<PAGE>
[LOGO]
NORTHSTAR
ADVANTAGE TRUST
SEMI-ANNUAL REPORT TO SHAREHOLDERS
APRIL 30, 1996
[LOGO]
<PAGE>
NORTHSTAR ADVANTAGE TRUST
SEMI-ANNUAL REPORT,
APRIL 30, 1996
[LOGO]
Dear Shareholders:
We are pleased to provide you with the semi-annual report of the Northstar
Advantage Trust for the six-month period ended April 30, 1996. 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 the overview in this letter is a summary of the results
of each Fund by its respective portfolio manager. We hope you find this report
informative.
In the last six months, many changes occurred which generally benefited the
stock market and the high yield bond market, but ultimately hurt other bond
markets. The first three months of that period were marked by growing concerns
that the U.S. economy was slipping into a recession. That outlook led to
continuing declines in interest rates. When growth in real GDP reached only 0.5%
in the 4th quarter of 1995, the Federal Reserve Board cut the federal funds and
the discount rates to 5.25% and 5%, respectively, on January 31, 1996. That
trend was abruptly reversed, however, when positive employment reports were
reported in February, causing fears that this growth would lead to higher
inflation. Market interest rates rose rapidly, and accelerated when the
year-over year CPI ticked up from 2.7% to 2.9%. Ten-year Treasury notes, which
paid 6.02% in October of 1995, and got as low as 5.52% on January 18, 1996,
peaked at 6.67% on April 30, 1996.
Faced with two very different economic scenarios, investors changed their
behavior. Stocks undulated sideways from October 1995 until the Fed cut rates
and signs of economic growth reappeared. Then, all the major stock indices
started a record-breaking rise, which is still in progress. During the past six
months, the S&P 500 stocks were up nearly 14%, the NASDAQ composite rose almost
15% and the Russell 2000 stocks returned about 18.5%. On the other hand, the
Lehman Brothers index of all investment grade bond returns increased only 0.53%
since October 1995. The returns were negative 2.33% year-to-date ending April
30, 1996. Domestic high yield bonds were a bright spot among bonds, however.
Between October 1995 and January 1996, high yield bonds were prized in a
declining rate environment, although demand was tempered due to credit concerns.
When the economic growth outlook improved and stocks took off, demand for high
yield bonds rose considerably. High yield returned 4.51% over the last six
months and 2% YTD, far outperforming bonds in general, and Treasuries in
particular.
We support the thinking that there will be a low inflationary environment
and moderate economic growth during the rest of 1996. Those trends should cause
interest rates to fall slightly and stocks to continue their rise. We expect
current levels of interest rates, cheap imports, federal budget restraint, a
strong dollar and continued productivity gains to keep U.S. inflation close to
3%. Low inflation, depleted business inventories, increasing consumer wealth and
income, economic recovery in foreign markets and the telecommunications
revolution should produce moderate economic growth in the U.S. Assuming we are
right, the remainder of 1996 should be good for your equity and fixed-income
Funds. Despite our positive outlook, you can count on our conservative
management philosophy to cushion your Funds against the effects of any economic
and market trends less supportive than those we now foresee.
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 L. Lipson
President
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
NORTHSTAR ADVANTAGE
INCOME AND GROWTH FUND
[PHOTO] [PHOTO][LOGO]
MARGARET D. PATEL ERNEST MYSOGLAND
INVESTMENT ENVIRONMENT
THE MARKETS
- In the six months ended April 30, 1996, the consensus outlook for the
U.S. economy, interest rates and corporate profits was again proved
wrong. Late in 1995 most investors expected interest rates to
continue to decline due to a near recession in the U.S. in 1996 which
would cause profits to fall. Instead the economy expanded, profits
rose and interest rates on long term treasuries rose sharply from
6.3% to 6.9%.
- The stock market rose in this period by 12% while long term treasury
bonds fell 4% and intermediate corporate bonds gained less than 2%.
Initially the stock market gains were confined to a very limited
number of large "defensive" stocks whose staple products would be in
demand even in a recession. By February, investors began to recognize
the economy was still growing solidly and the market broadened out
considerably. Industrial manufacturers, consumer cyclicals and lesser
capitalization stocks lead the market higher.
- We believe the U.S. economy will sustain its growth throughout 1996
and well into 1997. Despite the lack of a federal balanced budget
agreement, it appears most of the rise in interest rates has been
seen since inflation remains under control at about 3%. Thus further
gains are expected in selected common stocks.
THE FUND
- The Fund's Class A shares enjoyed a total return in the last six
months of 7.15% which was in line with the Lipper Balanced fund gain
of 7.5%. The gain was due mainly from the 54% invested in common
stocks which rose 12%. The Fund's holdings of straight bonds returned
1.5%. Bonds were reduced from 34% in January to 24% at the end of
April. To maintain the portfolio's yield, convertible securities and
REITs were increased to 14% and these issues gained over 6%.
- Equity gains were lead by energy related holdings, financials,
telecommunications, retail, office products and software. The best
values have been in economically sensitive sectors after fears ended.
CURRENT STRATEGY
- We expect the major stock market indices to make only modest further
gains in 1996 but believe individual stock selection of large and
smaller companies based on specific company fundamentals can be quite
rewarding. The stock and bond markets have been volatile and are
likely to remain so in this election year. We continue to favor
industrial and financial stocks versus many defensive consumer
stocks. We do not expect a sharp decline in interest rates and thus
plan to maintain fairly low straight bond holdings and to favor
quality convertible issues for yield and appreciation potential.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 4/30/96) TOTAL NET ASSETS:
$208,284,517
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
<C><S> <C>
NAME % FUND
1. Philip Morris 2.4 %
2. Wells Fargo 1.9
3. Citicorp 1.8
4. Home Depot 1.8
5. Global Marine 1.7
6. GM Class E 1.5
7. Microsoft 1.5
8. OMEGA 1.5
9. Kimberly-Clark 1.4
10. Millipore 1.4
----
16.9 %
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION
<C><S> <C>
INDUSTRY % FUND
1. Financial Services 8.9 %
2. Technology 8.5
3. Consumer
Cyclical 8.1
4. Energy 7.9
5. Corporate Goods 6.1
----
39.5 %
</TABLE>
<TABLE>
<CAPTION>
TOP 5 BOND HOLDINGS
<S> <C>
BOND % FUND
GNMA 6.50% due 2026 10.0 %
GNMA 8.50% due 2025 2.3
GNMA 7.00% due 2026 2.1
Airplane Pass Thru Trust 8.15% due 2019 1.8
Continental Air Pass Thru 7.82% due 2013 1.8
----
18.0 %
</TABLE>
1
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Industry $ Value % of Fund Portfolio
<S> <C> <C> <C>
Aerospace & Defense $ 6,510,150 .......... 3.13%
Automotive 7,104,750 .......... 3.41
Banking 9,162,487 .......... 4.40
Broadcasting 2,975,625 .......... 1.43
Business Services 4,832,252 .......... 2.32
Chemicals 5,090,312 .......... 2.44
Communications 4,388,425 .......... 2.11
Consumer Hardware 988,450 .......... 0.47
Consumer Staples 7,745,813 .......... 3.72
Containers 1,646,250 .......... 0.79
Electrical Equipment 4,405,625 .......... 2.11
Energy 14,860,369 .......... 7.14
Energy Services 8,961,625 .......... 4.30
Entertainment 1,882,843 .......... 0.90
Financial Services 9,444,688 .......... 4.54
Gaming 961,350 .......... 0.46
Healthcare 2,437,984 .......... 1.17
Insurance 1,382,838 .......... 0.66
Machinery 2,332,500 .......... 1.12
Office Equipment 2,842,100 .......... 1.36
Packaging & Container 1,761,375 .......... 0.85
Paper & Forest Products 5,421,542 .......... 2.60
Pharmaceutical/Healthcare 7,337,775 .......... 3.52
Real Estate Investment Trust 6,311,765 .......... 3.04
Retail 11,359,313 .......... 5.45
Semiconductor 4,415,100 .......... 2.12
Technology 9,478,750 .......... 4.55
Transportation 12,796,611 .......... 6.15
U.S. Government & Agencies 35,373,354 .......... 16.98
Repurchase Agreements 13,409,092 .......... 6.44
Other assets less liabilities 663,404 .......... 0.32
------------ --------
Net Assets $208,284,517 .......... 100.00%
------------ --------
------------ --------
</TABLE>
2
<PAGE>
NORTHSTAR ADVANTAGE
HIGH TOTAL RETURN FUND
[PHOTO][LOGO]
THOMAS OLE DIAL
INVESTMENT ENVIRONMENT
THE MARKETS
- The positive returns on government and investment grade bonds from
October 1995 through January 1996 were erased by losses from February
1996 through April 1996. Higher than expected growth in the first
quarter of 1996 ended the decline in interest rates that began back
in November 1994. The yield on the 10-year Treasury bond approached
7% by April 30, 1996. Strength in corporate profits and in liquidity
first supported stock prices and then propelled them to record highs.
- High yield bond returns were solidly positive, despite rising
Treasury yields, due to strong cash inflows and supportive stock
valuations. Stronger growth in the first quarter of 1996 also
extinguished fears of a recession this year.
- We and others still believe that the U.S. economy can now sustain
annual GDP growth and CPI inflation rates of 2.5% to 3%. Therefore
the outlook for domestic debt and equity markets remains positive for
1996.
THE FUND
- From October 31, 1995 through April 30, 1996, the total return of the
Fund's Class A shares was 11.87%; the Lipper average was 5.44%. Your
Fund's superior relative performance promoted sales that led to an
84% increase in its net assets, which rose from $195MM to $360MM in
that period. We are proud to report we have maintained the current
dividend for 22 months despite significant interest rate
fluctuations.
- The Fund's performance in the last six months was enhanced by changes
in portfolio allocations. We further increased our highly profitable
telecommunications investments (ACSI, Clearnet, EchoStar, and
WinStar). We reduced investments in interest-sensitive emerging
market securities, while we increased investments selectively in
gaming and steel companies. We continued to underweight investments
in the consumer and capital goods industries.
- High yield bonds that were issued with equity securities or rights
attached ("equity kickers") benefited from high stock prices and
contributed significantly to the Fund's high total return (e.g.,
EchoStar and Geotek).
CURRENT STRATEGY
- Pro-actively manage portfolio allocations based on expected changes
in economic and market conditions.
- Continue to overweigh investments in bonds of growth companies,
especially those that are issued with equity kickers. Very
selectively invest in the fixed income securities of emerging market
and cyclical issuers.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 4/30/96) TOTAL NET ASSETS:
$360,409,023
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME TOP 10 HOLDINGS % FUND INDUSTRY TOP 5 INDUSTRIES % FUND RATING CREDIT QUALITY % FUND
<S> <C> <C> <C> <C> <C>
1. CE Casecnan 2.4% 1. Telecommunications 18.7% AAA-A 0.0%
2. APP Int'l Finance 2.4 2. Cable 8.7 BBB 2.2
3. EchoStar Comm. 2.4 3. Broadcasting 7.7 BB 20.3
4. Long Island Lighting 2.2 4. Utilities 6.1 B 47.1
5. Clearnet Comm. 2.2 5. Steel 5.9 CCC 3.8
-------
6. Int'l Semi-Tech 2.2 47.1% Not Rated 17.1
7. Lehman ABS Corp 2.2 - Internal BB 1.5
8. Heartland Wireless 2.1 - Internal B 15.0
9. Central Rents 2.1 - Internal CCC/D 0.6
10. Lady Luck Gaming 2.1 Cash/Other Assets 9.5
------- ----
22.3% 100.0%
(Average Quality = B+)
</TABLE>
3
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 58.63%
AEROSPACE & DEFENSE - 3.13%
AlliedSignal, Inc. 32,000 $ 1,860,000
Boeing Co. 32,000 2,628,000
United Technologies Corp. 18,300 2,022,150
------------
6,510,150
------------
AUTOMOTIVE - 3.41%
Chrysler Corp. 43,000 2,698,250
General Motors Corp. 32,500 1,763,125
Magna International, Inc. 57,000 2,643,375
------------
7,104,750
------------
BANKING - 4.40%
Citicorp 47,500 3,740,625
Mellon Bank Corp. 29,100 1,564,125
Wells Fargo & Co. 15,900 3,857,737
------------
9,162,487
------------
BUSINESS SERVICES - 2.32%
Ceridian Corp. 34,000 1,623,500
General Motors Corp., Class E 56,918 3,208,752
------------
4,832,252
------------
CHEMICALS - 2.44%
Dow Chemical Co. 25,000 2,221,875
Millipore Corp. 68,500 2,868,437
------------
5,090,312
------------
COMMUNICATIONS - 2.11%
Alltel Corp. 55,000 1,808,125
WorldCom, Inc. @ 54,900 2,580,300
------------
4,388,425
------------
COMPUTER HARDWARE - 0.47%
Compaq Computer Corp. 21,200 988,450
------------
CONSUMER STAPLES - 3.02%
PepsiCo, Inc. 21,000 1,333,500
Philip Morris Companies, Inc. 55,000 4,956,875
------------
6,290,375
------------
ELECTRICAL EQUIPMENT - 0.47%
AMP, Inc. 21,800 975,550
------------
ENERGY - 3.57%
Amoco Corp. 36,190 2,641,870
El Paso Natural Gas Co. 64,700 2,393,900
Sonat, Inc. 36,000 1,570,500
Unocal Corp. 25,800 828,825
------------
7,435,095
------------
</TABLE>
4
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
ENERGY SERVICES - 4.30%
Baker Hughes, Inc. 55,000 $ 1,746,250
Global Marine, Inc. @ 313,000 3,560,375
McDermott International, Inc. 90,000 1,890,000
Schlumberger Ltd. 20,000 1,765,000
------------
8,961,625
------------
FINANCIAL SERVICES - 4.54%
American Express Co. 44,500 2,158,250
Capital One Financial Corp. 94,000 2,773,000
Federal National Mortgage Association 39,300 1,203,563
Household International, Inc. 30,000 2,073,750
NationsBank Corp. 15,500 1,236,125
------------
9,444,688
------------
MACHINERY - 1.12%
Deere & Co. 60,000 2,332,500
------------
OFFICE EQUIPMENT - 1.36%
Xerox Corp. 19,400 2,842,100
------------
PAPER & FOREST PRODUCTS - 2.60%
International Paper Co. 30,000 1,196,250
Kimberly-Clark Corp. 41,140 2,987,792
Weyerhaeuser Co. 25,000 1,237,500
------------
5,421,542
------------
PHARMACEUTICAL/HEALTHCARE - 3.52%
Bristol-Myers, Squibb Co. 33,000 2,714,250
Merck & Co., Inc. 45,000 2,722,500
Pharmacia & Upjohn, Inc. 49,700 1,901,025
------------
7,337,775
------------
REAL ESTATE INVESTMENT TRUSTS - 2.58%
General Growth Properties, Inc. 99,000 2,314,125
OMEGA Healthcare Investors, Inc. 109,000 3,052,000
------------
5,366,125
------------
RETAIL - 4.68%
AutoZone, Inc. @ 41,000 1,496,500
Home Depot, Inc. 78,000 3,695,250
Office Depot, Inc @ 84,500 1,890,688
Pep Boys-Manny, Moe & Jack 80,000 2,670,000
------------
9,752,438
------------
SEMICONDUCTOR - 2.12%
National Semiconductor Corp. @ 104,546 1,646,600
Texas Instruments, Inc. 49,000 2,768,500
------------
4,415,100
------------
</TABLE>
5
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
<TABLE>
<CAPTION>
Security
Shares/Principal Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY - 4.55%
Bay Networks, Inc. @ 60,000 $ 1,890,000
Cisco Systems, Inc. @ 41,000 2,126,875
Microsoft Corp. @ 27,000 3,061,125
Nokia Corp. ** 66,000 2,400,750
------------
9,478,750
------------
TRANSPORTATION - 1.92%
AMR Corp. @ 13,600 1,213,800
Delta Airlines, Inc. 34,600 2,780,975
------------
3,994,775
------------
TOTAL COMMON STOCKS
(cost $107,124,441) 122,125,264
------------
CONVERTIBLE PREFERRED STOCKS - 5.72%
BROADCASTING - 1.43%
Cablevision Systems Corp.
8.50%, Series I 115,000 2,975,625
------------
ELECTRICAL EQUIPMENT - 1.04%
Westinghouse Electric Corp.
$1.30, Series C # 120,000 2,175,000
------------
ENERGY - 2.40%
Enron Corp.
6.25%, 12/13/98 Series (1) 78,000 1,998,750
Occidental Petroleum Corp.
$3.875, Series 1993 # 48,000 2,997,024
------------
4,995,774
------------
PACKAGING & CONTAINER - 0.85%
Crown Cork & Seal Co., Inc.
4.50%, 2/26/00 Series 38,500 1,761,375
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $11,592,128) 11,907,774
------------
EXCHANGEABLE NOTES - 1.17%
ENERGY - 1.17%
Atlantic Richfield Corp.
9.00%, Exchangeable Notes, 9/15/97 (2) $ 86,000 2,429,500
------------
TOTAL EXCHANGEABLE NOTES
(cost $2,383,202) 2,429,500
------------
</TABLE>
<TABLE>
<S> <C> <C>
CONVERTIBLE BONDS - 4.21%
ELECTRICAL & ELECTRONIC EQUIPMENT - 0.60%
Richey Electronics, Inc.
7.00%, Subordinated Notes, 3/01/06 # 1,220,000 1,255,075
------------
ENTERTAINMENT - 0.90%
Imax Corp.
5.75%, Debentures, 4/01/03 1,900,000 1,882,843
------------
GAMING - 0.46%
Argosy Gaming Co.
12.00%, Unsecured Subordinated Notes, 6/01/01 1,020,000 961,350
------------
</TABLE>
6
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
[LOGO]
<TABLE>
<CAPTION>
Security
Principal Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE - 1.17%
Healthsource, Inc.
5.00%, Sr. Notes, 3/01/03 # $ 700,000 $ 681,184
Sierra Health Services, Inc.
7.50%, Debentures, 9/15/01 1,920,000 1,756,800
------------
2,437,984
------------
REAL ESTATE INVESTMENT TRUST - 0.46%
Meditrust
7.50%, Debentures, 3/01/01 940,000 945,640
------------
TRANSPORTATION - 0.62%
Alaska Air Group, Inc.
6.50%, Sr. Unsecured Debentures, 6/15/05 975,000 1,280,955
------------
TOTAL CONVERTIBLE BONDS
(cost $8,498,707) 8,763,847
------------
CORPORATE BONDS & NOTES - 6.53%
CONSUMER STAPLES - 0.70%
RJR Nabisco, Inc.
8.625%, Notes, 12/01/02 1,450,000 1,455,438
------------
CONTAINERS - 0.79%
Owens-Illinois, Inc.
11.00%, Sr. Debentures, 12/01/03 1,500,000 1,646,250
------------
INSURANCE - 0.66%
Leucadia National Corp.
8.25%, Sr. Subordinated Notes, 6/15/05 1,375,000 1,382,838
------------
RETAIL - 0.77%
Federated Department Stores, Inc.
10.00%, Sr. Notes, 2/15/01 1,500,000 1,606,875
------------
TRANSPORTATION - 3.61%
Airplanes Pass Through Trust
8.15%, Notes, 3/15/19 3,900,000 3,840,281
Continental Airlines, Inc.
7.82%, Pass-Thru Certificates, 10/15/13 # 3,850,000 3,680,600
------------
7,520,881
------------
TOTAL CORPORATE BONDS & NOTES
(cost $13,866,011) 13,612,282
------------
U.S. GOVERNMENT & AGENCIES - 16.98%
Government National Mortgage Association
6.50%, 10/15/23 2,644,493 2,480,826
6.50%, 2/15/26 22,326,913 20,903,125
7.00%, 2/15/26 4,626,383 4,454,282
8.00%, 1/15/23 2,698,749 2,741,714
8.50%, 4/15/25 4,631,356 4,793,407
------------
TOTAL U.S. GOVERNMENT & AGENCIES
(cost $36,919,779) 35,373,354
------------
TOTAL INVESTMENT SECURITIES - 93.24%
(Cost $180,384,268) 194,212,021
------------
</TABLE>
7
<PAGE>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
<TABLE>
<CAPTION>
Security
Principal Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS - 6.44%
Agreement with Bear Stearns bearing interest at
5.22% dated 4/30/96, to be repurchased 5/01/96 in
the amount of $13,411,037 and collateralized by
$11,156,819 U.S. Treasury Bills due 5/09/96,
$895,446 U.S. Treasury Bills due 6/06/96 and
$1,625,141 U.S. Treasury Bills due 6/13/96, value
$13,677,406 (cost $13,409,092) $13,409,092 $ 13,409,092
OTHER ASSETS LESS LIABILITIES - 0.32% 663,404
------------
NET ASSETS - 100.00% $208,284,517
------------
------------
</TABLE>
@ Non-income producing.
** American Depository Receipts.
# Sales restricted to qualified institutional investors.
(1) Mandatory conversion at maturity into shares of Enron Oil & Gas common
stock.
(2) Mandatory conversion at maturity into shares of Lyondell Petrochemical
Co. common stock.
8
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
[LOGO]
<TABLE>
<CAPTION>
Security
Principal Amount Value
<S> <C> <C>
DOMESTIC CORPORATE BONDS &
NOTES - 68.44%
BANKING - 0.40%
Berkeley Federal Bank and
Trust
12.00%, Subordinated
Debentures, 6/15/05 $ 1,425,000 $ 1,453,500
------------
BROADCASTING - 5.19%
Commodore Media, Inc.
7.50/13.25%, Sr. Subordinated
Notes, 5/01/03 $ 5,715,000 5,743,575
EchoStar Communications Corp.
0/13.125%, Sr. Discount
Notes, 3/15/04 $ # 13,800,000 8,625,000
Spanish Broadcasting Systems,
Inc.
7.50/12.50%, Sr. Notes,
6/15/02 $ 4,400,000 4,323,000
------------
18,691,575
------------
CABLE - 6.33%
Adelphia Communications, Inc.
12.50%, Sr. Notes, 5/15/02 7,000,000 7,166,250
Charter Communications
Southeast Holdings, LP
0/14.00%, Sr. Secured
Discount Debentures, 3/15/07
$ # 1,500,000 795,000
Charter Communications
Southeast, LP
11.25%, Sr. Notes, 3/15/06 # 3,500,000 3,539,375
Heartland Wireless
Communications, Inc.
13.00%, Sr. Notes, 4/15/03 7,083,000 7,685,055
International Cabletel, Inc.
0/11.50%, Sr. Notes, 2/01/06
$ # 5,250,000 3,084,375
Wireless One, Inc.
13.00%, Sr. Notes, 10/15/03 500,000 527,500
------------
22,797,555
------------
CHEMICALS - 1.56%
LaRoche Industries, Inc.
13.00%, Sr. Subordinated
Notes, 8/15/04 4,000,000 4,340,000
Pioneer Americas Acquisition
Corp.
13.375%, Sr. Notes, 4/01/05 1,200,000 1,290,000
------------
5,630,000
------------
COMPUTER SERVICES - 2.00%
Unisys Corp.
12.00%, Sr. Notes, 4/15/03 # 1,000,000 1,002,500
Unisys Corp.
15.00%, Notes, 7/01/97 5,800,000 6,220,500
------------
7,223,000
------------
CONGLOMERATE - 1.76%
Maxxam Group, Inc.
11.25%, Sr. Notes, 8/01/03 5,000,000 4,925,000
Maxxam Group, Inc.
0/12.25%, Sr. Discount Notes,
8/01/03 $ 2,000,000 1,410,000
------------
6,335,000
------------
</TABLE>
9
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
<TABLE>
<CAPTION>
Security
Principal Amount Value
<S> <C> <C>
CONSUMER PRODUCTS - 6.53%
International Semi-Tech Corp.
0/11.50%, Sr. Secured Notes,
8/15/03 $ $ 12,900,000 $ 7,836,750
Intracel Corp.
8.00/11.00%, Sr. Notes,
12/31/00 $ (1) 6,265,000 5,090,313
Revlon Worldwide Corp.
0%, Sr. Discount Notes,
3/15/98 5,000,000 4,062,500
Source Media, Inc.
13.00%, Sr. Secured Notes,
3/31/01 (1) 5,000,000 5,050,000
Telcom Technologies, Inc.
12.00%, Sr. Notes, 7/15/04
(1) 1,500,000 1,500,000
------------
23,539,563
------------
ENTERTAINMENT - 0.55%
AMF Group, Inc.
0/12.25%, Sr. Discount Notes,
3/15/06 $ # 3,000,000 1,661,250
Sam Houston Race Park
11.00%, Sr. Notes, 7/15/99 & 797,589 323,024
------------
1,984,274
------------
FINANCE/INSURANCE - 3.70%
Americo Life, Inc.
9.25%, Sr. Subordinated
Notes, 6/01/05 6,000,000 5,730,000
Central Rents, Inc.
12.875%, Sr. Notes, 12/15/03 7,550,000 7,606,625
------------
13,336,625
------------
GROCERY - 2.15%
Dairy Mart Convenience
Stores, Inc.
10.25%, Sr. Subordinated
Notes, 3/15/04 3,545,000 3,279,125
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 4,000,000 3,460,000
Jitney-Jungle Stores of
America, Inc.
12.00%, Sr. Notes, 3/01/06 1,000,000 1,027,500
------------
7,766,625
------------
HEALTHCARE/PHARMACEUTICAL -
1.35%
Unilab Corp.
11.00%, Sr. Notes, 4/01/06 4,900,000 4,851,000
------------
HOTELS & GAMING - 3.71%
Lady Luck Gaming Corp.
11.875%, 1st Mortgage Notes,
3/01/01 7,500,000 7,500,000
Mohegan Tribal Gaming
13.50%, Sr. Notes, 11/15/02 # 1,500,000 1,863,750
Trump Atlantic City Funding,
Inc.
11.25%, 1st Mortgage Notes,
5/01/06 3,900,000 4,007,250
------------
13,371,000
------------
MISCELLANEOUS SERVICES -
0.52%
La Petite Holdings Corp.
9.625%, Notes, 8/01/01 2,000,000 1,870,000
------------
</TABLE>
10
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
[LOGO]
<TABLE>
<CAPTION>
Security
Principal Amount/Units Value
<S> <C> <C>
OIL & GAS - 0.56%
TransTexas Gas Corp.
11.50%, Sr. Notes, 6/15/02 $ 2,000,000 $ 2,015,000
------------
PACKAGING - 0.35%
Ivex Packaging Corp.
0/13.25%, Debentures, 3/15/05
$ 2,000,000 1,250,000
------------
REAL ESTATE - 3.33%
Kmart Funding Corp.
8.80%, Secured Lease Bonds,
7/01/10 5,000,000 4,265,650
Lehman ABS Corp.
8.145%, Pass-Through,
11/02/07 9,161,694 7,741,630
------------
12,007,280
------------
RETAIL - 1.43%
Duane Reade Corp.
12.00%, Sr. Notes, 9/15/02 5,175,000 4,786,875
Wherehouse Entertainment,
Inc.
13.00%, Sr. Subordinated
Notes, 8/01/02 * 3,000,000 360,000
------------
5,146,875
------------
STEEL - 5.90%
Algoma Steel, Inc.
12.375%, 1st Mortgage Notes,
7/15/05 5,000,000 4,937,500
Bar Technologies LTD
13.50%, Units, 4/01/01 # (2) 4,000 3,980,000
Gulf States Steel, Inc.
13.50%, 1st Mortgage Notes,
7/15/03 7,010,000 6,484,250
NS Group, Inc.
13.50%, Units, 7/15/03 (3) 2,000 1,845,000
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes,
11/01/01 4,500,000 4,005,000
------------
21,251,750
------------
TELECOMMUNICATIONS - 14.52%
American Communications
Services, Inc.
0/12.75%, Sr. Discount Notes,
4/01/06 $ # 1,500,000 776,250
American Communications
Services, Inc.
0/13.00%, Sr. Discount Notes,
11/01/05 $ 10,500,000 5,801,250
Arch Communications Group,
Inc.
0/10.875%, Sr. Discount
Notes, 3/15/08 $ 2,450,000 1,384,250
Dial Call Communications
0/10.25%, Sr. Discount Notes,
12/15/05 $ 9,800,000 5,659,500
Dial Call Communications
0/12.25%, Sr. Discount Notes,
4/15/04 $ 2,000,000 1,250,000
Geotek Communications, Inc.
0/15.00%, Sr. Discount Notes,
7/15/05 $ 10,900,000 6,649,000
Geotek Communications, Inc.
12.00%, Notes, 2/15/01 (4) 1,800,000 2,151,000
Hyperion Telecommunications
0/13.00%, Units, 4/15/03 $ #
(5) 6,700 3,601,250
</TABLE>
11
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
<TABLE>
<CAPTION>
Security
Principal Amount Value
<S> <C> <C>
Intelcom Group (USA), Inc.
0/11.75%, Sr. Discount Notes,
10/01/06 $ $ 3,300,000 $ 1,831,500
Intelcom Group (USA), Inc.
0/13.50%, Sr. Discount Notes,
9/15/05 $ 7,000,000 4,305,000
Intercel, Inc.
0/12.00%, Sr. Discount Notes,
5/01/06 $ 7,700,000 4,350,500
Nextel Communications, Inc.
0/9.75%, Sr. Discount Notes,
8/15/04 $ 2,000,000 1,175,000
Nextlink Communications, Inc.
12.50%, Sr. Notes, 4/15/06 # 3,000,000 3,045,000
Pagemart Nationwide, Inc.
0/15.00%, Sr. Discount Notes,
2/01/05 $ 5,850,000 3,890,250
WinStar Communications, Inc.
0/14.00%, Subordinated
Discount Notes, 10/15/05 $
(4) 3,500,000 2,388,750
WinStar Communications, Inc.
0/14.00%, Sr. Discount Notes,
10/15/05 $ 7,000,000 4,077,500
------------
52,336,000
------------
TRANSPORTATION - 1.98%
Ameritruck Distribution Corp.
12.25%, Sr. Subordinated
Notes, 11/15/05 2,000,000 1,962,500
Burlington Motor Holdings,
Inc.
11.50%, Sr. Subordinated
Notes, 11/01/03 * 4,950,000 990,000
Great Dane Holdings, Inc.
12.75%, Sr. Subordinated
Debentures, 8/01/01 750,000 712,500
Great Dane Holdings, Inc.
14.50%, Subordinated
Debentures, 1/01/06 3,750,000 3,487,500
------------
7,152,500
------------
UTILITY - 4.62%
CE Casecnan Water & Energy
11.95%, Sr. Notes, 11/15/10 # 8,800,000 8,756,000
Long Island Lighting Co.
9.00%, Debentures, 11/01/22 8,500,000 7,887,150
------------
16,643,150
------------
TOTAL DOMESTIC CORPORATE
BONDS & NOTES
(cost $246,416,410) 246,652,272
------------
FOREIGN BONDS & NOTES -
13.11%
FOREIGN GOVERNMENT - 2.50%
Ecuador Global Bear-PDI
6.063%, Debentures, 2/28/15
(6) 7,150,403 3,164,053
Federal Republic of Brazil
Capitalization Bonds
8.00%, Debentures, 4/15/14
(7) 2,814,324 1,702,666
Republic of Argentina
6.8125%, Debentures, 3/31/05
(6) 2,000,000 1,535,000
Republic of Venezuela
6.688%, Debentures, 12/18/05
(6) 4,000,000 2,625,000
------------
9,026,719
------------
</TABLE>
12
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
[LOGO]
<TABLE>
<CAPTION>
Security
Principal Amount/Units/Shares Value
<S> <C> <C>
PAPER - 5.94%
APP International Finance Co.
11.75%, Guaranteed Sr.
Secured Notes, 10/01/05 $ 8,800,000 $ 8,668,000
Grupo Industrial Durango
12.00%, Notes, 7/15/01 7,250,000 7,086,875
Indah Kiat International
Finance
12.50%, Guaranteed Sr.
Secured Notes, 6/15/06 2,500,000 2,562,500
Mallette, Inc.
12.25%, Sr. Notes, 7/15/04 3,000,000 3,105,000
------------
21,422,375
------------
TELECOMMUNICATIONS - 3.20%
Clearnet Communications, Inc.
0/14.75%, Units, 12/15/05 $
(8) 12,600 7,875,000
GST Telecommunications, Inc.
0/13.875%, Units, 12/15/02 $
# (9) 6,500 3,640,000
------------
11,515,000
------------
UTILITIES - 1.47%
Invergas SA
12.50%, Sr. Notes, 12/16/99 4,925,000 5,288,219
------------
TOTAL FOREIGN BONDS & NOTES
(cost $44,254,224) 47,252,313
------------
DOMESTIC PREFERRED STOCK -
8.62%
BROADCASTING - 1.51%
Chancellor Broadcasting Co.,
12.25% # & 54,000 5,427,000
------------
CABLE - 2.18%
Cablevision Systems, 11.75%,
Series G # 71,762 7,266,205
Tele-Communication, Inc.,
6.00% 10,000 620,000
------------
7,886,205
------------
CONGLOMERATE - 1.49%
BCP/Essex Holdings, 15.00% 204,081 5,357,133
------------
HEALTHCARE - 2.16%
Foxmeyer Health Corp., $4.20
& 153,378 4,850,579
Intracel Corp., 8.00%, Series
A (4) 208,505 2,945,133
------------
7,795,712
------------
MISCELLANEOUS SERVICES -
1.28%
La Petite Holdings, 12.125% 124,200 3,788,100
Telos Corp., 12.00% & 129,687 842,966
------------
4,631,066
------------
RETAIL - 0.00%
Color Tile, Inc., 13.00%,
Series A (1) 20,000 0
------------
TOTAL DOMESTIC PREFERRED
STOCK
(cost $31,097,279) 31,097,116
------------
</TABLE>
13
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
<TABLE>
<CAPTION>
Security
Shares Value
<S> <C> <C>
DOMESTIC COMMON STOCK - 0.82%
@
BROADCASTING - 0.41%
EchoStar Communications Corp. 40,050 $ 1,341,675
Pegasus Media &
Communications, Inc. 440 143,000
------------
1,484,675
------------
ELECTRICAL EQUIPMENT - 0.36%
Berg Electronics Holding
Corp. 48,662 1,295,620
------------
ENTERTAINMENT - 0.00%
Sam Houston Race Park 224 1,232
------------
PRINTING/PUBLISHING - 0.02%
Affiliated Newspaper
Investments, Inc. 2,500 62,500
------------
RETAIL - 0.03%
Thrifty Payless Holdings,
Inc. 19,000 99,750
------------
TOTAL DOMESTIC COMMON STOCK
(cost $1,401,120) 2,943,777
------------
DOMESTIC WARRANTS - 1.57% @
AEROSPACE - 0.00%
Sabreliner Corp. (expires
9/01/99) 1,250 12,500
------------
BROADCASTING - 0.55%
Commodore Media, Inc.
(expires 5/01/00) 7,500 1,012,500
Spanish Broadcasting Systems,
Inc. (expires 6/30/99) 5,000 962,500
------------
1,975,000
------------
CABLE - 0.18%
American Telecasting, Inc.
(expires 8/10/00) 4,000 148,000
Heartland Wireless
Communications, Inc.
(expires 4/97) 46,402 489,541
Wireless One, Inc. (expires
10/15/03) 1,500 9,000
------------
646,541
------------
CONSUMER PRODUCTS - 0.11%
Chattem, Inc. (expires
8/17/99) # 1,300 4,225
Intracel Corp. (expires
12/31/00) 94,010 282,030
Source Media, Inc. (expires
6/23/00) 500,000 125,000
------------
411,255
------------
FINANCE/INSURANCE - 0.12%
Central Rents, Inc. (expires
2003) 7,150 429,000
------------
GROCERY - 0.00%
Dairy Mart Convenience
Stores, Inc. (expires
3/15/04) 6,300 6,300
------------
PAPER - 0.08%
SD Warren Co. (expires
1/01/00) 80,000 280,000
------------
STEEL - 0.02%
Gulf States Steel, Inc.
(expires 4/15/03) 7,010 38,555
Sheffield Steel Corp.
(expires 11/01/01) 12,500 40,625
------------
79,180
------------
</TABLE>
14
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
[LOGO]
<TABLE>
<CAPTION>
Security
Principal Amount/Shares Value
<S> <C> <C>
TELECOMMUNICATION - 0.51%
American Communications
Services, Inc. (expires
11/01/05) 10,500 $ 740,250
Cellular Communications, Inc.
(expires 8/15/03) 6,250 96,875
Geotek Communications, Inc.
(expires 2000) 177,000 907,125
Intelcom Group (USA), Inc.
(expires 8/3/05) 6,600 56,100
------------
1,800,350
------------
TRANSPORTATION - 0.00%
CHC Helicopter Corp. (expires
10/29/98) 2,000 1,000
------------
TOTAL DOMESTIC WARRANTS
(cost $2,667,596) 5,641,126
------------
TOTAL INVESTMENT SECURITIES -
92.56%
(Cost $325,836,629) 333,586,604
------------
REPURCHASE AGREEMENTS - 3.06%
Agreement with Bear Stearns
bearing interest at 5.22%
dated 4/30/96, to be
repurchased 5/01/96 in the
amount of $11,031,169 and
collateralized by $5,975,000
U.S. Treasury Bills, due
6/13/96 and 4,800,000 U.S.
Treasury Bonds, 7.875%, due
2/15/21,
value $11,253,638 (cost
$11,029,570) $ 11,029,570 11,029,570
OTHER ASSETS LESS LIABILITIES
- 4.38% 15,792,849
------------
NET ASSETS - 100.00% $360,409,023
------------
------------
</TABLE>
@ Non-income producing securities.
# Sale restricted to qualified institutional investors.
$ Step bond.
& Payment-in-kind security.
* Defaulted security.
(1) Private placement.
(2) Unit consists of $1,000 par value Sr. Secured Notes, 13.50% due 4/01/01
and 1 warrant.
(3) Unit consists of $1,000 par value Sr. Secured Notes, 13.50% due 7/15/03
and 1 warrant.
(4) Convertible Security.
(5) Unit consists of $1,000 par value Sr. Discount Notes, 13.00% due
4/15/03 and 1 warrant.
(6) Floating Rate Bond. Rate as of April 30, 1996.
(7) Interest paid partial cash/partial capitalization.
(8) Unit consists of $1,000 par value Sr. Discount Notes, 14.75% due
12/15/05 and 33 warrants.
(9) Unit consists of $1,000 par value Sr. Discount Notes, 13.875% due
12/15/05 and $1,000 par value Convertible Sr. Subordinated Discount
Notes.
15
<PAGE>
NORTHSTAR ADVANTAGE TRUST
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1996
[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 $180,384,268 and
$325,836,629, respectively) $194,212,021 $333,586,604
Repurchase agreements 13,409,092 11,029,570
Dividends and interest receivable 839,918 6,094,921
Receivable for shares of beneficial
interest sold 320,715 4,856,984
Receivable for investments sold 218,425 7,808,500
Prepaid expenses 36,592 42,245
------------------------------------------
Total Assets 209,036,763 363,418,824
------------------------------------------
LIABILITIES:
Payable for shares of beneficial
interest reacquired 338,477 435,810
Investment advisory fee payable 127,268 208,275
Distribution fee payable 123,449 211,440
Transfer agent fee payable 70,424 58,681
Accounting fee payable 25,888 52,022
Administrative services fee payable 16,969 28,290
Payable for investments purchased 0 1,927,300
Dividends payable 0 1,931
Accrued expenses 49,771 86,052
------------------------------------------
Total Liabilities 752,246 3,009,801
------------------------------------------
NET ASSETS $208,284,517 $360,409,023
------------------------------------------
------------------------------------------
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.01
par value outstanding (unlimited
shares authorized) Paid-in-Capital $184,150,735 $352,849,497
Undistributed net investment income 529,559 71,533
Accumulated net realized gain
(loss) on investments 9,776,470 (261,982)
Net unrealized appreciation of
investments 13,827,753 7,749,975
------------------------------------------
Net Assets $208,284,517 $360,409,023
------------------------------------------
------------------------------------------
CLASS A:
Net Assets $81,001,669 $128,119,026
------------------------------------------
Shares outstanding 7,052,618 26,939,834
------------------------------------------
Net asset value and redemption
value per share (net assets/shares
outstanding) $11.49 $4.76
------------------------------------------
Maximum offering price per share
(net asset value plus sales charge
of 4.75% of offering price) $12.06 $5.00
------------------------------------------
CLASS B:
Net Assets $67,869,354 $201,841,106
------------------------------------------
Shares outstanding 5,921,170 42,479,147
------------------------------------------
Net asset value and offering price
per share $11.46 $4.75
------------------------------------------
CLASS C:
Net Assets $59,413,494 $30,448,891
------------------------------------------
Shares outstanding 5,189,207 6,381,175
------------------------------------------
Net asset value and offering price
per share $11.45 $4.77
------------------------------------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
NORTHSTAR ADVANTAGE TRUST
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
Northstar Advantage Northstar Advantage
Income and Growth High Total Return
Fund Fund
-------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $1,741,524 $157,750
Interest 2,637,208 16,222,307
-------------------------------------
Total investment income 4,378,732 16,380,057
-------------------------------------
EXPENSES:
Investment advisory and management
fees 752,922 1,008,303
Distribution fees:
Class A 118,392 160,352
Class B 325,501 723,328
Class C 283,755 98,157
Transfer agent fees and expenses:
Class A 75,832 83,321
Class B 66,169 107,335
Class C 45,100 12,888
Administrative services fees 121,460 163,529
Fund accounting fees 80,312 108,479
Printing and postage expenses 22,152 24,201
Registration fees 17,871 37,984
Custodian fees and expenses 17,804 27,120
Audit expenses 13,006 14,776
Trustee expenses 8,878 13,560
Miscellaneous expenses 21,417 18,914
-------------------------------------
Total expenses 1,970,571 2,602,247
-------------------------------------
NET INVESTMENT INCOME 2,408,161 13,777,810
-------------------------------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments 11,581,217 4,157,228
Net realized gain on foreign
currency 6 0
Net change in unrealized
appreciation (depreciation) of
investments (720,174) 10,832,260
-------------------------------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 10,861,049 14,989,488
-------------------------------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $13,269,210 $28,767,298
-------------------------------------
-------------------------------------
</TABLE>
See accompanying notes to financial statements.
17
<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 period For the period
ended For the year ended For the year
April 30, ended April 30, ended
1996 (a) October 31, 1995 1996 (a) October 31, 1995
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $2,408,161 $4,652,135 $13,777,810 $13,258,203
Net realized gain (loss) on investments 11,581,217 (1,378,420 ) 4,157,228 (2,572,908 )
Net realized gain (loss) on foreign currency 6 (38,505 ) 0 0
Net change in unrealized appreciation
(depreciation) of investments (720,174 ) 16,414,821 10,832,260 4,695,216
----------------------------------------------------------------------
Increase in net assets resulting from
operations 13,269,210 19,650,031 28,767,298 15,380,511
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (1,035,803 ) (2,390,482 ) (5,642,878 ) (7,078,564 )
Class B (635,967 ) (1,286,761 ) (7,256,030 ) (5,602,745 )
Class C (571,191 ) (885,802 ) (997,390 ) (544,101 )
----------------------------------------------------------------------
(2,242,961 ) (4,563,045 ) (13,896,298 ) (13,225,410 )
----------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 19,517,095 79,489,052 162,514,186 128,604,858
Net asset value of shares issued to shareholders
in reinvestment of dividends 1,499,388 2,970,631 4,940,580 5,240,098
----------------------------------------------------------------------
21,016,483 82,459,683 167,454,766 133,844,956
Cost of shares redeemed (13,796,841 ) (22,320,893 ) (17,840,701 ) (19,082,236 )
----------------------------------------------------------------------
Net increase in net assets derived from capital
share transactions 7,219,642 60,138,790 149,614,065 114,762,720
----------------------------------------------------------------------
Net increase in net assets 18,245,891 75,225,776 164,485,065 116,917,821
NET ASSETS:
Beginning of period 190,038,626 114,812,850 195,923,958 79,006,137
----------------------------------------------------------------------
End of period (including undistributed net
investment income at April 30, 1996 and October
31, 1995 of $529,559, $71,533 and $364,359,
$190,021, respectively) $208,284,517 $190,038,626 $360,409,023 $195,923,958
----------------------------------------------------------------------
----------------------------------------------------------------------
(a) Unaudited
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
NORTHSTAR ADVANTAGE TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
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 (1) assets (1) 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
04/30/96 10.86 0.15 0.63 0.78 (0.15) 11.49 6.69 81,002 1.54 2.82 88
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
04/30/96 10.84 0.12 0.61 0.73 (0.11) 11.46 6.25 67,869 2.26 2.11 88
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
04/30/96 10.83 0.12 0.61 0.73 (0.11) 11.45 6.29 59,413 2.21 2.15 88
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
04/30/96 4.48 0.12 0.28 0.40 (0.12) 4.76 11.87 128,119 1.50 10.58 92
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
04/30/96 4.47 0.11 0.28 0.39 (0.11) 4.75 11.50 201,841 2.19 9.86 92
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
04/30/96 4.49 0.11 0.28 0.39 (0.11) 4.77 11.47 30,449 2.18 9.88 92
(1) Annualized
</TABLE>
See accompanying notes to financial statements
19
<PAGE>
NORTHSTAR ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 1996 (UNAUDITED)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - The Northstar Advantage 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, ("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, ("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 U.S. dollars based on the prevailing exchange
rates on that day. The Adviser uses independent pricing services to price the
Funds' securities.
Management's use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date(s) of financial statements and the reported amounts of
income and expenses during the reporting period(s). Actual results could differ
from those estimates.
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 regulation which may differ from generally accepted accounting
principles.
Forward Foreign Currency Contracts and Options - The Funds may enter into
forward foreign currency contracts ("contracts") to purchase or sell currencies
at a specified rate at a future date. The Funds may enter into these contracts
solely for hedging purposes.
20
<PAGE>
NORTHSTAR ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 1996 (UNAUDITED)
[LOGO]
The Funds write and purchase put and call options on foreign currencies. The
premium paid by the Funds for the purchase of a call or put option is recorded
as an investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the Funds have purchased expires
on the stipulated expiration date, the Funds realize a loss in the amount of the
cost of the option.
The amount of potential gain or loss to the Funds upon exercise of a written
call option is the value (in U.S. dollars) of the currency sold, less the value
of the U.S. dollars received in exchange. The amount of potential gain or loss
to the Funds upon exercise of a written put option is the value (in U.S.
dollars) of the currency received, less the value of the U.S. dollars paid in
exchange.
Risks may arise upon entering these contracts from the potential inability
of counterparties to meet the terms of their contract and from unanticipated
movement in the value of a foreign currency relative to the U.S. dollar.
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.
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
NWNL Northstar, Inc. (and its wholly owned operating subsidiaries, Northstar
Investment Management Corp., Northstar Distributors, Inc. and Northstar
Administrator Corp.) is an 80% owned subsidiary of ReliaStar Financial Corp.
Northstar Investment Management Corp. (the "Adviser") serves as each Fund's
investment adviser. Each Fund pays the Adviser an investment advisory fee
calculated at an annual rate of 0.75% on the first $250,000,000 of aggregate
average daily net assets; 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 0.55% on the remaining aggregate daily net assets of each Fund in
excess of $1 billion. For the six months ended April 30, 1996, the Adviser
earned $1,761,225 in investment advisory fees. Northstar Administrators Corp.
(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 0.10% of each Fund's average daily net assets, and an annual shareholder
account servicing fee of $5.00, payable semi-annually, for each account of
beneficial owners of shares. For the six months ended April 30, 1996, the
Administrator earned $284,989 in administrative and account servicing fees.
Northstar Distributors, Inc. (the "Distributor"), an affiliate of the Adviser
and the Administrator, is the distributor of each Fund's shares. Under separate
Plans of Distribution pertaining to Class A, Class B, and Class C shares, the
Trust pays the Distributor monthly service fees at an annual rate of 0.25% of
the average daily net assets in the case of Class A, Class B and Class C shares,
and monthly distribution fees at the annual rate of 0.05% of the average daily
net assets of Class A shares, and 0.75% of the average daily net assets of Class
B and Class C shares. At April 30, 1996 the Trust owed the Distributor $334,889
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 six months
ended April 30, 1996, 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 $268,471 N/A N/A
Contingent Deferred Sales Charges $ 0 $303,226 $11,957
</TABLE>
21
<PAGE>
NORTHSTAR ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 1996 (UNAUDITED)
NOTE 3. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the six months ended April 30, 1996, were
as follows:
<TABLE>
<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
<S> <C> <C>
Aggregate Purchases $177,233,563 $375,492,828
Aggregate Sales $169,571,087 $245,454,074
</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 April 30, 1996 were as follows:
<TABLE>
<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
<S> <C> <C>
Cost (tax basis) $180,384,268 $325,836,629
------------- -------------
------------- -------------
Appreciated Securities 17,196,136 17,546,280
Depreciated Securities (3,368,383) (9,796,305)
------------- -------------
Net Unrealized appreciation/depreciation $ 13,827,753 $ 7,749,975
------------- -------------
------------- -------------
</TABLE>
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each class of shares of each Fund for the
six months ended April 30, 1996, were as follows:
<TABLE>
<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
<S> <C> <C>
I. CLASS A
Shares sold 629,593 8,777,159
Reinvested dividends 51,279 521,602
Shares redeemed (629,861) (2,134,992)
------------- -------------
Net increase 51,011 7,163,769
------------- -------------
------------- -------------
<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
<S> <C> <C>
II. CLASS B
Shares sold 753,505 21,791,803
Reinvested dividends 32,001 464,175
Shares redeemed (432,006) (1,316,730)
------------- -------------
Net increase 353,500 20,939,248
------------- -------------
------------- -------------
<CAPTION>
INCOME AND TOTAL RETURN
GROWTH FUND FUND
------------- -------------
<S> <C> <C>
III. CLASS C
Shares sold 342,655 4,217,633
Reinvested dividends 48,830 74,778
Shares redeemed (158,171) (362,541)
------------- -------------
Net increase 233,314 3,929,870
------------- -------------
------------- -------------
</TABLE>
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
------------- -------------
------------- -------------
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
------------- -------------
------------- -------------
III. CLASS 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>
NOTE 6. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the Total Return Fund had
68.44% 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 April 30, 1996, the
Total Return Fund held Burlington Motor Holdings, Inc. and Wherehouse
Entertainment, Inc., securities in default. The aggregate value of these
securities at
22
<PAGE>
NORTHSTAR ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 1996 (UNAUDITED)
[LOGO]
April 30, 1996 represented $1,350,000 or 0.37% of the Total Return 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 April 30, 1996, the Funds did not have any securities on
loan.
NOTE 8. FEDERAL INCOME TAX - CAPITAL LOSS CARRYFORWARD
At April 30, 1996, 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>
[LOGO]
<TABLE>
<S> <C> <C>
TRUSTEES
Paul S. Doherty Mark L. Lipson John R. Smith
Robert B. Goode Walter H. May John G. Turner
Alan L. Gosule David W. C. Putnam David W. Wallace
</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 &
Thomas Ole Dial - Vice President Secretary
Agnes Mullady - 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
FIRST DATA INVESTOR SERVICES GROUP,
NORTHSTAR DISTRIBUTORS, INC. 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>
24
<PAGE>
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