<PAGE>
[LOGO]
NORTHSTAR
ADVANTAGE FUNDS
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
[LOGO]
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
ANNUAL REPORT,
DECEMBER 31, 1995
Dear Shareholders:
We are pleased to provide you with the annual report of the Northstar Advantage
Funds for the year ended December 31, 1995. We are gratified with your decision
to entrust your assets to the Northstar Advantage Funds and are confident that
we can assist you in reaching your financial objectives. Our goal is to provide
you with long term, consistent and superior long term investment results through
fundamental research, analysis, and traditional investment disciplines.
Following this letter is a summary of the results of each Fund by its respective
portfolio manager. We hope you will find it informative.
During 1995, many favorable changes occurred which benefited the stock and
bond markets. Investors began the year with substantial fears of further large
increases in interest rates driven by rising inflation and an overheated
economy. These fears were quickly proven to be incorrect. Although the Federal
Reserve Board did raise short term interest rates slightly on February 1st, that
proved to be the last in a series of Fed tightening moves. Economic growth in
the U.S. slowed to a moderate 2 1/2% rate, and long term interest rates fell
sharply from over 8% last winter to just over 6% currently.
The result of the "soft landing" or moderate growth/moderate inflation
strategy by the Fed produced a solid rise in bond prices of about 17% or more
and a sharp rise in the major stock market indices of over 33.4% for the twelve
months ended 12/31/95. Stock prices again were supported by excellent gains in
corporate profits even as economic growth slowed somewhat. The efficiency,
productivity, and world class competitiveness of so many U.S. companies is
finally being recognized by investors despite so many "experts" who had forecast
recession, high inflation and a decline in corporate profits.
Our outlook for both the bond and stock markets in 1996 remains favorable.
Government bond prices have improved strongly while other segments, especially
high yield bonds, continue to perform well. Stock markets have remained
favorable during the fall. In coming months we expect the President and Congress
to hammer out a long term budget which will reduce sharply the federal deficit.
We also expect the Fed to follow with another interest rate cut. Based on these
actions and continued low inflation, we believe that both stock and bond markets
should produce positive returns in 1996.
We note with great conviction that attempts to "time" the market often prove
counterproductive. Investors are strongly urged to focus on the long term.
Consistent disciplined investing is the proven method of achieving attractive
returns and meeting your financial objectives. We continue to support this
philosophy and look forward to serving your investment needs in the future.
Sincerely,
[SIG]
Mark Lipson
President
January 31, 1996
<PAGE>
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
- 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 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, and 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.
- 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.
- Each Fund's portfolio composition may change and there is no assurance the
Fund will continue to hold any particular securities.
- Past performance is not indicative of future results.
ABOUT INDICES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
- Standard & Poor's Corporation (S&P) is a credit-rating agency. The
unmanaged Standard & Poor's Composite Index of 500 Stocks is widely
regarded by investors as representative of the stock market in general.
- 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.
- The unmanaged Russell 2000 Index is generally representative of the
performance of the stocks of small-capitalization companies.
- Lehman Brothers Inc. is the principal subsidiary of publicly-held Lehman
Brothers Holdings, Inc. It is engaged principally in raising and managing
funds in capital markets worldwide. Lehman Brothers indices measure the
performance of fixed income securities over various time periods and in
various groupings. The indices are unmanaged, but exclude small, illiquid
and/or esoteric bonds from the indices. We believe that about two-thirds
of fixed income index users rely on one or more of Lehman Brothers Fixed
Income Indices.
- An investment cannot be made in any indices listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
<PAGE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
[PHOTO][LOGO]
MARGARET D. PATEL
INVESTMENT ENVIRONMENT
THE MARKETS
- Slow economic growth, subdued inflation, strong foreign purchases of
governments, and optimism over an accord to reach a balanced federal
budget caused long term interest rates to decline in the quarter.
Treasury bonds due in 30 years dropped from 7.87% at the end of
December, 1994, to 5.94% at year-end 1995. The overnight Federal
Funds rate declined from approximately 6.00% to 5.50% over the same
period.
- The economy is likely to continue to grow at moderate rates of 2.5%
or less over the next few quarters, with inflation remaining at
today's low levels around 2 1/2% to 2 3/4%.
- The Federal Reserve may well make further modest cuts in the Fed
Funds rate over the next few months, if it appears that economic
growth may slip below the current low rate of expansion.
THE FUND
- In the year ended December 31, 1995 the Fund (T shares) rose 22.90%,
versus an increase of 17.34% for the average fund in the Lipper
general U.S. government fund category. The Fund benefited from its
longer than average maturity, which caused prices of bonds held in
the Fund to rise more than those held in the average portfolio as
interest rates dropped over the last three months.
- During the year's first half, the Fund first increased its holdings
of long duration zero coupon Treasuries and agencies, and reduced its
premium coupon GNMA holdings. In 1995's final quarter, the Fund
reduced its long duration issues, and reinvested the proceeds in
slight discount GNMA 6.5% issues, resulting in the percentage of
mortgage securities rising from 54.1% at 9/30/95 of the portfolio to
72.7% at year end.
- Because of the substantial price outperformance of the strips versus
mortgages, the Fund was able to slightly increase the yield of the
Fund through these transactions. Intermediate term securities, such
as GNMAs, represent attractive investment value now because their
yields are very close to those of long maturity issues.
CURRENT STRATEGY
- We expect long term interest rates to stay around current levels, or
possibly to decline somewhat if the economy continues to grow at a
subdued level with inflation in check. Since it is likely that any
further rate declines may not be as large as those of 1995 (when long
term government yields dropped from 7.87% to 5.94% during the year),
we expect to maintain the focus of the portfolio. Holdings of longer
term zero coupon bonds whose prices are extremely sensitive to small
changes in interest rates have been reduced, while those of GNMA
securities which we feel represent attractive investment value, have
been increased.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGEST HOLDINGS (BY PERCENT OF TOTAL ASSETS)
<S> <C> <C> <C>
NAME % FUND
1. GNMA 7.0% 7/15/24 44.6%
2 GNMA 6.5% 22.4
3. FNMA 0% 10/09/19 14.2
4. FHLM 0% 11/29/19 12.4
5. GNMA 7.5% 4/15/23-7/15/24 5.8
---
99.4%
<CAPTION>
SECTOR ALLOCATION
NAME % FUND
<S> <C> <C> <C>
GNMAs 72.8%
US Agencies 26.6
</TABLE>
1
<PAGE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE
GOVERNMENT SECURITIES FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH
CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 9.07% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 8.63% and 16.01% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on February 3, 1986 for Class T shares of 7.96%, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B of 5.00% declines to 0% and Class T shares of 4.00% declines
to 0% after five years; and maximum charge for Class C shares is 1.00% during
the first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND -- CLASS A
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS A LEHMAN INT GOV'T CPI
6/5/95 9,525 10,000 10,000
6/30/95 9,450 10,064 10,010
7/31/95 9,672 10,069 10,030
8/31/95 9,684 10,152 10,040
9/30/95 9,764 10,220 10,050
10/31/95 9,777 10,332 10,080
11/30/95 9,801 10,458 10,080
12/31/95 9,918 10,562 10,080
CLASS B LEHMAN INT GOV'T CPI
6/5/95 10,000 10,000 10,000
6/30/95 9,338 10,064 10,010
7/31/95 9,166 10,069 10,030
8/31/95 9,430 10,152 10,040
9/30/95 9,643 10,220 10,050
10/31/95 9,990 10,332 10,080
11/30/95 10,204 10,458 10,080
12/31/95 10,483 10,562 10,080
</TABLE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND -- CLASS C
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS C LEHMAN INT GOV'T CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,729 10,064 10,010
7/31/95 9,548 10,069 10,030
8/31/95 9,820 10,152 10,040
9/30/95 10,040 10,220 10,050
10/31/95 10,390 10,332 10,080
11/30/95 10,593 10,458 10,080
12/31/95 10,883 10,562 10,080
CLASS T LEHMAN INT GOV'T CPI
2/03/86 10,000 10,000 10,000
2/86 10,230 10,237 9,980
3/86 10,254 10,512 9,920
4/86 10,339 10,582 9,880
5/86 10,066 10,445 9,910
6/86 10,309 10,698 9,950
7/86 10,403 10,816 9,960
8/86 10,527 11,068 9,970
9/86 10,542 10,964 10,010
10/86 10,719 11,102 10,030
11/86 10,839 11,208 10,050
12/86 10,849 11,238 10,090
1/87 10,985 11,339 10,150
2/87 11,054 11,395 10,191
3/87 10,855 11,370 10,232
4/87 10,552 11,169 10,283
5/87 10,457 11,144 10,314
6/87 10,480 11,276 10,355
7/87 10,471 11,301 10,386
8/87 10,366 11,271 10,428
9/87 10,138 11,131 10,469
10/87 10,274 11,462 10,501
11/87 10,271 11,531 10,543
12/87 10,337 11,643 10,564
1/88 10,654 11,932 10,606
2/88 10,847 12,058 10,617
3/88 10,698 12,007 10,648
4/88 10,631 11,987 10,702
5/88 10,649 11,929 10,734
6/88 10,663 12,124 10,777
7/88 10,620 12,088 10,820
8/88 10,616 12,103 10,852
9/88 10,740 12,313 10,907
10/88 10,854 12,483 10,939
11/88 10,696 12,375 10,972
12/88 10,644 12,388 11,005
1/89 10,773 12,511 11,049
2/89 10,734 12,458 11,082
3/89 10,760 12,516 11,138
4/89 10,931 12,769 11,216
5/89 11,130 13,015 11,272
6/89 11,371 13,347 11,294
7/89 11,518 13,618 11,339
8/89 11,410 13,434 11,339
9/89 11,465 13,499 11,362
10/89 11,699 13,782 11,419
11/89 11,824 13,919 11,453
12/89 11,894 13,959 11,499
1/90 11,655 13,873 11,602
2/90 11,815 13,924 11,649
3/90 11,825 13,941 11,695
4/90 11,677 13,895 11,731
5/90 12,005 14,192 11,754
6/90 12,176 14,379 11,825
7/90 12,377 14,581 11,884
8/90 12,254 14,528 11,979
9/90 12,309 14,658 12,063
10/90 12,454 14,861 12,147
11/90 12,706 15,086 12,171
12/90 12,914 15,294 12,220
1/91 13,093 15,451 12,269
2/91 13,165 15,546 12,281
3/91 13,253 15,631 12,281
4/91 13,358 15,792 12,318
5/91 13,463 15,881 12,355
6/91 13,506 15,893 12,380
7/91 13,707 16,065 12,404
8/91 13,910 16,370 12,442
9/91 14,115 16,648 12,479
10/91 14,336 16,838 12,504
11/91 14,389 17,035 12,554
12/91 14,818 17,449 12,592
1/92 14,540 17,282 12,604
2/92 14,673 17,335 12,629
3/92 14,559 17,266 12,680
4/92 14,661 17,421 12,705
5/92 14,932 17,681 12,731
6/92 15,137 17,935 12,769
7/92 15,582 18,280 12,807
8/92 15,652 18,466 12,833
9/92 15,860 18,721 12,858
10/92 15,429 18,496 12,910
11/92 15,692 18,421 12,936
12/92 16,264 18,658 12,962
1/93 16,786 19,005 12,987
2/93 17,311 19,285 13,026
3/93 17,321 19,356 13,052
4/93 17,422 19,507 13,105
5/93 17,432 19,454 13,131
6/93 18,311 19,736 13,144
7/93 18,688 19,776 13,157
8/93 19,723 20,071 13,183
9/93 19,775 20,153 13,197
10/93 19,972 20,201 13,263
11/93 19,194 20,102 13,289
12/93 19,270 20,185 13,316
1/94 19,789 20,385 13,329
2/94 18,621 20,105 13,369
3/94 17,638 19,812 13,396
4/94 17,407 19,683 13,423
5/94 17,365 19,697 13,436
6/94 17,247 19,701 13,476
7/94 17,551 19,959 13,517
8/94 17,547 20,017 13,571
9/94 17,330 19,850 13,598
10/94 17,248 19,854 13,612
11/94 17,205 19,767 13,625
12/94 17,379 19,832 13,652
1/95 17,697 20,156 13,693
2/95 18,077 20,545 13,734
3/95 18,097 20,658 13,762
4/95 18,300 20,897 13,817
5/95 19,134 21,487 13,858
6/95 19,071 21,624 13,872
7/95 18,722 21,635 13,900
8/95 19,261 21,812 13,914
9/95 19,679 21,958 13,928
10/95 20,390 22,200 13,970
11/95 20,791 22,471 13,970
12/31/1995 21,361 22,693 13,970
</TABLE>
2
<PAGE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
[LOGO]
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCIES - 99.38%
Federal Home Loan Mortgage Corp., 0% due 11/29/19 $90,000,000 $19,478,700
Federal National Mortgage Association, 0% due 10/09/19 102,000,000 22,318,620
GNMA Pool # TBA, 6.50%, due 1/15/99 3,000,000 2,975,610
GNMA Pool #367856, 6.50%, due 9/15/23 1,702,880 1,690,620
GNMA Pool #367431, 6.50%, due 12/15/23 1,963,609 1,949,471
GNMA Pool #372896, 6.50%, due 12/15/23 1,713,738 1,701,399
GNMA Pool #366750, 6.50%, due 3/15/24 4,189,719 4,159,553
GNMA Pool #376430, 6.50%, due 3/15/24 2,755,567 2,735,727
GNMA Pool #351481, 6.50%, due 4/15/24 3,915,340 3,887,150
GNMA Pool #352824, 6.50%, due 4/15/24 1,839,821 1,826,575
GNMA Pool #780035, 6.50%, due 7/15/24 3,811,383 3,786,342
GNMA Pool #411355, 6.50%, due 12/15/25 2,436,184 2,418,643
GNMA Pool #417514, 6.50%, due 12/15/25 2,157,235 2,141,703
GNMA Pool #420591, 6.50%, due 12/15/25 1,965,300 1,951,150
GNMA Pool #420596, 6.50%, due 12/15/25 1,995,150 1,980,785
GNMA Pool #421387, 6.50%, due 12/15/25 1,960,000 1,945,888
GNMA Pool #780144, 7.00%, due 7/15/24 69,115,749 69,979,005
GNMA Pool #348628, 7.50%, due 4/15/23 3,098,347 3,198,021
GNMA Pool #337620, 7.50%, due 4/15/23 964,080 995,094
GNMA Pool #334644, 7.50%, due 6/15/23 949,784 980,338
GNMA Pool #340821, 7.50%, due 6/15/23 943,629 973,986
GNMA Pool #359515, 7.50%, due 5/15/24 941,702 969,350
GNMA Pool #375893, 7.50%, due 6/15/24 960,794 989,003
GNMA Pool #397463, 7.50%, due 6/15/24 949,338 977,210
-----------
TOTAL INVESTMENT SECURITIES - 99.38%
(cost $146,502,019) 156,009,943
REPURCHASE AGREEMENT - 2.29%
Agreement with State Street Bank and Trust bearing
interest at 5.25% dated 12/29/95 to be repurchased
1/02/96 at $3,596,097 and collateralized by $3,585,000
U.S. Treasury Notes, 6.875% due 10/31/96, value
$3,669,762 (cost $3,595,572) 3,594,000 3,595,572
Liabilities in excess of other assets - (1.67%) (2,622,266)
-----------
Net Assets - 100.00% $156,983,249
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
[PHOTO][LOGO][PHOTO][LOGO]
THOMAS OLE DIAL PRESCOTT B. CROCKER
INVESTMENT ENVIRONMENT
THE MARKETS
- American government bond markets posted the third strongest yearly
total return of the century in 1995 when investor sentiment shifted
from the expectation of accelerating economic growth to the reality
of economic soft landing. In the backdrop of benign inflation
pressures the Federal Reserve lowered interest rates 1/2% while
interest rates in the long treasury market dropped 2 percentage
points to 6%. 1996 is expected to bring further declines in short
interest rates of up to 1 percentage point while long rates are
expected to trade in a range of 5.5% to 6.5%.
- Broad stock indexes achieved dramatic total returns of 33.4%, as
measured by the Dow, as American corporate earnings grew 25% and
multiples were bolstered by the dramatic drop in long interest rates.
Expected future earnings growth of 10-15% and stable bond markets
support a positive outlook for equity markets in 1996.
- High Yield markets completed a highly successful year with broad
indexes providing between 17 and 19% in total return. Investor fund
flows into high yield funds totaled $16.2 billion and provided strong
technical strength to the market. Although default rates moved higher
as the year progressed and high yield to treasury spreads increased
some 100 basis points, total returns were highest in the non rated
corporate categories. Single B rated bonds returned 16.6%. 1996
outlook is also positive in response to strong technical demand and
continued moderate economic growth.
- Emerging bond markets suffered heavily in the first quarter in
response to the Mexican Peso crisis but rallied strongly in the final
months to post high returns of some 45% for broad indexes. High
relative yields and improving emerging economies provide a positive
outlook for returns in 1996.
- Foreign Markets were also strong throughout the year outperforming
the U.S. while yield spreads generally narrowed 15 to 40 basis points
to the U.S. yield curve when foreign central banks continued to ease.
The dollar strengthened against the Yen and European currencies.
THE FUND
- The Fund's NAV moved from $11.71 to $12.39 over the year to provide a
total return of 14.5% for Class T shares.
- Duration was maintained between four and seven years over the year in
an effort to keep NAV price volatility low.
- Portfolio weightings averaged 25% in U.S. government bonds, 25% in
foreign government bonds, 40% in U.S. High Yield and 10% in Emerging
market debt.
CURRENT STRATEGY
- The Fund will adjust its duration to exploit the expected range of
5 1/2 to 6 1/2% in the long bond market.
- Emerging Market position will be strengthened further as
opportunities arise on price consolidation.
- High Yield holdings will continue to be characterized as high quality
and will be overweighted.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
<S> <C> <C>
NAME % FUND
1. U.S. Treas 6.125% '99 6.8%
2. Australia 12.0% '99 5.2
3. U.S. Treas 9.125% '99 2.7
4. New Zealand 6.5% '00 2.5
5. GNMA 6.5% 2.3
6. British Columbia 9.0%
'01 2.2
7. Canada 9.5 % '98 2.2
8. Ralph's 11.0% '05 1.9
9. Cal En. 0% '04 1.7
10. Americo Life 1.6
---
29.1%
<CAPTION>
CREDIT RATING DISTRIBUTION
<S> <C> <C>
AAA-AA 39.4%
BB 26.8
B 29.5
Caa/NR 4.3
---
100.0%
<CAPTION>
ASSET ALLOCATION
<S> <C> <C>
U.S. High Yield 38.4%
Foreign Govt. 23.5
U.S. Govt. 14.6
Foreign High Yield 11.2
U.S. Corporates 3.3
Equity 2.6
</TABLE>
4
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
[LOGO]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE STRATEGIC
INCOME FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES
THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 1.83% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 0.95% and 7.96% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on July 1, 1994 of 9.12% for Class T shares, reflect applicable
contingent deferred sales charges (maximum contingent deferred sales charge for
Class B of 5.00% declines to 0% and Class T shares of 4.00% declines to 0% after
five years; and maximum charge for Class C shares is 1.00% during the first year
of investment only). All performance data shown represents past performance, and
should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND -- CLASS A
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS A LEHMAN AGG BOND CPI
6/05/95 9,525 10,000 10,000
6/30/95 9,491 10,073 10,010
7/31/95 9,565 10,051 10,030
8/31/95 9,664 10,172 10,040
9/30/95 9,771 10,271 10,050
10/31/95 9,839 10,405 10,080
11/30/95 9,934 10,561 10,080
12/31/95 10,102 10,709 10,080
CLASS B LEHMAN AGG BOND CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,463 10,073 10,010
7/31/95 9,535 10,051 10,030
8/31/95 9,631 10,172 10,040
9/30/95 9,743 10,271 10,050
10/31/95 9,792 10,405 10,080
11/30/95 9,892 10,561 10,080
12/31/95 10,054 10,709 10,080
</TABLE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND -- CLASS C
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS C LEHMAN AGG BOND CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,851 10,073 10,010
7/31/95 9,923 10,051 10,030
8/31/95 10,020 10,172 10,040
9/30/95 10,135 10,271 10,050
10/31/95 10,183 10,405 10,080
11/30/95 10,276 10,561 10,080
12/31/95 10,447 10,709 10,080
CLASS T LEHMAN AGG BOND CPI
7/01/94 10,000 10,000 10,000
7/31/94 9,659 10,199 10,030
8/31/94 9,860 10,211 10,070
9/30/94 9,843 10,061 10,090
10/31/94 9,787 10,052 10,100
11/30/94 9,748 10,030 10,110
12/31/94 9,824 10,099 10,131
1/31/95 9,893 10,299 10,161
2/28/95 10,175 10,544 10,192
3/31/95 10,212 10,609 10,212
4/30/95 10,449 10,757 10,253
5/31/95 10,619 11,173 10,284
6/30/95 10,628 11,255 10,294
7/31/95 10,810 11,230 10,314
8/31/95 10,920 11,366 10,325
9/30/95 11,040 11,476 10,335
10/31/95 11,104 11,626 10,366
11/30/95 11,219 11,800 10,366
12/31/95 11,399 11,965 10,366
</TABLE>
5
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
INVESTMENT GRADE SECURITIES - 22.38%
DOMESTIC BONDS & NOTES - 3.39%
BROADCASTING & CABLE - 1.31%
Turner Broadcasting Systems, Inc.
8.40%, Sr. Debentures, 2/01/24 $1,000,000 $1,004,670
---------
PACKAGING - 0.74%
Owens-Illinois, Inc.
11.00%, Sr. Debentures, 12/01/03 500,000 567,500
---------
TRANSPORTATION - 1.34%
American President Co. Ltd.
7.125%, Sr. Notes, 11/15/03 500,000 512,550
Electronic Transfer Master Trust
9.35%, Certificate Series, 4/01/02 (1) 500,000 508,375
---------
1,020,925
---------
TOTAL DOMESTIC BONDS & NOTES
(Cost $2,528,060) 2,593,095
---------
FOREIGN BONDS & NOTES - 18.99%
FOREIGN GOVERNMENT SECURITIES - 18.99% (12)
Canadian Government Bonds, 9.00%, due 12/01/04 1,000,000 825,081
Canadian Government Bonds, 9.50%, due 10/01/98 2,100,000 1,665,936
Commonwealth of Australia Government Bonds, 10.00%, due
2/15/06 1,000,000 833,098
Commonwealth of Australia Government Bonds, 12.00%, due
11/15/01 4,500,000 3,979,971
Kingdom of Denmark, 8.00%, due 3/15/06 6,000,000 1,136,677
New Zealand, 6.50%, due 2/15/00 3,000,000 1,885,297
Province of British Columbia, 9.50%, due 1/09/12 2,000,000 1,705,016
Spanish Government Bonds, 10.00%, due 2/28/05 112,000,000 936,627
Spanish Government Bonds, 10.90%, due 8/30/03 60,000,000 521,946
U.K. Treasury Gilts, 8.50%, due 12/07/05 350,000 584,160
U.K. Treasury Gilts, 9.50%, due 1/15/99 250,000 419,320
---------
14,493,129
---------
TOTAL FOREIGN BONDS & NOTES
(Cost $14,149,883) 14,493,129
---------
TOTAL INVESTMENT GRADE SECURITIES
(Cost $16,677,943) 17,086,224
---------
HIGH YIELD SECURITIES - 54.16%
DOMESTIC BONDS & NOTES - 38.44%
AUTOMOTIVE - 1.30%
Walbro Corp.
9.875%, Sr. Notes, 7/15/05 1,000,000 992,500
---------
</TABLE>
6
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Units Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BROADCASTING & CABLE - 4.50%
Cablevision Systems Corp.
10.75%, Sr. Subordinated Debentures, 4/01/04 $ 500,000 $ 528,750
Chancellor Broadcasting Co.
12.50%, Sr. Subordinated Notes, 10/01/04 500,000 537,500
Granite Broadcasting Corp.
10.375%, Sr. Subordinated Notes, 5/15/05 (1) 250,000 257,812
Paxson Communications Corp.
11.625%, Sr. Subordinated Notes, 10/01/02 (1) 500,000 515,000
SCI Television, Inc.
11.00%, Sr. Notes, 6/30/05 550,000 587,125
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 12/15/03 500,000 513,750
Spanish Broadcasting System, Inc.
7.50/12.50%, Sr. Notes, 6/15/02 (2) 500,000 492,500
---------
3,432,437
---------
CHEMICALS - 1.80%
LaRoche Industries, Inc.
13.00%, Sr. Subordinated Notes, 8/15/04 800,000 854,000
Pioneer Americas Acquisition Corp.
13.375%, Sr. Notes, 4/01/05 (1) 500,000 520,000
---------
1,374,000
---------
CONGLOMERATE - 0.58%
Terex Corp.
13.75%, Units, 5/15/02 (1) (3) 500 442,500
---------
DEFENSE - 0.72%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 500,000 553,750
---------
ENERGY - 1.73%
California Energy, Inc.
0/10.25%, Discount Notes, 1/15/04 (2) 1,400,000 1,323,000
---------
FINANCE & BANKING - 1.06%
HMC Acquisition Properties Inc.
9.00%, Sr. Notes, 12/15/07 (1) 800,000 810,000
---------
FOOD & BEVERAGE - 0.68%
Curtice-Burns Foods, Inc.
12.25%, Sr. Subordinated Notes, 2/01/05 500,000 517,500
---------
GAMING - 3.97%
Ballys Park Place Funding, Inc.
9.25%, 1st Mortgage Notes, 3/15/04 500,000 507,500
Grand Casinos, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 900,000 942,750
Mohegan Tribal Gaming Authority
13.50%, Sr. Secured Notes, 11/15/02 (1) 500,000 541,250
Trump Plaza Funding, Inc.
10.875%, Guaranteed Mortgage Notes, 6/15/01 1,000,000 1,040,000
---------
3,031,500
---------
</TABLE>
7
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount/Units Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROCERY - 5.07%
Brunos, Inc.
10.50%, Sr. Subordinated Notes, 8/01/05 $ 500,000 $ 493,750
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 750,000 648,750
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 1,500,000 1,237,500
Ralphs Grocery Co.
11.00%, Sr. Subordinated Notes, 6/15/05 1,500,000 1,488,750
---------
3,868,750
---------
INSURANCE - 1.63%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 1,300,000 1,241,500
---------
LODGING & RESTAURANTS - 1.67%
American Restaurant Group
12.00%, Sr. Secured Notes, 9/15/98 1,000,000 780,000
John Q. Hammons Hotels
8.875%, 1st Mortgage Notes, 2/15/04 500,000 492,500
---------
1,272,500
---------
PAPER & FOREST PRODUCTS - 0.68%
Stone Container Corp.
10.75%, 1st Mortgage Notes, 10/01/02 500,000 518,750
---------
PRINTING & PUBLISHING - 0.67%
Garden State Newspapers, Inc.
12.00%, Sr. Subordinated Secured Notes, 7/01/04 500,000 510,000
---------
RETAIL - 1.51%
Duane Reade Corp.
12.00%, Sr. Notes , 9/15/02 1,000,000 970,000
Wherehouse Entertainment, Inc.
13.00%, Sr. Subordinated Notes, 8/01/02 (8)(11) 1,000,000 180,000
---------
1,150,000
---------
STEEL - 3.43%
AK Steel Corp.
10.75%, Sr. Notes, 4/01/04 500,000 555,000
NS Group, Inc.
13.50%, Units, 7/15/03 (4) 1,250 1,125,000
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes, 11/01/01 500,000 457,500
WCI Steel, Inc.
10.50%, Sr. Notes, 3/01/02 500,000 483,750
---------
2,621,250
---------
</TABLE>
8
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Units Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS - 5.57%
American Communication Services, Inc.
0/13.00%, Units, 11/01/05 (1) (2) (5) 2,000 $1,105,000
Dial Call Communications, Inc.
0/10.25%, Sr. Discount Notes, 12/15/05 (2) $2,000,000 1,070,000
IXC Communications, Inc.
12.50%, Sr. Notes, 10/01/05 (1) 900,000 965,250
Mobile Telecommunication Technologies Corp.
13.50%, Sr. Notes, 12/15/02 1,000,000 1,115,000
---------
4,255,250
---------
TEXTILES - 0.65%
Synthetic Industries, Inc.
12.75%, Debentures, 12/01/02 500,000 496,250
---------
TRANSPORTATION - 1.22%
Johnstown America Industries, Inc.
11.75%, Sr. Subordinated Notes, 8/15/05 500,000 455,000
Moran Transportation Co.
11.75%, Sr. Guaranteed Notes, 7/15/04 500,000 475,000
---------
930,000
---------
TOTAL DOMESTIC BONDS & NOTES
(cost $29,693,156) 29,341,437
---------
FOREIGN BONDS & NOTES - 15.72%
BANKING - 1.87%
Banco Nacional De Mexico
7.00%, Notes, 12/15/99 (6) 1,500,000 1,203,750
Banco Rio De La Plata SA
8.75%, Notes, 12/15/03 250,000 220,000
---------
1,423,750
---------
BROADCASTING & CABLE - 1.48%
Rogers Cablesystems Ltd.
9.65%, Sr. Secured Debentures, 1/15/14 (13) 1,750,000 1,127,792
---------
CHEMICAL - 0.68%
Acetex Corp.
9.75%, Sr. Secured Notes, 10/01/03 (1) 500,000 521,250
---------
FOREIGN GOVERNMENT SECURITIES - 4.55%
Federal Republic of Brazil Capitalization Bonds
8.00%, Government Guaranty, 4/15/14 1,061,208 604,889
Mexican Cetes
0%, Government Guaranty, 7/25/96 (12) 4,126,180 420,694
Republic of Argentina
5.00%, Government Guaranty, 3/31/23 1,000,000 575,620
Republic of Argentina
6.8125%, Government Guaranty, 3/31/05 1,000,000 707,500
Republic of Ecuador
6.8125%, Government Guaranty, 2/28/25 1,000,000 511,250
United Mexican States
6.25%, Debentures, 12/31/19 (10) 1,000,000 656,250
---------
3,476,203
---------
</TABLE>
9
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount/Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PAPER - 3.51%
Empaques Ponderosa
8.75%, Sr. Notes, 12/06/96 $ 750,000 $ 731,250
Grupo Industrial Durango SA
12.00%, Notes, 7/15/01 1,000,000 890,000
Indah Kiat International Finance
12.50%, Guaranteed Secured Notes, 6/15/06 500,000 498,750
Malette, Inc.
12.25%, Sr. Secured Notes, 7/15/04 500,000 560,000
---------
2,680,000
---------
TELECOMMUNICATION - 0.69%
Videotron Ltd.
10.25%, Sr. Subordinated Notes, 10/15/02 500,000 526,250
---------
TRANSPORTATION - 0.36%
Mexico City Toluca
11.00%, Debentures, 5/19/02 (1) 477,118 274,343
---------
UTILITIES - 2.58%
Sodigas Pampeana
10.50%, Notes, 7/06/99 1,000,000 970,000
Telecom Brazil Funding Corp.
11.13%, Guaranteed Secured Notes, 12/09/99 (1)(7) 1,000,000 1,002,500
---------
1,972,500
---------
TOTAL FOREIGN BONDS & NOTES
(cost $12,094,061) 12,002,088
---------
TOTAL HIGH YIELD SECURITIES
(cost $41,787,217) 41,343,525
---------
COMMON STOCKS - 0.00% (8)
GAMING - 0.00%
Capital Gaming International, Inc. 14,701 2,307
---------
TOTAL COMMON STOCKS
(cost $103,128) 2,307
---------
PREFERRED STOCKS - 2.54%
BANKING - 1.03%
First Nationwide Bank, 11.50% 7,000 785,750
---------
HEALTHCARE - 1.51%
Foxmeyer Health Corp., $4.20 Series A (9) 30,787 1,150,664
---------
TOTAL PREFERRED STOCKS
(cost $1,823,388) 1,936,414
---------
WARRANTS - 0.06%
AEROSPACE - 0.00%
Sabreliner Corp., (expires 2100) 500 2,500
---------
AIRLINES - 0.00%
CHC Helicopter Corp., (expires 12/15/00) 4,000 2,600
---------
GAMING - 0.00%
Capital Gaming International, Inc., (expires 2/01/99) 11,137 390
---------
</TABLE>
10
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTHCARE - 0.00%
Chattem, Inc., (expires 6/17/99) (1) 500 $ 1,375
---------
RETAIL - 0.04%
Central Rents, Inc., (expires 2003) 500 30,000
---------
STEEL - 0.02%
Sheffield Steel Corp., (expires 11/01/01) 2,500 12,500
---------
TOTAL WARRANTS
(cost $40,746) 49,365
---------
U.S. GOVERNMENT AND AGENCIES - 14.52%
GNMA 6.50%, due 1/20/24 $1,725,912 1,754,062
GNMA 8.50%, due 1/15/17 - 7/15/24 749,565 789,028
GNMA 9.00%, due 1/15/20 - 11/15/24 769,541 816,894
Resolution Trust Corp. Mortgage Pass 8.00%, due 6/25/26 428,502 436,237
U.S. Treasury Notes, 6.75%, due 5/31/99 5,000,000 5,222,900
U.S. Treasury Notes, 9.125%, due 5/15/99 1,850,000 2,065,081
---------
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $10,518,958) 11,084,202
---------
TOTAL INVESTMENT SECURITIES - 93.66%
(cost $70,951,380) 71,502,037
REPURCHASE AGREEMENT - 4.23%
Agreement with State Street Bank and Trust bearing interest
at 5.25% dated 12/29/95 to be repurchased 1/02/96 at
$3,226,881 and collateralized by $3,215,000 U.S. Treasury
Notes, 6.875% due 10/31/96, value $3,291,014
(cost $3,226,411) 3,225,000 3,226,411
Other assets less liabilities - 2.11% 1,604,976
---------
Net Assets - 100.00% $76,333,424
---------
---------
</TABLE>
(1) Sale restricted to qualified institutional investors.
(2) Step bond.
(3) A unit consists of $1,000 par value 13.75%, Sr. Secured Notes, 5/15/02
and 4 common stock Appreciation rights.
(4) A unit consists of $1,000 par value 13.50%, Sr. Secured Notes, 7/15/03
and 1 warrant.
(5) A unit consists of $1,000 par value 0%/13.00%, Sr. Discount Notes,
11/01/05 and 1 warrant.
(6) Convertible bonds.
(7) Floating rate security. Rate as of December 31, 1995.
(8) Non-income producing.
(9) Payment-in-kind security.
(10) Issued with 1,000 value recovery rights (expiration 2003) per $1,000
par value 6.25%, Debentures, 12/31/19.
(11) Defaulted security.
(12) The principal amount is shown in the respective country's currency.
(13) The principal amount is shown in Canadian Dollars.
See accompanying notes to financial statements.
11
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
[PHOTO][LOGO]
PRESCOTT B. CROCKER
INVESTMENT ENVIRONMENT
THE MARKETS
- American government bond markets posted the third strongest yearly
total return of the century in 1995 when investor sentiment shifted
from the expectation of accelerating economic growth to the reality
of economic soft landing. In the backdrop of benign inflation
pressures the Federal Reserve lowered interest rates 1/2% while
interest rates in the long treasury market dropped 2 percentage
points to 6%. 1996 is expected to bring further declines in short
interest rates of up to 1 percentage point while long rates are
expected to trade in a range of 5.5% to 6.5%.
- Broad stock indexes achieved dramatic total returns of 33.4%, as
measured by the Dow, as American corporate earnings grew 25% and
multiples were bolstered by the dramatic drop in long interest rates.
Expected future earnings growth of 10-15% and stable bond markets
support a positive outlook for equity markets in 1996.
- High yield markets completed a highly successful year with broad
indexes providing between 17% and 19% in total return. Investor fund
flows into high yield funds totaled $16.2 billion and provided strong
technical strength to the market. Although default rates moved higher
as the year progressed and high yield to treasury spreads increased
some 100 basis points, total returns were highest in the non rated
corporate categories. Single B rated bonds returned 16.6%. 1996
outlook is also positive in response to strong technical demand from
mutual funds and continued moderate economic growth.
- Emerging bond markets suffered heavily in the first quarter in
response to the Mexican Peso crisis but rallied strongly in the final
months to post high returns for broad indexes. High relative yields
and improving emerging economies provide a positive outlook for
return in 1996.
THE FUND
- Fund provided total returns of 13.7% for the year as net asset value
moved up from $8.29 to $8.56 on Class T shares.
- The Fund aggressively pursued a strategy of up grading its portfolio
to better handle any possible future recession. Holdings rated B+ and
higher were increased from 42% to 58% of the total and holdings rated
B- or lower were reduced from 25.6% to 15%.
- The Fund's portfolio at year end maintained an average rating of B+
and a long duration of six years.
- The average holding produced operating earnings which covered
interest expense 2.8 times.
CURRENT STRATEGY
- The Fund will look to reduce its duration as Treasury rates move
towards old lows.
- The Fund will continue to increase its weightings of higher rated
investments and non cyclicals to systematically improve its credit
profile to protect against further weakness in the economy.
- Fund returns will be more yield curve than equity market correlated.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
<S> <C> <C> <C>
NAME % FUND
1. Heritage Media 1.8%
2. Synthetic Ind. 1.6
3. SD Warren 1.5
4. Foxmeyer Corp 1.5
5. SCI TV 1.5
6. Domtar 1.5
7. AK Steel 1.5
8. Rexene Corp. 1.5
9. Harvard Ind. 1.5
10. Pioneer Acq. 1.4
---
15.3%
<CAPTION>
CREDIT RATING DISTRIBUTION
<S> <C> <C> <C>
BB 32%
B 62
CCC 4
NR 2
---
100 %
<CAPTION>
LARGEST INDUSTRY POSITIONS
<S> <C> <C> <C>
Oil & Gas 13.1%
Broadcasting 12.5
Paper & Forest Prod. 8.0
Telecommunications 6.2
Steel 4.4
---
44.2%
</TABLE>
12
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
[LOGO]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE HIGH
YIELD FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES
THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of (1.37)% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of (1.94)% and 5.01% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on June 5, 1989 of 10.45% for Class T shares, reflect applicable
contingent deferred sales charges (maximum contingent deferred sales charge for
Class B of 5.00% declines to 0% and Class T shares of 4.00% declines to 0% after
five years; and maximum charge for Class C shares is 1.00% during the first year
of investment only). All performance data shown represents past performance, and
should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE HIGH YIELD FUND -- CLASS A
NORTHSTAR ADVANTAGE HIGH YIELD FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS A LEHMAN HIGH YIELD BOND CPI
6/05/95 9,525 10,000 10,000
6/30/95 9,450 10,064 10,010
7/31/95 9,672 10,191 10,030
8/31/95 9,684 10,222 10,040
9/30/95 9,764 10,348 10,050
10/31/95 9,777 10,412 10,080
11/30/95 9,801 10,504 10,080
12/31/95 9,918 10,669 10,080
CLASS B LEHMAN HIGH YIELD BOND CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,423 10,064 10,010
7/31/95 9,643 10,191 10,030
8/31/95 9,653 10,222 10,040
9/30/95 9,731 10,348 10,050
10/31/95 9,741 10,412 10,080
11/30/95 9,775 10,504 10,080
12/31/95 9,889 10,669 10,080
</TABLE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND -- CLASS C
NORTHSTAR ADVANTAGE HIGH YIELD FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS C LEHMAN HIGH YIELD BOND CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,817 10,064 10,010
7/31/95 10,043 10,191 10,030
8/31/95 10,050 10,222 10,040
9/30/95 10,128 10,348 10,050
10/31/95 10,135 10,412 10,080
11/30/95 10,167 10,504 10,080
12/31/95 10,283 10,669 10,080
CLASS T LEHMAN HIGH YIELD BOND CPI
6/05/89 10,000 10,000 10,000
6/89 9,954 10,124 10,020
7/89 9,916 10,111 10,060
8/89 9,969 10,145 10,060
9/89 9,725 9,975 10,080
10/89 9,242 9,738 10,131
11/89 9,181 9,719 10,161
12/89 9,120 9,734 10,202
1/90 8,629 9,525 10,293
2/90 8,439 9,329 10,335
3/90 8,659 9,573 10,376
4/90 8,399 9,557 10,407
5/90 8,671 9,742 10,428
6/90 8,924 9,977 10,490
7/90 9,111 10,246 10,543
8/90 8,562 9,663 10,627
9/90 7,879 8,957 10,702
10/90 7,529 8,487 10,777
11/90 7,653 8,752 10,798
12/90 7,789 8,796 10,841
1/91 7,968 9,037 10,885
2/91 8,502 10,026 10,896
3/91 9,042 10,617 10,896
4/91 9,717 11,052 10,928
5/91 9,827 11,072 10,961
6/91 9,885 11,400 10,983
7/91 10,210 11,764 11,005
8/91 10,337 12,035 11,038
9/91 10,519 12,202 11,071
10/91 11,035 12,610 11,093
11/91 11,097 12,675 11,138
12/91 11,410 12,858 11,171
1/92 12,350 13,311 11,182
2/92 12,834 13,639 11,205
3/92 12,869 13,808 11,249
4/92 12,951 13,861 11,272
5/92 13,168 14,056 11,294
6/92 13,267 14,188 11,328
7/92 13,625 14,403 11,362
8/92 13,680 14,591 11,385
9/92 13,936 14,740 11,408
10/92 13,868 14,532 11,453
11/92 14,285 14,716 11,476
12/92 14,552 14,883 11,499
1/93 14,903 15,316 11,522
2/93 14,901 15,586 11,557
3/93 15,257 15,787 11,580
4/93 15,158 15,924 11,626
5/93 15,668 16,114 11,649
6/93 16,214 16,452 11,661
7/93 16,531 16,612 11,673
8/93 16,664 16,751 11,696
9/93 16,799 16,795 11,708
10/93 17,140 17,134 11,766
11/93 17,242 17,216 11,790
12/93 17,304 17,430 11,813
1/94 17,859 17,808 11,825
2/94 18,025 17,762 11,861
3/94 17,533 17,090 11,884
4/94 17,095 16,974 11,908
5/94 17,093 16,983 11,920
6/94 17,033 17,035 11,956
7/94 17,147 17,180 11,992
8/94 17,224 17,302 12,040
9/94 17,233 17,304 12,064
10/94 17,271 17,345 12,076
11/94 16,948 17,127 12,088
12/94 16,926 17,254 12,112
1/95 17,127 17,488 12,149
2/95 17,537 18,088 12,185
3/95 17,660 18,283 12,209
4/95 18,159 18,748 12,258
5/95 18,432 19,273 12,295
6/95 18,367 19,396 12,307
7/95 18,793 19,641 12,332
8/95 18,814 19,701 12,344
9/95 18,964 19,944 12,357
10/95 18,983 20,067 12,394
11/95 19,048 20,244 12,394
12/31/95 19,246 20,562 12,394
</TABLE>
13
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
DOMESTIC BONDS & NOTES - 66.48%
AIRLINES - 1.32%
US Air, Inc.
10.375%, Pass-Thru Certificates, 3/01/13 $ 2,500,000 $ 2,362,500
------------
AUTOMOTIVE - 2.56%
Harvard Industries, Inc.
12.00%, Sr. Notes, 7/15/04 2,500,000 2,612,500
Walbro Corp.
9.875%, Sr. Notes, 7/15/05 2,000,000 1,985,000
------------
4,597,500
------------
BROADCASTING & CABLE - 8.28%
Busse Broadcasting Corp.
11.625%, Sr. Secured Notes, 10/15/00 (1) 2,000,000 1,920,000
Cablevision Systems Corp.
9.875%, Sr. Subordinated Debentures, 4/01/23 1,500,000 1,556,250
Granite Broadcasting Corp.
10.375%, Sr. Subordinated Notes, 5/15/05 (1) 500,000 515,625
Heritage Media Corp.
11.00%, Sr. Subordinated Notes, 10/01/02 3,000,000 3,187,500
SCI Television, Inc.
11.00%, Sr. Notes, 6/30/05 2,500,000 2,668,750
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 12/15/03 1,250,000 1,284,375
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 9/30/05 1,250,000 1,284,375
Spanish Broadcasting System, Inc.
7.50%/12.50%, Sr. Notes, 6/15/02 (2) 2,500,000 2,462,500
------------
14,879,375
------------
BUILDING MATERIALS - 1.33%
Building Materials Corp. of America
11.75%, Sr. Deferred Coupon Notes, 7/01/04 3,500,000 2,397,500
------------
CHEMICALS - 4.23%
NL Industries, Inc. (2)
0%, Sr. Secured Discount Notes, 10/15/05 3,000,000 2,332,500
Pioneer Americas Acquisition Corp.
13.375%, Sr. Notes, 4/01/05 (1) 2,500,000 2,600,000
Rexene Corp.
11.75%, Sr. Notes, 12/01/04 2,500,000 2,662,500
------------
7,595,000
------------
CONSUMER NONDURABLES - 2.65%
Hines Horticulture, Inc.
11.75%, Sr. Subordinated Notes, 10/05/05 (1) 1,500,000 1,567,500
Ithaca Industries
11.125%, Sr. Subordinated Notes, 12/15/02 (11) 1,975,000 701,125
Renaissance Cosmetics, Inc.
13.75%, Sr. Notes, 8/15/01 2,500,000 2,500,000
------------
4,768,625
------------
</TABLE>
14
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Units Value
- ------------------------------------------------------------------------------
<S> <C> <C>
DEFENSE - 0.92%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 $ 1,500,000 $ 1,661,250
------------
ENERGY - 0.57%
Kenetech Corp.
12.75%, Sr. Secured Notes, 12/15/02 2,750,000 1,031,250
------------
ENTERTAINMENT - 1.12%
United Artists Theatre Circuit
9.30%, Pass Thru Certificates, 7/01/15 (1) 2,000,000 2,005,000
------------
ENVIRONMENTAL CONTROL - 1.06%
Allied Waste Industries, Inc.
12.00%, Sr. Subordinated Notes, 2/01/04 1,750,000 1,903,125
------------
FOOD & BEVERAGE - 2.62%
Curtice-Burns Foods, Inc.
12.25%, Sr. Subordinated Notes, 2/01/05 2,500,000 2,587,500
South Carolina International Services, Inc.
13.00%, Sr. Subordinated Notes, 10/01/05 2,000,000 2,120,000
------------
4,707,500
------------
GAMING - 3.95%
Ballys Grand, Inc.
10.375%, 1st Mortgage Notes, 12/15/03 1,500,000 1,537,500
Ballys Park Place Funding, Inc.
9.25%, 1st Mortgage Notes, 3/15/04 500,000 507,500
Grand Casinos, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 1,000,000 1,047,500
Rio Hotel & Casino, Inc.
10.625%, Sr. Subordinated Notes, 7/15/05 (1) 2,000,000 2,065,000
Trump Taj Mahal Funding, Inc.
11.35%, Units, 11/15/99 (4) 2,000 1,935,000
------------
7,092,500
------------
GROCERY - 3.35%
Brunos, Inc.
10.50%, Sr. Subordinated Notes, 8/01/05 1,500,000 1,481,250
Pathmark Stores, Inc.
11.625%, Subordinated Notes, 6/15/02 2,500,000 2,543,750
Ralphs Grocery Co.
11.00%, Sr. Subordinated Notes, 6/15/05 2,000,000 1,985,000
------------
6,010,000
------------
HEALTHCARE - 0.62%
Tenet Healthcare Corp.
10.125%, Sr. Subordinated Notes, 3/01/05 1,000,000 1,112,500
------------
HEAVY EQUIPMENT - 0.99%
Terex Corp.
13.75%, Units, 5/15/02 (1) (3) 2,000 1,770,000
------------
INSURANCE - 1.20%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 2,250,000 2,148,750
------------
</TABLE>
15
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
LODGING & RESTAURANTS - 1.70%
Family Restaurants, Inc.
9.75%, Sr. Notes, 2/01/02 $ 1,000,000 $ 565,000
John Q. Hammons Hotels
8.875%, 1st Mortgage Notes, 2/15/04 1,500,000 1,477,500
John Q. Hammons Hotels LP
9.75%, 1st Mortgage Notes, 10/01/05 (1) 1,000,000 1,010,000
------------
3,052,500
------------
MANUFACTURING - 1.17%
Wyman-Gorgon Co.
10.75%, Sr. Notes, 3/15/03 2,000,000 2,110,000
------------
OIL & GAS - 8.22%
AmeriGas Partners LP
10.125%, Sr. Notes, 4/15/07 (1) 1,000,000 1,075,000
California Energy, Inc.
9.875%, Sr. Notes, 6/30/03 1,000,000 1,047,500
California Energy, Inc.
0/10.25%, Sr. Discount Notes, 1/15/04 (2) 2,650,000 2,504,250
Chesapeake Energy Corp.
10.50%, Sr. Notes, 6/01/02 (1) 2,000,000 2,105,000
HS Resources, Inc.
9.875%, Sr. Subordinated Notes, 12/01/03 2,500,000 2,465,625
Kelley Oil & Gas Corp.
13.50%, Sr. Notes, 6/15/99 2,500,000 2,025,000
Petroleum Heat and Power, Inc.
9.375%, Subordinated Debentures, 2/01/06 1,500,000 1,477,500
TransTexas Gas Corp.
11.50%, Sr. Secured Notes, 6/15/02 2,000,000 2,070,000
------------
14,769,875
------------
PACKAGING - 2.09%
Crown Packaging Holdings Ltd.
0%, Sr. Subordinated Discount Notes, 11/01/03 3,750,000 1,687,500
Gaylord Container Corp.
11.50%, Sr. Notes, 5/15/01 2,000,000 2,062,500
------------
3,750,000
------------
PAPER & FOREST PRODUCTS - 1.53%
SD Warren Co.
12.00%, Sr. Subordinated Notes, 12/15/04 2,500,000 2,750,000
------------
PRINTING & PUBLISHING - 1.14%
Garden State Newspapers, Inc.
12.00%, Sr. Subordinated Notes, 7/01/04 2,000,000 2,040,000
------------
RETAIL - 1.43%
Waban, Inc.
11.00%, Sr. Subordinated Notes, 5/15/04 2,500,000 2,562,500
------------
</TABLE>
16
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Units Value
- ------------------------------------------------------------------------------
<S> <C> <C>
STEEL - 4.42%
AK Steel Corp.
10.75%, Sr. Notes, 4/01/04 $ 2,400,000 $ 2,664,000
NS Group, Inc.
13.50%, Units, 7/15/03 (5) 2,500 2,250,000
UCAR Global Enterprises, Inc.
12.00%, Sr. Subordinated Notes, 1/15/05 535,000 616,588
WCI Steel, Inc.
10.50%, Sr. Notes, 3/01/02 2,500,000 2,418,750
------------
7,949,338
------------
TELECOMMUNICATIONS - 3.41%
CAI Wireless Systems, Inc.
12.25%, Sr. Notes, 9/15/02 2,000,000 2,145,000
Metrocall, Inc.
10.375%, Sr. Subordinated Notes, 10/01/07 1,000,000 1,070,000
Mobilemedia Communications, Inc.
9.375%, Sr. Subordinated Notes, 11/01/07 1,000,000 1,030,000
Paging Network, Inc.
8.875%, Sr. Subordinated Notes, 2/01/06 500,000 515,000
Paging Network, Inc.
10.125%, Sr Subordinated Notes, 8/01/07 1,250,000 1,365,625
------------
6,125,625
------------
TEXTILES - 1.57%
Synthetic Industries, Inc.
12.75%, Debentures, 12/01/02 2,850,000 2,828,625
------------
TRUCKING & TRANSPORTATION - 2.18%
Johnstown America Industries, Inc.
11.75%, Sr. Subordinated Notes, 8/15/05 2,000,000 1,820,000
Moran Transportation Co.
11.75%, Sr. Secured Notes, 7/15/04 2,200,000 2,090,000
------------
3,910,000
------------
WASTE MANAGEMENT - 0.85%
Norcal Waste Systems, Inc.
12.50%, Sr. Notes, 11/15/05 (1) 1,500,000 1,518,750
------------
TOTAL DOMESTIC BONDS & NOTES
(cost $120,922,107) 119,409,588
------------
FOREIGN BONDS & NOTES - 20.27%
AIRLINES - 0.99%
CHC Helicopter Corp.
11.50%, Sr. Subordinated Notes, 7/15/02 2,000,000 1,775,000
------------
</TABLE>
17
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
BROADCASTING & CABLE - 4.23%
Bell Cablemedia PLC
0%/11.875%, Sr. Discount Notes, 9/15/05 (1) (2) $ 2,000,000 $ 1,262,500
Comcast UK Cable Partners Ltd.
0%/11.20%, Sr. Discount Debentures, 11/15/07 (2) 3,250,000 1,893,125
Fundy Cable Ltd.
11.00%, Sr. Secured Second Priority Notes,
11/15/05 2,000,000 2,085,000
Rogers Cablesystems Ltd.
9.65%, Sr. Secured Debentures, 1/15/14 (12) 2,025,000 1,305,016
Rogers Communications, Inc.
10.875%, Sr. Debentures, 4/15/04 1,000,000 1,050,000
------------
7,595,641
------------
EMERGING MARKETS - 2.94%
Federal Republic of Brazil Eligible Interest
Bonds
6.8125%, Debentures, 4/15/06 (6) 3,000,000 2,066,250
Republic of Argentina
5.00%, Government Guaranty, 3/31/23 (6) 3,000,000 1,726,860
Republic of Ecuador
6.8125%, Government Guaranty, 2/28/25 (6) 1,000,000 511,250
United Mexican States
6.25%, Debentures, 12/31/19 (7) 1,500,000 984,375
------------
5,288,735
------------
METALS & MINING 0.16%
Agnico Eagle Mines Ltd.
3.50%, Sr. Notes, 1/27/04 350,000 290,500
------------
OIL & GAS - 1.24%
Petroleos Mexicanos Medium Term
8.625%, Debentures, 12/01/23 (1) 3,000,000 2,223,750
------------
PAPER & FOREST PRODUCTS - 6.47%
APP International Finance Co.
11.75%, Guaranteed Secured Notes, 10/01/05 2,000,000 1,960,000
Domtar, Inc.
11.25%, Debentures, 9/15/17 2,500,000 2,665,625
Grupo Industrial Durango SA
12.00%, Notes, 7/15/01 2,600,000 2,314,000
Malette, Inc.
12.25%, Sr. Secured Notes, 7/15/04 2,000,000 2,240,000
Repap New Brunswick, Inc.
10.625%, Sr. Secured Notes, 4/15/05 2,500,000 2,450,000
------------
11,629,625
------------
TELECOMMUNICATIONS - 2.80%
Fonorola Inc
12.50%, Sr. Notes, 8/15/02 1,000,000 1,055,000
Telefonica de Argentina SA
11.875%, Notes, 11/01/04 1,500,000 1,556,720
Telewest PLC
0%, Sr. Discount Debentures, 10/01/07 4,000,000 2,425,000
------------
5,036,720
------------
</TABLE>
18
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 1.44%
Stena AB
10.50%, Sr. Notes, 12/15/05 $ 2,500,000 $ 2,581,250
------------
TOTAL FOREIGN BONDS & NOTES
(cost $35,677,651) 36,421,221
------------
CONVERTIBLE BONDS - 0.82%
LEISURE - 0.04%
Discovery Zone, Inc.
0%, Liquid Yield Option Notes, 10/14/13 250,000 64,845
------------
OIL & GAS - 0.78%
Cross Timbers Oil Co.
5.25%, Subordinated Notes, 11/01/03 1,500,000 1,397,580
------------
TOTAL CONVERTIBLE BONDS
(cost $1,636,232) 1,462,425
------------
COMMON STOCKS - 0.41%
GAMING - 0.00%
Capital Gaming International, Inc. (8) 44,540 5,568
------------
METALS & MINING - 0.41%
Freeport McMoran Copper and Gold, Inc. Class B 19,999 562,472
Freeport McMoran, Inc. 4,750 175,750
------------
738,222
------------
TOTAL COMMON STOCKS
(cost $784,094) 743,790
------------
PREFERRED STOCKS - 1.09%
BANKING - 1.09%
First Nationwide Bank, 11.50% 17,500 1,964,375
------------
TOTAL PREFERRED STOCKS
(cost $1,750,000) 1,964,375
------------
CONVERTIBLE PREFERRED STOCKS - 4.95%
HEALTHCARE - 1.50%
Foxmeyer Health Corp., $4.20 Series A (9) 71,928 2,688,309
------------
METALS & MINING - 0.61%
Freeport McMoran Copper and Gold, Inc., 5.00%
(10) 40,000 1,090,000
------------
OIL & GAS - 2.85%
BCP/Essex Holdings, 15.00% 64,584 1,711,476
Parker & Parsley Petroleum Co., 6.25% (1) 32,500 1,575,308
Tejas Gas Corp., 5.25% 38,600 1,833,500
------------
5,120,284
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $8,046,264) 8,898,593
------------
WARRANTS - 0.09% (8)
AIRLINES - 0.01%
CHC Helicopter Corp., (expires 12/15/00) 16,000 10,400
------------
CONSUMER NONDURABLES - 0.06%
Renaissance Cosmetics, Inc., (expires 8/15/01) 5,000 113,750
------------
GAMING - 0.00%
Capital Gaming International, Inc., (expires
2/01/99) 36,318 725
------------
</TABLE>
19
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
PACKAGING - 0.02%
Crown Packaging Holdings Ltd., (expires 11/01/03) 3,750 $ 39,375
------------
TOTAL WARRANTS
(cost $318,150) 164,250
------------
TOTAL INVESTMENT SECURITIES - 94.11%
(cost $169,134,498) 169,064,242
REPURCHASE AGREEMENT - 4.51%
Agreement with State Street Bank and Trust
bearing interest at 5.25% dated 12/29/95 to be
repurchased 1/02/96 at $8,113,730 and
collateralized by $8,065,000 U.S. Treasury Notes,
6.875% due 10/31/96, value $8,276,158
(cost $8,112,548) $ 8,109,000 8,112,548
Other assets less liabilities - 1.38% 2,472,946
------------
Net Assets - 100.00% $179,649,736
------------
------------
</TABLE>
(1) Sale restricted to qualified institutional investors.
(2) Step bond.
(3) A unit consists of $1,000 par value 13.75%, Sr. Secured Notes, 5/15/02
and 4 common stock Appreciation rights.
(4) A unit consists of $1,000 par value 11.35%, Debentures, 11/15/99 and 1
Class A and 1 Class B common stock.
(5) A unit consists of $1,000 par value 13.50%, Sr. Secured Notes, 7/15/03
and 1 warrant.
(6) Floating rate security. Rate as of December 31, 1995.
(7) Issued with 1,000 value recovery rights (expiration 2003) per $1,000
par value 6.25%, Debentures, 12/31/19.
(8) Non-income producing securities.
(9) Payment-in-kind security.
(10) Dividend rate resets to 7.00% on 8/01/96.
(11) Defaulted security.
(12) The principal amount shown in Canadian Dollars.
See accompanying notes to financial statements.
20
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
[LOGO]
[PHOTO]
MARGARET D. PATEL
INVESTMENT ENVIRONMENT
THE MARKETS
- Both the Dow Jones Industrials and the S&P 500 rose during 1995,
posting total rates of return of 33.4% and 34.1%, respectively,
reflecting good corporate earnings growth.
- Interest rates as measured by 10 year Treasury maturities fell from
7.82% at the end of December, 1994 to 5.57%, at year-end 1995
reflecting subdued economic growth and low inflation.
- Convertible issues performed well, aided both by higher underlying
equity prices as well as declining interest rates.
THE FUND
- The Fund's return of 25.1% (T shares) in the year compared to 21.7%
for the average fund in the Lipper Income Fund category (the Fund's
universe), and its results may also be compared to the 25.2% return
achieved by average for the Lipper Balanced Fund category.
- Holdings were increased in finance (insurance), industrial, energy,
airlines, and healthcare. Exposure was eliminated in
telecommunications issues representing cellular, wireless, and
alternative access providers.
- Asset allocation to intermediate term straight bonds was
substantially reduced, and holdings of convertible preferred stocks,
convertible bonds, and long term straight bonds were increased with
the proceeds. Holdings of common stock were slightly reduced.
CURRENT STRATEGY
- The Fund remains fully invested in sectors which represent reasonable
valuations for stable to improving growth. Since it seems likely that
capital appreciation from equity holdings may not be as great in 1996
versus 1995, the Fund continues to concentrate on convertible issues
(bonds and preferreds total 52% of market value) in order to achieve
higher income, while still maintaining equity exposure through the
equity linked features of convertibles.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<S> <C> <C>
1. Jet Equipment 5.0%
2. MascoTech 4.6
3. Roche 4.4
4. AMR 3.8
5. Gencorp 3.7
6. Allmerica 3.6
7. Time Warner 3.4
8. Unocal 3.4
9. Interface 3.4
10. United Companies 3.2
------
38.5%
<CAPTION>
5 TOP SECTORS
SECTORS % FUND
<S> <C> <C>
1. Industrial 12.4%
2. Financial 11.5
3. Energy 11.1
4. Airlines 10.9
5. Drugs 7.3
------
53.2%
<CAPTION>
ASSET ALLOCATION
<S> <C>
Common Stock 28.8%
Bonds 43.1
- -Convertibles 19.2
- -Straight 23.9
Preferreds (cvt.) 28.0
</TABLE>
21
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE INCOME
FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES THROUGH
THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 12.03% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 12.13% and 19.33% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on February 3, 1986 of 9.66% for Class T shares, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B of 5.00% declines to 0% and Class T shares of 4.00% declines
to 0% after five years; and maximum charge for Class C shares is 1.00% during
the first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE INCOME FUND -- CLASS A
NORTHSTAR ADVANTAGE INCOME FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
CLASS A S & P 500 CPI LEHMAN GOVT/CORP
6/05/95 9,525 10,000 10,000 10,000
6/30/95 9,475 10,280 10,010 10,064
7/31/95 9,770 10,607 10,030 10,069
8/31/95 9,921 10,604 10,040 10,152
9/30/95 10,103 11,095 10,050 10,220
10/31/95 9,996 11,039 10,080 10,332
11/30/95 10,462 11,492 10,080 10,458
12/31/95 10,672 11,760 10,080 10,562
CLASS B S & P 500 CPI LEHMAN GOVT/CORP
6/05/95 10,000 10,000 10,000 10,000
6/30/95 9,454 10,280 10,010 10,064
7/31/95 9,739 10,607 10,030 10,069
8/31/95 9,897 10,604 10,040 10,152
9/30/95 10,084 11,095 10,050 10,220
10/31/95 9,984 11,039 10,080 10,332
11/30/95 10,453 11,492 10,080 10,458
12/31/95 10,675 11,760 10,080 10,562
</TABLE>
NORTHSTAR ADVANTAGE INCOME FUND -- CLASS C
NORTHSTAR ADVANTAGE INCOME FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
CLASS C S & P 500 CPI LEHMAN GOVT/CORP
6/05/95 10,000 10,000 10,000 10,000
6/30/95 9,844 10,280 10,010 10,064
7/31/95 10,143 10,607 10,030 10,069
8/31/95 10,302 10,604 10,040 10,152
9/30/95 10,481 11,095 10,050 10,220
10/31/95 10,361 11,039 10,080 10,332
11/30/95 10,849 11,492 10,080 10,458
12/31/95 11,060 11,760 10,080 10,562
CLASS T S & P 500 CPI LEHMAN GOVT/CORP
2/03/86 10,000 10,000 10,000 10,000
2/86 10,150 10,715 9,980 10,237
3/86 10,400 11,377 9,920 10,512
4/86 10,300 11,217 9,880 10,582
5/86 10,420 11,780 9,910 10,445
6/86 10,551 12,045 9,950 10,698
7/86 10,556 11,338 9,960 10,816
8/86 11,046 12,145 9,970 11,068
9/86 10,763 11,208 10,010 10,964
10/86 11,063 11,821 10,030 11,102
11/86 11,198 12,075 10,050 11,208
12/86 11,076 11,833 10,090 11,238
1/87 11,607 13,393 10,150 11,339
2/87 11,713 13,887 10,191 11,395
3/87 11,778 14,356 10,232 11,370
4/87 11,489 14,191 10,283 11,169
5/87 11,424 14,276 10,314 11,144
6/87 11,725 15,072 10,355 11,276
7/87 11,881 15,798 10,386 11,301
8/87 12,037 16,351 10,428 11,271
9/87 11,773 16,067 10,469 11,131
10/87 10,503 12,570 10,501 11,462
11/87 10,321 11,498 10,543 11,531
12/87 10,483 12,447 10,564 11,643
1/88 11,082 12,950 10,606 11,932
2/88 11,324 13,491 10,617 12,058
3/88 11,225 13,155 10,648 12,007
4/88 11,236 13,279 10,702 11,987
5/88 11,178 13,321 10,734 11,929
6/88 11,582 14,026 10,777 12,124
7/88 11,582 13,950 10,820 12,088
8/88 11,476 13,412 10,852 12,103
9/88 11,713 14,070 10,907 12,313
10/88 12,004 14,436 10,939 12,483
11/88 11,835 14,163 10,972 12,375
12/88 11,887 14,499 11,005 12,388
1/89 12,315 15,530 11,049 12,511
2/89 12,216 15,081 11,082 12,458
3/89 12,338 15,526 11,138 12,516
4/89 12,674 16,304 11,216 12,769
5/89 12,984 16,876 11,272 13,015
6/89 13,109 16,893 11,294 13,347
7/89 13,691 18,386 11,339 13,618
8/89 13,918 18,671 11,339 13,434
9/89 13,893 18,699 11,362 13,499
10/89 13,688 18,228 11,419 13,782
11/89 13,881 18,529 11,453 13,919
12/89 13,989 19,079 11,499 13,959
1/90 13,414 17,766 11,602 13,873
2/90 13,389 17,917 11,649 13,924
3/90 13,493 18,501 11,695 13,941
4/90 13,227 18,004 11,731 13,895
5/90 13,931 19,660 11,754 14,192
6/90 14,072 19,660 11,825 14,379
7/90 14,058 19,558 11,884 14,581
8/90 13,492 17,713 11,979 14,528
9/90 13,317 16,971 12,063 14,658
10/90 13,440 16,858 12,147 14,861
11/90 13,836 17,867 12,171 15,086
12/90 14,098 18,484 12,220 15,294
1/91 14,446 19,251 12,269 15,451
2/91 15,031 20,546 12,281 15,546
3/91 15,282 21,159 12,281 15,631
4/91 15,282 21,165 12,318 15,792
5/91 15,535 21,982 12,355 15,881
6/91 15,013 21,112 12,380 15,893
7/91 15,572 22,059 12,404 16,065
8/91 15,944 22,492 12,442 16,370
9/91 16,073 22,240 12,479 16,648
10/91 16,247 22,505 12,504 16,838
11/91 16,262 21,517 12,554 17,035
12/91 17,084 24,092 12,592 17,449
1/92 16,895 23,613 12,604 17,282
2/92 16,792 23,839 12,629 17,335
3/92 16,652 23,487 12,680 17,266
4/92 16,845 24,142 12,705 17,421
5/92 17,275 24,166 12,731 17,681
6/92 17,208 23,934 12,769 17,935
7/92 17,717 24,877 12,807 18,280
8/92 17,673 24,280 12,833 18,466
9/92 17,853 24,688 12,858 18,721
10/92 17,671 24,740 12,910 18,496
11/92 18,019 25,489 12,936 18,421
12/92 18,460 25,925 12,962 18,658
1/93 18,859 26,107 12,987 19,005
2/93 19,319 26,381 13,026 19,285
3/93 19,814 27,053 13,052 19,356
4/93 19,614 26,366 13,105 19,507
5/93 19,753 26,965 13,131 19,454
6/93 20,225 27,181 13,144 19,736
7/93 20,381 27,037 13,157 19,776
8/93 20,960 27,967 13,183 20,071
9/93 21,230 27,880 13,197 20,153
10/93 21,387 28,421 13,263 20,201
11/93 20,882 28,054 13,289 20,102
12/93 21,062 28,525 13,316 20,185
1/94 21,664 29,452 13,329 20,385
2/94 21,127 28,569 13,369 20,105
3/94 20,377 27,455 13,396 19,812
4/94 20,377 27,770 13,423 19,683
5/94 20,410 28,115 13,436 19,697
6/94 20,146 27,572 13,476 19,701
7/94 20,511 28,441 13,517 19,959
8/94 20,677 29,510 13,571 20,017
9/94 20,386 28,920 13,598 19,850
10/94 20,235 29,524 13,612 19,854
11/94 19,832 28,358 13,625 19,767
12/94 19,939 28,917 13,652 19,832
1/95 20,250 29,619 13,693 20,156
2/95 20,856 30,689 13,734 20,545
3/95 21,071 31,726 13,762 20,658
4/95 21,456 32,614 13,817 20,897
5/95 22,190 33,798 13,858 21,487
6/95 22,188 34,745 13,872 21,624
7/95 22,860 35,849 13,900 21,635
8/95 23,214 35,839 13,914 21,812
9/95 23,646 37,498 13,928 21,958
10/95 23,379 37,311 13,970 22,200
11/95 24,468 38,840 13,970 22,471
12/31/95 24,948 39,745 13,970 22,693
</TABLE>
22
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 28.71%
CHEMICALS - 0.88%
Atlantic Richfield Co., 6,000 $ 664,500
------------
CONSUMER NONDURABLES - 1.10%
Procter & Gamble Co. 10,000 830,000
------------
FINANCIAL SERVICES - 6.94%
Allmerica Financial Corp. 100,500 2,713,500
Allstate Corp. 20,000 822,500
Finova Group, Inc. 35,000 1,688,750
------------
5,224,750
------------
FOREST & PAPER PRODUCTS - 2.19%
Buckeye Cellulose Corp. (1) 75,000 1,650,000
------------
HEALTHCARE\PHARMACEUTICAL - 5.67%
Bristol-Myers, Squibb Co. 10,000 858,750
Merck & Co., Inc. 20,000 1,315,000
U.S. Healthcare, Inc. 45,000 2,092,500
------------
4,266,250
------------
OIL & GAS - 4.19%
Amoco Corp. 9,000 646,875
KN Energy, Inc. 40,000 1,165,000
Mobil Corp 12,000 1,344,000
------------
3,155,875
------------
REAL ESTATE INVESTMENT TRUST - 5.93%
Health and Retirement Property Trust 42,000 682,500
Health Care Property Investors, Inc. 32,000 1,124,000
Meditrust 25,000 871,875
National Health Investors, Inc. 27,150 899,344
Nationwide Health Properties, Inc. 21,000 882,000
------------
4,459,719
------------
TEXTILES - 1.81%
Interface, Inc. 80,000 1,360,000
------------
TOTAL COMMON STOCK
(cost $17,179,304) 21,611,094
------------
CONVERTIBLE PREFERRED STOCK - 27.97%
AIRLINES - 2.12%
Continental Air Finance Group, 8.50% (2) 30,000 1,597,500
------------
CHEMICALS - 3.64%
Atlantic Richfield Co., 9.00% 80,000 1,880,000
Corning Delaware LP, 6.00% 17,000 856,375
------------
2,736,375
------------
COMPUTER SERVICES - 3.21%
General Motors Corp.,
Class E, $3.25 33,000 2,417,250
------------
</TABLE>
23
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Shares/Principal
Security Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES - 4.19%
Jefferson-Pilot Corp., 7.25% 10,000 $ 731,250
United Companies Financial Corp., 6.75% 48,000 2,424,000
------------
3,155,250
------------
FOREST & PAPER PRODUCTS - 2.43%
International Paper Capital Trust, 5.25% (2) 40,000 1,827,000
------------
INDUSTRIAL SERVICES - 2.29%
Browning-Ferris Industries, Inc., 7.25% 55,000 1,725,625
------------
INSURANCE - 2.51%
Alexander & Alexander Services, Inc., $3.625 (2) 39,200 1,886,892
------------
METALS & MINING - 2.28%
Pittston Mineral Group, 6.25%, (2) 44,000 1,717,584
------------
OIL & GAS - 5.30%
Tejas Gas Corp., 5.25% 30,000 1,425,000
Unocal Corp., 7.00% (2) 46,300 2,563,168
------------
3,988,168
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $20,489,894) 21,051,644
------------
CORPORATE BONDS - 23.91%
AIRLINES - 3.75%
AMR Corp.
9.00%, Debentures, 8/01/12 $ 2,500,000 2,820,125
------------
BROADCASTING - 2.95%
TCI Communications, Inc.
8.75%, Sr. Debentures, 8/01/15 2,000,000 2,217,440
------------
FINANCIAL SERVICES - 4.97%
Jet Equipment Trust
9.71%, Subordinated Notes, 2/15/15 (2) 3,400,000 3,743,400
------------
FOREST & PAPER PRODUCTS - 2.72%
Buckeye Cellulose Corp.
8.50%, Sr. Subordinated Notes, 12/15/05 2,000,000 2,050,000
------------
HEALTHCARE\PHARMACEUTICAL - 2.70%
Universal Health Services, Inc.
8.75%, Sr. Notes, 8/15/05 2,000,000 2,035,000
------------
MEDIA & COMMUNICATION - 3.41%
Time Warner, Inc.
9.15%, Debentures, 2/01/23 2,250,000 2,569,950
------------
TEXTILES - 3.41%
Interface, Inc.
9.50%, Sr. Subordinated Notes, 11/15/05 (2) 2,500,000 2,562,500
------------
TOTAL CORPORATE BONDS
(cost $17,147,533) 17,998,415
------------
</TABLE>
24
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Principal
Security Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS - 19.22%
AUTOMOTIVE - 4.61%
MascoTech, Inc.
4.50%, Subordinated Debentures, 12/15/03 $ 4,430,000 $ 3,466,475
------------
DIVERSIFIED MANUFACTURING - 3.66%
Gencorp, Inc.
8.00%, Subordinated Debentures, 8/01/02 2,750,000 2,750,825
------------
FINANCIAL SERVICES - 2.45%
American Travellers Corp.
6.50%, Subordinated Debentures, 10/01/05 1,350,000 1,840,401
------------
HEALTHCARE\PHARMACEUTICAL - 4.40%
Roche Holdings, Inc.
0%, Liquid Yield Option Notes, 4/20/10 (2)(3) 7,500,000 3,309,375
------------
INSURANCE - 1.80%
Equitable Companies, Inc.
6.125%, Subordinated Debentures, 12/15/24 1,200,000 1,357,956
------------
OIL & GAS - 0.56%
Pogo Producing Co.
5.50%, Subordinated Notes, 3/15/04 300,000 418,980
------------
TECHNOLOGY - 0.73%
Thermo Electron Corp.
4.25%, Subordinated Debentures, 1/01/03 (2) 500,000 548,750
------------
TELECOMMUNICATIONS - 1.01%
California Microwave, Inc.
5.25%, Subordinated Notes, 12/15/03 905,000 762,462
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(cost $13,525,511) 14,455,224
------------
TOTAL INVESTMENT SECURITIES - 99.81%
(cost $68,342,242) 75,116,377
Other assets less liabilities - 0.19% 141,890
------------
Net Assets - 100.00% $ 75,258,267
------------
------------
</TABLE>
(1) Non-income producing security.
(2) Sale restricted to qualified institutional investors.
(3) Foreign denominated securities.
See accompanying notes to financial statements.
25
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
[PHOTO][LOGO]
PRESCOTT B. CROCKER ROBERT L. THOMAS
INVESTMENT ENVIRONMENT
THE MARKETS
- The year 1995 was extraordinarily good for the stock market. The S&P
500 index gained 34.1%.
- Stock prices responded to strong corporate earnings increases,
sharply lower interest rates, and the outlook for an extended
economic expansion.
- In late 1995 a slowing in global economic activity lead to inventory
corrections and reduced expectations for an increasing number of
companies. This along with federal budget uncertainties has caused
some increased price volatility.
THE FUND
- The Fund's return of 24.4% (T shares), in 1995 compared to 30.82% for
the Lipper Growth Fund Index. Most of the shortfall relative to the
broad averages occurred in the first quarter when Latin American
stocks declined sharply and unfounded fears of recession weighed
heavily on the cyclically sensitive holdings.
- Very strong gains were achieved in a variety of well capitalized,
high quality stocks such as Fannie Mae, Pfizer, Boeing, Texas
Instruments, British Sky Broadcasting and Philip Morris.
- Underperforming areas such as consumer durables were sold early in
the year. Technology, which was very strong at mid-year, was cut back
and finished 1995 with disappointing returns. Basic materials were
sold and technology cut back after mid-year while additions were made
to more consistent growers in consumer staples, energy, and financial
services.
CURRENT STRATEGY
- We continue to expect positive results for stocks in 1996. Slow
economic growth should continue in the first half but strengthen
later in the year because of low interest rates and more simulative
monetary policy. Stock prices look attractive relative to interest
rates. The major stock indices should appreciate by 5-10% supported
by modest earnings growth. Selective individual stocks should benefit
from superior growth in earnings, global competitive strength, large
stock buy backs, and substantial dividend increases.
- Stocks with long term consistent growth prospects have received more
emphasis with the largest holdings in consumer staples/health,
financial and energy. Technology was adjusted early in January to
emphasize consistent growth issues. Cash reserves were raised
slightly to be deployed opportunistically.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 EQUITY HOLDINGS
<S> <C> <C> <C>
NAME % FUND
1. Intel 4.0%
2. Philip Morris 3.6
3. WorldCom 3.3
4. Merck 3.2
5. Fannie Mae 3.1
6. National Semi 2.9
7. BankAmerica 2.8
8. Home Depot 2.8
9. Citicorp 2.7
10. Bristol Myers 2.6
---
31.0%
<CAPTION>
5 TOP SECTORS
SECTORS % FUND
<S> <C> <C> <C>
1. Consumer
Staples 22.1%
2. Technology 18.7
3. Financial 17.6
4. Energy 11.1
5. Capital Goods 7.4
---
76.9%
<CAPTION>
ASSET ALLOCATION
<S> <C> <C> <C>
Common Stock 94.9%
Convertible 4.9
</TABLE>
26
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
[LOGO]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE GROWTH
FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES THROUGH
THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 11.18% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 12.34% and 18.75% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on February 3, 1986 of 11.08% for Class T shares, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B of 5.00% declines to 0% and Class T shares of 4.00% declines
to 0% after five years; and maximum charge for Class C shares is 1.00% during
the first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE GROWTH FUND -- CLASS A
NORTHSTAR ADVANTAGE GROWTH FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS A S & P 500 CPI
6/05/95 9,525 10,000 10,000
6/30/95 9,866 10,280 10,010
7/31/95 10,333 10,607 10,030
8/31/95 10,321 10,604 10,040
9/30/95 10,555 11,095 10,050
10/31/95 10,310 11,039 10,080
11/30/95 10,635 11,492 10,080
12/31/95 10,623 11,760 10,080
CLASS B S & P 500 CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,850 10,280 10,010
7/31/95 10,340 10,607 10,030
8/31/95 10,322 10,604 10,040
9/30/95 10,556 11,095 10,050
10/31/95 10,299 11,039 10,080
11/30/95 10,636 11,492 10,080
12/31/95 10,686 11,760 10,080
</TABLE>
NORTHSTAR ADVANTAGE GROWTH FUND -- CLASS C
NORTHSTAR ADVANTAGE GROWTH FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS C S & P 500 CPI
6/05/95 10,000 10,000 10,000
6/30/95 10,253 10,280 10,010
7/31/95 10,737 10,607 10,030
8/31/95 10,720 10,604 10,040
9/30/95 10,887 11,095 10,050
10/31/95 10,699 11,039 10,080
11/30/95 11,036 11,492 10,080
12/31/95 11,029 11,760 10,080
CLASS T S & P 500 CPI
2/03/86 10,000 10,000 10,000
2/86 10,310 10,715 9,980
3/86 10,750 11,377 9,920
4/86 10,580 11,217 9,880
5/86 11,041 11,780 9,910
6/86 11,110 12,045 9,950
7/86 10,285 11,338 9,960
8/86 10,995 12,145 9,970
9/86 10,454 11,208 10,010
10/86 10,865 11,821 10,030
11/86 11,096 12,075 10,050
12/86 10,895 11,833 10,090
1/87 11,966 13,393 10,150
2/87 12,441 13,887 10,191
3/87 12,741 14,356 10,232
4/87 12,641 14,191 10,283
5/87 12,869 14,276 10,314
6/87 13,345 15,072 10,355
7/87 13,831 15,798 10,386
8/87 14,110 16,351 10,428
9/87 13,903 16,067 10,469
10/87 10,893 12,570 10,501
11/87 10,241 11,498 10,543
12/87 10,904 12,447 10,564
1/88 11,403 12,950 10,606
2/88 11,851 13,491 10,617
3/88 11,675 13,155 10,648
4/88 11,769 13,279 10,702
5/88 11,665 13,321 10,734
6/88 12,052 14,026 10,777
7/88 12,041 13,950 10,820
8/88 11,841 13,412 10,852
9/88 12,282 14,070 10,907
10/88 12,640 14,436 10,939
11/88 12,461 14,163 10,972
12/88 12,725 14,499 11,005
1/89 13,481 15,530 11,049
2/89 13,322 15,081 11,082
3/89 13,520 15,526 11,138
4/89 14,037 16,304 11,216
5/89 14,640 16,876 11,272
6/89 14,343 16,893 11,294
7/89 15,483 18,386 11,339
8/89 15,843 18,671 11,339
9/89 15,919 18,699 11,362
10/89 15,440 18,228 11,419
11/89 15,744 18,529 11,453
12/89 15,811 19,079 11,499
1/90 14,567 17,766 11,602
2/90 14,818 17,917 11,649
3/90 15,480 18,501 11,695
4/90 14,746 18,004 11,731
5/90 16,293 19,660 11,754
6/90 16,269 19,660 11,825
7/90 16,073 19,558 11,884
8/90 14,730 17,713 11,979
9/90 13,853 16,971 12,063
10/90 13,830 16,858 12,147
11/90 14,474 17,867 12,171
12/90 14,982 18,484 12,220
1/91 15,869 19,251 12,269
2/91 17,140 20,546 12,281
3/91 17,589 21,159 12,281
4/91 17,530 21,165 12,318
5/91 18,227 21,982 12,355
6/91 17,338 21,112 12,380
7/91 18,362 22,059 12,404
8/91 18,880 22,492 12,442
9/91 18,663 22,240 12,479
10/91 19,171 22,505 12,504
11/91 18,795 21,517 12,554
12/91 20,688 24,092 12,592
1/92 20,497 23,613 12,604
2/92 20,549 23,839 12,629
3/92 20,113 23,487 12,680
4/92 20,493 24,142 12,705
5/92 20,708 24,166 12,731
6/92 19,948 23,934 12,769
7/92 20,619 24,877 12,807
8/92 20,303 24,280 12,833
9/92 20,492 24,688 12,858
10/92 20,959 24,740 12,910
11/92 22,160 25,489 12,936
12/92 22,351 25,925 12,962
1/93 22,091 26,107 12,987
2/93 22,118 26,381 13,026
3/93 22,857 27,053 13,052
4/93 22,297 26,366 13,105
5/93 22,968 26,965 13,131
6/93 23,055 27,181 13,144
7/93 23,083 27,037 13,157
8/93 24,061 27,967 13,183
9/93 23,960 27,880 13,197
10/93 24,320 28,421 13,263
11/93 24,016 28,054 13,289
12/93 24,854 28,525 13,316
1/94 25,657 29,452 13,329
2/94 24,941 28,569 13,369
3/94 23,452 27,455 13,396
4/94 23,668 27,770 13,423
5/94 23,696 28,115 13,436
6/94 22,691 27,572 13,476
7/94 23,511 28,441 13,517
8/94 24,489 29,510 13,571
9/94 23,879 28,920 13,598
10/94 23,764 29,524 13,612
11/94 22,928 28,358 13,625
12/94 22,948 28,917 13,652
1/95 22,935 29,619 13,693
2/95 23,517 30,689 13,734
3/95 24,049 31,726 13,762
4/95 24,837 32,614 13,817
5/95 25,466 33,798 13,858
6/95 26,579 34,745 13,872
7/95 27,822 35,849 13,900
8/95 27,778 35,839 13,914
9/95 28,395 37,498 13,928
10/95 27,736 37,311 13,970
11/95 28,585 38,840 13,970
12/31/95 28,550 39,745 13,970
</TABLE>
27
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 97.35%
AEROSPACE - 0.69%
Boeing Co. 7,000 $ 548,625
------------
AUTOMOTIVE - 1.52%
Magna International, Inc. 28,000 1,211,000
------------
BANKING - 8.44%
Ahmanson (H.F.) & Co. 50,000 1,325,000
BankAmerica Corp. 35,000 2,266,250
Citicorp 32,300 2,172,175
Mellon Bank Corp. 18,000 967,500
------------
6,730,925
------------
BROADCASTING & CABLE - 1.80%
British Sky Broadcast Group PLC (1) 20,000 752,500
Source Media, Inc. 75,000 684,375
------------
1,436,875
------------
BUSINESS SERVICES - 3.29%
H & R Block, Inc. 37,500 1,518,750
Reuters Holdings PLC (1) 20,000 1,102,500
------------
2,621,250
------------
CHEMICALS - 0.99%
Air Products and Chemical, Inc. 15,000 791,250
------------
COMPUTER SERVICES - 2.41%
General Motors Corp.
Class E 37,000 1,924,000
------------
COSMETICS - 0.49%
Estee Lauder Companies, Inc. (2) 11,300 394,088
------------
ELECTRICAL EQUIPMENT - 5.22%
AMP, Inc. 48,000 1,842,000
General Electric Co. 20,000 1,440,000
Illinois Tool Works, Inc. 15,000 885,000
------------
4,167,000
------------
ELECTRONICS - 3.63%
DSC Communications Corp. (2) 54,500 2,009,687
LSI Logic Corp. (2) 27,000 884,250
------------
2,893,937
------------
FINANCIAL SERVICES - 8.06%
Dean Witter, Discover & Co. 30,000 1,410,000
Federal National Mortgage Association 20,000 2,482,500
MBNA Corp. 30,000 1,106,250
MGIC Investment Corp. 26,300 1,426,775
------------
6,425,525
------------
FOOD, BEVERAGE & TOBACCO - 6.56%
PanAmerican Beverages, Inc. 38,000 1,216,000
Pepsico, Inc. 20,000 1,117,500
Philip Morris Cos., Inc. 32,000 2,896,000
------------
5,229,500
------------
</TABLE>
28
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/ PHARMACEUTICAL - 11.62%
Abbott Laboratories 20,000 $ 835,000
Bristol-Myers, Squibb Co. 24,000 2,061,000
Merck & Co., Inc. 39,000 2,564,250
Pfizer, Inc. 30,000 1,890,000
Pharmacia & Upjohn, Inc. 49,500 1,918,125
------------
9,268,375
------------
HOUSEHOLD PRODUCTS - 1.87%
Procter & Gamble Co. 18,000 1,494,000
------------
INSURANCE - 1.45%
American International Group, Inc. 12,500 1,156,250
------------
LEISURE - 1.16%
Cedar Fair LP 25,000 925,000
------------
MACHINERY - 1.65%
Deere & Co. 18,000 634,500
Kennametal, Inc. 21,500 682,625
------------
1,317,125
------------
OFFICE EQUIPMENT - 1.55%
Xerox Corp. 9,000 1,233,000
------------
OIL & GAS - 11.31%
Amoco Corp. 24,000 1,725,000
El Paso Natural Gas Co. 40,000 1,135,000
ENI SpA (1) 30,000 1,027,500
Enron Oil And Gas Co. 40,000 960,000
Royal Dutch Petroleum Co. 10,000 1,411,250
Schlumberger Ltd. 26,000 1,800,500
Sonat, Inc. 27,000 961,875
------------
9,021,125
------------
PAPER & FOREST PRODUCTS - 0.65%
Kimberly-Clark Corp. 6,240 516,360
------------
RAILROADS & EQUIPMENT - 1.43%
Canadian National Railway Co. (3) 20,000 300,000
Conrail, Inc. 12,000 840,000
------------
1,140,000
------------
RETAIL & WHOLESALE - 3.73%
Home Depot, Inc. 46,000 2,202,250
Pep Boys-Manny, Moe & Jack 30,000 768,750
------------
2,971,000
------------
TECHNOLOGY - 9.99%
Applied Materials, Inc. (2) 26,000 1,023,750
Compaq Computer Corp. (2) 30,500 1,464,000
Intel Corp. 56,000 3,178,000
National Semiconductor Corp. (2) 103,400 2,300,650
------------
7,966,400
------------
</TABLE>
29
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Shares/Principal
Security Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS - 6.38%
Alltel Corp. 39,000 $ 1,150,500
GTE Corp. 29,000 1,276,000
WorldCom, Inc. (2) 75,500 2,661,375
------------
5,087,875
------------
WIRELESS COMMUNICATION - 1.46%
Nokia Corp. (1) 30,000 1,166,250
------------
TOTAL COMMON STOCKS
(cost $70,572,746) 77,636,735
------------
CONVERTIBLE PREFERRED STOCK - .51%
HOUSEHOLD PRODUCTS - 0.51%
Amway Japan Ltd. (1) 20,900 407,550
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $400,444) 407,550
------------
CONVERTIBLE BONDS - 1.97%
GAMING - 1.14%
Argosy Gaming Corp.
12.00%, Subordinated Notes, 6/01/01 $ 1,000,000 907,500
------------
HEALTHCARE - 0.83%
Roche Holdings, Inc.
0%, Liquid Yield Option Notes, 4/20/10 (3) (4) 1,500,000 661,875
------------
TOTAL CONVERTIBLE BONDS
(cost $1,671,980) 1,569,375
------------
TOTAL INVESTMENT SECURITIES - 99.83%
(cost $72,645,170) 79,613,660
REPURCHASE AGREEMENT - 1.84%
Agreement with State Street Bank and Trust
bearing interest at 5.25% dated 12/29/95 to be
repurchased 1/02/96 at $1,469,857 and
collateralized by $1,465,000 U.S. Treasury Notes,
6.875% due 10/31/96, value $1,499,638 (cost
$1,469,643) 1,469,000 1,469,643
Liabilities in excess of other assets - (1.67)% (1,330,250)
------------
Net Assets - 100.00% $ 79,753,053
------------
------------
</TABLE>
(1) American Depositary Receipts.
(2) Non-income producing securities.
(3) Foreign securities.
(4) Convertible into a 144A American Depository shares.
See accompanying notes to financial statements.
30
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
[PHOTO][LOGO]
ROBERT L. THOMAS
INVESTMENT ENVIRONMENT
THE MARKETS
- Prices of both stocks and bonds performed admirably in 1995, with the
Dow Jones Industrial Average providing a total return of 33.4% and
the long-term U.S. Treasuries returning 29.95%. Each of those rates
was more than three times historic average returns.
- For common stock owners, 1995 provided a year of sharply rising
corporate profit margins on quite modest sales gains. Bond-holders
were beneficiaries of the continuing positive news on inflation at a
point so far enough along in the economic recovery that "overheating"
would have come as no surprise.
- At year-end, signs of an economic slowdown were abundant, and prompt
action by the Federal Reserve to stimulate the economy was a
reasonable expectation. With or without that stimulus, smaller sales
and profit gains are likely this year. On the other hand, we expect
significant increases in corporate dividends and still lower interest
rates to offset any disappointment in earnings reports.
THE FUND
- Effective February 1, 1996, Navellier Fund Management, Inc. will
assume day to day investment management of the Fund's portfolio
pursuant to a Subadvisory Agreement with the Fund's Adviser approved
by shareholders at a meeting held on January 30, 1996.
- The Special Fund's return of 11.34% (T shares), lagged the indicies
and most other funds in the "small cap" category. While the return
was actually higher than average historic returns for stocks, it was
a year when more exceptional returns were commonplace. The Fund's
five-year average annual return of 18.1%, although below the average
for all small cap funds, places the Fund among the top 14% of funds
in the Lipper universe.
- The Fund's performance reflected its relatively small commitments to
the technology sector in the first half of the year, modest holdings
in financial services stock which did well as interest rates
continued to fall; and oversized holdings in consumer-related stocks
which performed poorly through much of the year.
- In the course of the year, we increased the Fund's liquidity by
buying larger companies then we have in the past. In each of the past
two years, larger companies have outperformed small companies -
perhaps because individuals are increasingly buying funds which favor
larger companies rather than individual stocks, and also perhaps
because the huge flood of new issues of small companies has created
an imbalance in supply and demand. We continue to believe that small
companies provide exceptional value to the patient investor.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
<S> <C> <C> <C>
NAME % FUND
1. NFO Research 4.3%
2. Comair 3.6
3. MEMC 3.5
4. Oak Tech 3.4
5. WorldCom 2.8
6. Daka Int'l 2.8
7. Vicor 2.7
8. Fresenius 2.7
9. Paging Network 2.6
10. Cambridge 2.3
---
30.7%
<CAPTION>
5 TOP INDUSTRIES
SECTORS % FUND
<S> <C> <C> <C>
1. Technology 18.2%
2. Airlines 8.6
3. Computer
Software 8.1
4. Business
Services 7.5
5. Consumer
Nondur. 6.7
---
49.1%
<CAPTION>
ASSET ALLOCATION
<S> <C> <C> <C>
Common Stock 91.3%
Convertible 2.5
</TABLE>
31
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE SPECIAL
FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES THROUGH
THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 12.32% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 12.22% and 19.70% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on February 3, 1986 of 9.42% for Class T shares, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B of 5.00% declines to 0% and Class T shares of 4.00% declines
to 0% after five years; and maximum charge for Class C shares is 1.00% during
the first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE SPECIAL FUND -- CLASS A
NORTHSTAR ADVANTAGE SPECIAL FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS A RUSSELL 2000 CPI
6/05/95 9,525 10,000 10,000
6/30/95 10,231 10,949 10,010
7/31/95 10,708 12,198 10,030
8/31/95 10,864 12,681 10,040
9/30/95 10,888 13,138 10,050
10/31/95 10,431 11,821 10,080
11/30/95 10,717 12,855 10,080
12/31/95 10,686 13,528 10,080
CLASS B RUSSELL 2000 CPI
6/05/95 10,000 10,000 10,000
6/30/95 10,247 10,949 10,010
7/31/95 10,732 12,198 10,030
8/31/95 10,886 12,681 10,040
9/30/95 10,911 13,138 10,050
10/31/95 10,420 11,821 10,080
11/30/95 10,712 12,855 10,080
12/31/95 10,679 13,528 10,080
</TABLE>
NORTHSTAR ADVANTAGE SPECIAL FUND -- CLASS C
NORTHSTAR ADVANTAGE SPECIAL FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS C RUSSELL 2000 CPI
6/05/95 10,000 10,000 10,000
6/30/95 10,641 10,949 10,010
7/31/95 11,132 12,198 10,030
8/31/95 11,286 12,681 10,040
9/30/95 11,306 13,138 10,050
10/31/95 10,820 11,821 10,080
11/30/95 11,117 12,855 10,080
12/31/95 11,079 13,528 10,080
CLASS T RUSSELL 2000 CPI
2/03/86 10,000 10,000 10,000
2/86 10,190 10,000 9,980
3/86 10,330 10,470 9,920
4/86 10,349 10,621 9,880
5/86 10,369 10,994 9,910
6/86 10,119 10,964 9,950
7/86 9,419 9,830 9,960
8/86 9,488 10,122 9,970
9/86 9,089 9,468 10,010
10/86 9,289 9,820 10,030
11/86 9,139 9,771 10,050
12/86 8,919 9,475 10,090
1/87 9,739 10,516 10,150
2/87 10,289 11,438 10,191
3/87 10,259 11,758 10,232
4/87 9,809 11,344 10,283
5/87 9,719 11,280 10,314
6/87 9,849 11,577 10,355
7/87 10,198 11,962 10,386
8/87 10,488 12,371 10,428
9/87 10,418 12,069 10,469
10/87 7,569 7,571 10,501
11/87 7,488 7,219 10,543
12/87 7,898 7,665 10,564
1/88 8,158 7,927 10,606
2/88 8,498 8,538 10,617
3/88 8,608 8,905 10,648
4/88 8,987 9,085 10,702
5/88 8,887 8,850 10,734
6/88 9,598 9,473 10,777
7/88 9,428 9,378 10,820
8/88 9,328 9,103 10,852
9/88 9,508 9,319 10,907
10/88 9,358 9,197 10,939
11/88 9,227 8,856 10,972
12/88 9,548 9,192 11,005
1/89 10,127 9,615 11,049
2/89 9,977 9,664 11,082
3/89 10,157 9,893 11,138
4/89 10,847 10,367 11,216
5/89 11,266 10,871 11,272
6/89 11,047 10,555 11,294
7/89 11,496 11,085 11,339
8/89 12,016 11,375 11,339
9/89 11,976 11,376 11,362
10/89 11,486 10,510 11,419
11/89 11,567 10,563 11,453
12/89 11,666 10,573 11,499
1/90 10,826 9,445 11,602
2/90 10,996 9,743 11,649
3/90 11,566 10,152 11,695
4/90 11,316 9,752 11,731
5/90 12,675 10,500 11,754
6/90 13,095 10,516 11,825
7/90 12,605 9,949 11,884
8/90 11,255 8,396 11,979
9/90 10,116 7,636 12,063
10/90 9,866 7,208 12,147
11/90 10,416 7,651 12,171
12/90 10,635 7,906 12,220
1/91 11,315 8,577 12,269
2/91 12,465 9,540 12,281
3/91 13,174 10,284 12,281
4/91 13,224 10,256 12,318
5/91 13,934 10,818 12,355
6/91 12,964 9,994 12,380
7/91 13,843 10,360 12,404
8/91 14,753 10,825 12,442
9/91 14,912 10,907 12,479
10/91 15,802 11,279 12,504
11/91 14,883 10,592 12,554
12/91 16,725 11,611 12,592
1/92 17,841 12,863 12,604
2/92 17,798 13,410 12,629
3/92 16,915 12,701 12,680
4/92 15,799 12,030 12,705
5/92 15,862 12,224 12,731
6/92 15,479 11,368 12,769
7/92 16,213 11,859 12,807
8/92 15,777 11,359 12,833
9/92 16,053 11,692 12,858
10/92 17,180 12,187 12,910
11/92 18,561 13,477 12,936
12/92 19,155 14,164 12,962
1/93 19,805 14,876 12,987
2/93 19,034 14,277 13,026
3/93 19,971 14,965 13,052
4/93 19,266 14,272 13,105
5/93 20,081 15,234 13,131
6/93 20,015 15,361 13,144
7/93 20,411 15,698 13,157
8/93 21,391 16,782 13,183
9/93 22,415 17,587 13,197
10/93 23,088 18,365 13,263
11/93 22,483 17,222 13,289
12/93 23,020 18,221 13,316
1/94 23,816 19,245 13,329
2/94 23,650 19,110 13,369
3/94 22,519 17,150 13,396
4/94 22,299 17,330 13,423
5/94 21,955 16,928 13,436
6/94 20,871 15,849 13,476
7/94 21,202 16,273 13,517
8/94 22,687 17,804 13,571
9/94 23,052 17,653 13,598
10/94 22,586 17,515 13,612
11/94 21,301 16,177 13,625
12/94 21,900 16,877 13,652
1/95 21,276 16,457 13,693
2/95 21,722 17,591 13,734
3/95 22,057 18,115 13,762
4/95 21,320 18,809 13,817
5/95 21,710 19,354 13,858
6/95 23,428 21,191 13,872
7/95 24,487 23,609 13,900
8/95 24,832 24,544 13,914
9/95 24,876 25,427 13,928
10/95 23,817 22,880 13,970
11/95 24,465 24,879 13,970
12/31/95 24,384 26,183 13,970
</TABLE>
32
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 91.31%
AIRLINES - 6.53%
America West Airlines, Inc. 40,000 $ 680,000
Atlantic Coast Airlines, Inc. 30,000 307,500
Comair Holdings, Inc. 50,000 1,343,750
Greenwich Air Service, Inc. 5,000 115,000
------------
2,446,250
------------
AUTOMOTIVE - 2.46%
Cherry Corp. (1) 20,000 195,000
Lear Seating Corp. (1) 25,000 725,000
------------
920,000
------------
BROADCASTING & MEDIA - 2.36%
Spelling Entertainment Group, Inc. 25,000 312,500
Viacom, Inc. (1) 6,061 287,140
Young Broadcasting, Inc. 10,000 282,500
------------
882,140
------------
BUSINESS SERVICES - 7.48%
Bell & Howell Holdings Co. (1) 12,500 350,000
Cambridge Technology Partners, Inc. (1) 15,000 862,500
NFO Research, Inc. (1) 60,000 1,590,000
------------
2,802,500
------------
CAPITAL GOODS - 1.36%
AGCO Corp. 10,000 510,000
------------
COMMUNICATIONS - 5.42%
Paging Network, Inc. (1) 40,000 975,000
WorldCom, Inc. 30,000 1,057,500
------------
2,032,500
------------
COMPUTER HARDWARE - 2.47%
Encad, Inc. (1) 20,000 350,000
Mylex Corp. (1) 30,000 573,750
------------
923,750
------------
COMPUTER SOFTWARE - 8.14%
Macromedia, Inc. (1) 15,000 783,750
Progress Software Corp. (1) 20,000 750,000
Sanctuary Woods Multimedia Corp. 100,000 287,500
Software 2000, Inc. 100,000 775,000
Systemsoft Corp. (1) 40,000 450,000
------------
3,046,250
------------
CONSUMER NONDURABLES - 6.22%
Cinram Ltd. (2) 30,000 551,995
De Rigo SpA (3) 25,000 568,750
Mattel, Inc. 24,901 765,706
Safety 1st, Inc. (1) 30,000 442,500
------------
2,328,951
------------
CONSUMER SERVICES - 1.09%
Team Rental Group, Inc. (1) 48,000 408,000
------------
</TABLE>
33
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES - 2.75%
20th Century Industries 30,000 $ 596,250
Surety Capital Corp. (1) 124,000 434,000
------------
1,030,250
------------
FOOD & BEVERAGE - 0.92%
Pepsi-Cola Puerto Rico Bottling Co. 30,000 345,000
------------
HEALTHCARE - 5.80%
Elan PLC (1)(3) 15,000 729,375
Fresenius USA, Inc. (1) 50,000 993,750
TECNOL Medical Products, Inc. (1) 25,000 450,000
------------
2,173,125
------------
INDUSTRIAL MANUFACTURING - 5.25%
CasTech Aluminum Group, Inc. (1) 28,700 387,450
Greenfield Industries, Inc. 25,000 781,250
Haskel International, Inc. 20,000 117,500
Thermo Fibertek, Inc. (1) 30,000 678,750
------------
1,964,950
------------
OIL & GAS - 3.77%
Barrett Resources Corp. (1) 20,000 587,500
Smith International, Inc. 35,000 822,500
------------
1,410,000
------------
PACKAGING - 0.85%
Brockway Standard Holdings Corp. (1) 20,000 317,500
------------
RESTAURANTS - 4.06%
Daka International, Inc 38,400 1,056,000
Italian Oven, Inc. 60,000 465,000
------------
1,521,000
------------
RETAIL - 4.77%
Department 56, Inc. (1) 15,000 575,625
Dollar General Corp. 19,531 405,268
Zale Corp. (1) 50,000 806,250
------------
1,787,143
------------
TECHNOLOGY - 18.18%
General Scanning, Inc. 40,000 400,000
Marshall Industries (1) 15,000 481,875
MEMC Electronic Materials, Inc. 40,000 1,305,000
Molex, Inc. 18,750 574,219
Oak Technology, Inc. (1) 30,000 1,267,500
Rainbow Technologies, Inc. 25,000 540,625
SDL, Inc. 20,000 480,000
Smart Modular Technologies, Inc. 10,000 106,250
Trimble Navigation Ltd. (1) 35,000 651,875
Vicor Corp. (1) 50,000 1,000,000
------------
6,807,344
------------
TRANSPORTATION - 1.43%
Swift Transportation Corp. (1) 35,000 533,750
------------
TOTAL COMMON STOCK
(cost $27,096,147) 34,190,403
------------
</TABLE>
34
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Principal
Security Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS - 2.47%
AIRLINES - 2.03%
Greenwich Air Services, Inc.
8.00%, Subordinated Debentures, 11/15/00 $ 400,000 $ 761,000
------------
CONSUMER NONDURABLES - 0.44%
Roadmaster Industries, Inc.
8.00%, Subordinated Debentures, 8/15/03 200,000 164,500
------------
TOTAL CONVERTIBLE BONDS
(cost $635,000) 925,500
------------
TOTAL INVESTMENT SECURITIES - 93.78%
(cost $27,731,147) 35,115,903
REPURCHASE AGREEMENT - 5.54%
Agreement with State Street Bank and Trust
bearing interest at 5.25% dated 12/29/95 to be
repurchased 1/02/96 at $2,073,209 and
collateralized
by $2,065,000 U.S. Treasury Notes, 6.875% due
10/31/96,
value $2,113,824 (cost $2,072,907) 2,072,000 2,072,907
Other assets less liabilities - 0.68% 256,180
------------
Net Assets - 100.00% $ 37,444,990
------------
------------
</TABLE>
(1) Non-income producing security.
(2) Foreign denominated securities.
(3) American Depositary Receipt.
See accompanying notes to financial statements.
35
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Northstar Northstar
Advantage Advantage Northstar Northstar Northstar Northstar
Government Strategic Advantage Advantage Advantage Advantage
Securities Income High Yield Income Growth Special
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
ASSETS:
Investments in securities, at value (cost
$146,502,019, $70,951,380, $169,134,498, $68,342,242,
$72,645,170 and $27,731,147, respectively) $156,009,943 $71,502,037 $169,064,242 $75,116,377 $79,613,660 $35,115,903
Repurchase agreements 3,595,572 3,226,411 8,112,548 0 1,469,643 2,072,907
Cash 815 705 659 1,097,446 1,917 196
Dividends and interest receivable 633,756 1,631,855 3,784,598 852,842 184,573 19,113
Receivable for shares of beneficial interest sold 225,782 415,826 1,669,367 36,254 159,610 33,867
Prepaid expenses 6,306 85,213 8,360 5,573 724 4,458
Due from advisor 0 7,304 0 0 0 733
Receivable for investments sold 0 0 10,000 0 0 387,500
------------------------------------------------------------------------
Total Assets 160,472,174 76,869,351 182,649,774 77,108,492 81,430,127 37,634,677
------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 2,963,438 0 1,915,000 500,000 0 0
Dividend payable 283,587 319,269 719,805 1,203,338 1,456,891 98,895
Distribution fee payable 85,112 50,687 103,502 48,715 64,954 29,344
Investment advisory fee payable 58,821 43,920 67,238 42,128 51,812 24,128
Payable for shares of beneficial interest reacquired 25,863 56,606 71,128 11,511 46,668 464
Accounting and custodian fee payable 13,873 12,868 19,168 13,516 16,416 7,897
Accrued expenses 58,231 52,577 104,197 31,017 40,333 28,959
------------------------------------------------------------------------
Total Liabilities 3,488,925 535,927 3,000,038 1,850,225 1,677,074 189,687
------------------------------------------------------------------------
NET ASSETS $156,983,249 $76,333,424 $179,649,736 $75,258,267 $79,753,053 $37,444,990
------------------------------------------------------------------------
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.01 par value
outstanding
(unlimited shares authorized), $173,066,366 $78,628,070 $188,493,927 $68,394,138 $72,762,775 $30,060,234
Undistributed net investment income (loss) (328,169) 104,844 (37,974) (50,342) (27,666) 0
Accumulated net realized gain (loss) on investments,
foreign currency, options, and futures (25,262,872) (2,413,429) (8,735,961) 140,336 49,454 0
Net unrealized appreciation (depreciation) of
investments and foreign currency 9,507,924 13,939 (70,256) 6,774,135 6,968,490 7,384,756
------------------------------------------------------------------------
Net Assets $156,983,249 $76,333,424 $179,649,736 $75,258,267 $79,753,053 $37,444,990
------------------------------------------------------------------------
CLASS A:
Net Assets $3,234,699 $21,790,419 $7,466,081 $796,886 $1,354,561 $2,335,103
------------------------------------------------------------------------
Shares outstanding 321,185 1,757,737 872,019 63,584 87,218 111,604
------------------------------------------------------------------------
Net asset value and redemption value per share
(net assets/shares outstanding) $10.07 $12.40 $8.56 $12.53 $15.53 $20.92
------------------------------------------------------------------------
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price) $10.57 $13.02 $8.99 $13.15 $16.30 $21.96
------------------------------------------------------------------------
CLASS B:
Net Assets $2,789,619 $22,142,826 $29,062,558 $1,759,236 $1,986,942 $1,490,929
------------------------------------------------------------------------
Shares outstanding 276,968 1,786,800 3,392,409 140,614 128,174 71,553
------------------------------------------------------------------------
Net asset value and offering price per share $10.07 $12.39 $8.57 $12.51 $15.50 $20.84
------------------------------------------------------------------------
CLASS C:
Net Assets $7,573 $2,171,805 $3,410,152 $230,585 $68,902 $61,753
------------------------------------------------------------------------
Shares outstanding 752 175,474 398,145 18,424 4,445 2,963
------------------------------------------------------------------------
Net asset value and offering price per share $10.07 $12.38 $8.57 $12.52 $15.50 $20.84
------------------------------------------------------------------------
CLASS T:
Net Assets $150,951,358 $30,228,374 $139,710,945 $72,471,560 $76,342,648 $33,557,205
------------------------------------------------------------------------
Shares outstanding 14,993,613 2,439,270 16,315,322 5,779,671 4,917,043 1,610,464
------------------------------------------------------------------------
Net asset value and offering price per share $10.07 $12.39 $8.56 $12.54 $15.53 $20.84
------------------------------------------------------------------------
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (cost
$146,502,019, $70,951,380, $169,134,498, $68,342,242,
$72,645,170 and $27,731,147, respectively)
Repurchase agreements
Cash
Dividends and interest receivable
Receivable for shares of beneficial interest sold
Prepaid expenses
Due from advisor
Receivable for investments sold
Total Assets
LIABILITIES:
Payable for investments purchased
Dividend payable
Distribution fee payable
Investment advisory fee payable
Payable for shares of beneficial interest reacquired
Accounting and custodian fee payable
Accrued expenses
Total Liabilities
NET ASSETS
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.01 par value
outstanding
(unlimited shares authorized),
Undistributed net investment income (loss)
Accumulated net realized gain (loss) on investments,
foreign currency, options, and futures
Net unrealized appreciation (depreciation) of
investments and foreign currency
Net Assets
CLASS A:
Net Assets
Shares outstanding
Net asset value and redemption value per share
(net assets/shares outstanding)
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price)
CLASS B:
Net Assets
Shares outstanding
Net asset value and offering price per share
CLASS C:
Net Assets
Shares outstanding
Net asset value and offering price per share
CLASS T:
Net Assets
Shares outstanding
Net asset value and offering price per share
</TABLE>
Redemption price per share varies with the length of time Class B, C and T
shares are held.
See accompanying notes to financial statements.
36
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Advantage Advantage Advantage Northstar Northstar Northstar
Government Strategic High Advantage Advantage Advantage
Securities Income Yield Income Growth Special
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of withholding
taxes $0, $0, $0, $1,447,
$18,573 and $0, respectively) -- $31,371 $555,999 $1,831,989 $1,329,626 $142,461
Interest (net of withholding
taxes $0, $10,163, $31,854, $0,
$0 and $0, respectively) $11,347,423 3,805,526 16,157,384 2,662,506 546,337 113,192
---------------------------------------------------------------
Total investment income 11,347,423 3,836,897 16,713,383 4,494,495 1,875,963 255,653
---------------------------------------------------------------
EXPENSES:
Investment advisory and
management fees 980,772 252,201 683,323 477,095 593,282 287,311
Distribution fees
Class A 1,392 15,416 7,358 835 2,523 3,463
Class B 6,354 40,187 59,176 5,264 5,718 5,097
Class C 32 3,773 8,287 449 245 283
Class T 973,588 278,019 927,236 544,122 737,831 347,851
Transfer agent fees and expenses
Class A 522 9,786 2,741 353 1,406 1,105
Class B 649 6,398 5,537 623 609 399
Class C 4 460 837 38 37 30
Class T 90,322 19,557 98,363 60,531 71,362 45,637
Printing and postage expenses 20,426 15,265 27,529 8,874 11,651 5,691
Registration fees 17,588 28,854 28,267 19,541 17,919 19,431
Accounting and Custodian fees 81,209 67,047 96,884 74,361 78,042 55,625
Audit fees 30,013 11,167 27,168 13,080 14,506 11,817
Directors 19,122 15,058 18,772 15,878 16,361 23,849
Legal fees 8,221 3,964 8,652 1,408 5,148 3,443
Insurance 25,039 4,599 23,405 11,361 16,742 7,913
Organization 0 21,167 0 0 0 0
Miscellaneous expenses 5,944 12,939 8,652 989 4,117 3,628
---------------------------------------------------------------
2,261,197 805,857 2,032,187 1,234,802 1,577,499 822,573
Less expenses reimbursed/waived
by management company 301,776 87,944 0 0 0 733
---------------------------------------------------------------
Total expenses 1,959,421 717,913 2,032,187 1,234,802 1,577,499 821,840
---------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 9,388,002 3,118,984 14,681,196 3,259,693 298,464 (566,187)
---------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain(loss) on
investments 10,033,763 657,579 (5,577,338) 6,842,914 16,582,023 1,862,208
Net realized gain(loss) on
foreign currency 0 (15,982) (61,890) 0 (27,666) 21
Net realized loss on options and
futures 0 (84,957) 0 0 0 0
Net change in unrealized
appreciation of investments 11,830,566 1,109,531 9,968,024 6,328,209 160,556 2,669,199
Net change in unrealized
appreciation of foreign
currency 0 13,355 0 0 0 0
---------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 21,864,329 1,679,526 4,328,796 13,171,123 16,714,913 4,531,428
---------------------------------------------------------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $31,252,331 $4,798,510 $19,009,992 $16,430,816 $17,013,377 $3,965,241
---------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Advantage Advantage Advantage
Government Strategic High
Securities Income Yield
Fund Fund Fund
---------------------- ---------------------- ----------------------
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $9,388,002 $9,969,143 $3,118,984 $709,465 $14,681,196 $12,572,129
Net realized gain (loss) on
investments 10,033,763 (16,686,437) 657,579 107,862 (5,577,338) (3,158,623)
Net realized loss on foreign currency 0 0 (15,982) 0 (61,890) 0
Net realized loss on options and
futures 0 0 (84,957) 0 0 0
Net change in unrealized appreciation
(depreciation) of investments 11,830,566 (11,609,888) 1,109,531 (573,620) 9,968,024 (12,836,963)
Net change in unrealized appreciation
of foreign currency 0 0 13,355 0 0 0
---------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 31,252,331 (18,327,182) 4,798,510 243,707 19,009,992 (3,423,457)
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (31,103) 0 (382,101) 0 (238,931) 0
Class B (34,991) 0 (315,465) 0 (537,227) 0
Class C (156) 0 (29,224) 0 (76,102) 0
Class T (9,374,624) (10,141,623) (2,318,425) (709,465) (13,814,466) (12,847,877)
In excess of net investment income (328,169) (48,535) 0 (31,758) (37,974) 0
Net realized gain from investments 0 0 0 (96,195) 0 (90,444)
Tax return of capital 0 (175,125) 0 0 0 0
---------------------------------------------------------------------
Total distributions (9,769,043) (10,365,283) (3,045,215) (837,418) (14,704,700) (12,938,321)
---------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 9,486,902 21,123,034 15,818,725 26,116,925 54,017,286 43,821,554
Net proceeds from merger (note 8) 0 0 45,577,269 0 0 0
Net asset value of shares issued to
shareholders in reinvestment of
dividends 6,083,503 6,296,992 1,467,264 488,237 7,796,432 7,185,417
---------------------------------------------------------------------
15,570,405 27,420,026 62,863,258 26,605,162 61,813,718 51,006,971
Cost of shares redeemed (32,678,732) (30,274,780) (13,535,436) (859,152) (22,895,030) (23,314,935)
---------------------------------------------------------------------
Net increase (decrease) in net assets
derived from capital share
transactions (17,108,327) (2,854,754) 49,327,822 25,746,010 38,918,688 27,692,036
---------------------------------------------------------------------
Net increase (decrease) in net assets 4,374,961 (31,547,219) 51,081,117 25,152,299 43,223,980 11,330,258
NET ASSETS:
Beginning of period 152,608,288 184,155,507 25,252,307 100,008 136,425,756 125,095,498
End of period (including undistributed
(overdistributed) net investment
income: $(328,169), $0; $104,844,
$24,028,
---------------------------------------------------------------------
$(37,974) and $47,420, respectively) $156,983,249 $152,608,288 $76,333,424 $25,252,307 $179,649,736 $136,425,756
---------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
[LOGO]
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Advantage Advantage Advantage
Income Growth Special
Fund Fund Fund
---------------------- ---------------------- ----------------------
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $3,259,693 $3,482,966 $298,464 $394,554 $(566,187) $(446,594)
Net realized gain on investments 6,842,914 1,000,270 16,582,023 656,441 1,862,208 267,480
Net realized gain (loss) on foreign
currency 0 0 (27,666) 0 21 0
Net change in unrealized appreciation
of investments 6,328,209 (8,922,243) 160,556 (7,523,774) 2,669,199 (1,674,276)
---------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 16,430,816 (4,439,007) 17,013,377 (6,472,779) 3,965,241 (1,853,390)
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (16,747) 0 (5,272) 0 0 0
Class B (35,496) 0 (330) 0 0 0
Class C (3,103) 0 (5) 0 0 0
Class T (3,228,817) (3,524,386) (265,197) (414,465) 0 0
Distributions in excess of net
investment income (50,342) (100,848) (27,660) 0 0 0
Net realized gain from investments (6,865,265) (956,639) (16,582,008) (702,318) (1,761,465) (267,480)
Tax return of capital 0 0 0 (104,514) 0 0
---------------------------------------------------------------------
Total distributions (10,199,770) (4,581,873) (16,880,472) (1,221,297) (1,761,465) (267,480)
---------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 4,370,028 10,355,024 10,998,087 12,408,096 8,290,445 17,069,716
Net asset value of shares issued to
shareholders in reinvestment of
dividends 8,536,854 3,770,123 15,393,542 1,098,246 1,662,683 254,328
---------------------------------------------------------------------
12,906,882 14,125,147 26,391,629 13,506,342 9,953,128 17,324,044
Cost of shares redeemed (17,643,533) (12,181,158) (23,161,995) (10,180,895) (13,560,271) (5,193,117)
---------------------------------------------------------------------
Net increase (decrease) in net assets
derived from capital share
transactions (4,736,651) 1,943,989 3,229,634 3,325,447 (3,607,143) 12,130,927
---------------------------------------------------------------------
Net increase (decrease) in net assets 1,494,395 (7,076,891) 3,362,539 (4,368,629) (1,403,367) 10,010,057
NET ASSETS:
Beginning of period 73,763,872 80,840,763 76,390,514 80,759,143 38,848,357 28,838,300
End of period (including undistributed
(overdistributed) net investment
income: $(50,342), $24,470;
$(27,666), $0,
---------------------------------------------------------------------
$0 and $0, respectively) $75,258,267 $73,763,872 $79,753,053 $76,390,514 $37,444,990 $38,848,357
---------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD
<TABLE>
<CAPTION>
Net
realized
& Dividends Distributions
Net Asset unrealized declared declared Net Asset
Value, Net gain (loss) Total from from net from net Distributions Value,
Period beginning investment on investment investment realized from Total end of Total
ended of period income investments operations income gain Capital Distributions period Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Government Securities Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 $9.51 $0.34 $0.59 $0.93 ($0.37) -- -- ($0.37) $10.07 10.04%
Government Securities Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 9.51 0.30 0.59 0.89 (0.33) -- -- (0.33) 10.07 9.61
Government Securities Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 9.51 0.30 0.59 0.89 (0.33) -- -- (0.33) 10.07 9.61
Government Securities Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 8.74 0.58 1.35 1.93 (0.60) -- -- (0.60) 10.07 22.90
12/31/94 10.32 0.56 (1.56) (1.00) (0.57) -- (0.01) (0.58) 8.74 (9.82)
12/31/93 9.22 0.59 1.09 1.68 (0.58) -- -- (0.58) 10.32 18.48
12/31/92 8.99 0.61 0.23 0.84 (0.61) -- -- (0.61) 9.22 9.77
12/31/91 8.47 0.67 0.52 1.19 (0.67) -- -- (0.67) 8.99 14.73
12/31/90 8.47 0.68 -- 0.68 (0.68) -- -- (0.68) 8.47 8.57
Strategic Income Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 12.24 0.63 0.13 0.76 (0.60) -- -- (0.60) 12.40 6.40
Strategic Income Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 12.24 0.55 0.15 0.70 (0.55) -- -- (0.55) 12.39 5.89
Strategic Income Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 12.24 0.55 0.14 0.69 (0.55) -- -- (0.55) 12.38 5.81
Strategic Income Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 11.71 0.98 0.66 1.64 (0.96) -- -- (0.96) 12.39 14.54
7/01/94-
12/31/94 12.00 0.51 (0.25) 0.26 (0.49) (0.05) (0.01) (0.55) 11.71 2.14
High Yield Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 8.68 0.48 (0.10) 0.38 (0.50) -- -- (0.50) 8.56 4.48
High Yield Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 8.68 0.44 (0.09) 0.35 (0.46) -- -- (0.46) 8.57 4.17
High Yield Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 8.68 0.44 (0.09) 0.35 (0.46) -- -- (0.46) 8.57 4.17
High Yield Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 8.29 0.84 0.26 1.10 (0.83) -- -- (0.83) 8.56 13.71
12/31/94 9.31 0.81 (0.99) (0.18) (0.83) (0.01) -- (0.84) 8.29 (2.18)
12/31/93 9.09 0.85 0.80 1.65 (0.83) (0.60) -- (1.43) 9.31 18.89
12/31/92 7.94 0.92 1.19 2.11 (0.94) (0.02) -- (0.96) 9.09 27.57
12/31/91 6.27 1.08 1.67 2.75 (1.08) -- -- (1.08) 7.94 46.49
12/31/90 8.55 1.12 (2.30) (1.18) (1.10) -- -- (1.10) 6.27 (14.59)
<CAPTION>
Ratio of
net
Net Ratio of Ratio of investment
Assets, expenses expense income to
end of to average reimbursement average
Period period net to average net Portfolio
ended (000's) assets(1) net assets(1) assets(1) turnover
<S> <C> <C> <C> <C> <C>
- ---------
- ---------
6/05/95
12/31/95 $3,235 1.02% 0.20% 6.01% 295%
- ---------
6/05/95
12/31/95 2,790 1.70 0.20 5.20 295
- ---------
6/05/95
12/31/95 8 1.68 0.20 5.28 295
- ---------
12/31/95 150,951 1.30 0.20 6.23 295
12/31/94 152,608 1.29 0.20 6.00 315
12/31/93 184,156 1.31 0.20 5.83 81
12/31/92 144,144 1.39 0.20 6.81 120
12/31/91 121,389 1.44 0.20 7.68 87
12/31/90 108,420 1.43 0.20 8.23 17
- ---------
6/05/95
12/31/95 21,790 1.36 0.07 7.03 153
- ---------
6/05/95
12/31/95 22,143 2.06 0.06 6.47 153
- ---------
6/05/95
12/31/95 2,172 2.02 0.06 6.48 153
- ---------
12/31/95 30,228 1.90 0.28 6.86 153
7/01/94
12/31/94 25,252 1.90 0.63 7.92 156
- ---------
6/05/95
12/31/95 7,466 1.02 -- 9.83 103
- ---------
6/05/95
12/31/95 29,063 1.71 -- 9.18 103
- ---------
6/05/95
12/31/95 3,410 1.72 -- 9.29 103
- ---------
12/31/95 139,711 1.33 -- 9.69 103
12/31/94 136,426 1.34 -- 9.08 86
12/31/93 125,095 1.40 -- 8.84 176
12/31/92 64,063 1.50 0.05 10.3 122
12/31/91 25,651 1.50 0.46 14.84 57
12/31/90 11,342 1.44 0.81 15.15 156
</TABLE>
(1) Annualized
40
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD
[LOGO]
<TABLE>
<CAPTION>
Net
realized
& Dividends Distributions
Net Asset unrealized declared declared Net Asset
Value, Net gain (loss) Total from from net from net Distributions Value,
Period beginning investment on investment investment realized from Total end of Total
ended of period income investments operations income gain Capital Distributions period Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of
net
Net Ratio of Ratio of investment
Assets, expenses expense income to
end of to average reimbursement average
Period period net to average net Portfolio
ended (000's) assets(1) net assets(1) assets(1) turnover
<S> <C> <C> <C> <C> <C>
- ---------
Income Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 $12.77 $0.43 $1.06 $1.49 ($0.48) ($1.25) -- ($1.73) $12.53 11.95%
Income Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 12.77 0.35 1.09 1.44 (0.45) (1.25) -- (1.70) 12.51 11.56
Income Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 12.77 0.38 1.07 1.45 (0.45) (1.25) -- (1.70) 12.52 11.49
Income Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 11.54 0.57 2.27 2.84 (0.59) (1.25) -- (1.84) 12.54 25.11
12/31/94 12.94 0.57 (1.25) (0.68) (0.54) (0.16) (0.02) (0.72) 11.54 (5.33)
12/31/93 12.05 0.49 1.20 1.69 (0.49) (0.31) -- (0.80) 12.94 14.08
12/31/92 11.66 0.55 0.36 0.91 (0.52) -- -- (0.52) 12.05 8.06
12/31/91 10.13 0.57 1.53 2.10 (0.57) -- -- (0.57) 11.66 21.17
12/31/90 10.71 0.61 (0.54) 0.07 (0.63) -- (0.02) (0.65) 10.13 0.78
Growth Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 17.59 0.08 1.95 2.03 (0.10) (3.99) -- (4.09) 15.53 11.55
Growth Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 17.59 0.06 1.92 1.98 (0.08) (3.99) -- (4.07) 15.50 11.27
Growth Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 17.59 0.04 1.92 1.96 (0.06) (3.99) -- (4.05) 15.50 11.17
Growth Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 15.75 0.07 3.77 3.84 (0.07) (3.99) -- (4.06) 15.53 24.40
12/31/94 17.33 0.08 (1.41) (1.33) (0.08) (0.15) (0.02) (0.25) 15.75 (7.66)
12/31/93 16.36 0.02 1.67 1.69 (0.04) (0.67) (0.01) (0.72) 17.33 10.36
12/31/92 16.37 0.02 1.30 1.32 (0.02) (1.31) -- (1.33) 16.36 8.05
12/31/91 12.49 0.09 4.62 4.71 (0.08) (0.75) -- (0.83) 16.37 38.10
12/31/90 13.85 0.10 (0.83) (0.73) (0.10) (0.51) (0.02) (0.63) 12.49 (5.24)
Special Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 19.56 (0.09) 2.48 2.39 -- (1.03) -- (1.03) 20.92 12.20
Special Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 19.56 (0.12) 2.43 2.31 -- (1.03) -- (1.03) 20.84 11.79
Special Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 19.56 (0.15) 2.46 2.31 -- (1.03) -- (1.03) 20.84 11.79
Special Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 19.64 (0.34) 2.57 2.23 -- (1.03) -- (1.03) 20.84 11.34
12/31/94 20.79 (0.25) (0.76) (1.01) -- (0.14) -- (0.14) 19.64 (4.86)
12/31/93 17.40 (0.32) 3.83 3.51 -- (0.12) -- (0.12) 20.79 20.16
12/31/92 15.74 (0.33) 2.61 2.28 -- (0.62) -- (0.62) 17.40 14.54
12/31/91 10.64 (0.21) 6.24 6.03 -- (0.93) -- (0.93) 15.74 57.27
12/31/90 11.67 (0.20) (0.83) (1.03) -- -- -- -- 10.64 (8.83)
<CAPTION>
- ---------
6/05/95
12/31/95 $797 1.27% -- 4.99% 131%
- ---------
6/05/95
12/31/95 1,759 1.95 -- 4.38 131
- ---------
6/05/95
12/31/95 231 1.91 -- 4.49 131
- ---------
12/31/95 72,472 1.68 -- 4.44 131
12/31/94 73,764 1.69 -- 4.36 59
12/31/93 80,841 1.77 -- 3.99 38
12/31/92 56,823 2.02 -- 4.73 59
12/31/91 49,367 2.06 -- 5.21 77
12/31/90 44,750 2.10 -- 5.73 57
- ---------
6/05/95
12/31/95 1,355 1.42 -- 0.63 134
- ---------
6/05/95
12/31/95 1,987 2.07 -- 0.06 134
- ---------
6/05/95
12/31/95 69 2.11 -- 0.02 134
- ---------
12/31/95 76,343 2.00 -- 0.37 134
12/31/94 76,391 2.00 -- 0.49 54
12/31/93 80,759 2.04 -- 0.13 42
12/31/92 56,759 2.15 -- 0.09 47
12/31/91 40,884 2.25 -- 0.66 64
12/31/90 24,927 2.33 -- 0.80 54
- ---------
6/05/95
12/31/95 2,335 1.50 -- (0.91) 71
- ---------
6/05/95
12/31/95 1,491 2.20 0.01 (1.64) 71
- ---------
6/05/95
12/31/95 62 2.20 0.03 (1.60) 71
- ---------
12/31/95 33,557 2.16 -- (1.50) 71
12/31/94 38,848 2.16 -- (1.25) 39
12/31/93 28,838 2.34 -- (1.66) 35
12/31/92 11,336 2.84 -- (2.12) 40
12/31/91 5,480 2.95 0.74 (1.57) 85
12/31/90 3,024 2.95 2.03 (0.97) 72
</TABLE>
(1) Annualized
41
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
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. 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.
NORTHSTAR ADVANTAGE HIGH YIELD FUND ("High Yield Fund") seeks high current
income through investment primarily in long-term and intermediate-term fixed
income securities, with emphasis on high yield-high risk, lower-rated and
nonrated corporate debt instruments.
NORTHSTAR ADVANTAGE INCOME FUND ("Income Fund") seeks to realize income and
secondarily, capital appreciation. This Fund invests in a balance of debt
securities, common and preferred stocks, and debt securities and preferred
stocks convertible into common stock.
NORTHSTAR ADVANTAGE GROWTH FUND ("Growth Fund") seeks to achieve long-term
growth of capital through investment principally in common stocks and, to a
lesser extent, it may also invest in preferred stocks and convertible
securities.
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. The Fund invests primarily in smaller,
lesser-known companies that may be subject to greater price volatility than more
mature 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. The books and records of the Funds
are maintained in U.S. dollars. Securities quoted in foreign currencies are
translated into U.S. dollars based on the prevailing exchange rates on that day.
The Adviser uses independent pricing services to price the Funds' securities.
Security Transactions, Investment Income, 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 Special
Fund and declared and paid annually by the Growth Fund. Distributions of net
realized capital gains, if any, are declared annually; however, to the extent
that a net realized capital gain can
42
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
[LOGO]
be reduced by a capital loss carryover, such gain will not be distributed.
Net realized and unrealized gain (loss) on foreign currency transactions
represents the foreign exchange:
(1) gains and losses from the sale of holdings of foreign currencies, (2)
gains and losses between trade date and settlement date on investment securities
transactions and forward exchange contracts, and (3) gains and losses from the
difference between amounts of interest and dividends recorded and the amounts
actually received.
The Funds may periodically make reclassifications among certain of their
capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance with
federal tax regulations which may differ from generally accepted accounting
principles.
Forward Foreign Currency Contracts and Options - The Funds may enter into
forward foreign currency contracts ("contracts") to purchase or sell currencies
at a specified rate at a future date. The Funds may enter into these contracts
solely for hedging purposes.
The Funds write and purchase put and call options on foreign currencies. The
premium paid by the Funds for the purchase of a call or put option is recorded
as an investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the Funds have purchased expires
on the stipulated expiration date, the Funds realize a loss in the amount of the
cost of the option.
The amount of potential gain or loss to the Funds upon exercise of a written
call option is the value (in U.S. dollars) of the currency sold, less the value
of the U.S. dollars received in exchange. The amount of potential gain or loss
to the Funds upon exercise of a written put option is the value (in U.S.
dollars) of the currency received, less the value of the U.S. dollars paid in
exchange.
Risks may arise upon entering these contracts from the potential inability
of counterparties to meet the terms of their contract and from unanticipated
movement in the value of a foreign currency relative to the U.S. dollar.
Repurchase Agreements - The Funds' Custodian takes possession of collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a marked-to-market basis to assure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the Funds have the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Funds may be delayed or limited.
Federal Income Taxes - The 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, 1995 therefore the rate paid
equals 0.45% of average daily net assets. For the year ended December 31, 1995,
the Adviser waived $301,776 of advisory fees for the Government Securities Fund.
For the year ended December 31, 1995, the Funds paid combined advisory fees to
Boston Security Counselors, Inc. (the former adviser) and Northstar Investment
Management Corp. (the current adviser) of $3,273,984.
43
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
Northstar Administrators Corporation (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 2.5% of the first $30,000,000 of
average net assets, 2.0% of the next $70,000,000 and 1.5% of the excess.
The Adviser has voluntarily undertaken to limit the expenses through
December 31, 1995 of the Strategic Income Fund to 1.2% (Class A), 1.9% (Class
B), 1.9% (Class C) and 1.29% (Class T) and of the Special Fund to 1.5% (Class
A), 2.2% (Class B & C), and 2.16 (Class T) of each respective class's average
net assets. The Adviser will reimburse the Funds for amounts in excess of such
limits, up to the total amount of fees received during the period. During the
year ended December 31, 1995, the Adviser's reimbursements aggregated $87,944
and $733 for the Strategic Income Fund and Special Fund, 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 December 31, 1995, the Funds owed
the Distributor $382,314 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 twelve months ended December 31, 1995, 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 $ 359,111 $ 0 $ 0 $ 0
Contingent
Deferred Sales
Charges $ 0 $ 25,864 $ 4,699 $1,164,912
</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 year ended December 31, 1995, were as
follows:
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE NORTHSTAR
GOVERNMENT STRATEGIC ADVANTAGE
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
Aggregate Purchases $435,284,789 $103,412,467 $179,129,009
Aggregate Sales $440,568,347 $57,645,035 $149,037,583
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<S> <C> <C> <C>
Aggregate Purchases $435,284,789 $13,853,812 $6,775,781
Aggregate Sales $440,568,347 $12,304,156 $8,771,078
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE ADVANTAGE
INCOME GROWTH SPECIAL
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
Aggregate Purchases $92,115,139 $98,960,228 $26,310,256
Aggregate Sales $94,451,550 $105,559,381 $32,938,066
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<S> <C> <C> <C>
Aggregate Purchases $2,000,000 $1,883,200 $ 0
Aggregate Sales $10,367,352 $ 0 $ 0
</TABLE>
44
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
[LOGO]
For the year ended December 31, 1995, option transactions on foreign
currencies in the Funds were as follows:
<TABLE>
<CAPTION>
PREMIUMS
STRATEGIC INCOME FUND RECEIVED
-----------
<S> <C>
Call options outstanding at December 31,
1994 0
Call options written $ 28,880
Call options exercised (28,800)
-----------
Call options outstanding at December 31,
1995 $ 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 December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE NORTHSTAR
GOVERNMENT STRATEGIC ADVANTAGE
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
Cost (tax basis) $146,502,019 $70,946,205 $169,134,498
---------- ---------- ----------
Appreciated
Securities 9,507,924 2,664,042 6,510,205
Depreciated
Securities 0 2,108,210 6,580,461
---------- ---------- ----------
Net Unrealized
Appreciation $9,507,924 $ 555,832 $ (70,256)
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE ADVANTAGE
INCOME GROWTH SPECIAL
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
Cost (tax basis) $68,342,244 $72,645,170 $27,731,147
---------- ---------- ----------
Appreciated
Securities 7,615,202 10,287,227 9,085,142
Depreciated
Securities 841,067 3,318,737 1,700,386
---------- ---------- ----------
Net Unrealized
Appreciation $6,774,135 $6,968,490 $7,384,756
---------- ---------- ----------
</TABLE>
45
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
NOTE 6. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the year 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)
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
<TABLE>
<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
(Note 8) 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
(decrease) 1,757,737 $21,744,484 1,786,801 $22,057,711 175,475 $2,164,714 282,806 $3,360,913
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
<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)
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
<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 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)
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
46
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
[LOGO]
<TABLE>
<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)
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
<TABLE>
<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>
Transactions in capital shares of each Fund for the period ended December 31,
1994:
<TABLE>
<CAPTION>
NORTHSTAR
ADVANTAGE NORTHSTAR NORTHSTAR NORTHSTAR
GOVERNMENT ADVANTAGE ADVANTAGE NORTHSTAR NORTHSTAR ADVANTAGE
SECURITIES STRATEGIC HIGH YIELD ADVANTAGE ADVANTAGE SPECIAL
FUND INCOME FUND FUND INCOME FUND GROWTH FUND FUND
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 2,245,605 2,179,305 4,838,429 816,629 738,054 836,044
Reinvested Dividends 688,507 41,216 814,933 315,928 69,353 13,295
shares redeemed (3,319,046) (72,391) (2,639,388) (986,442) (616,850) (259,035)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) (384,934) 2,148,130 3,013,974 146,115 190,557 590,304
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
NOTE 7. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Yield Fund had
66.81% of its portfolio invested in lower rated and comparable quality unrated
high yield securities. Investments in higher yield securities are accompanied by
a greater degree of credit risk and such lower rated securities tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities, because such securities are generally unsecured and
are often subordinated to other creditors of the issuer. At December 31, 1995,
the High Yield Fund and Strategic Income Fund held Ithaca Industries and
Wherehouse Entertainment, Inc., securities in default, respectively. The value
of these securities represented $701,125 or 0.39% of the High Yield Fund and
$180,000 or 0.24% of the Strategic Income 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 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
47
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
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 shares and $12.21 for Class C
shares.
NOTE 9. SUBSEQUENT EVENTS
The shareholders of the Northstar Advantage Special Fund at a meeting dated
January 30, 1996 voted to approve a subadvisory agreement (the "Agreement")
between Northstar Investment Management Corporation, the Fund's investment
adviser (the "Adviser"), and Navellier Fund Management, Inc. (Navellier).
Pursuant to the Agreement, Navellier will assume responsibility for the day to
day investment management of the Fund, subject to the supervision of the Adviser
and the Trustees of the Fund. For its services, the Adviser will pay Navellier
an annual fee of 0.48% of 1% annually of average daily net assets of the Fund.
NOTE 10. FEDERAL INCOME TAX -- CAPITAL LOSS CARRYFORWARD
At December 31, 1995, 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.
In addition, at December 31, 1995, Strategic Income Fund had remaining
acquired capital loss carryforwards expiring October 31, 2002 and 2003 of
$1,591,699 and $1,301,325, respectively. These acquired capital loss
carryforwards are subject to limitations on their use under the Internal Revenue
Code, as amended.
NOTE 11. COMPENSATING BALANCE ARRANGEMENT
The Funds have an informal compensating balance 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 December 31, 1995, the
Income Fund had a remaining obligation to leave $13,242,987 in the Fund's
account. This offset arrangement does not result in a reduction of the fees paid
by the Funds to the Custodian.
48
<PAGE>
NORTHSTAR ADVANTAGE TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
To The Shareholders and Board of Trustees of
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:
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of 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") as of the December 31, 1995, and
the related statement of operations, the statement of changes in net assets and
the financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The financial statements for the year
ended December 31, 1994, were audited by other auditors, whose report dated
February 15, 1995, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
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 as of
December 31, 1995, the results of their operations, the changes in their net
assets and the financial highlights for the year then ended, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 15, 1996
49
<PAGE>
<TABLE>
<S> <C> <C> <C>
TRUSTEES
Paul S. Doherty Mark L. Lipson John G. Turner
Robert B. Goode Walter H. May David W. C. Putnam
David W. Wallace Alan L. Gosule John R. Smith
Marjory D. Williams
</TABLE>
<TABLE>
<S> <C> <C>
PRINCIPAL OFFICERS
John G. Turner - Chairman Margaret D. Patel - Vice President
Mark L. Lipson - President Prescott B. Crocker - Vice President
Geoffrey Wadsworth - Vice President Thomas Ole Dial - Vice President
Lisa Hurley - Vice President & Secretary Ernest N. Mysogland - Vice President
Agnes Mullady - Vice President & Treasurer
INVESTMENT ADVISER ADMINISTRATOR
NORTHSTAR INVESTMENT NORTHSTAR ADMINISTRATORS CORPORATION
MANAGEMENT CORPORATION Two Pickwick Plaza
Two Pickwick Plaza Greenwich, CT 06830
Greenwich, CT 06830
DISTRIBUTOR TRANSFER AGENT
NORTHSTAR DISTRIBUTORS, INC. FIRST DATA INVESTORS SERVICES GROUP
Two Pickwick Plaza One Exchange Place
Greenwich, CT 06830 Boston, MA 02109
CUSTODIAN & FUND
ACCOUNTANT
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
</TABLE>
50
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
