<PAGE>
[Northstar logo]
ADVANTAGE FUNDS
SEMI-ANNUAL REPORT TO SHAREHOLDERS
JUNE 30, 1996
[Picture of a Star showing some of Northstars Funds]
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
SEMI-ANNUAL REPORT
JUNE 30, 1996
Dear Shareholders: (Northstar logo)
We are pleased to provide you with the semi-annual report of the Northstar Funds
for the six month period ended June 30, 1996. We are gratified with your
decision to entrust your assets to Northstar and are confident that we can
assist you in reaching your financial objectives. Our goal is to provide you
with consistently superior investment results through the investment disciplines
we employ and the breadth and skill of our investment professionals. Following
this overview is a summary of the results of each Fund by its respective
portfolio manager. We hope you will find this letter and report informative.
The financial markets have been volatile in 1996. Significant changes in
world economic events have caused sharp changes in investor behavior so far this
year. The beginning of the year was marked by growing concerns that the U.S.
economy was slipping into a recession. This outlook kept interest rates on
longer term U.S. Treasuries near the low levels they reached in October 1995.
Reacting to the economy's slow growth in the fourth quarter of 1995, the Federal
Reserve lowered short term interest rates in late January 1996. All major stock
indices, which had moved sideways to close out 1995, started a significant rise
with the lowering of interest rates and the prospect of continued
non-inflationary growth. During the first six months of 1996, the S&P 500 rose
8.88%, the NASDAQ composite rose 12.63% and the Russell 2000 index rose 10.5%.
This low level of interest rates began to reverse itself in February as the
market reacted to robust job creation reports and additional indicators pointing
to potentially higher levels of inflation. Yields on ten year U.S. Treasury
Notes, which got as low as 5.5% on January 18, 1996, peaked at over 7% by early
June 1996. At the end of June, the combination of higher interest rates and
growing concerns over corporate earnings, sparked a significant correction in
the stock market during July. The S&P 500 declined more than 5% but has now
recovered most of that loss as many bell-weather companies reported strong
earnings.
Within the fixed income market, the domestic high yield sector was a noted
bright spot. During January and February, high yield bonds were prized in that
low-interest-rate environment, although demand was tempered due to credit
concerns. As the economic outlook improved and stocks accelerated, demand for
high yield bonds rose commensurately. The high yield sector returned 3.46% over
the last six months, far outperforming bonds in general, and Treasuries in
particular. Now as we look to the second half of the year, our portfolio
managers generally expect, to varying degrees, that the growth rate of the
economy is slowing, but is unlikely headed for recession. This suggests a
continuing reasonable environment for the financial markets.
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 pursue this
philosophy and look forward to serving your investment needs in the future.
On a different note, over the past six months a few changes have taken place
with respect to the operation and management of the Funds which I would like to
bring to your attention. First, the Trustees of your Fund elected to remove the
word "Advantage" from the names of all funds in the Northstar family. This was
done to simplify communication and to remove any confusion with other fund
families containing the word "Advantage" in their names.
With respect to the Northstar Advantage Income Fund, I would like to take
this opportunity to point out some additional changes which have recently been
made to your Fund. First and foremost, the investment objective and policies of
your Fund have not changed. The Fund will continue to pursue income, and
secondarily, capital appreciation primarily through investments in a balance of
debt securities, common and preferred stocks, and securities convertible into
common stocks. However, at their most recent meeting on July 31, 1996, the
Trustees of your Fund elected to change the name of the Fund to the Northstar
Balance Sheet Opportunities Fund. The Trustees and officers of the Fund believe
that this new name more appropriately reflects the investment objective,
strategy, and the range of investments your Fund will pursue, and will eliminate
any possible ambiguity regarding the Fund's ability to invest in other than
"fixed income" securities. Additionally, effective August 1, 1996, the Fund will
be co-managed by T. Ole Dial and Peter Bakst. Mr. Dial, Executive Vice President
and Chief Investment Officer at Northstar Investment Management, has managed
investments for over 15 years and is currently the distinguished portfolio
manager of the Northstar High Total Return Fund and the Northstar High Yield
Fund. Mr. Bakst, Vice President of Northstar Investment Management since May
1996, has served as an investment professional for over 11 years with Salomon
Brothers, Bankers Trust, and CS First Boston Corporation.
With respect to the Northstar Strategic Income Fund, I am pleased to
announce that effective August 1, 1996, Margaret Patel has been appointed senior
portfolio manager of the Fund. Ms. Patel, a Managing Director of Northstar
Investment Management since June 1995, currently serves as the senior portfolio
manager of the Northstar Government Securities Fund and co-portfolio manager of
the Northstar Income & Growth Fund. With over 25 years of experience in the
investment advisory business, Margie previously served as the distinguished
portfolio manager of the Advest Advantage High Yield Fund. We are quite pleased
to have someone of Margie's talent and experience to manage this portfolio.
Sincerely,
/s/ Mark Lipson
Mark Lipson
President
August 14, 1996
<PAGE>
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
(Bullet) Performance figures are historical and reflect reinvestment of all
distributions and changes in net asset value. Unless otherwise
indicated, the Fund's performance is computed without a sales
charge. When sales charges are included, Fund performance reflects
the maximum sales charge for each class of shares. Class A shares
are subject to a maximum front-end sales load of 4.75%; class B, C
and T shares are subject to a maximum contingent deferred sales
charge of 5%, 1% and 4%, respectively.
(Bullet) Class T shares of each fund represent the largest asset class of
each fund. Class T shares are no longer available for purchase by
new investors and may be purchased only under limited circumstances
by existing Class T shareholders. Since June 5, 1995, each Fund
began offering three new classes of shares (Class A, B, C), each
representing a unique pricing structure for purchasing shares of
the Funds. Performance information relating to each class of shares
of each Fund is contained in the performance graph for each Fund.
(Bullet) Each fund's investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less
than their original cost.
(Bullet) Each Fund's portfolio composition may change and there is no
assurance the Fund will continue to hold any particular securities.
(Bullet) Past performance is not indicative of future results.
ABOUT INDICES AND OTHER PERFORMANCE BENCHMARKS CITED IN THE REPORT:
(Bullet) Standard & Poor's Corporation (S&P) is a credit-rating agency.
Unlike the Funds, the unmanaged Standard & Poor's 500 Composite
Index composed solely of common stocks.
(Bullet) The CPI is an index of the prices paid by consumers for consumer
goods and services. The index is prepared by the Bureau of Labor
Statistics. The index is widely regarded by investors as the key
measure of inflation in the U.S. economy.
(Bullet) Unless otherwise indicated, index results include reinvested
dividends and do not reflect sales charges.
<PAGE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND [Photo of Margaret Patel]
[Northstar logo]
THE ECONOMY
(Bullet) After a sluggish start in early 1996, economic growth accelerated
in the second quarter. Inflation remained near historically low
levels despite higher business activity.
(Bullet) Just as the economy benefited in the first half of 1996 from 1995's
falling interest rates, the second half of 1996 may well experience
slower economic activity as financially sensitive sectors of the
economy are slowed by rising interest rates thus far in 1996.
(Bullet) After reducing the Federal Funds rate by 0.25% in late January to
5.25%, the Federal Reserve has left short term monetary conditions
unchanged in the first half of the year.
THE MARKETS
(Bullet) While Federal Reserve monetary policy remained relatively unchanged
in the first six months of 1996, longer term interest rates rose
sharply. From the end of 1995 to the end of June, 1996, Treasury
issues due in five years rose from 5.37% to 6.46%; Treasuries due
in 10 years increased from 5.57% to 6.71%; and 30 year Treasury
bonds jumped from 5.95% to 6.87%.
(Bullet) Interest rates increased because of market concerns that higher
business activity might well raise the risk of inflation, although
thus far in 1996 it is notable that inflation still remains near
historic low levels of less than 3%.
(Bullet) Higher interest rates caused bond prices to fall, with the result
that for many bonds, the interest income received was offset by
bond price declines.
THE FUND
(Bullet) Over the first half of 1996, the Fund's holdings of Government
National Mortgage Association (GNMA) mortgage issues were increased
from 72.8% to 86.1% of total assets. Holdings of other U.S.
government agency bonds which represented 26.6% of the portfolio
were sold and reinvested in GNMA's and U.S. Treasury zero coupon
issues. These changes were made because we felt they represented
attractive investment value.
CURRENT STRATEGY
(Bullet) Despite market reverses in the first half of 1996, we are
optimistic over the investment environment during the balance of
the year. We believe that some portion of the rise in interest
rates is likely to be reduced.
(Bullet) After five years of economic expansion, inflation is low, and most
forecasters look for continuation of muted inflation, so that the
"after inflation" rate earned by bonds appears relatively high
compared to past experience.
(Bullet) The Federal Reserve appears vigilant to control overheating of the
economy as well as any signs of incipient acceleration of prices
levels. We believe that their responsive oversight of our economy
provides an attractive backdrop for fixed income holders who are
investing for the long term.
FUND INFORMATION (ALL DATA AS OF 6/30/96)
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
1 GNMA 7% 57.9%
2 GNMA 6.5% 28.2%
U.S. Treasury 0%
3 2/15/19 10.2%
U.S. Treasury 0%
4 8/15/13 2.0%
5 Cash equivalents 1.7%
100.0%
</TABLE>
<TABLE>
<S> <C>
SECTOR ALLOCATIONS
(by percentage of net assets)
GNMAs 86.1%
U.S.
Treasuries 12.2%
Cash
equivalents 1.7%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
<S> <C> <C> <C>
Class A -0.22% n/a 1.46%
Class B 0.12% n/a 0.88%
Class C 3.70% n/a 4.81%
Class T 7.01% 8.44% 2.21%
<CAPTION>
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
</TABLE>
<TABLE>
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
Class A 4.71% n/a 6.49%
Class B 4.03% n/a 5.86%
Class C 3.79% n/a 5.80%
Class T 102.47% 49.94% 6.19%
</TABLE>
3
<PAGE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
U.S. GOVERNMENT AND AGENCIES -- 98.37%
GNMA Pool #367856, 6.50%, due 9/15/23 $ 1,689,864 $ 1,584,230
GNMA Pool #367431, 6.50%, due 12/15/23 1,916,195 1,796,413
GNMA Pool #372896, 6.50%, due 12/15/23 1,700,276 1,593,992
GNMA Pool #366750, 6.50%, due 3/15/24 4,157,499 3,897,614
GNMA Pool #376430, 6.50%, due 3/15/24 2,663,453 2,491,394
GNMA Pool #351481, 6.50%, due 4/15/24 3,829,655 3,574,293
GNMA Pool #352824, 6.50%, due 4/15/24 1,787,650 1,672,168
GNMA Pool #780035, 6.50%, due 7/15/24 3,693,877 3,455,253
GNMA Pool #411355, 6.50%, due 12/15/25 2,421,808 2,255,284
GNMA Pool #417514, 6.50%, due 12/15/25 2,145,919 1,998,365
GNMA Pool #420591, 6.50%, due 12/15/25 1,955,379 1,820,927
GNMA Pool #420596, 6.50%, due 12/15/25 1,984,112 1,851,811
GNMA Pool #420675, 6.50%, due 12/15/25 2,925,758 2,724,583
GNMA Pool #411385, 6.50%, due 4/15/26 4,987,004 4,644,097
GNMA Pool #413640, 6.50%, due 4/15/26 4,988,906 4,645,869
GNMA Pool #352081, 7.00%, due 9/15/23 4,922,038 4,741,695
GNMA Pool #369686, 7.00%, due 12/15/23 8,041,004 7,746,382
GNMA Pool #382159, 7.00%, due 1/15/24 3,754,146 3,625,529
GNMA Pool #780144, 7.00%, due 7/15/24 63,642,793 61,310,921
GNMA Pool #420648, 7.00%, due 1/15/26 4,883,770 4,685,294
U.S. Treasury Strips, 0% due 2/15/19 72,150,000 14,470,404
U.S. Treasury Strips, 0% due 8/15/13 9,500,000 2,847,530
TOTAL INVESTMENT SECURITIES -- 98.37%
(cost $143,727,818) 139,434,048
REPURCHASE AGREEMENT -- 1.25%
Agreement with State Street Bank and Trust bearing interest at
4.90% dated 6/28/96 to be repurchased 7/01/96 at $1,763,720 and
collateralized by $1,765,000 U.S. Treasury Notes, 6.00% due
8/31/97, value $1,799,257
(cost $1,763,000) 1,763,000 1,763,000
Other assets less liabilities -- 0.38% 544,351
NET ASSETS -- 100.00% $141,741,399
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND [Photo of Margaret Patel]
[Northstar logo]
THE MARKETS
(Bullet) Most bond prices fell sharply in the first 6 months of 1996.
Treasury yields rose above 7% and closed the semester just below
that level. That happened because accelerating growth raised
expectations for the beginning of a new round of increases in the
fed funds rate and inflation. High yield bond prices fell the least
of all domestic bonds, due to strong demand for their high coupons
and rising stock valuations. Spreads of high yield bonds over
10-yr. Treasury yields remained about 3.2% and spreads of B-rated
bonds' yields over those of BB-rated bonds remained about 2.0%
during the period. Strength in corporate profits and in liquidity
supported stock prices against the ill-effects of rising rates.
(Bullet) Emerging markets bonds greatly outperformed domestic bonds. They
were fundamentally stronger due to a broadened base of
institutional buyers and continued improvements in economic trends
in those markets. Most foreign corporates remained too expensive
due to tight spreads and the strengthening U.S. dollar.
(Bullet) We and others still believe that the U.S. economy will sustain
annual GDP growth and CPI inflation rates of 2.5% to 3%. Therefore,
our outlook for domestic Debt and equity markets remains positive
for 1996.
THE FUND
(Bullet) We continued to adjust the Fund's holdings in response to the many
changes in the investment environment. We considered it prudent to
make significant changes in the Fund's allocations starting in the
2nd quarter.
(Bullet) The Fund's performance was constrained by the need to have minimum
allocations of U.S. and foreign government bonds. Net assets
nonetheless rose $5MM from $76MM to $81MM in the last 6 months.
(Bullet) The number of high yield issuers was reduced and the mix of names
was upgraded in an effort to reduce credit risks. Some foreign
sovereign names also were pared down or replaced with larger
positions in sovereigns with better total return prospects (e.g.,
Italy and New Zealand). We cut U.S. government bonds and bought
more high yield and foreign bonds to seek improved total returns.
CURRENT STRATEGY
(Bullet) Seek increased total returns by improving the mix within each of
the three types of bonds in this Fund and by proactively adjusting
the allocations among the types of bonds in light of expected
market developments.
(Bullet) For now, maximize high yield and minimize U.S. and foreign
government investments. Keep the Fund's duration moderate and its
credit quality at a minimum of BBB-.
FUND INFORMATION (ALL DATA ARE AS OF 6/30/96)
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
1 U.S. Treasury '25 6.6%
2 Australia Govt. '07 3.3%
3 Poland Govt. '14 3.3%
U.S. Treasury
4 6.75/'99 3.1%
5 U.S. Treasury '05 2.9%
6 Australia Govt. '06 2.6%
7 CE Casecnan 2.5%
U.S. Treasury
8 9.13/'99 2.5%
New Zealand Govt.
9 '00 2.4%
10 GNMA 11 2.1%
31.3%
</TABLE>
<TABLE>
<S> <C>
SECTOR ALLOCATIONS
(by percentage of net assets)
High Yield 42%
Investment
Grade 25%
U.S.
Government 21%
Cash 8%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales
charge)
Inception 1 year
<S> <C> <C>
Class A 3.53% 4.10%
Class B 3.86% 3.58%
Class C 7.43% 7.51%
Class T 8.15% 4.77%
<CAPTION>
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
Inception 1 year
<S> <C> <C>
Class A 8.94% 9.32%
Class B 8.12% 8.58%
Class C 7.97% 8.51%
Class T 19.96% 8.77%
</TABLE>
5
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
<S> <C> <C>
INVESTMENT GRADE SECURITIES -- 25.40%
DOMESTIC BONDS & NOTES -- 1.13%
BROADCASTING & MEDIA -- 1.13%
Turner Broadcasting Systems, Inc.
8.40%, Sr. Debentures, 2/01/24
(cost $996,927) $ 1,000,000 $ 915,810
FOREIGN BONDS & NOTES -- 24.27% (1)
FOREIGN GOVERNMENT SECURITES -- 24.27%
Canadian Government Bonds, 9.00%, due 12/01/04 1,000,000 797,795
Canadian Government Bonds, 9.00%, due 6/01/25 2,000,000 1,605,638
Commonwealth of Australia Government Bonds, 10.00%, due
2/15/06 2,500,000 2,103,399
Commonwealth of Australia Government Bonds, 10.00%, due
10/15/07 3,200,000 2,696,676
Kingdom of Denmark, 8.00%, due 3/15/06 6,000,000 1,065,119
New Zealand, 6.50%, due 2/15/00 3,000,000 1,909,185
Poland Republic, 3.75%, due 10/27/14 (2) 3,500,000 2,686,250
Province of British Columbia, 9.50%, due 1/09/12 2,000,000 1,636,708
Queensland Treasury Corp., 8.00%, due 8/14/01 1,200,000 915,324
Republic Of Ireland, 8.00%, due 8/18/06 600,000 982,759
Republic Of Italy, 12.00%, due 5/01/02 1,200,000,000 889,234
Spanish Government Bonds, 10.00%, due 2/28/05 112,000,000 931,847
Spanish Government Bonds, 10.90%, due 8/30/03 60,000,000 524,141
U.K. Treasury Gilts, 8.50%, due 12/07/05 350,000 566,833
U.K. Treasury Gilts, 9.50%, due 1/15/99 250,000 412,040
TOTAL FOREIGN BONDS & NOTES
(cost $19,851,427) 19,722,948
TOTAL INVESTMENT GRADE SECURITIES
(cost $20,848,354) 20,638,758
HIGH YIELD SECURITIES -- 41.80%
DOMESTIC BONDS & NOTES -- 27.00%
BROADCASTING & MEDIA -- 1.71%
Chancellor Broadcasting Co.
12.50%, Sr. Subordinated Notes, 10/01/04 375,000 413,438
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 12/15/03 500,000 478,750
Spanish Broadcasting System, Inc.
7.50%/12.50%, Sr. Notes, 6/15/02 $ 500,000 501,250
1,393,438
CABLE -- 1.92%
CS Wireless Systems, Inc.
0%/11.375%, Units, 3/01/06 #$(3) 3,000 1,560,000
CHEMICALS -- 1.71%
LaRoche Industries, Inc.
13.00%, Sr. Subordinated Notes, 8/15/04 800,000 862,000
Pioneer Americas Acquisition Corp.
13.375%, Sr. Notes, 4/01/05 # 500,000 530,000
1,392,000
</TABLE>
6
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
DEFENSE -- 0.66%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 $ 500,000 $ 540,000
FOREST & PAPER PRODUCTS -- 1.25%
Stone Container Corp.
10.75%, 1st Mortgage Notes, 10/01/02 1,000,000 1,013,750
GAMING -- 1.80%
Ballys Park Place Funding, Inc.
9.25%, 1st Mortgage Notes, 3/15/04 500,000 534,375
Grand Casino, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 900,000 924,750
1,459,125
GROCERY -- 3.65%
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 750,000 705,000
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 1,500,000 1,305,000
Ralphs Grocery Co.
10.45%, Sr. Notes, 6/15/04 1,000,000 957,500
2,967,500
HEALTHCARE/PHARMACEUTICAL -- 1.16%
Unilab Corp.
11.00%, Sr. Notes, 4/01/06 1,000,000 945,000
HOTEL & RESTAURANTS -- 0.58%
John Q. Hammons Hotels
8.875%, 1st Mortgage Notes, 2/15/04 500,000 470,000
INSURANCE -- 1.51%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 1,300,000 1,228,500
OIL & GAS -- 2.80%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 # 900,000 931,500
California Energy, Inc.
0%/10.25%, Sr. Discount Notes, 1/15/04 $ 1,400,000 1,344,000
2,275,500
PRINTING & PUBLISHING -- 0.65%
Garden State Newspapers, Inc.
12.00%, Sr. Subordinated Secured Notes, 7/01/04 500,000 528,750
</TABLE>
7
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
<S> <C> <C>
RETAIL & WHOLESALE -- 0.10%
Wherehouse Entertainment, Inc.
13.00%, Sr. Subordinated Notes, 8/01/02 *@ $ 1,000,000 $ 80,000
STEEL -- 2.71%
AK Steel Corp.
10.75%, Sr. Notes, 4/01/04 500,000 541,250
NS Group, Inc.
13.50%, Units, 7/15/03 (4) 1,250 1,218,750
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes, 11/01/01 500,000 445,625
2,205,625
TELECOMMUNICATION -- 3.52%
American Communications Services, Inc.
0%/13.00%, Sr. Discount Notes, 11/01/05 $ 2,000,000 1,115,000
Brooks Fiber Properties, Inc.
0%/10.875%, Sr. Discount Notes, 3/01/06 #$ 1,000,000 535,000
Dial Call Communications, Inc.
0%/10.25%, Sr. Discount Notes, 12/15/05 $ 2,000,000 1,210,000
2,860,000
TEXTILES -- 0.65%
Synthetic Industries, Inc.
12.75%, Debentures, 12/01/02 500,000 528,750
TRANSPORTATION -- 0.62%
Moran Transportation Co.
11.75%, Sr. Guaranteed Notes, 7/15/04 500,000 500,000
TOTAL DOMESTIC BONDS & NOTES
(cost $22,529,229) 21,947,938
FOREIGN BONDS & NOTES -- 14.80%
BROADCASTING & MEDIA -- 1.37%
Rogers Cablesystems Ltd.
9.65%, Sr. Secured Debentures, 1/15/14 (1) 1,750,000 1,115,971
CABLE -- 0.63%
Videotron Ltd.
10.25%, Sr. Subordinated Notes, 10/15/02 500,000 515,000
CHEMICALS -- 0.61%
Acetex Corp. #
9.75%, Sr. Secured Notes, 10/01/03 500,000 491,250
FOREIGN GOVERNMENT SECURITES -- 4.23%
Mexican Cetes
0%, Government Guaranty, 7/25/96 (1) 4,126,180 532,412
Republic of Argentina
0%/5.25%, Government Guaranty, 3/31/23 $ 1,000,000 550,000
Republic of Argentina
6.3125%, Government Guaranty, 3/31/05 (5) 1,000,000 782,500
Republic of Ecuador
6.0625%, Government Guaranty, 2/28/25 (5) 1,000,000 581,870
United Mexican States
9.75%, Notes, 2/06/01 (6) 1,000,000 993,750
3,440,532
</TABLE>
8
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Security Principal Amount/Shares Value
<S> <C> <C>
FOREST & PAPER PRODUCTS -- 2.55%
Grupo Industrial Durango SA
12.00%, Sr. Notes, 7/15/01 $ 1,000,000 $ 1,007,500
Indah Kiat International Finance
12.50%, Guaranteed Secured Notes, 6/15/06 500,000 532,500
Malette, Inc.
12.25%, Sr. Secured Notes, 7/15/04 500,000 530,000
2,070,000
TRANSPORTATION -- 0.34%
Mexico City Toluca
11.00%, Debentures, 5/19/02 # 465,406 276,917
UTILITIES -- 5.07%
CE Casecnan Water & Energy, Inc.
11.95%, Sr. Notes, 11/15/10 # 2,000,000 2,022,500
Invergas
12.50%, Sr. Notes, 12/16/99 1,000,000 1,075,000
Telecom Brazil Funding Corp.
11.1289%, Guaranteed Secured Notes, 12/09/99 # (5) 1,000,000 1,020,000
4,117,500
TOTAL FOREIGN BONDS & NOTES
(cost $11,917,573) 12,027,170
TOTAL HIGH YIELD SECURITIES
(cost $34,446,802) 33,975,108
PREFERRED STOCKS -- 3.83%
BANKING -- 0.94%
First Nationwide Bank, 11.50% 7,000 766,500
BROADCASTING & MEDIA -- 1.81%
Cablevision Systems Corp., 11.75% # 5,147 501,833
Time Warner, Inc., 10.25% # 10,000 972,500
1,474,333
HEALTHCARE/PHARMACEUTICAL -- 1.08%
Foxmeyer Health Corp., $4.20 & 32,424 875,448
TOTAL PREFERRED STOCKS
(cost $3,353,369) 3,116,281
</TABLE>
9
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
WARRANTS -- 0.32% @
AEROSPACE & DEFENSE -- 0.00%
Sabreliner Corp., (expires 9/01/99) 500 $ 2,500
FINANCE -- 0.04%
Central Rents, Inc., (expires 2003) 500 30,000
HEALTHCARE/PHARMACEUTICAL -- 0.01%
Chattem, Inc., (expires 8/17/99) 500 8,125
STEEL -- 0.01%
Sheffield Steel Corp., (expires 11/01/01) 2,500 8,125
TELECOMMUNICATION -- 0.26%
American Communications Services, Inc., (expires 11/01/05) 2,000 210,000
TRANSPORTATION -- 0.00%
CHC Helicopter Corp., (expires 12/15/00) 4,000 2,000
TOTAL WARRANTS
(cost $22,500) 260,750
U.S. GOVERNMENT AND AGENCIES -- 21.19%
Federal National Mortgage Association 6.55, due 6/13/01 $1,500,000 1,506,480
GNMA 7.00, due 2/15/26 1,758,298 1,686,841
GNMA 8.50, due 1/15/17 -- 7/15/24 685,817 708,065
GNMA 9.00, due 1/15/20 -- 11/15/24 623,161 654,914
Resolution Trust Corp. 8.00, due 6/25/26 417,877 402,047
U.S. Treasury Bonds 7.625, due 2/15/25 5,000,000 5,389,550
U.S. Treasury Notes 5.875, due 11/15/05 2,500,000 2,356,675
U.S. Treasury Notes 6.75, due 5/31/99 2,500,000 2,529,400
U.S. Treasury Notes 9.125, due 5/15/99 1,850,000 1,985,235
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $17,975,775) 17,219,207
RIGHTS -- 0.00%
FOREIGN GOVERNMENT SECURITES -- 0.00%
United Mexican States 1,000,000 0
TOTAL INVESTMENT SECURITIES -- 92.54%
(cost $76,646,800) 75,210,104
REPURCHASE AGREEMENT -- 2.88%
Agreement with State Street Bank and Trust bearing interest
at 4.90%
dated 6/28/96 to be repurchased 7/01/96 at $2,342,956 and
collaterized by $2,345,000 U.S. Treasury Notes, 6.00% due
8/31/97, value $2,390,514
(cost $2,342,000) 2,342,000 2,342,000
Other assets less liabilities -- 4.58% 3,719,677
NET ASSETS -- 100.00% $81,271,781
</TABLE>
# Sale restricted to qualified institutional investors.
$ Step bond.
* Defaulted security.
@ Non-income producing.
& Payment-in-kind security.
(1) The principal amount is shown in the respective country's currency.
(2) U.S. denominated security.
(3) A unit consists of $1,000 par value 11.375%, Sr. Discount Notes, 3/01/06 and
1.1 share of Common Stock.
(4) A unit consists of $1,000 par value 13.50%, Sr. Notes, 7/15/03 and 1
warrant.
(5) Floating Rate Bond. Rate as of June 30, 1996.
(6) Issued with 1,000 value rights (expiration 2003) per $1,000 par value 6.25%,
Debentures, 12/31/19.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND [Photo of Thomas Ole Dial]
[Northstar logo]
THE MARKETS
(Bullet) Treasury bonds began 1996 with yields below 6%. However, job growth
was much stronger than expected and annualized GDP grew as fast as
4% during the last six months. That caused fears of inflation and
rate increases by the Federal Reserve Board. The yields on both the
10- and 30-year Treasury bonds exceeded 7% in June, but managed to
close under 7% by the end of the first half. Strength in corporate
profits and in liquidity supported stock prices against the
ill-effects of rising rates.
(Bullet) High yield bond prices fell the least of all domestic bonds, due to
strong demand for their high coupons and rising stock valuations.
Stronger economic growth limited fears of a recession, so investors
were more willing to buy corporate bonds. Spreads of high yield
bonds over 10-yr. Treasury yields fell to 3.2% and spreads of
B-rated bonds' yields over those of BB-rated bonds fell to 2% in
the first half.
(Bullet) We and others still believe that the U.S. economy will sustain
annual GDP growth and CPI inflation rates of 2.5% to 3%. Therefore,
our outlook for domestic debt and equity markets remains positive
for the rest of 1996.
THE FUND
(Bullet) We continued to adjust the Fund's holdings in response to the
numerous and rapid changes in the investment environment. In
particular, we sought to make the Fund less sensitive to high
interest rates and to increase its returns without compromising the
Fund's credit rating quality.
(Bullet) The portfolio's performance helped the Fund maintain a good balance
among sales, redemptions and net asset value changes, so that net
assets invested in the Fund rose $28MM in 6 months to $207MM.
(Bullet) The Fund's performance during the last 6 months was enhanced by
changes in portfolio allocations, especially in the 2nd quarter. We
sharply reduced cyclical bonds and took profits in steel,
transportation and emerging market investments. However, we
selectively added paper industry bonds, which performed well. We
capitalized on short-term opportunities in the utilities industry
and raised telecommunications exposure.
CURRENT STRATEGY
(Bullet) We will continue to improve the Fund's risk/reward mix. In general,
it will invest in high yield bonds with below-average risks and
strong downside protection. Its returns are expected to be
commensurate with that risk profile.
(Bullet) We currently intend to invest most of the portfolio in bonds rated
B1 or higher. Further, we expect to improve the mix of paper
industry bonds we hold and further reduce utilities bonds while
increasing investments in companies that will benefit from
deregulation. We anticipate restricting investments in emerging
markets and in cyclicals to compelling cases in order to minimize
volatility.
FUND INFORMATION (ALL DATA ARE AS OF 6/30/96)
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
1 Allied Waste Ind. 2.3%
2 Grupo Televisa 2.1%
3 CAI Wireless 2.0%
4 CE Casecnan 2.0%
5 Americo Life 1.9%
APP Int'l Finance
6 Co. 1.9%
7 Sweetheart Cup 1.9%
8 Paging Network 1.9%
9 Time Warner 1.9%
10 Telewest 1.9%
19.8%
</TABLE>
<TABLE>
<CAPTION>
TOP 5 INDUSTRIES
(by percentage of net assets)
<S> <C>
Telecommunications 13.7%
Broadcasting 13.1%
Paper 8.4%
Oil & Gas 7.2%
Utilities 4.8%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
<S> <C> <C> <C>
Class A 3.71% n/a 4.72%
Class B 4.19% n/a 4.36%
Class C 7.86% n/a 8.35%
Class T 10.38% 15.30% 5.68%
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
Inception 5 years 1 year
Class A 9.11% n/a 9.98%
Class B 8.42% n/a 9.35%
Class C 8.43% n/a 9.35%
Class T 101.47% 103.81% 9.67%
</TABLE>
11
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
DOMESTIC BONDS & NOTES -- 61.33%
BROADCASTING & MEDIA -- 7.89%
Echostar Satellite Broadcasting Corp.
0%/13.125%, Sr. Secured Discount Notes, 3/15/04 #$ $6,000,000 $ 3,840,000
JACOR Communications, Inc.
10.125%, Sr. Subordinated Notes, 6/15/06 3,000,000 2,985,000
SCI Television, Inc.
11.00%, Sr. Notes, 6/30/05 2,500,000 2,609,375
SFX Broadcasting, Inc.
10.75%, Sr. Subordinated Notes, 5/15/06 # 2,000,000 2,000,000
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 12/15/03 1,250,000 1,196,875
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 9/30/05 1,250,000 1,196,875
Spanish Broadcasting System, Inc.
7.50%/12.50%, Sr. Notes, 6/15/02 $ 2,500,000 2,506,250
16,334,375
CABLE -- 0.66%
Cablevision Systems Corp.
9.875%, Sr. Subordinated Debentures, 4/01/23 1,500,000 1,368,750
CHEMICALS -- 2.42%
NL Industries, Inc.
0%/13.00%, Sr. Secured Discount Notes, 10/15/05 $ 3,000,000 2,355,000
Pioneer Americas Acquisition Corp.
13.375%, Sr. Notes, 4/01/05 # 2,500,000 2,650,000
5,005,000
CONSUMER STAPLES -- 1.92%
Sweetheart Cup Co., Inc.
10.50%, Sr. Surbodinated Notes, 9/01/03 4,000,000 3,980,000
DEFENSE -- 0.78%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 1,500,000 1,620,000
FOOD & BEVERAGE -- 1.05%
South Carolina International Services , Inc.
13.00%, Sr. Subordinated Notes, 10/01/05 2,000,000 2,185,000
FOREST & PAPER PRODUCTS -- 1.27%
SD Warren Co.
12.00%, Sr. Subordinated Notes, 12/15/04 2,500,000 2,637,500
GAMING -- 1.96%
Grand Casino, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 1,000,000 1,027,500
Trump Atlantic City
11.25%, 1st Mortgage Notes, 5/01/06 3,000,000 3,023,250
4,050,750
</TABLE>
12
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
GROCERY -- 3.05%
Jitney-Jungle Stores of America, Inc.
12.00%, Sr. Notes, 3/01/06 $2,000,000 $ 2,050,000
Pathmark Stores, Inc.
9.625%, Sr. Subordinated Notes, 5/01/03 2,500,000 2,356,250
Ralphs Grocery Co.
10.45%, Sr. Notes, 6/15/04 2,000,000 1,915,000
6,321,250
HEALTHCARE/PHARMACEUTICAL -- 2.38%
Integrated Health Services, Inc.
10.25%, Sr. Subordinated Notes, 4/30/06 # 2,000,000 1,990,000
Tenet Healthcare Corp.
10.125%, Sr. Subordinated Notes, 3/01/05 1,000,000 1,057,500
Unilab Corp.
11.00%, Sr. Notes, 4/01/06 2,000,000 1,890,000
4,937,500
HOTEL & RESTAURANTS -- 2.10%
Courtyard By Marriott, Ltd.
10.75%, Sr. Secured Notes, 2/01/08 # 2,000,000 1,965,000
John Q. Hammons Hotels
8.875%, 1st Mortgage Notes, 2/15/04 1,500,000 1,410,000
John Q. Hammons Hotels LP
9.75%, 1st Mortgage Notes, 10/01/05 1,000,000 965,000
4,340,000
INDUSTRIALS AND COMMERCIAL SERVICES -- 0.74%
Homeside, Inc.
11.25%, Sr. Notes, 5/15/03 # 1,500,000 1,537,500
INDUSTRIAL MANUFACTURING -- 1.01%
Wyman-Gordon Co.
10.75%, Sr. Notes, 3/15/03 2,000,000 2,090,000
INSURANCE -- 1.94%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 4,250,000 4,016,250
MEDICAL SUPPLIES -- 2.26%
Dade International, Inc.
11.125%, Sr. Subordinated Notes, 5/01/06 # 1,900,000 1,976,000
Mediq, Inc.
12.125%, Sr. Notes, 7/01/99 2,500,000 2,693,750
4,669,750
</TABLE>
13
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
<S> <C> <C>
OIL & GAS -- 6.13%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 # $2,000,000 $ 2,070,000
California Energy, Inc.
9.875%, Sr. Notes, 6/30/03 1,000,000 1,020,000
California Energy, Inc.
0%/10.25% Sr. Discount Notes, 1/15/04 $ 2,650,000 2,544,000
Calpine Corp.
10.50%, Sr. Notes, 5/15/06 # 2,000,000 2,000,000
HS Resources, Inc.
9.875%, Sr. Subordinated Notes, 12/01/03 2,500,000 2,425,000
Kelley Oil & Gas Corp.
13.50%, Sr. Notes, 6/15/99 2,500,000 2,625,000
12,684,000
PACKAGING -- 0.70%
Crown Packaging Holdings, Ltd.
0%/12.25%, Sr. Subordinated Notes, 11/01/03 $ 3,750,000 1,443,750
POLLUTION CONTROL -- 2.26%
Allied Waste Industries, Inc.
12.00%, Sr. Subordinated Notes, 2/01/04 4,250,000 4,675,000
PRINTING & PUBLISHING -- 1.47%
Garden State Newspapers, Inc.
12.00%, Sr. Subordinated Secured Notes, 7/01/04 2,000,000 2,115,000
Hollinger International, Inc.
9.25%, Sr. Subordinated Notes, 2/01/06 1,000,000 921,250
3,036,250
RETAIL & WHOLESALE -- 1.25%
Waban, Inc.
11.00%, Sr. Subordinated Notes, 5/15/04 2,500,000 2,587,500
STEEL -- 1.52%
Bar Technologies, Inc.
13.50%, Units, 4/01/01 #(1) 2,000 2,040,000
NS Group, Inc.
13.50%, Units, 7/15/03 (2) 500 487,500
UCAR Global Enterprises, Inc.
12.00%, Sr. Subordinated Notes, 1/15/05 535,000 609,900
3,137,400
</TABLE>
14
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
TELECOMMUNICATION -- 8.49%
CAI Wireless Systems, Inc.
12.25%, Sr. Discount Notes, 9/15/02 $4,000,000 $ 4,200,000
Comcast Corp.
9.375%, Sr. Subordinated Debentures, 5/15/05 2,000,000 1,940,000
MFS Communications, Inc.
0%/8.875%, Sr. Discount Notes, 1/15/06 $ 6,000,000 3,660,000
Paging Network, Inc.
10.125%, Sr. Subordinated Notes, 8/01/07 4,000,000 3,950,000
Teleport Communications Group, Inc.
0%/11.125%, Sr. Discount Notes, 7/01/07 $ 6,500,000 3,818,750
17,568,750
TEXTILES -- 2.43%
Avondale Mills, Inc.
10.25%, Sr. Subordinated Notes, 5/01/06 # 2,000,000 1,975,000
Collins & Aikman Products Co.
11.50%, Sr. Subordinated Notes, 4/15/06 3,000,000 3,056,250
5,031,250
TRANSPORTATION -- 3.29%
Continental Airlines, Inc.
9.50%, Pass-Thru Certificates, 10/15/13 # 2,500,000 2,387,500
Moran Transportation Co.
11.75%, Sr. Guaranteed Notes, 7/15/04 2,200,000 2,200,000
Sea Containers Ltd.
12.50%, Sr. Subordinated Debentures, 12/01/04 2,000,000 2,220,000
6,807,500
UTILITIES -- 2.36%
AES Corp.
10.25%, Sr. Subordinated Notes, 7/15/06 3,000,000 3,011,250
Long Island Lighting Co.
7.125%, Debentures, 6/01/05 2,100,000 1,875,153
4,886,403
TOTAL DOMESTIC BONDS & NOTES
(cost $126,265,620) 126,951,428
FOREIGN BONDS & NOTES -- 22.52%
BROADCASTING & MEDIA -- 3.29%
Bell Cablemedia PLC
0%/11.875%, Sr. Discount Notes, 9/15/05 $ 4,000,000 2,460,000
Fundy Cable Ltd.
11.00%, Sr. Secured Second Priority Notes, 11/15/05 2,000,000 2,030,000
Rogers Cablesystems Ltd.
9.65%, Sr. Secured Debentures, 1/15/14 (3) 2,025,000 1,291,338
Rogers Communications, Inc.
10.875%, Sr. Debentures, 4/15/04 1,000,000 1,022,500
6,803,838
FOREIGN GOVERNMENT SECURITES -- 1.13%
Republic of Argentina
6.3125%, Government Guaranty, 3/31/05 (4) 3,000,000 2,347,500
</TABLE>
15
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount/Shares Value
<S> <C> <C>
FOREST & PAPER PRODUCTS -- 7.16%
APP International Finance Co.
11.75%, Guaranteed Secured Notes, 10/01/05 $3,900,000 $ 3,997,500
Domtar, Inc.
11.25%, Debentures, 9/15/17 2,500,000 2,656,250
Grupo Industrial Durango SA
12.00%, Sr. Notes, 7/15/01 2,600,000 2,619,500
Malette, Inc.
12.25%, Sr. Secured Notes, 7/15/04 3,000,000 3,180,000
Repap New Brunswick, Inc.
10.625%, Sr. Secured Notes, 4/15/05 2,500,000 2,375,000
14,828,250
OIL & GAS -- 1.09%
Petroleos Mexicanos MTN
8.625%, Debentures, 12/01/23 3,000,000 2,250,000
PRINTING & PUBLISHING -- 0.97%
Newsquest Capital PLC
11.00%, Sr. Subordinated Notes, 5/01/06 # 2,000,000 2,010,000
RETAIL & WHOLESALE -- 1.69%
International Semi-Tech Corp.
0%/11.50%, Sr. Discount Notes, 8/15/03 $ 6,000,000 3,487,500
TELECOMMUNICATION -- 5.24%
Fonorola, Inc.
12.50%, Sr. Notes, 8/15/02 1,000,000 1,076,250
Grupo Televisa SA
11.375%, Sr. Notes, 5/15/03 # 4,200,000 4,273,500
Telefonica De Argentina SA
11.875%, Notes, 11/01/04 1,500,000 1,623,750
Telewest PLC
0%/11.00%, Sr. Discount Debentures, 10/01/07 $ 6,500,000 3,867,500
10,841,000
UTILITIES -- 1.95%
CE Casecnan Water & Energy, Inc.
11.95%, Sr. Notes, 11/15/10 # 4,000,000 4,045,000
TOTAL FOREIGN BONDS & NOTES
(cost $45,895,346) 46,613,088
COMMON STOCKS -- 0.00%
GAMING -- 0.00%
Capital Gaming International, Inc. @ 44,540 7,215
TOTAL COMMON STOCKS
(cost $274,102) 7,215
PREFERRED STOCKS -- 6.35%
BANKING -- 0.93%
First Nationwide Bank, 11.50% 17,500 1,916,250
</TABLE>
16
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
BROADCASTING & MEDIA -- 1.88%
Time Warner, Inc., 10.25% # 40,000 $ 3,890,000
CABLE -- 0.69%
Cablevision Systems Corp., 11.125% & 15,213 1,437,629
CONGLOMERATES -- 0.91%
BCP/Essex Holdings Inc., 15.00% 69,519 1,877,013
HEALTHCARE/PHARMACEUTICAL -- 0.99%
Foxmeyer Health Corp., $4.20 & 75,753 2,045,331
PRINTING & PUBLISHING -- 0.44%
K-III Communications Corp., 10.00% # 10,000 920,000
UTILITIES -- 0.51%
El Paso Electric Co., 11.40% & 10,000 1,055,000
TOTAL PREFERRED STOCKS
(cost $12,859,172) 13,141,223
WARRANTS -- 0.01% @
GAMING -- 0.00%
Capital Gaming International, Inc., (expires 2/01/99) 36,318 2,724
PACKAGING -- 0.01%
Crown Packaging Holdings, Ltd., (expires 11/01/03) 3,750 20,625
TRANSPORTATION -- 0.00%
CHC Helicopter Corp., (expires 12/15/00) 16,000 8,000
TOTAL WARRANTS
(cost $318,150) 31,349
TOTAL INVESTMENT SECURITIES -- 90.21%
(cost $185,612,390) 186,744,303
REPURCHASE AGREEMENT -- 4.17%
Agreement with State Street Bank and Trust bearing
interest at 4.90% dated 6/28/96 to be repurchased 7/01/96
at $8,628,522 and collaterized by $8,635,000 U.S. Treasury
Notes, 6.00% due 8/31/97 value $8,802,597
(cost $8,625,000) $8,625,000 8,625,000
Other assets less liabilities -- 5.62% 11,632,041
NET ASSETS -- 100.00% $207,001,344
</TABLE>
# Sale restricted to qualified institutional investors.
$ Step bond.
@ Non-income producing.
& Payment-in-kind security.
(1) A unit consists of $1,000 par value 13.50%, Sr. Notes, 4/01/01 and 1
warrant.
(2) A unit consists of $1,000 par value 13.50%, Sr. Notes, 7/15/03 and 1
warrant.
(3) The principal amount is shown in the respective country's currency.
(4) Floating Rate Bond. Rate as of June 30, 1996.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
NORTHSTAR ADVANTAGE [Photo of Peter A. Bakst and Thomas Ole Dial]
INCOME FUND
THE ECONOMY
(Bullet) After a slow start at the beginning of the year due to weather
related difficulties, the economy accelerated in the second quarter
of 1996. Despite the improvement in business, inflation remained at
historic low levels.
(Bullet) Much of the economic strength was the lagged result of low interest
rates in 1995, as financially sensitive sectors experienced
improvement.
(Bullet) While short term interest rates remained around 5.25% for much of
the first half of 1996, longer term rates sharply increased, as
market participants were concerned about the possibility of rising
inflation.
THE MARKETS
(Bullet) The stock market staged a substantial upward move, with the Dow
Jones Industrial Average gaining 10.5% in the first half of 1996.
(Bullet) In contrast the bond market experienced falling prices as interest
rates rose, with Treasury bonds due in 30 years rising from 5.95%
at the end of 1995, to 6.87% at month-end June, 1996.
THE FUND
(Bullet) Asset allocation for stocks remained relatively unchanged over the
six month period at a little over 28% of assets. We substantially
reduced our holdings of straight long term bonds in the period from
23.9% at the end of December, 1995, to 5.89% at the end of June.
Proceeds were invested in convertible preferred issues, increasing
from 28% of holdings to 31%, while convertible bonds rose from 19%
to 31% of holdings over the same period.
(Bullet) The Fund's concentration among industry groups continued to favor
industrial companies, pharmaceuticals, healthcare and financial
services.
CURRENT STRATEGY
(Bullet) In view of the substantial run-up in prices of many equity and
equity related convertible issues, we continue to search for
securities which provide a good combination of reasonable price,
growth potential, and dividend or interest income.
(Bullet) Since economic conditions may well slow in the second half of the
year, we are focusing on areas of the economy which should have
above average growth, such as the drug and healthcare areas,
certain financial services, and selected industrial companies which
are leaders in their field.
(Bullet) We expect to continue to emphasize issues with above average
income, such as convertible bonds and preferreds, in our asset
allocation over the balance of the year.
FUND INFORMATION (ALL DATA ARE AS OF 6/30/96)
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
1 Mascotech 4.8%
2 Roche Holdings 4.4%
3 Equitable 4.2%
4 MCN 3.9%
5 Magnatek 3.5%
Allmerica
6 Financial 3.5%
7 Interface 3.5%
8 Merrill Co. 3.2%
Beverly
9 Enterprises 3.2%
10 Buckeye Cellulose 2.9%
37.1%
</TABLE>
<TABLE>
TOP 5 SECTORS
(by percentage of net assets)
<S> <C>
Diversified
Industries 10.2%
Pharmaceuticals 9.1%
Healthcare 8.5%
Financial
services 8.2%
Oil and gas 8.2%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
<S> <C> <C> <C>
Class A 11.16% n/a 12.58%
Class B 11.94% n/a 12.46%
Class C 15.56% n/a 16.41%
Class T 9.67% 11.73% 13.81%
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
Inception 5 years 1 year
Class A 17.61% n/a 18.23%
Class B 16.83% n/a 17.46%
Class C 16.73% n/a 17.41%
Class T 161.39% 74.09% 17.81%
</TABLE>
18
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
COMMON STOCKS -- 28.21%
BROADCASTING & MEDIA -- 3.21%
Merrill Lynch Co., Inc. ("Cox Communications")(1) 105,000 $2,323,125
CHEMICALS -- 3.37%
Hanna (M.A.) Co. 21,000 438,375
Morton International, Inc. 12,000 447,000
W.R. Grace & Co. 22,000 1,559,250
2,444,625
CONTAINERS -- 0.53%
Avery-Dennison Corp. 7,000 384,125
FINANCIAL SERVICES -- 2.36%
Finova Group, Inc. 35,000 1,706,250
FOREST & PAPER PRODUCTS -- 2.86%
Buckeye Cellulose Corp. 75,000 2,071,875
HEALTHCARE -- 2.66%
U.S. Healthcare, Inc. 35,000 1,925,000
INSURANCE -- 4.75%
Allmerica Financial Corp. 85,000 2,528,750
Allstate Corp. 20,000 912,500
3,441,250
OIL & GAS -- 3.73%
Amoco Corp. 9,000 651,375
Atlantic Richfield Co. 6,000 711,000
KN Energy, Inc. 40,000 1,340,000
2,702,375
PHARMACEUTICAL -- 3.03%
Bristol-Myers, Squibb Co. 10,000 900,000
Merck & Co., Inc. 20,000 1,292,500
2,192,500
TEXTILES -- 1.71%
Interface, Inc. 80,000 1,240,000
TOTAL COMMON STOCKS
(cost $17,237,661) 20,431,125
CONVERTIBLE PREFERRED STOCKS -- 30.50%
AEROSPACE & DEFENSE -- 2.86%
Kaman Corp., 6.50% 40,300 2,070,412
</TABLE>
19
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
AIRLINES -- 4.06%
Continental Air Finance Group, 8.50% # 20,000 $1,479,160
Trans World Airlines, Inc., 8.00% # 30,000 1,459,410
2,938,570
CHEMICALS -- 2.69%
Atlantic Richfield Co., 9.00% 80,000 1,950,000
COMPUTER HARDWARE -- 2.71%
Wang Laboratories, Inc., 6.50% # 40,000 1,965,920
FINANCIAL SERVICES -- 1.35%
United Companies Financial Corp., 6.75% 16,400 975,800
INDUSTRIAL -- 2.78%
Corning Delaware LP, 6.00% 21,400 1,222,475
Greenfield Capital Trust, 6.00% # 15,000 791,250
2,013,725
INSURANCE -- 2.61%
Alexander & Alexander Services, Inc., $3.625 # 39,200 1,892,929
METALS & MINING -- 2.28%
Pittston Mineral Group, 6.25% # 44,000 1,650,000
OIL & GAS -- 3.74%
Tejas Gas Corp., 5.25% 30,000 1,500,000
Unocal Corp., 7.00% # 21,300 1,207,263
2,707,263
TOYS & AMUSEMENTS -- 1.55%
Tyco Toys, Inc., $0.4125 200,000 1,125,000
UTILITIES -- 3.87%
MCN Corp., 8.75% 110,000 2,805,000
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $20,822,018) 22,094,619
CORPORATE BONDS -- 5.90%
HEALTHCARE/PHARMACEUTICAL -- 2.61%
Unilab Corp.
11.00%, Sr. Notes, 4/01/06 $2,000,000 1,890,000
TEXTILES -- 3.29%
Interface, Inc.
9.50%, Sr. Subordinated Notes, 11/15/05 2,500,000 2,381,250
TOTAL CORPORATE BONDS
(cost $4,524,637) 4,271,250
</TABLE>
20
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS -- 31.26%
BROADCASTING & MEDIA -- 1.96%
Comcast Corp.
3.375%/5.50%, Subordinated Debentures, 9/09/05 $ $1,500,000 $1,420,620
ELECTRICAL EQUIPMENT -- 3.50%
Magnetek, Inc.
8.00%, Debentures, 9/15/01 2,641,000 2,535,360
ELECTRONICS -- 3.01%
Park Electrochemical Corp.
5.50%, Subordinated Notes, 3/01/06 1,000,000 795,390
Solectron Corp.
6.00%, Subordinated Notes, 3/01/06 1,500,000 1,383,150
2,178,540
HEALTHCARE -- 3.19%
Beverly Enterprises, Inc.
5.50%, Subordinated Debentures, 8/01/18 2,250,000 2,306,250
INDUSTRIAL -- 7.46%
Gencorp, Inc.
8.00%, Subordinated Debentures, 8/01/02 1,750,000 1,894,375
MascoTech, Inc.
4.50%, Subordinated Debentures, 12/15/03 4,430,000 3,510,775
5,405,150
INSURANCE -- 4.23%
Equitable Companies, Inc.
6.125%, Subordinated Debentures, 12/15/24 2,700,000 3,060,963
OIL & GAS -- 0.69%
Pogo Producing Co.
5.50%, Subordinated Notes, 3/15/04 300,000 502,500
PHARMACEUTICAL -- 6.03%
North American Vaccine, Inc.
6.50%, Subordinated Notes, 5/01/03 # 1,250,000 1,181,250
Roche Holdings, Inc.
0%, LYONS, 4/20/10 #(2) 7,500,000 3,187,500
4,368,750
TECHNOLOGY -- 1.19%
Apple Computer, Inc.
6.00%, Subordinated Notes, 6/01/01 # 900,000 864,414
</TABLE>
21
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Value
<S> <C>
TOTAL CONVERTIBLE CORPORATE BONDS
(cost $22,220,402) $22,642,547
TOTAL INVESTMENT SECURITIES -- 95.87%
(cost $64,804,718) 69,439,541
Other assets less liabilities -- 4.13% 2,994,982
NET ASSETS -- 100.00% $72,434,523
</TABLE>
# Sale restricted to qualified institutional investors.
$ Step bond.
(1) Strypes -- Structured Yield Product Exchangeable for Stock.
(2) Foreign denominated securities.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND [Photo of Geoffrey Wadsworth]
[Northstar logo]
THE MARKET
(Bullet) During the first half of 1996, the stock market benefited from
better than expected growth in the economy and corporate profits
while inflation increased very little. The S&P 500 index gained
8.9% for the period despite a rise in long term interest rates from
6% up to about 7%.
(Bullet) As early January concerns over a possible recession were dispelled,
stocks rose sharply and the market strength broadened away from a
narrow list of blue chips to cyclically sensitive sectors and
smaller companies.
(Bullet) Since early February the S&P 500 traded In a range around 650 (680
to 627). So far in July, strong wage and employment data led to
increased GDP forecasts, heightened inflation fears, and concerns
about profit margins. This precipitated a market correction of over
7% from the May highs, back to the low side of the range.
THE FUND
(Bullet) The return for the Fund was 9.9% for the first half. This compares
to the S&P 500 at 8.9% and the Lipper Growth Index (30 large Mutual
funds) of 8.0%. After a slow start at the beginning of the year,
the Fund had a much better second quarter performance of +6.8% vs.
3.9% for the S&P 500.
(Bullet) A change in the portfolio manager occurred at the end of January.
The focus remains on high quality large and mid-cap companies.
Investments are made where earnings growth prospects are above
average and the equity valuation is reasonable or temporarily
depressed.
(Bullet) Over 40% of the holdings are new since January. Purchases were made
in diverse sectors including oil services, specialty retailing,
technology, business services, aerospace, financial services, and
others.
CURRENT STRATEGY
(Bullet) In the general economy inventories now seem to have been brought
down and final demand prospects are improving. However, we still do
not hear enough confirmation of acceleration from companies to
expect overheating. We look for moderate future GDP growth (+2% to
2.5%) and only modestly higher inflation (+3% to 3.5%). This should
not prompt a near term monetary policy so restrictive as to cause
significantly higher interest rates or a recession.
(Bullet) Increasingly, we are being attracted to consistent-growth companies
and global leaders that will benefit from a more synchronized
worldwide expansion in 1997. The Fund remains close to fully
invested favoring stocks in the financial, technology, consumer and
energy sectors.
FUND INFORMATION (ALL DATA AS OF 6/30/96)
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
1 Phillip Morris 3.7%
2 Citicorp 3.5%
3 Pharmacia Upjohn 3.3%
4 Home Depot 3.2%
5 Global Marine 3.2%
6 Microsoft 3.1%
7 Wells Fargo 3.1%
8 Magna Int'l 3.0%
9 Worldcom 3.0%
10 Schlumberger 2.9%
32.0%
</TABLE>
<TABLE>
<S> <C>
TOP 5 SECTORS
(by percentage of net assets)
Consumer
Staples 20%
Technology 19%
Consumer
Cyclical 15%
Financial 14%
Energy 11%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
<S> <C> <C> <C>
Class A 15.58% n/a 12.72%
Class B 16.75% n/a 13.10%
Class C 20.23% n/a 16.70%
Class T 11.50% 12.37% 13.98%
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
Inception 5 years 1 year
Class A 22.60% n/a 18.36%
Class B 21.89% n/a 17.77%
Class C 21.79% n/a 17.64%
Class T 210.61% 79.14% 17.73%
</TABLE>
23
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
COMMON STOCKS -- 99.02%
AEROSPACE & DEFENSE -- 2.14%
Boeing Co. 14,000 $ 1,219,750
Northrop Grumman Corp. @ 6,100 415,563
1,635,313
ALUMINUM -- 0.72%
Century Aluminum Co. @ 35,000 551,250
AUTOMOTIVE -- 4.22%
Chrysler Corp. 15,000 930,000
Magna International, Inc. 50,000 2,300,000
3,230,000
BANKING -- 8.19%
Citicorp 32,300 2,668,787
Mellon Bank Corp. 21,300 1,214,100
Wells Fargo & Co. 10,000 2,388,750
6,271,637
BUSINESS SERVICES -- 7.05%
Ceridian Corp. @ 35,000 1,767,500
Electronic Data Systems Corp. 37,000 1,988,750
Metromail Corp. @ 24,800 554,900
Reuters Holdings Plc ** 15,000 1,087,500
5,398,650
CHEMICALS -- 2.42%
Air Products and Chemicals, Inc. 15,000 866,250
Dow Chemical Co. 13,000 988,000
1,854,250
COMMUNICATIONS -- 4.53%
Alltel Corp. 39,000 1,199,250
WorldCom, Inc. @ 41,000 2,270,375
3,469,625
COMPUTER HARDWARE -- 5.10%
Bay Networks, Inc. @ 50,000 1,287,500
Cisco Systems, Inc. @ 16,000 906,000
Compaq Computer Corp. @ 34,800 1,713,900
3,907,400
COMPUTER SOFTWARE -- 3.14%
Microsoft Corp. @ 20,000 2,402,500
CONSUMER PRODUCTS -- 7.65%
Pepsico, Inc. 40,000 1,415,000
Philip Morris Co., Inc. 27,000 2,808,000
Procter & Gamble Co. 18,000 1,631,250
5,854,250
ELECTRICAL EQUIPMENT -- 1.42%
AMP, Inc. 27,000 1,083,375
</TABLE>
24
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
ENERGY -- 5.05%
El Paso Natural Gas Co. 40,000 $ 1,540,000
Enron Oil And Gas Co. 40,000 1,115,000
Sonat, Inc. 27,000 1,215,000
3,870,000
ENERGY SERVICES -- 6.03%
Global Marine, Inc. @ 175,000 2,428,125
Schlumberger, Ltd. 26,000 2,190,500
4,618,625
FINANCIAL SERVICES -- 5.77%
Associates First Capital Corp. @ 22,000 827,750
Capital One Financial Corp. 60,000 1,710,000
Federal National Mortgage Association 56,000 1,876,000
4,413,750
FOREST & PAPER PRODUCTS -- 2.27%
Kimberly-Clark Corp. 22,540 1,741,215
HEALTHCARE/PHARMACEUTICAL -- 5.14%
Pfizer, Inc. 20,000 1,427,500
Pharmacia & Upjohn, Inc. 56,500 2,507,187
3,934,687
HOTEL & RESTAURANTS -- 1.53%
La Quinta Inns, Inc. 35,000 1,172,500
MACHINERY -- 1.93%
Deere & Co. 37,000 1,480,000
PHARMACEUTICAL -- 4.85%
Bristol-Myers, Squibb Co. 24,000 2,160,000
Merck & Co., Inc. 24,000 1,551,000
3,711,000
RETAILING -- 9.52%
AutoZone, Inc. @ 40,000 1,390,000
Home Depot, Inc. 46,000 2,484,000
Nine West Group, Inc. @ 15,000 766,875
Office Depot, Inc. @ 80,000 1,630,000
Pep Boys-Manny, Moe & Jack 30,000 1,020,000
7,290,875
</TABLE>
25
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
SEMICONDUCTOR -- 2.88%
National Semiconductor Corp. @ 103,400 $ 1,602,700
Texas Instruments, Inc. 12,000 598,500
2,201,200
SEMICONDUCTOR CAPITAL EQUIPMENT -- 2.52%
Applied Materials, Inc. @ 42,000 1,281,000
Lam Research Corp. @ 25,000 650,000
1,931,000
TECHNOLOGY -- 4.95%
Millipore Corp. 41,500 1,737,813
Xerox Corp. 38,400 2,054,400
3,792,213
TOTAL COMMON STOCKS
(cost $64,357,234) 75,815,315
TOTAL INVESTMENT SECURITIES -- 99.02%
(cost $64,357,234) 75,815,315
REPURCHASE AGREEMENT -- 1.04%
Agreement with State Street Bank and Trust bearing
interest at 4.90% dated 6/28/96, to be repurchased
7/01/96 in the amount of $799,326 and collateralized by
$800,000 U.S. Treasury Notes, 6.00% due 8/31/97, value
$815,527
(cost $799,000) $799,000 799,000
Liabilities in excess of other assets -- (0.06%) (44,210)
NET ASSETS -- 100.00% $76,570,105
</TABLE>
** American Depository Receipts.
@ Non-income producing.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND [Photo of Louis Navellier]
[Northstar logo]
THE MARKETS
(Bullet) During the first six months of 1996 the S & P 500 rose 8.9%, the
NASDAQ composite rose 12.63%, and the Dow Jones industrials rose
10.50%.
(Bullet) The market was extremely volatile during the second quarter. April
was characterized by heavy institutional buying pressure,
especially in stocks with outstanding forecasted earnings's growth.
This buying pressure continued into May as Wall Street began to
focus more on small-to-mid cap stocks, and drove these markets to
record highs in early June. The markets then corrected sharply for
the remainder of June, as stronger than expected economic reports
caused inflation fears.
THE FUND
(Bullet) The Fund rose 18.36% compared to 10.08% for the Lipper Growth Fund
Index during the first six months.
(Bullet) The Fund's performance was primarily fueled by having exposure to
small and mid cap stocks, while also focusing on stocks with
superior earnings characteristics.
CURRENT STRATEGY
(Bullet) After the correction in June, we believe stocks look very
attractive going forward.
(Bullet) Interest rates are hovering near the 7% level, and earnings on many
fund holdings have come in better than expected. In our opinion,
downside risk may be limited, while strong upside potential
remains.
(Bullet) We continue to aggressively purchase those stocks with the best
prospects to surprise Wall Street with their earnings to the
upside. The fund continues to be well diversified as the stock
market remains very volatile day-to-day.
FUND INFORMATION (ALL DATA AS OF 6/30/96)
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
PMT Services,
1 Inc. 2.3%
Liz Claiborne,
2 Inc. 2.0%
3 CIGNA Corp. 2.0%
4 Becton Dickinson 1.9%
5 The Gap, Inc. 1.8%
Imperial Credit
6 Ind. 1.6%
7 Iomega Corp. 1.6%
8 OthoLogic Corp. 1.6%
Pairgain
9 Technologies 1.6%
10 Lewis Galoob Toys 1.6%
18.0%
</TABLE>
<TABLE>
<S> <C>
TOP 5 SECTORS
(by percentage of net assets)
Consumer
cyclical 16%
Healthcare 15%
Technology 14%
Financial 12%
Capital goods 8%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
<S> <C> <C> <C>
Class A 24.53% n/a 17.75%
Class B 25.92% n/a 17.80%
Class C 29.54% n/a 21.80%
Class T 10.69% 17.30% 18.86%
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
Inception 5 years 1 year
Class A 32.80% n/a 23.63%
Class C 31.91% n/a 22.80%
Class T 187.97% 122.03% 22.86%
</TABLE>
27
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
COMMON STOCKS -- 91.90%
ADVERTISING/MARKETING -- 0.54%
NFO Research, Inc. @ 43,000 $1,015,875
AEROSPACE & DEFENSE -- 0.76%
Oregon Metallurgical Corp. @ 48,100 1,418,950
AGRICULTURAL -- 1.24%
Delta & Pine Land Co. 54,900 2,319,525
AIRLINES -- 1.29%
Atlantic Coast Airlines, Inc. @ 50,000 653,125
Comair Holdings, Inc. 30,000 810,000
Continental Airlines, Inc. @ 15,200 938,600
2,401,725
AUTO PARTS & EQUIPMENT -- 0.67%
Gentex Corp. @ 64,400 1,255,800
ADVANCE MEDICAL DEVICES -- 4.78%
Guidant Corp. 36,700 1,807,475
Hologic, Inc. @ 55,000 2,433,750
Protocol Systems, Inc. @ 119,600 2,750,800
VISX, Inc. @ 56,800 1,938,300
8,930,325
BANKING -- 1.26%
Zions BanCorp. 32,200 2,342,550
BIOTECHNOLOGY -- 0.29%
Genetics Institute, Inc. @ 8,600 542,875
CHEMICALS -- 1.78%
Albemarle Corp. 46,800 854,100
Cytec Industries, Inc. @ 28,800 2,462,400
3,316,500
CLOTHING/FABRIC -- 4.50%
Fila Holdings SpA ** 16,000 1,380,000
Liz Claiborne, Inc. 104,000 3,601,000
The Gap, Inc. 106,400 3,418,100
8,399,100
COMPUTER HARDWARE -- 1.58%
Iomega Corp. @ 101,400 2,940,600
COMPUTER SOFTWARE -- 3.91%
Cadence Design Systems, Inc. @ 24,750 835,312
Cambridge Technology Partners, Inc. @ 30,000 915,000
Control Data Systems, Inc. @ 39,200 837,900
HBO & Co. 22,000 1,490,500
Security Dynamics Technologies, Inc. @ 28,200 2,319,450
Structural Dynamics Research Corp. @ 41,000 902,000
7,300,162
COSMETICS/PERSONAL CARE -- 0.99%
Natures Sunshine Products, Inc. 72,800 1,856,400
</TABLE>
28
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
DATA COMMUNICATION/NETWORKING -- 0.44%
Ascend Communications, Inc. @ 14,500 $ 815,625
EDUCATION -- 1.47%
Apollo Group, Inc. @ 65,250 1,827,000
National Education Corp. @ 63,800 909,150
2,736,150
ELECTRONICS -- 2.64%
Cable Design Technologies Corp. @ 14,700 481,425
Computer Products, Inc. @ 89,700 1,536,113
Rexel, Inc. @ 140,700 1,987,387
Universal Electronics, Inc. @ 80,000 930,000
4,934,925
ENERGY SERVICES -- 0.63%
Global Marine, Inc. @ 84,100 1,166,888
ENGINEERING/DESIGN -- 0.60%
Imp, Inc. @ 100,000 1,125,000
ENTERTAINMENT -- 0.98%
Regal Cinemas, Inc. @ 40,000 1,830,000
ENVIRONMENTAL CONTROL -- 0.71%
U.S.A. Waste Services, Inc. @ 44,500 1,318,313
FINANCIAL SERVICES -- 4.68%
PMT Services, Inc. @ 148,000 4,236,500
Primark Corp. @ 20,000 652,500
Student Loan Marketing Association 30,000 2,220,000
The Money Store, Inc. 73,100 1,617,337
8,726,337
FOOD -- 2.78%
Hershey Foods Corp. 15,100 1,107,962
Safeway, Inc. @ 75,400 2,488,200
Supervalu, Inc. 50,700 1,597,050
5,193,212
GAMING -- 1.29%
Bally Entertainment Corp. @ 87,600 2,409,000
HEALTHCARE -- 3.79%
ABR Information Services, Inc. @ 44,600 2,241,150
Access Health, Inc. @ 45,700 2,159,325
Healthsouth Corp. @ 50,000 1,800,000
Johnson & Johnson 17,800 881,100
7,081,575
HEAVY MACHINERY/CONSTRUCTION -- 0.32%
Gardner Denver Machinery, Inc. @ 22,500 593,438
HOME FURNISHINGS -- 0.75%
Bush Industries, Inc. 41,100 1,397,400
HOMEBUILDERS/HOME CONSTRUCTION -- 0.60%
Cavalier Homes, Inc. 48,200 1,114,625
29
</TABLE>
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
HOUSEHOLD DURABLES -- 0.35%
Aon Corp. 12,900 $ 654,675
INDUSTRIALS AND COMMERCIAL SERVICES -- 1.04%
Roper Industries, Inc. 40,000 1,950,000
INSURANCE -- 4.86%
Ambac, Inc. @ 30,000 1,563,750
American Bankers Insurance Group, Inc. 10,400 446,654
CIGNA Corp. 30,500 3,595,187
Conseco, Inc. 50,400 2,016,000
Exel Ltd. 10,100 712,050
Penncorp Financial Group, Inc. 23,200 736,600
9,070,241
LODGING -- 1.01%
HFS, Inc. @ 26,800 1,876,000
MEDICAL SUPPLIES -- 4.26%
Becton, Dickinson & Co. 43,900 3,522,975
Kinetic Concepts, Inc. 96,600 1,497,300
OrthoLogic Corp. @ 230,000 2,932,500
7,952,775
NATURAL GAS -- 0.41%
Sonat Offshore Drilling Co. 15,000 757,500
OFFICE EQUIPMENT/SUPPLIES -- 3.16%
Herman Miller, Inc. 60,800 1,862,000
U.S. Office Products Co. @ 46,500 1,953,000
Wallace Computer Services, Inc. 35,000 2,091,250
5,906,250
OIL & GAS -- 1.38%
Chesapeake Energy Corp. @ 18,400 1,653,700
ENSCO International, Inc. @ 28,100 913,250
2,566,950
OIL & GAS EXPLORATION -- 2.36%
Diamond Offshore Drilling, Inc. @ 15,400 881,650
Marine Drilling Co., Inc. @ 120,400 1,219,050
Tuboscope Vetco International Corp. @ 142,800 1,588,650
United Meridian Corp. @ 20,000 720,000
4,409,350
PHARMACEUTICAL -- 1.95%
Jones Medical Industries, Inc. 80,000 2,660,000
PCI Services, Inc. @ 50,000 987,500
3,647,500
PRINTING/PAPER PRODUCTS -- 1.15%
Day Runner, Inc. @ 77,900 2,015,662
Thermo Fibertek, Inc. @ 7,500 126,563
2,142,225
</TABLE>
30
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
RECREATION PRODUCTS -- 2.40%
Callaway Golf Co. 82,600 $2,746,450
Nike, Inc. 16,900 1,736,475
4,482,925
RESTAURANTS -- 1.63%
Boston Chicken, Inc. @ 47,300 1,537,250
Longhorn Steaks, Inc. @ 60,000 1,500,000
3,037,250
RETAILERS -- 4.64%
Mercantile Stores Co., Inc. 19,800 1,160,775
Nautica Enterprises, Inc. @ 90,000 2,587,500
Tiffany & Co. 28,100 2,051,300
Wet Seal, Inc. @ 49,100 1,169,194
Zale Corp. @ 100,800 1,701,000
8,669,769
SAVINGS AND LOAN -- 1.62%
Imperial Credit Industries, Inc. @ 100,000 3,025,000
SEMICONDUCTOR -- 0.81%
Vitesse Semiconductor Corp. @ 63,200 1,516,800
TECHNICAL SERVICES -- 0.79%
Raychem Corp. 20,500 1,473,438
TECHNOLOGY -- 3.70%
Input/Output, Inc. @ 28,200 912,975
Perceptron, Inc. @ 64,500 2,354,250
Quintiles Transnational Corp. @ 35,900 2,360,425
Sanctuary Woods Multimedia Corp. @ 70,000 38,500
Zoltek Co., Inc. @ 36,400 1,246,700
6,912,850
TELECOMMUNICATION -- 3.68%
Aspect Telecommunications Corp. @ 48,100 2,380,950
California Amplifier, Inc. @ 60,000 1,380,000
Loral Space & Communications Corp. @ 15,000 204,375
Pairgain Technologies, Inc. @ 46,800 2,901,600
6,866,925
TELEPHONE SYSTEMS -- 1.50%
Cincinnati Bell, Inc. 40,700 2,121,487
Sprint Corp. 16,100 676,200
2,797,687
</TABLE>
31
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
TEMPORARY STAFFING -- 2.15%
AccuStaff, Inc. @ 80,100 $ 2,182,725
Employee Solutions, Inc. @ 58,000 1,827,000
4,009,725
TOYS & AMUSEMENTS -- 1.55%
Lewis Galoob Toys, Inc. @ 102,200 2,887,150
UTILITIES -- 0.23%
AGL Resources, Inc. 23,500 435,723
TOTAL COMMON STOCKS
(cost $162,058,630) 171,531,583
TOTAL INVESTMENT SECURITIES -- 91.90%
(cost $162,058,630) 171,531,583
REPURCHASE AGREEMENT -- 3.98%
Agreement with State Stree Bank and Trust bearing
interest at 4.90% dated 6/28/96 to be repurchased
7/01/96 at $7,437,036 and collateralized by $7,440,000
U.S. Treasury Notes, 6.00% due 8/31/97, value $7,584,403
(cost $7,434,000) $7,434,000 7,434,000
Other assets less liabilities -- 4.12% 7,692,052
NET ASSETS -- 100.00% $186,657,635
</TABLE>
@ Non-income producing.
** American Depository Receipts.
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996 [Northstar logo]
<TABLE>
<CAPTION>
Northstar
Advantage Northstar Northstar
Government Advantage Advantage Northstar Northstar Northstar
Securities Strategic High Yield Advantage Advantage Advantage
Fund Income Fund Fund Income Fund Growth Fund Special Fund
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost
$143,727,818, $76,646,800, $185,612,390,
$64,804,718, $64,357,234
and $162,058,630, respectively) $139,434,048 $75,210,104 $186,744,303 $69,439,541 $75,815,315 $171,531,583
Repurchase agreements 1,763,000 2,342,000 8,625,000 0 799,000 7,434,000
Cash 945 600 216 949,827 322 487
Foreign cash 0 5,775 0 0 0 0
Dividends and interest receivable 730,065 1,503,397 3,691,265 455,245 161,794 16,372
Receivable for shares of beneficial interest
sold 207,796 282,691 954,961 102,893 60,456 4,814,165
Prepaid expenses 7,784 66,291 9,433 3,158 3,735 1,860
Due from advisor 0 2,801 0 98 125 0
Receivable for investments sold 0 2,137,419 14,394,641 1,687,500 64,325 5,249,108
Total Assets 142,143,638 81,551,078 214,419,819 72,638,262 76,905,072 189,047,575
LIABILITIES:
Payable for shares of beneficial interest
reacquired 234,095 148,902 393,876 103,168 206,399 685,830
Distribution fee payable 73,183 52,394 126,635 45,446 60,176 114,874
Investment advisory fee payable 51,898 43,226 76,483 39,121 47,967 106,123
Dividend payable 1,012 5,220 0 0 0 0
Payable for investments purchased 0 0 6,783,975 0 0 1,425,252
Accrued expenses 42,051 29,555 37,506 16,004 20,425 57,861
Total Liabilities 402,239 279,297 7,418,475 203,739 334,967 2,389,940
NET ASSETS $141,741,399 $81,271,781 $207,001,344 $72,434,523 $76,570,105 $186,657,635
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.01 par value
outstanding (unlimited shares authorized),
Paid-in-capital $170,011,910 $84,248,808 $216,536,200 $63,389,010 $62,419,626 $171,746,864
Undistributed (overdistributed) net investment
income (458,867) 6,170 (692,235) (4,723) (68,687) (247,650)
Accumulated net realized gain (loss) on
investments, foreign currency options, and
futures (23,517,874) (1,547,440) (9,974,534) 4,415,413 2,761,085 5,685,468
Net unrealized appreciation (depreciation) of
investments and foreign currency (4,293,770) (1,435,757) 1,131,913 4,634,823 11,458,081 9,472,953
Net Assets $141,741,399 $81,271,781 $207,001,344 $72,434,523 $76,570,105 $186,657,635
CLASS A:
Net Assets $ 12,834,304 $22,590,714 $ 10,765,476 $ 1,111,505 $ 1,376,786 $ 47,633,530
Shares outstanding 1,386,855 1,848,036 1,259,056 86,208 80,673 1,924,284
Net asset value and redemption value per share
(net assets/shares outstanding) $ 9.25 $ 12.22 $ 8.55 $ 12.89 $ 17.07 $ 24.75
Maximum offering price per share (net asset
value plus sales charge of 4.75% of offering
price) $ 9.71 $ 12.83 $ 8.98 $ 13.53 $ 17.92 $ 25.98
CLASS B:
Net Assets $ 5,694,981 $27,621,834 $ 58,049,418 $ 3,280,895 $ 3,392,562 $ 78,331,251
Shares outstanding 615,115 2,260,451 6,784,013 255,091 199,769 3,185,735
Net asset value and offering price per share $ 9.26 $ 12.22 $ 8.56 $ 12.86 $ 16.98 $ 24.59
CLASS C:
Net Assets $ 1,095,590 $ 3,128,815 $ 10,454,938 $ 344,116 $ 255,684 $ 23,657,284
Shares outstanding 118,367 256,382 1,222,122 26,742 15,060 962,233
Net asset value and offering price per share $ 9.26 $ 12.20 $ 8.55 $ 12.87 $ 16.98 $ 24.59
CLASS T:
Net Assets $122,116,524 $27,930,418 $127,731,512 $67,698,007 $71,545,073 $ 37,035,570
Shares outstanding 13,195,417 2,285,997 14,934,814 5,246,093 4,204,154 1,505,840
Net asset value and offering price per share $ 9.25 $ 12.22 $ 8.55 $ 12.90 $ 17.02 $ 24.59
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Northstar
Advantage Northstar Northstar Northstar Northstar
Government Advantage Advantage Northstar Advantage Advantage
Securities Strategic High Yield Advantage Growth Special
Fund Income Fund Fund Income Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of $0, $0, $0,
$0, $10,272, and $701 respectively) $ 0 $ 40,250 $ 252,279 $ 920,887 $ 615,816 $ 336,893
Interest (net of withholding tax of $0, $8,675,
$0, $0, $0, and $0 respectively) 5,330,550 3,786,689 9,791,631 1,168,639 110,912 217,667
Total investment income 5,330,550 3,826,939 10,043,910 2,089,526 726,728 554,560
EXPENSES:
Investment advisory and management fees 464,090 261,422 446,878 241,112 289,668 296,766
Distribution fees
Class A 10,000 33,796 14,439 1,421 1,893 23,202
Class B 20,665 128,934 232,352 12,528 13,889 113,508
Class C 2,308 14,128 36,670 1,482 957 35,551
Class T 427,490 139,150 439,342 264,145 346,815 160,824
Transfer agent fees and expenses
Class A 5,228 25,465 8,482 1,057 1,451 12,784
Class B 3,005 26,732 33,433 2,111 2,369 17,202
Class C 1,665 2,623 5,220 439 347 6,030
Class T 45,476 12,670 49,565 26,115 36,928 24,886
Accounting and custodian fees 50,761 45,042 60,594 42,814 44,382 52,239
Printing and postage expenses 10,788 7,561 19,972 5,342 7,936 26,098
Registration fees 10,683 27,841 22,958 8,558 6,035 34,703
Directors 6,969 3,938 9,452 4,297 3,783 5,257
Audit fees 6,441 7,366 10,273 10,205 7,987 11,893
Insurance 5,512 1,833 6,132 4,055 1,509 1,418
Organization 0 10,920 0 0 0 0
Legal fees 0 1,500 0 0 0 244
Miscellaneous expenses 4,951 3,375 3,688 3,145 1,925 220
1,076,032 754,296 1,399,450 628,826 767,874 822,825
Less expenses reimbursed/waived by management
company 146,422 18,002 0 98 125 20,615
Total expenses 929,610 736,294 1,399,450 628,728 767,749 802,210
Net investment income(loss) 4,400,940 3,090,645 8,644,460 1,460,798 (41,021) (247,650)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments 1,744,998 671,481 (1,238,573) 4,275,077 2,711,585 5,683,756
Net realized gain on foreign currency 0 194,508 0 0 46 1,712
Net change in unrealized appreciation
(depreciation) of investments (13,801,694) (1,987,352) 1,202,169 (2,139,312) 4,489,591 2,088,197
Net change in unrealized appreciation of foreign
currency 0 2,329 0 0 0 0
Net realized and unrealized gain (loss) on
investments (12,056,696) (1,119,034) (36,404) 2,135,765 7,201,222 7,773,665
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ($ 7,655,756) $ 1,971,611 $ 8,608,056 $ 3,596,563 $7,160,201 $7,526,015
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF CHANGES IN NET ASSETS [Northstar logo]
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Northstar Northstar
Advantage Advantage Northstar
Government Strategic Advantage
Securities Fund Income Fund High Yield Fund
1996(1) 1995 1996(1) 1995 1996(1) 1995
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 4,400,940 $ 9,388,002 $ 3,090,645 $ 3,118,984 $ 8,644,460 $ 14,681,196
Net realized gain (loss) on investments 1,744,998 10,033,763 671,481 657,579 (1,238,573) (5,577,338)
Net realized gain (loss) on foreign currency 0 0 194,508 (15,982) 0 (61,890)
Net realized loss on options and futures 0 0 0 (84,957) 0 0
Net change in unrealized appreciation
(depreciation)
of investments (13,801,694) 11,830,566 (1,987,352) 1,109,531 1,202,169 9,968,024
Net change in unrealized appreciation of
foreign currency 0 0 2,329 13,355 0 0
Increase (decrease) in net assets
resulting
from operations (7,655,756) 31,252,331 1,971,611 4,798,510 8,608,056 19,009,992
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (266,908) (31,103) (943,987) (382,101) (474,036) (238,931)
Class B (128,827) (34,991) (996,621) (315,465) (2,163,255) (537,227)
Class C (16,725) (156) (110,085) (29,224) (345,165) (76,102)
Class T (4,119,178) (9,374,624) (1,138,626) (2,318,425) (6,316,265) (13,814,466)
In excess of net investment income 0 (328,169) 0 0 0 (37,974)
Total distributions (4,531,638) (9,769,043) (3,189,319) (3,045,215) (9,298,721) (14,704,700)
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 14,678,493 9,486,902 12,695,789 15,818,725 44,355,087 54,017,286
Net proceeds from merger 0 0 0 45,577,269 0 0
Net asset value of shares issued to
shareholders in reinvestment of dividends 3,015,417 6,083,503 1,234,687 1,467,264 4,331,794 7,796,432
17,693,910 15,570,405 13,930,476 62,863,258 48,686,881 61,813,718
Cost of shares redeemed (20,748,366) (32,678,732) (7,774,411) (13,535,436) (20,644,608) (22,895,030)
Net increase (decrease) in net assets derived
from capital share transactions (3,054,456) (17,108,327) 6,156,065 49,327,822 28,042,273 38,918,688
Net increase (decrease) in net assets (15,241,850) 4,374,961 4,938,357 51,081,117 27,351,608 43,223,980
NET ASSETS:
Beginning of period 156,983,249 152,608,288 76,333,424 25,252,307 179,649,736 136,425,756
End of period (including undistributed
(overdistributed) net investment income:
$(458,867),$(328,169); $6,170, $104,844 and
$(692,235), $(37,974), respectively) $141,741,399 $156,983,249 $81,271,781 $ 76,333,424 $207,001,344 $179,649,736
</TABLE>
(1) Unaudited
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Advantage Advantage Advantage
Income Fund Growth Fund Special Fund
1996(1) 1995 1996(1) 1995 1996(1) 1995
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 1,460,798 $ 3,259,693 $ (41,021) $ 298,464 $ (247,650) $ (566,187)
Net realized gain on investments 4,275,077 6,842,914 2,711,585 16,582,023 5,683,756 1,862,208
Net realized gain (loss) on foreign currency 0 0 46 (27,666) 1,712 21
Net change in unrealized appreciation
(depreciation) of investments (2,139,312) 6,328,209 4,489,591 160,556 2,088,197 2,669,199
Increase in net assets resulting from
operations 3,596,563 16,430,816 7,160,201 17,013,377 7,526,015 3,965,241
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (21,439) (16,747) 0 (5,272) 0 0
Class B (52,711) (35,496) 0 (330) 0 0
Class C (5,514) (3,103) 0 (5) 0 0
Class T (1,335,515) (3,228,817) 0 (265,197) 0 0
Distributions in excess of net investment
income 0 (50,342) 0 (27,660) 0 0
Net realized gain from investments 0 (6,865,265) 0 (16,582,008) 0 (1,761,465)
Total distributions (1,415,179) (10,199,770) 0 (16,880,472) 0 (1,761,465)
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 2,269,669 4,370,028 3,138,657 10,998,087 155,283,566 8,290,445
Net asset value of shares issued to
shareholders in reinvestment of dividends 1,142,899 8,536,854 0 15,393,542 0 1,662,683
3,412,568 12,906,882 3,138,657 26,391,629 155,283,566 9,953,128
Cost of shares redeemed (8,417,696) (17,643,533) (13,481,806) (23,161,995) (13,596,936) (13,560,271)
Net increase (decrease) in net assets derived
from capital share transactions (5,005,128) (4,736,651) (10,343,149) 3,229,634 141,686,630 (3,607,143)
Net increase (decrease) in net assets (2,823,744) 1,494,395 (3,182,948) 3,362,539 149,212,645 (1,403,367)
NET ASSETS:
Beginning of period 75,258,267 73,763,872 79,753,053 76,390,514 37,444,990 38,848,357
End of period (including undistributed
(overdistributed) net investment income:
$(4,723), $(50,342); $(68,687), $(27,666)
and $(247,650), $0, respectively) $ 72,434,523 $ 75,258,267 $76,570,105 $ 79,753,053 $186,657,635 $ 37,444,990
</TABLE>
(1) Unaudited
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
FINANCIAL HIGHLIGHTS [Northstar logo]
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
Net realized Dividends
Net Asset & unrealized declared Distributions
Value, Net gain (loss) Total from from net declared from
Period beginning investment on investment investment net realized Distributions
ended of period income investments operations income gain from Capital
Government Securities Fund, Class A
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/96 (2) $ 10.07 $ 0.26 ($0.82) ($0.56) ($0.26) -- --
6/05/95-
12/31/95 9.51 0.34 0.59 0.93 (0.37) -- --
Government Securities Fund, Class B
6/30/96 (2) 10.07 0.04 (0.62) (0.58) (0.23) -- --
6/05/95-
12/31/95 9.51 0.30 0.59 0.89 (0.33) -- --
Government Securities Fund, Class C
6/30/96 (2) 10.07 0.24 (0.82) (0.58) (0.23) -- --
6/05/95-
12/31/95 9.51 0.30 0.59 0.89 (0.33) -- --
Government Securities Fund, Class T
6/30/96 (2) 10.07 0.24 (0.81) (0.57) (0.25) -- --
12/31/95 8.74 0.58 1.35 1.93 (0.60) -- --
12/31/94 10.32 0.56 (1.56) (1.00) (0.57) -- (0.01)
12/31/93 9.22 0.59 1.09 1.68 (0.58) -- --
12/31/92 8.99 0.61 0.23 0.84 (0.61) -- --
12/31/91 8.47 0.67 0.52 1.19 (0.67) -- --
12/31/90 8.47 0.68 -- 0.68 (0.68) -- --
Strategic Income Fund, Class A
6/30/96 (2) 12.40 0.50 (0.17) 0.33 (0.51) -- --
6/05/95-
12/31/95 12.24 0.63 0.13 0.76 (0.60) -- --
Strategic Income Fund, Class B
6/30/96 (2) 12.39 0.45 (0.15) 0.30 (0.47) -- --
6/05/95-
12/31/95 12.24 0.55 0.15 0.70 (0.55) -- --
Strategic Income Fund, Class C
6/30/96 (2) 12.38 0.45 (0.16) 0.29 (0.47) -- --
6/05/95-
12/31/95 12.24 0.55 0.14 0.69 (0.55) -- --
Strategic Income Fund, Class T
6/30/96 (2) 12.39 0.50 (0.19) 0.31 (0.48) -- --
12/31/95 11.71 0.98 0.66 1.64 (0.96) -- --
7/01/94-
12/31/94 12.00 0.51 (0.25) 0.26 (0.49) (0.05) (0.01)
High Yield Bond Fund, Class A
6/30/96 (2) 8.56 0.32 0.02 0.34 (0.35) -- --
6/05/95-
12/31/95 8.68 0.48 (0.10) 0.38 (0.50) -- --
High Yield Bond Fund, Class B
6/30/96 (2) 8.57 0.30 0.01 0.31 (0.32) -- --
6/05/95-
12/31/95 8.68 0.44 (0.09) 0.35 (0.46) -- --
High Yield Bond Fund, Class C
6/30/96 (2) 8.57 0.31 (0.01) 0.30 (0.32) -- --
6/05/95-
12/31/95 8.68 0.44 (0.09) 0.35 (0.46) -- --
High Yield Bond Fund, Class T
6/30/96 (2) 8.56 0.32 0.01 0.33 (0.34) -- --
12/31/95 8.29 0.84 0.26 1.10 (0.83) -- --
12/31/94 9.31 0.81 (0.99) (0.18) (0.83) (0.01) --
12/31/93 9.09 0.85 0.80 1.65 (0.83) (0.60) --
12/31/92 7.94 0.92 1.19 2.11 (0.94) (0.02) --
12/31/91 6.27 1.08 1.67 2.75 (1.08) -- --
12/31/90 8.55 1.12 (2.30) (1.18) (1.10) -- --
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Ratio of net
Net Net expenses Ratio of investment
Asset Assets, to expense income to
Value, end of average reimbursement average
Period Total end of Total period net to average net Portfolio
ended Distributions period Return (000's) assets(1) net assets(1) assets(1) turnover
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/96 (2) ($ 0.26) $ 9.25 (5.56%) $12,834 1.04% 0.20% 6.86% 35%
6/05/95
12/31/95 (0.37) 10.07 10.04 3,235 1.02 0.20 6.01 295
6/30/96 (2) (0.23) 9.26 (5.76) 5,695 1.73 0.20 5.93 35
6/05/95
12/31/95 (0.33) 10.07 9.61 2,790 1.70 0.20 5.20 295
6/30/96 (2) (0.23) 9.26 (5.76) 1,096 1.88 0.62 6.36 35
6/05/95
12/31/95 (0.33) 10.07 9.61 8 1.68 0.20 5.28 295
6/30/96 (2) (0.25) 9.25 (5.66) 122,117 1.30 0.20 6.14 35
12/31/95 (0.60) 10.07 22.90 150,951 1.30 0.20 6.23 295
12/31/94 (0.58) 8.74 (9.82) 152,608 1.29 0.20 6.00 315
12/31/93 (0.58) 10.32 18.48 184,156 1.31 0.20 5.83 81
12/31/92 (0.61) 9.22 9.77 144,144 1.39 0.20 6.81 120
12/31/91 (0.67) 8.99 14.73 121,389 1.44 0.20 7.68 87
12/31/90 (0.68) 8.47 8.57 108,420 1.43 0.20 8.23 17
6/30/96 (2) (0.51) 12.22 2.66 22,591 1.40 0.05 8.11 46
6/05/95
12/31/95 (0.60) 12.40 6.40 21,790 1.36 0.07 7.03 153
6/30/96 (2) (0.47) 12.22 2.42 27,622 2.13 0.04 7.43 46
6/05/95
12/31/95 (0.55) 12.39 5.89 22,143 2.06 0.06 6.47 153
6/30/96 (2) (0.47) 12.20 2.34 3,129 2.11 0.04 7.46 46
6/05/95
12/31/95 (0.55) 12.38 5.81 2,172 2.02 0.06 6.48 153
6/30/96 (2) (0.48) 12.22 2.50 27,930 1.96 0.05 7.61 46
12/31/95 (0.96) 12.39 14.54 30,228 1.90 0.28 6.86 153
7/01/94
12/31/94 (0.55) 11.71 2.14 25,252 1.90 0.63 7.92 156
6/30/96 (2) (0.35) 8.55 3.97 10,765 1.06 -- 9.07 70
6/05/95
12/31/95 (0.50) 8.56 4.48 7,466 1.02 -- 9.83 103
6/30/96 (2) (0.32) 8.56 3.62 58,049 1.73 -- 8.41 70
6/05/95
12/31/95 (0.46) 8.57 4.17 29,063 1.71 -- 9.18 103
6/30/96 (2) (0.32) 8.55 3.50 10,455 1.73 -- 8.44 70
6/05/95
12/31/95 (0.46) 8.57 4.17 3,410 1.72 -- 9.29 103
6/30/96 (2) (0.34) 8.55 3.86 127,732 1.31 -- 8.77 70
12/31/95 (0.83) 8.56 13.71 139,711 1.33 -- 9.69 103
12/31/94 (0.84) 8.29 (2.18) 136,426 1.34 -- 9.08 86
12/31/93 (1.43) 9.31 18.89 125,095 1.40 -- 8.84 176
12/31/92 (0.96) 9.09 27.57 64,063 1.50 0.05 10.30 122
12/31/91 (1.08) 7.94 46.49 25,651 1.50 0.46 14.84 57
12/31/90 (1.10) 6.27 (14.59) 11,342 1.44 0.81 15.15 156
</TABLE>
<TABLE>
<CAPTION>
Average
Period Commissions
ended Per Share
<S> <C>
6/30/96 (2) --
6/05/95
12/31/95 --
6/30/96 (2) --
6/05/95
12/31/95 --
6/30/96 (2) --
6/05/95
12/31/95 --
6/30/96 (2) --
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
6/30/96 (2) --
6/05/95
12/31/95 --
6/30/96 (2) --
6/05/95
12/31/95 --
6/30/96 (2) --
6/05/95
12/31/95 --
6/30/96 (2) --
12/31/95 --
7/01/94
12/31/94 --
6/30/96 (2) 0.05
6/05/95
12/31/95 --
6/30/96 (2) 0.05
6/05/95
12/31/95 --
6/30/96 (2) 0.05
6/05/95
12/31/95 --
6/30/96 (2) 0.05
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
</TABLE>
(1) Annualized
(2) Unaudited
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
Net realized Dividends
Net Asset & unrealized declared Distributions
Value, Net gain (loss) Total from from net declared from
Period beginning investment on investment investment net realized Distributions
ended of period income investments operations income gain from Capital
Income Fund, Class A
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/96 (2) $ 12.53 $ 0.27 $ 0.36 $ 0.63 ($0.27) -- --
6/05/95-
12/31/95 12.77 0.43 1.06 1.49 (0.48) (1.25) --
Income Fund, Class B
6/30/96 (2) 12.51 0.25 0.34 0.59 (0.24) -- --
6/05/95-
12/31/95 12.77 0.35 1.09 1.44 (0.45) (1.25) --
Income Fund, Class C
6/30/96 (2) 12.52 0.24 0.34 0.58 (0.23) -- --
6/05/95-
12/31/95 12.77 0.38 1.07 1.45 (0.45) (1.25) --
Income Fund, Class T
6/30/96 (2) 12.54 0.26 0.35 0.61 (0.25) -- --
12/31/95 11.54 0.57 2.27 2.84 (0.59) (1.25) --
12/31/94 12.94 0.57 (1.25) (0.68) (0.54) (0.16) (0.02)
12/31/93 12.05 0.49 1.20 1.69 (0.49) (0.31) --
12/31/92 11.66 0.55 0.36 0.91 (0.52) -- --
12/31/91 10.13 0.57 1.53 2.10 (0.57) -- --
12/31/90 10.71 0.61 (0.54) 0.07 (0.63) -- (0.02)
Growth Fund, Class A
6/30/96 (2) 15.53 0.01 1.53 1.54 -- 0.00 --
6/05/95-
12/31/95 17.59 0.08 1.95 2.03 (0.10) (3.99) --
Growth Fund, Class B
6/30/96 (2) 15.50 (0.03) 1.51 1.48 -- 0.00 --
6/05/95-
12/31/95 17.59 0.06 1.92 1.98 (0.08) (3.99) --
Growth Fund, Class C
6/30/96 (2) 15.50 (0.03) 1.51 1.48 -- 0.00 --
6/05/95-
12/31/95 17.59 0.04 1.92 1.96 (0.06) (3.99) --
Growth Fund, Class T
6/30/96 (2) 15.53 (0.01) 1.50 1.49 -- 0.00 --
12/31/95 15.75 0.07 3.77 3.84 (0.07) (3.99) --
12/31/94 17.33 0.08 (1.41) (1.33) (0.08) (0.15) (0.02)
12/31/93 16.36 0.02 1.67 1.69 (0.04) (0.67) (0.01)
12/31/92 16.37 0.02 1.30 1.32 (0.02) (1.31) --
12/31/91 12.49 0.09 4.62 4.71 (0.08) (0.75) --
12/31/90 13.85 0.10 (0.83) (0.73) (0.10) (0.51) (0.02)
Special Fund, Class A
6/30/96 (2) 20.92 0.00 3.83 3.83 -- 0.00 --
6/05/95-
12/31/95 19.56 (0.09) 2.48 2.39 -- (1.03) --
Special Fund, Class B
6/30/96 (2) 20.84 (0.02) 3.77 3.75 -- 0.00 --
6/05/95-
12/31/95 19.56 (0.12) 2.43 2.31 -- (1.03) --
Special Fund, Class C
6/30/96 (2) 20.84 (0.02) 3.77 3.75 -- 0.00 --
6/05/95-
12/31/95 19.56 (0.15) 2.46 2.31 -- (1.03) --
Special Fund, Class T
6/30/96 (2) 20.84 (0.09) 3.84 3.75 -- 0.00 --
12/31/95 19.64 (0.34) 2.57 2.23 -- (1.03) --
12/31/94 20.79 (0.25) (0.76) (1.01) -- (0.14) --
12/31/93 17.40 (0.32) 3.83 3.51 -- (0.12) --
12/31/92 15.74 (0.33) 2.61 2.28 -- (0.62) --
12/31/91 10.64 (0.21) 6.24 6.03 -- (0.93) --
12/31/90 11.67 (0.20) (0.83) (1.03) -- -- --
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Ratio of net
Net Net expenses Ratio of investment
Asset Assets, to expense income to
Value, end of average reimbursement average
Period Total end of Total period net to average net Portfolio
ended Distributions period Return (000's) assets(1) net assets(1) assets(1) turnover
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/96 (2) ($ 0.27) $12.89 5.03% $1,112 1.38% -- 4.27% 56%
6/05/95
12/31/95 (1.73) 12.53 11.95 797 1.27 -- 4.99 131
6/30/96 (2) (0.24) 12.86 4.72 3,281 2.03 -- 3.63 56
6/05/95
12/31/95 (1.70) 12.51 11.56 1,759 1.95 -- 4.38 131
6/30/96 (2) (0.23) 12.87 4.63 344 2.16 -- 3.57 56
6/05/95
12/31/95 (1.70) 12.52 11.49 231 1.91 -- 4.49 131
6/30/96 (2) (0.25) 12.90 4.70 67,698 1.69 -- 3.95 56
12/31/95 (1.84) 12.54 25.11 72,472 1.68 -- 4.44 131
12/31/94 (0.72) 11.54 (5.33) 73,764 1.69 -- 4.36 59
12/31/93 (0.80) 12.94 14.08 80,841 1.77 -- 3.99 38
12/31/92 (0.52) 12.05 8.06 56,823 2.02 -- 4.73 59
12/31/91 (0.57) 11.66 21.17 49,367 2.06 -- 5.21 77
12/31/90 (0.65) 10.13 0.78 44,750 2.10 -- 5.73 57
6/30/96 (2) 0.00 17.07 9.92 1,377 1.47 -- (0.41) 44
6/05/95
12/31/95 (4.09) 15.53 11.55 1,355 1.42 -- 0.63 134
6/30/96 (2) 0.00 16.98 9.55 3,393 2.12 -- (0.27) 44
6/05/95
12/31/95 (4.07) 15.50 11.27 1,987 2.07 -- 0.06 134
6/30/96 (2) 0.00 16.98 9.55 256 2.18 -- (0.36) 44
6/05/95
12/31/95 (4.05) 15.50 11.17 69 2.11 -- 0.02 134
6/30/96 (2) 0.00 17.02 9.60 71,545 1.99 -- (0.11) 44
12/31/95 (4.06) 15.53 24.40 76,343 2.00 -- 0.37 134
12/31/94 (0.25) 15.75 (7.66) 76,391 2.00 -- 0.49 54
12/31/93 (0.72) 17.33 10.36 80,759 2.04 -- 0.13 42
12/31/92 (1.33) 16.36 8.05 56,759 2.15 -- 0.09 47
12/31/91 (0.83) 16.37 38.10 40,884 2.25 -- 0.66 64
12/31/90 (0.63) 12.49 (5.24) 24,927 2.33 -- 0.80 54
6/30/96 (2) 0.00 24.75 18.36 47,634 1.49 0.05 (0.05) 66
6/05/95
12/31/95 (1.03) 20.92 12.20 2,335 1.50 -- (0.91) 71
6/30/96 (2) 0.00 24.59 18.04 78,331 2.17 0.05 (0.70) 66
6/05/95
12/31/95 (1.03) 20.84 11.79 1,491 2.20 0.01 (1.64) 71
6/30/96 (2) 0.00 24.59 18.00 23,657 2.19 0.05 (0.68) 66
6/05/95
12/31/95 (1.03) 20.84 11.79 62 2.20 0.03 (1.60) 71
6/30/96 (2) 0.00 24.59 18.04 37,036 2.14 0.05 (0.83) 66
12/31/95 (1.03) 20.84 11.34 33,557 2.16 -- (1.50) 71
12/31/94 (0.14) 19.64 (4.86) 38,848 2.16 -- (1.25) 39
12/31/93 (0.12) 20.79 20.16 28,838 2.34 -- (1.66) 35
12/31/92 (0.62) 17.40 14.54 11,336 2.84 -- (2.12) 40
12/31/91 (0.93) 15.74 57.27 5,480 2.95 0.74 (1.57) 85
12/31/90 -- 10.64 (8.83) 3,024 2.95 2.03 (0.97) 72
</TABLE>
<TABLE>
<CAPTION>
Average
Period Commisions
ended Per share
<S> <C>
6/30/96 (2) 0.08
6/05/95
12/31/95 --
6/30/96 (2) 0.08
6/05/95
12/31/95 --
6/30/96 (2) 0.08
6/05/95
12/31/95 --
6/30/96 (2) 0.08
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
6/30/96 (2) 0.06
6/05/95
12/31/95 --
6/30/96 (2) 0.06
6/05/95
12/31/95 --
6/30/96 (2) 0.06
6/05/95
12/31/95 --
6/30/96 (2) 0.06
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
6/30/96 (2) 0.04
6/05/95
12/31/95 --
6/30/96 (2) 0.04
6/05/95
12/31/95 --
6/30/96 (2) 0.04
6/05/95
12/31/95 --
6/30/96 (2) 0.04
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
</TABLE>
(1) Annualized
(2) Unaudited
38
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1996
(UNAUDITED) [Northstar logo]
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization -- Northstar Advantage Government Securities Fund, Northstar
Advantage Strategic Income Fund, Northstar Advantage High Yield Fund, Northstar
Advantage Income Fund, Northstar Advantage Growth Fund and Northstar Advantage
Special Fund (the "Funds") are organized under the laws of the Commonwealth of
Massachusetts and registered under the Investment Company Act of 1940 as
diversified open-end management investment companies. Effective August 1, 1996,
the Funds amended their Declarations of Trust to remove the term "Advantage"
from their names. Northstar Advantage Income Fund changed its name to Northstar
Balance Sheet Opportunities Fund. Each is a separate investment company with its
own investment objective and specific investment goals set forth below:
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND ("Government Securities
Fund") seeks to achieve a high level of current income and to conserve principal
by investing in debt obligations issued or guaranteed by the U.S. Government or
its agencies and instrumentalities.
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND ("Strategic Income Fund") seeks to
achieve high current income by allocating its investments among the following
three sectors of the fixed income securities markets: debt obligations of the
U.S. Government, its agencies and instrumentalities; high yield-high risk,
lower-rated and nonrated U.S. and foreign fixed income securities, and
investment grade debt obligations of foreign governments, their agencies and
instrumentalities and obligations of supranational entities.
NORTHSTAR ADVANTAGE HIGH YIELD FUND ("High Yield Fund") seeks to achieve
high current income primarily through investments in long and intermediate-term
high yield-high risk, lower-rated and nonrated corporate debt instruments.
NORTHSTAR 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 securities convertible into common
stock.
NORTHSTAR ADVANTAGE GROWTH FUND ("Growth Fund") seeks to achieve long-term
growth of capital by investing principally in common stocks selected for their
prospects for capital appreciation.
NORTHSTAR 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.
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 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 Government Securities, Strategic Income and
High Yield Funds, declared and paid quarterly by the Income Fund and declared
and paid annually by the Growth and Special Funds. Distributions of net realized
capital gains, if any, are declared annually; however, to the extent that a net
realized capital gain can be reduced by a capital loss carryover, such gain will
not be distributed.
39
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1996
(UNAUDITED)
Net realized and unrealized gain(loss) on foreign currency transactions
represent the foreign exchange:
(1) gains and losses from the sale of holdings of foreign currencies, (2)
gains and losses between trade date and settlement date on investment securities
transactions and forward exchange contracts, and (3) gains and losses from the
difference between amounts of interest and dividends recorded and the amounts
actually received.
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.
Forward Foreign Currency Contracts, Options and Futures -- The Funds may
enter into forward foreign currency contracts ("contracts") to purchase or sell
currencies at a specified rate at a future date. The Funds may enter into these
contracts solely for hedging purposes.
The Funds write and purchase put and call options on foreign currencies. The
premium paid by the Funds for the purchase of a call or put option is recorded
as an investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the Funds have purchased expires
on the stipulated expiration date, the Funds realize a loss in the amount of the
cost of the option.
The amount of potential gain or loss to the Funds upon exercise of a written
call option is the value (in U.S. dollars) of the currency sold, less the value
of the U.S. dollars received in exchange. The amount of potential gain or loss
to the Funds upon exercise of a written put option is the value (in U.S.
dollars) of the currency received, less the value of the U.S. dollars paid in
exchange.
Risks may arise upon entering these contracts from the potential inability
of counterparties to meet the terms of their contract and from unanticipated
movement in the value of a foreign currency relative to the U.S. dollar.
Initial margin deposits made upon entering into futures contracts are
recognized as assets due from the broker (the Fund's agent in acquiring the
futures position). During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the contract
at the end of each day's trading.
Variation margin payments are received or made, depending upon whether
unrealized gains or losses are incurred. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
Repurchase Agreements -- The Funds' Custodian takes possession of collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a 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 Funds intend to comply with the special
provisions of the Internal Revenue Code available to investment companies and to
distribute all of the taxable net income to their respective shareholders.
Therefore, no Federal income tax provision or excise tax provision is required.
Organization Expenses -- Organization expenses have been capitalized by the
Funds and amortized on a straight-line basis over a 60 month period from the
commencement of operations of each Fund. Costs incurred by the Strategic Income
Fund in connection with its organization and its original registration amounted
to $105,074.
NOTE 2. INVESTMENT ADVISER AND 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 0.45% of average daily net assets for High Yield
Fund, 0.65% of average daily net assets for the Government Securities, Strategic
Income and Income Funds, and 0.75% of average daily net assets for the Growth
and Special Funds. The Adviser has agreed to waive 0.20% of its advisory fee for
the Government Securities Fund through December 31, 1996 therefore the rate paid
equals 0.45% of average daily net assets. For the six months ended June 30,
1996, the Adviser waived $142,797 of Advisory fees for the
40
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1996
(UNAUDITED) [Northstar logo]
Government Securities Fund. For the six months ended June 30, 1996, the Funds
paid advisory fees to Northstar Investment Management Corp. of $1,999,936.
Navellier Fund Management, Inc.("Navellier"), a registered investment adviser,
serves as subadviser to the Special Fund pursuant to a Subadvisory Agreement
dated February 1, 1996, between the Adviser and Navellier. For its services,
Navellier receives an annual fee equal to 0.48% of the average daily net assets
of the Fund. For the period February 1, 1996 through June 30, 1996, Navellier
received $175,408 in subadvisory fees from the Adviser.
Northstar Administrators Corp.(the "Administrator") serves as administrator
to the Funds pursuant to an Administrative Services Agreement.
The Adviser has agreed that the fee of a Fund will be reduced, or the
Adviser will reimburse the Fund (up to the amount of its fee) by an amount
necessary to prevent the total expenses of the Fund (excluding taxes, interest,
brokerage commissions or transaction costs, certain distribution fees and
extraordinary expenses) from exceeding limits applicable to the Fund in any
state in which its shares then are qualified for sale. Currently, the most
restrictive annual expense limitation is 2.50% of the first $30,000,000 of
average net assets, 2.00% of the next $70,000,000 and 1.50% of the excess.
The Adviser has voluntarily undertaken to limit the expenses through June
30, 1996 of the Government Securities Fund 1.20% (Class A), 1.90% (Class B & C),
and 1.29% (Class T); Strategic Income Fund 1.40% (Class A), 2.10% (Class B & C),
and 1.87% (Class T); Income Fund 1.40% (Class A), 2.10% (Class B & C), and 1.69%
(Class T) and Growth Fund 1.50% (Class A), 2.20% (Class B & C), and 2.00% (Class
T) of each respective class's average net assets. The Adviser will reimburse the
Funds for amounts in excess of such limits, up to the total amount of fees
received during the period. At June 30, 1996, the Advisor's reimbursements
aggregated $3,625, $18,002, $98, $125 and $20,615 for the Government Securities,
Strategic Income, Income, Growth and Special Funds, respectively.
Northstar Distributors, Inc. (the "Distributor") an affiliate of the Adviser
and the Administrator, is the distributor of each Fund's shares. Under separate
Plans of Distribution pertaining to Class A, Class B, Class C and Class T
shares, the Funds pay the Distributor monthly service fees at an annual rate of
0.25% of the average daily net assets in the case of Class A, Class B, Class C
and Class T shares, and monthly distribution fees at the annual rate of 0.05% of
the average daily net assets of Class A shares and 0.75% of the average daily
net assets of Class B and Class C shares for all Funds. Class T shares pay
monthly distribution fees at an annual rate of 0.40% of average daily net assets
for the Government Securities and High Yield Funds, 0.50% of average daily net
assets for the Income Fund and 0.65% of average daily net assets for the
Strategic Income, Growth and Special Funds. At June 30, 1996, the Funds owed the
Distributor $472,708 in service and distribution fees.
The Distributor also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares, and the contingent deferred
sales charge paid by shareholders upon certain redemptions of Class A, Class B,
Class C and Class T shares. For the six months ended June 30, 1996, the
Distributor earned the following amounts in sales charges:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
Initial Sales
Charges $259,649 $ 0 $ 0 $ 0
Contingent Deferred
Sales Charges $ 0 $140,808 $14,332 $685,873
</TABLE>
NOTE 3. ACQUISITION
On the close of business June 2, 1995, the Adviser completed the acquisition
of certain assets related to the mutual fund business of The Advest Group, Inc.
At the time of the transaction, the Funds entered into new Investment Advisory
Agreements, Distribution Agreements and Transfer Agency and Service Agreements
with new service providers, the terms and provisions of which are substantially
identical to the agreements with the former service providers.
NOTE 4. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the six months ended June 30, 1996, were
as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
<S> <C> <C> <C>
Aggregate Purchases $31,989,345 $31,298,018 $148,563,306
Aggregate Sales $51,353,342 $25,104,156 $132,024,364
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<S> <C> <C> <C>
Aggregate Purchases $17,846,816 $8,583,203 $ 0
Aggregate Sales $ 0 $2,630,859 $ 0
</TABLE>
41
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
INCOME GROWTH SPECIAL
FUND FUND FUND
<S> <C> <C> <C>
Aggregate Purchases $41,202,805 $33,236,312 $179,234,014
Aggregate Sales $49,159,793 $24,241,700 $ 50,591,999
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<S> <C> <C> <C>
Aggregate Purchases $0 $0 $0
Aggregate Sales $0 $0 $0
</TABLE>
NOTE 5. PORTFOLIO SECURITIES (TAX BASIS)
The cost of securities for federal income tax purposes and the aggregate
appreciation and depreciation of securities at June 30, 1996 were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
<S> <C> <C> <C>
Cost (tax basis) $143,727,818 $76,646,800 $185,612,522
Appreciated
Securities 0 1,942,820 4,023,406
Depreciated
Securities 4,293,770 3,379,515 2,891,493
Net Unrealized
Appreciation
(Depreciation) ($ 4,293,770) ($1,436,695) $ 1,131,913
</TABLE>
<TABLE>
<CAPTION>
INCOME GROWTH SPECIAL
FUND FUND FUND
<S> <C> <C> <C>
Cost (tax basis) $64,804,718 $64,357,234 $162,058,630
Appreciated
Securities 5,858,442 14,232,335 16,933,405
Depreciated
Securities 1,223,619 2,774,254 7,460,452
Net Unrealized
Appreciation $ 4,634,823 $11,458,081 $ 9,472,953
</TABLE>
NOTE 6. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the six months ended June
30, 1996, were as follows:
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,061,175 $ 9,927,354 361,455 $ 3,437,516 117,471 $ 1,099,702 22,911 $ 213,921
Reinvested
dividends 26,505 246,823 10,958 102,981 144 1,357 281,730 2,664,256
Shares redeemed (22,010) (206,779) (34,266) (327,129) 0 0 (2,102,837) (20,214,458)
Net increase
(decrease) 1,065,670 $ 9,967,398 338,147 $ 3,213,368 117,615 $ 1,101,059 (1,798,196) ($17,336,281)
<CAPTION>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 272,104 $ 3,378,359 616,568 $ 7,666,585 103,477 $ 1,287,523 29,199 $ 363,322
Reinvested
dividends 24,153 298,003 26,390 325,567 2,146 26,424 47,373 584,693
Shares redeemed (205,958) (2,546,448) (169,307) (2,091,669) (24,715) (304,728) (229,845) (2,831,566)
Net increase
(decrease) 90,299 $ 1,129,914 473,651 $ 5,900,483 80,908 $ 1,009,219 (153,273) ($ 1,883,551)
<CAPTION>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 488,541 $ 4,238,910 3,595,818 $31,224,610 869,319 $ 7,538,530 156,435 $ 1,353,037
Reinvested
dividends 30,102 259,719 74,016 638,827 7,443 64,211 389,979 3,369,037
Shares redeemed (131,606) (1,136,824) (278,230) (2,396,181) (52,785) (454,584) (1,926,922) (16,657,019)
Net increase
(decrease) 387,037 $ 3,361,805 3,391,604 $29,467,256 823,977 $ 7,148,157 (1,380,508) ($11,934,945)
</TABLE>
42
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1996
(UNAUDITED) [Northstar logo]
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE INCOME FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 24,458 $ 314,424 115,035 $ 1,472,661 7,955 $ 101,339 29,963 $ 381,245
Reinvested
dividends 1,464 18,767 2,713 34,699 363 4,647 84,548 1,084,786
Shares redeemed (3,298) (41,836) (3,271) (41,808) 0 0 (648,089) (8,334,052)
Net increase
(decrease) 22,624 $ 291,355 114,477 $ 1,465,552 8,318 $ 105,986 (533,578) ($ 6,868,021)
<CAPTION>
NORTHSTAR ADVANTAGE GROWTH FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 23,989 $ 387,647 91,566 $ 1,450,413 11,349 $ 179,903 71,905 $ 1,120,694
Reinvested
dividends 0 0 0 0 0 0 0 0
Shares redeemed (30,534) (479,710) (19,971) (316,794) (734) (12,468) (784,794) (12,672,834)
Net increase
(decrease) (6,545) ($ 92,063) 71,595 $ 1,133,619 10,615 $ 167,435 (712,889) ($11,552,140)
<CAPTION>
NORTHSTAR ADVANTAGE SPECIAL FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 2,052,959 $50,375,629 3,175,770 $77,343,472 1,009,530 $24,566,352 128,044 $ 2,998,113
Reinvested
dividends 0 0 0 0 0 0 0 0
Shares redeemed (240,279) (5,919,150) (61,588) (1,478,703) (50,260) (1,230,042) (232,668) (4,969,041)
Net increase
(decrease) 1,812,680 $44,456,479 3,114,182 $75,864,769 959,270 $23,336,310 (104,624) ($ 1,970,928)
</TABLE>
Transactions in capital shares of each Fund for the twelve months ended
December 31, 1995, were as follows:
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 326,499 $ 3,175,556 278,689 $ 2,664,382 732 $ 6,973 403,851 $ 3,639,991
Reinvested
dividends 3,398 32,936 3,358 32,382 20 190 649,744 6,017,995
Shares redeemed (8,712) (83,280) (5,079) (50,119) 0 0 (3,526,879) (32,545,333)
Net increase
(decrease) 321,185 $ 3,125,212 276,968 $ 2,646,645 752 $ 7,163 ($2,473,284) ($22,887,347)
<CAPTION>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 147,505 $ 2,139,353 492,026 $ 6,234,501 51,547 $ 652,909 565,764 $ 6,791,962
Issued in merger 2,278,702 27,859,837 1,316,859 16,093,857 133,030 1,623,575 0 0
Reinvested
dividends 9,752 119,651 9,167 112,921 517 6,349 101,327 1,228,343
Shares redeemed (678,222) (8,374,357) (31,251) (383,568) (9,620) (118,119) (384,285) (4,659,392)
Net increase 1,757,737 $21,744,484 1,786,801 $22,057,711 175,475 $ 2,164,714 282,806 $ 3,360,913
</TABLE>
43
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 910,824 $ 7,850,386 3,422,451 $29,521,715 439,743 $ 3,740,733 1,518,926 $ 12,904,451
Reinvested
dividends 21,104 181,582 24,757 213,414 2,911 25,009 862,636 7,376,428
Shares redeemed (59,909) (516,072) (54,799) (471,184) (44,509) (326,267) (2,517,197) (21,581,507)
Net increase
(decrease) 872,019 $ 7,515,896 3,392,409 $29,263,945 398,145 $ 3,439,475 (135,635) ($ 1,300,628)
<CAPTION>
NORTHSTAR ADVANTAGE INCOME FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 61,555 $ 803,879 131,744 $ 1,730,774 16,525 $ 219,651 127,572 $ 1,615,724
Reinvested
dividends 6,552 82,392 9,620 120,686 1,910 23,922 661,324 8,309,854
Shares redeemed (4,523) (61,195) (750) (9,931) (11) (142) (1,402,049) (17,572,265)
Net increase
(decrease) 63,584 $ 825,076 140,614 $ 1,841,529 18,424 $ 243,431 (613,153) ($ 7,646,687)
<CAPTION>
NORTHSTAR ADVANTAGE GROWTH FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 294,621 $ 5,453,559 116,727 $ 2,205,716 3,902 $ 73,428 191,904 $ 3,265,384
Reinvested
dividends 17,194 267,392 20,122 312,150 704 10,926 951,457 14,803,074
Shares redeemed (224,597) (4,152,792) (8,675) (165,916) (161) (3,133) (1,077,114) (18,840,154)
Net increase
(decrease) 87,218 $ 1,568,159 128,174 $ 2,351,950 4,445 $ 81,221 66,247 ($ 771,696)
<CAPTION>
NORTHSTAR ADVANTAGE SPECIAL FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 131,315 $ 2,798,032 70,725 $ 1,537,491 2,986 $ 64,085 199,543 $ 3,892,577
Reinvested
dividends 4,827 100,976 2,276 47,440 23 476 72,639 1,513,791
Shares redeemed (24,538) (536,495) (1,448) (31,326) (46) (1,008) (639,277) (12,993,182)
Net increase
(decrease) 111,604 $ 2,362,513 71,553 $ 1,553,605 2,963 $ 63,553 (367,095) ($ 7,586,814)
</TABLE>
NOTE 7. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Yield and
Strategic Income Funds had 83.85% and 41.80%, respectively, of their portfolios
invested in lower rated and comparable quality unrated high yield securities.
Investments in higher yield securities are accompanied by a greater degree of
credit risk and such lower rated securities tend to be more sensitive to
economic conditions than higher rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities, because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. At June 30, 1996, Strategic
Income Fund held Wherehouse Entertainment, Inc., security in default. The value
at June 30, 1996 was $80,000 and represented 0.10% 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 8. TRANSFER OF NET ASSETS
At the close of business on October 27, 1995 (the "Closing"), the Northstar
Advantage Strategic Income Fund ("Strategic Income Fund") acquired the net
assets of the Northstar Advantage Multi-Sector Bond Fund, ("Multi-Sector Fund")
pursuant to an Agreement and Plan of Reorganization dated June 2, 1995. In
accordance with the agreement, the Strategic Income Fund, at the closing, issued
3,728,590 shares of the Strategic Income Fund having an aggregate value of
$45,577,269 which included unrealized depreciation on investments of $535,327
and accumulated
44
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1996
(UNAUDITED) [Northstar logo]
net realized loss of $2,981,579. As a result the Strategic Income Fund issued
.370703764 share for each Multi-Sector Fund Class A and Class B share and
.371826372 share for each Multi-Sector Fund Class C share. The transaction was
structured for tax purposes to qualify as a tax-free reorganization under the
Internal Revenue Code. Directly after the merger the combined net assets in the
Strategic Income Fund were $79,737,813 with a net asset value of $12.22 for
Class A and Class B and $12.21 for Class C shares.
NOTE 9. FEDERAL INCOME TAX -- CAPITAL LOSS CARRYFORWARD
At June 30, 1996, the High Yield Fund had capital loss carryforwards
expiring December 31, 2002 and 2003 of $3,158,623 and $5,578,591, respectively.
The Government Securities Fund had capital loss carryforwards expiring December
31, 1996, 1997, 1998, and 2002 of $4,142,376, $2,940,526, $1,442,754 and
$16,737,216, respectively.
NOTE 10. COMPENSATING BALANCE ARRANGEMENT
The Funds have an informal compensating balance arrangement with the
Custodian whereby the Funds may have overdrafts in their respective accounts and
have no interest assessed on the overdrafts. In return, the Funds are required
to maintain positive balances to offset negative balances. The required deposits
are calculated by dividing the overdrawn amounts by 0.90. At June 30, 1996, the
Income Fund and Growth Fund had remaining obligations to leave $6,294,309 and
$70,757, respectively, in the Fund's account. This offset arrangement does not
result in a reduction of the fees paid by the Funds to the Custodian.
45
<PAGE>
[Northstar logo]
ADVANTAGE FUNDS
