWTH C

3/23/95 9.7800 101.656 0.070 7.03 0.000 0.00 0.719 994.20
6/22/95 10.5900 102.303 0.067 6.85 0.000 0.00 0.647 1,083.39
9/26/95 10.8400 102.893 0.063 6.40 0.000 0.00 0.590 1,115.36
10/31/95 10.8300 102.893 1,114.33
10/31/95 Less: 1.000% Contingent Deferred Sales Charge 10.00
10/31/95 Net Ending Redeemable Value 1,104.33

</TABLE>

FORMULA -- Average Annual Total Return: ERV = P(1+T)TO THE POWER OF n
Overall Total Return: ERV/P -1

<TABLE>
<S> <C> <C> <C>
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 10.43%
ERV = Ending Redeemable Value $1,104.33 Overall Total Return 10.43%
n = Number of Time Periods 1.00
</TABLE>