[NORTHSTAR TRUST LOGO APPEARS HERE]
NORTHSTAR
TRUST
ANNUAL REPORT TO SHAREHOLDERS
October 31, 1998
[NORTHSTAR TRUST GRAPHIC APPEARS HERE]
<PAGE>
NORTHSTAR TRUST
ANNUAL REPORT
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR FUND LOGO APPEARS HERE]
[PHOTOGRAPH OF MARK L. LIPSON APPEARS HERE]
MARK L. LIPSON
Dear Shareholders:
We are pleased to provide you with the annual report of the Northstar Trust for
the year ended October 31, 1998. We are gratified with your decision to entrust
your assets to the Northstar Funds and are confident that we can assist you in
reaching your financial objectives. Our goal is to provide you with consistent,
long term, attractive returns achieved through fundamental research, analysis
and disciplined investment processes. Following this letter is a summary of the
results of each Fund by their respective portfolio manager. We hope you will
find it informative.
During the past year the financial markets experienced extreme volatility.
Returns in the first half of the year were quite positive, but the latter six
months saw significant dislocations in the markets as the default of Russia,
worries about passage of a Japanese banking reform bill, and concern over the
possible impeachment of the U.S. President led to a broad-based correction in
the equity markets in the late summer/early fall. The fixed income markets
experienced even more volatility as concerns about the economy and corporate
profits were exacerbated by the unwinding of hedge fund leverage, leading to a
severe liquidity crunch. Investor fear reached heights not seen since the early
part of this decade as the bailout of Long Term Capital was made public in
September, and the Federal Reserve cut rates in response to fears of a global
liquidity crisis.
Although U.S. economic growth continued to be strong, with GDP advancing at
about a 3.0% annual rate, the impact of the continuing slowdown in Asia began
to be seen on global economic growth and corporate profits in the second half
of the year. Fears of inflation were replaced with concern about deflation as
commodity prices continued to move to historic new lows and the excess
productive capacity in Asia limited corporations' ability to raise prices.
While the S&P 500 experienced a double-digit correction, many other assets
classes, such a smaller and mid-capitalization equity issues and high yield
issues, experienced corrections much more severe in size and scope as investors
sought safe havens. While we have seen some rebound in these areas recently,
smaller and mid-capitalization issues still stand at significant valuation
discounts to the larger S&P 500 equities, and the same holds true for corporate
and high-yield bond spreads relative to Treasury bonds.
We believe the investment environment may continue to see high volatility and a
significant amount of cross-currents into 1999. While there are signs that the
U.S. economy may be slowing, it also appears that the Asian economies are
bottoming and may see a recovery beginning in the second half of 1999. While
concerns about possible deflation continue, historically three rate cuts by the
U.S. Federal Reserve have been stimulative; if this holds true again, it
implies we will avoid a true deflationary spiral in the U.S. economy. While the
rate of profit growth continues to slow, particularly for large multinational
corporations, the combination of U.S. rate cuts and the slow recovery in the
Asian economies implies we might be close to a profit trough. All throughout
this decade, U.S. corporations have improved their efficiency and profitability
through strategic investments in productivity-improving technology and the
replacement of labor with technology; we have recently seen a pickup in that
trend, which has positive implications for profits over the next twelve months.
Although volatility may continue to be higher than average, we believe that we
may have passed the worst of the liquidity crisis. The longer-term investment
environment continues to be favorable: Interest rates continue to trend lower,
inflation remains low, and the global economic and profit outlook appears to be
improving. Many of these trends are secular, not cyclical, and imply a positive
investment environment for financial markets.
We note with great conviction that attempts to "time" the market often prove
counterproductive. Investors are strongly urged to focus on the long term.
Consistent disciplined investing is the proven method of achieving attractive
returns and meeting your financial objectives. We continue to support this
philosophy and look forward to serving your investment needs in the future.
Sincerely,
/s/ Mark L. Lipson
- ---------------------
Mark L. Lipson
President
<PAGE>
NORTHSTAR
GROWTH + VALUE FUND
- --------------------------------------------------------------------------------
[NORTHSTAR GROWTH + VALUE TRUST LOGO APPEARS HERE]
[PHOTOGRAPH OF LOUIS NAVELLIER APPEARS HERE]
LOUIS NAVELLIER
THE MARKETS
o The outlook for 1999 is outstanding. Mid cap stocks ($1 billion to $5
billion market capitalization) are at the best relative valuations (i.e.,
growth relative to price/earnings ratios) since the Gulf War in 1990.
Small cap stocks (under $1 billion market capitalization) are at the best
relative valuations since 1973-1974. Surprisingly, small-to-mid cap stocks
have had better earnings than their large cap counterparts for seven
straight quarters. After many large capitalization stocks released
negative third quarter earnings, many institutional investors gave up hope
and started to aggressively accumulate both small and mid cap stocks due
to their superior fundamental characteristics. The impressive rebound in
the stock market since the low point on October 8, 1998 has been nothing
less than phenomenal. Fortunately, the news media has been pointing out
that small capitalization stocks have been even more impressive on the
rebound than many of their large capitalization counterparts. The
institutional parade into both small and mid cap stocks is very bullish
and has reduced the volatility that once plagued this capitalization
sector of the stock market.
THE FUND
o The Fund returned (12.63)%, (13.38)%, and (13.38)% for Class A, B, and C
shares, respectively, for the fiscal year ended October 31,1998. The
Russell 2000 Index returned (12.75)% for the same period.
o Due to mediocre earnings for many leading stocks during the past several
quarters, the stock market remains unusually narrow and selective. In
early 1999, the stock market should gather more breadth and power, simply
because more stocks are anticipated to release improved earnings. The
catalyst behind these improving earnings is two-fold. First, for
predominately small-to-mid cap domestic stocks, they are benefiting from
accelerating economic growth due to continued strong consumer spending.
Second, the large multi-international stocks that dominate the S&P 500 are
expected to release improved earnings due to the fact that the U.S. dollar
weakened in the past few months (a strong U.S. dollar hinders the earnings
of the large multi-international stocks that dominate the S&P 500).
Although the breadth and power of the overall stock market will likely
improve in 1999 in the wake of improved earnings, investors must remain
very selective.
o The Growth + Value Fund has a very flexible charter that provides a great
deal of management flexibility. Currently, the Fund is in predominately
mid capitalization growth stocks that have benefitted from substantial
institutional buying pressure. However, as the volatility continues to
subside in the small cap arena, the small cap stocks will likely become
more attractive. The "value" tilt to this Fund always insures that stocks
are only purchased with reasonable growth to price/earnings ratios.
Furthermore, the stocks in the Fund are currently characterized by
unusually smooth, steady growth.
CURRENT STRATEGY
o Overall, the outlook for 1999 is very positive due to improving corporate
earnings and accelerating economic growth. Small cap stocks are near the
best valuations in over 25 years, while mid cap stocks are at the most
attractive valuations in over 8 years. We are in the lowest interest rate
environment in over 30 years, which is extremely bullish for higher stock
prices. I expect that the stock market will broaden out and gather more
strength in early 1999 when improved earnings are announced. However,
until the stock market gathers more breadth and power, I plan to
concentrate on only the best small to mid cap stocks with outstanding
fundamental characteristics. The latest mutual fund statistics confirm
that investors are returning to growth stocks, which is a very good sign
for the Growth + Value Fund. Overall, I remain excited about the small to
mid cap stocks that dominate the Growth + Value Fund and the fact that the
stock market will likely get stronger in early 1999.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/98) TOTAL NET ASSETS $176,872,068
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<S> <C> <C>
1 Century Telephone Enterprises, Inc. 4.8%
2 Dell Computer Corp. 4.3%
3 Sofamor Danek Group, Inc. 4.3%
4 EMC Corp. 3.8%
5 Nokia Corp. 3.6%
6 COMAIR Holdings, Inc. 3.3%
7 Lexmark International Group, Inc. 3.2%
8 Symbol Technologies, Inc. 3.2%
9 The Clorox Co. 3.2%
10 Best Buy Co., Inc. 3.0%
----
36.7%
====
</TABLE>
<TABLE>
<CAPTION>
TOP 5 INDUSTRIES
(by percentage of net assets)
<S> <C>
EDP Peripherals 8.2%
Medical Specialties 6.0%
Consumer Cyclicals 5.5%
Airlines 5.2%
Telephone/ 4.8%
Communications
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
- ----------------------------------------------------
<S> <C> <C> <C>
Inception 5 years 1 year
Class A 0.56% N/A (16.81)%
Class B 0.33% N/A (17.64)%
Class C 2.35% N/A (14.23)%
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
- -----------------------------------------------------
Inception 5 years 1 year
Class A 6.16% N/A (12.63)%
Class B 4.64% N/A (13.38)%
Class C 4.64% N/A (13.38)%
</TABLE>
3
<PAGE>
NORTHSTAR
GROWTH + VALUE FUND
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
GROWTH + VALUE FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH
CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended October
31, 1998. The average annualized total return for Class A shares of 0.56% for
the period since the Fund's inception of November 18, 1996 reflects payment of
the maximum sales charge of 4.75%. Average annualized total returns of 0.33%
and 2.35% since inception for Class B and Class C shares of November 18, 1996
and November 18, 1996, respectively, reflect applicable contingent deferred
sales charges (maximum contingent deferred sales charge for Class B shares of
5.00% declines to 0% after five years; and maximum charge for Class C shares is
1.00% during the first year of investment only.) All performance data shown
represents past performance, and should not be considered indicative of future
performance.
[THREE LINE CHARTS APPEAR BELOW WITH THE FOLLOWING INFORMATION:]
NORTHSTAR GROWTH + VALUE FUND -- CLASS A
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (16.81%)
SINCE INCEPTION 0.56%
Class A S&P 500 Lipper Growth Fund
------- ------- ------------------
(in thousands)
11/18/96 9.525 10 10
10/31/97 11.571 12.969 12.842
10/31/98 10.11 15.578 14.624
NORTHSTAR GROWTH + VALUE FUND -- CLASS B
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (17.64%)
SINCE INCEPTION 0.33%
Class B S&P 500 Lipper Growth Fund
------- ------- ------------------
(in thousands)
11/18/96 10 10 10
10/31/97 12.08 12.969 12.842
10/31/98 10.464 15.578 14.624
NORTHSTAR GROWTH + VALUE FUND -- CLASS C
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (14.23%)
SINCE INCEPTION 2.35%
Class C S&P 500 Lipper Growth Fund
------- ------- ------------------
(in thousands)
11/18/96 10 10 10
10/31/97 12.08 12.969 12.842
10/31/98 10.464 15.578 14.624
4
<PAGE>
NORTHSTAR GROWTH + VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Shares Value
- ----------------------------------------- -------------- -------------
<S> <C> <C>
COMMON STOCKS -- 96.83%
AIRLINES -- 5.18%
COMAIR Holdings, Inc. 175,400 $5,766,275
USAirways Group, Inc. @ 60,000 3,393,750
----------
9,160,025
----------
APPAREL -- 1.37%
Tarrant Apparel Group @ 128,800 2,431,100
----------
BIOTECHNOLOGY -- 4.64%
ALZA Corp. @ 64,500 3,087,937
Amgen, Inc. @ 65,000 5,110,625
----------
8,198,562
----------
BUILDING MATERIALS -- 4.03%
Centex Construction Products, Inc. 110,700 3,722,287
Vulcan Materials Co. 28,700 3,404,538
----------
7,126,825
----------
CELLULAR TELEPHONE -- 2.05%
Vodafone Group PLC ** 27,000 3,634,875
----------
CLOTHING/SHOE/ACCESSORY STORES -- 2.44%
The Gap, Inc. 71,900 4,322,988
----------
COMPUTERS -- 4.30%
Dell Computer Corp. @ 116,000 7,598,000
----------
COMPUTER SOFTWARE -- 2.62%
Legato Systems, Inc. @ 118,500 4,636,313
----------
COMPUTER/VIDEO CHAINS -- 3.99%
Best Buy Co., Inc. @ 110,800 5,318,400
Trans World Entertainment Corp. @ 84,450 1,741,781
----------
7,060,181
----------
CONSUMER CYCLICALS -- 5.51%
Abercrombie & Fitch Co. @ 58,200 2,309,813
American Eagle Outfitters, Inc. @ 75,000 3,037,500
Gemstar International Group Ltd. @ @@ 80,500 4,397,312
----------
9,744,625
----------
CONSUMER ELECTRONICS/APPLIANCES -- 3.04%
Maytag Corp. 107,200 5,299,700
Recoton Corp. @ 3,500 77,875
----------
5,377,575
----------
DIVERSIFIED COMMERICAL SERVICES -- 2.76%
Dendrite International, Inc. @ 98,700 2,035,687
Labor Ready, Inc. @ 158,550 2,853,900
----------
4,889,587
----------
DRUG STORE CHAINS -- 1.90%
CVS Corp. 73,500 3,358,031
----------
EDP PERIPHERALS -- 8.24%
EMC Corp. 104,000 6,695,000
National Computer Systems, Inc. 78,600 2,200,800
Symbol Technologies, Inc. 126,700 5,669,825
----------
14,565,625
----------
</TABLE>
5
<PAGE>
NORTHSTAR GROWTH + VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Shares Value
- -------------------------------------- -------------- -------------
<S> <C> <C>
ENTERTAINMENT/FILM -- 1.69%
Viacom, Inc. @ 50,000 $2,993,750
----------
ENVIRONMENTAL SERVICES -- 2.30%
Catalytica, Inc. @ 130,000 2,112,500
Republic Industries, Inc. @ 121,500 1,951,594
----------
4,064,094
----------
FINANCIAL -- 3.12%
Capital One Financial Corp. 50,000 5,087,500
FirstPlus Financial Group, Inc. @ 98,800 438,425
Metris Cos., Inc. 1 27
----------
5,525,952
----------
HOMEBUILDING -- 1.05%
Lennar Corp. 91,900 1,860,975
----------
MEDICAL/DENTAL DISTRIBUTORS -- 1.77%
Bindley Western Industries, Inc. 86,266 3,127,143
----------
MEDICAL/NURSING SERVICES -- 2.94%
Lincare Holdings, Inc. @ 130,000 5,191,875
----------
MEDICAL SPECIALTIES -- 5.97%
MiniMed, Inc. @ 36,700 2,036,850
Safeskin Corp. @ 43,400 960,225
Sofamor Danek Group, Inc. @ 74,400 7,560,900
----------
10,557,975
----------
OFFICE EQUIPMENT/SUPPLIES -- 3.16%
Lexmark International Group, Inc. @ 80,000 5,595,000
----------
OFFICE/PLANT AUTOMATION -- 1.68%
InterVoice, Inc. @ 105,100 2,969,075
----------
PACKAGE GOODS/COSMETICS -- 3.21%
The Clorox Co. 51,900 5,670,075
----------
PROPERTY-CASUALTY INSURERS -- 1.05%
HSB Group, Inc. 45,800 1,849,175
----------
RECREATIONAL PRODUCTS/TOYS -- 1.50%
THQ, Inc. @ 122,850 2,648,953
----------
SAVINGS & LOAN -- 0.33%
PDS Financial Corp. @ 152,955 592,701
----------
SERVICES TO HEALTH INDUSTRY -- 1.51%
MedQuist, Inc. @ 99,100 2,669,506
----------
SPECIALTY INSURERS -- 3.07%
Fidelity National Financial, Inc. 81,040 2,491,980
The First American Financial Corp. 93,600 2,930,850
----------
5,422,830
----------
SUPERMARKETS -- 2.07%
Safeway, Inc. @ 76,700 3,667,219
----------
TELECOMMUNICATIONS EQUIPMENT -- 3.59%
Nokia Corp. ** 68,200 6,346,862
----------
TELEPHONE/COMMUNICATIONS -- 4.75%
Century Telephone Enterprises, Inc. 147,900 8,402,569
----------
</TABLE>
6
<PAGE>
NORTHSTAR GROWTH + VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------------- ------------------ ---------------
<S> <C> <C>
TOTAL COMMON STOCKS
(cost $158,709,989) $171,260,041
------------
TOTAL INVESTMENT SECURITIES -- 96.83%
(cost $158,709,989) 171,260,041
REPURCHASE AGREEMENT -- 2.36%
Agreement with State Street Bank and Trust bearing interest at 5.25% dated
10/30/98, to be repurchased 11/02/98 in the amount of $4,187,831 and
collateralized by $4,080,000 U.S. Treasury Bonds, 5.625% due 4/30/00,
value $4,273,812
(cost $4,186,000) $4,186,000 4,186,000
OTHER ASSETS LESS LIABILITIES -- 0.81% 1,426,027
------------
NET ASSETS -- 100.00% $176,872,068
============
</TABLE>
@ Non-income producing security.
** American Depositary Receipt.
@@ Foreign security.
See accompanying notes to financial statements.
7
<PAGE>
NORTHSTAR
INTERNATIONAL VALUE FUND
- --------------------------------------------------------------------------------
THE MARKETS
o Global equity markets experienced a sharp decline during the fiscal year
ended October 31, 1998. The global decline, however, was partly tempered
by strong market returns during the month of October. Belgium was the best
performing market for the six-month period ended October 31,1998, rising
over 15% in dollar terms, while Russia was the worst performing market,
declining over 81% in dollar terms.
o Deteriorating economic fundamentals in Japan which threatened to
intensify and prolong the broader economic slump in Asia, coupled with the
political and economic turmoil in Russia, contributed to the widespread
global sell-off. In particular, the devaluation of the Russian ruble
pressured the currencies of Latin American nations, as investors worried
that these countries would not be able to maintain their managed currency
systems. Not even the previously high-flying European markets were immune
to the bearish sentiment. Concern about exposure of European banks to
defaulted loans in Russia was primarily responsible for the correction.
THE FUND
o The Fund returned 9.86%, 9.16%, and 9.07% for Class A, B, and C,
respectively, for the fiscal year ended October 31, 1998. The MSCI Europe
Australasia Far East Index (EAFE) declined 8.01% for the same period.
o The Fund's Asian holdings, particularly those in Hong Kong, had the
greatest positive impact on performance for the period. While holdings in
Europe, Latin America, and Africa declined as a whole, individual holdings
in Denmark, Switzerland, and South Korea followed Hong Kong as the most
significant contributors to performance. Latin American holdings, led by
Brazil, had the largest negative impact on performance for the semi-annual
period. On a sector basis, the Services and Multi-Industry sectors were
the strongest performers.
o Regionally, the Fund's largest commitment continues to be in Europe,
followed by an increasing exposure to Asia and Latin America.
Multi-Industry and Telecommunications are the largest industry
commitments.
CURRENT STRATEGY
o The bottom-up, value philosophy used in managing the Fund will be
consistently applied to find the best opportunities available in non-U.S.
markets. There is no focus on top-down macroeconomic evaluations or
forecasts in structuring the Fund. Country and industry exposure are
exclusively a residual of the purchase of individual businesses that meet
the strict value criteria.
o The fundamental valuations of the Fund reflect, and will continue to
reflect, significant discounts to the world market averages. This absolute
value focus has performed very favorably in declining market environments
as well as doing well over long-term market cycles.
o The Fund will endeavor to stay fully invested in non-U.S. equities and
will not attempt to anticipate short-term market movements. We will hold
the best values available without bias to either country or industry.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/98) TOTAL NET ASSETS $494,645,483
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<S> <C> <C>
1 Hutchison Whampoa Ltd. 5.4%
2 Hitachi Ltd. 3.9%
3 HSBC Holdings PLC 3.8%
4 Deutsche TeleKom AG 3.6%
5 Swire Pacific Ltd. 3.5%
6 Diageo PLC 3.4%
7 Telecom Italia SpA 3.4%
8 Tokio Marine & Fire Insurance Co. 3.3%
9 Mitsubishi Heavy Industries Ltd. 3.2%
10 Development Bank of Singapore Ltd. 3.0%
----
36.5%
====
</TABLE>
<TABLE>
<CAPTION>
TOP 5 INDUSTRIES
(by percentage of net assets)
<S> <C>
Multi-Industry 13.55%
Telecommunications 13.34%
Banking 13.15%
Energy 7.05%
Electrical & Electronics 6.6%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
Inception 5 years 1 year
Class A 12.79% N/A 4.68%
Class B 9.22% N/A 4.16%
Class C 13.62% N/A 8.07%
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
Inception 5 years 1 year
Class A 63.15% N/A 9.86%
Class B 18.55% N/A 9.16%
Class C 59.56% N/A 9.07%
</TABLE>
8
<PAGE>
NORTHSTAR
INTERNATIONAL VALUE FUND
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
INTERNATIONAL VALUE FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH
CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended October
31, 1998, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 12.79% for the period since the Fund's
inception on March 6, 1995 reflects payment of the maximum sales charge of
4.75%. Average annualized total returns of 9.22% and 13.62% since inception for
Class B and Class C shares of April 18, 1997 and March 6, 1995, respectively,
reflect applicable contingent deferred sales charges (maximum contingent
deferred sales charge for Class B shares of 5.00% declines to 0% after five
years; and maximum charge for Class C shares is 1.00% during the first year of
investment only). All performance data shown represents past performance, and
should not be considered indicative of future performance.
[THREE LINE CHARTS APPEAR BELOW WITH THE FOLLOWING INFORMATION:]
NORTHSTAR INTERNATIONAL VALUE FUND -- CLASS A
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 4.68%
SINCE INCEPTION 12.79%
Class A EAFE Index
------- ----------
(in thousands)
02/28/95 9.525 10
10/31/95 10.092 10.73
10/31/96 11.327 11.669
10/31/97 14.139 12.024
10/31/98 15.534 12.987
NORTHSTAR INTERNATIONAL VALUE FUND -- CLASS B
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 4.16%
SINCE INCEPTION 9.22%
Class B EAFE Index
------- ----------
(in thousands)
04/18/97 10 10
10/31/97 10.86 10.266
10/31/98 11.855 11.088
NORTHSTAR INTERNATIONAL VALUE FUND -- CLASS C
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 8.07%
SINCE INCEPTION 13.62%
Class C EAFE Index
------- ----------
(in thousands)
02/28/95 10 10
10/31/95 10.56 10.73
10/31/96 11.781 11.669
10/31/97 14.63 12.024
10/31/98 15.956 12.987
9
<PAGE>
NORTHSTAR INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country $ Value % of Net Assets
- --------------------------------------- ---------------- ----------------
<S> <C> <C>
Argentina $ 12,690,251 2.57%
Austria 3,219,567 0.65
Brazil 27,378,571 5.53
Denmark 13,681,629 2.77
France 40,653,547 8.22
Germany 31,895,358 6.45
Hong Kong 52,524,635 10.62
Italy 17,029,654 3.44
Japan 85,637,969 17.31
Korea 9,294,885 1.88
Mexico 13,574,397 2.74
Netherlands 18,376,828 3.72
Singapore 18,514,786 3.74
South Africa 11,799,427 2.39
Spain 12,426,699 2.51
Switzerland 18,112,890 3.66
United Kingdom 79,456,624 16.06
United States 24,883,000 5.03
Venezuela 5,187,850 1.05
Liabilities in excess of other assets (1,693,084) ( 0.34)
------------ ------
NET ASSETS $494,645,483 100.00%
============ ======
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
NORTHSTAR INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------- ----------- --------------
<S> <C> <C>
COMMON STOCKS -- 91.54%
AUTOMOBILES -- 4.91%
Daimler-Benz AG (Germany) 181,000 $14,040,749
PSA Peugeot Citroen SA (France) 61,410 10,246,237
-----------
24,286,986
-----------
BANKING -- 12.32%
Argentaria SA (Spain) 351,920 7,657,495
Compagnie Financiere de Paribas @ (France) 42,400 3,116,715
Den Danske Bank A/S (Denmark) 100,780 13,681,629
Development Bank of Singapore Ltd. (Singapore) 2,407,000 15,085,346
HSBC Holdings PLC @ (United Kingdom) 828,800 18,994,448
Societe Generale SA (France) 18,200 2,407,711
-----------
60,943,344
-----------
BEVERAGES/TOBACCO -- 4.36%
British America Tobacco PLC (United Kingdom) 548,700 4,929,290
Diageo PLC (United Kingdom) 1,542,012 16,646,572
-----------
21,575,862
-----------
CHEMICALS -- 1.81%
BOC Group PLC (United Kingdom) 226,200 3,320,241
Imperial Chemical Industries PLC (United Kingdom) 624,800 5,610,326
-----------
8,930,567
-----------
ELECTRICAL & ELECTRONICS -- 5.68%
Hitachi Ltd. (Japan) 3,739,200 19,019,948
Matsushita Electric Industrial Co. Ltd. (Japan) 619,000 9,084,826
-----------
28,104,774
-----------
ENERGY -- 5.72%
Elf Aquitaine SA (France) 107,695 12,463,847
Nippon Oil Co. Ltd. (Japan) 906,000 3,147,452
YPF Sociedad Anonima ** (Argentina) 438,540 12,690,251
-----------
28,301,550
-----------
FOOD & HOUSEHOLD PRODUCTS -- 5.16%
Groupe Danone (France) 46,970 12,419,038
Nestle SA (Switzerland) 6,165 13,100,568
-----------
25,519,606
-----------
HEALTH/PERSONAL CARE -- 0.83%
Ono Pharmaceutical Co. Ltd. (Japan) 137,000 4,089,552
-----------
INDUSTRIAL COMPONENTS -- 2.32%
Kyocera Corp. (Japan) 259,800 11,476,840
-----------
INSURANCE -- 7.74%
Allied Zurich (United Kingdom) 393,000 4,538,569
ING Groep N.V. (Netherlands) 290,360 14,048,299
Royal & Sun Alliance PLC (United Kingdom) 391,000 3,579,657
Tokio Marine & Fire Insurance Co. (Japan) 1,418,400 16,120,947
-----------
38,287,472
-----------
MACHINERY & ENGINEERING -- 4.59%
Komatsu (Japan) 1,301,000 7,030,623
Mitsubishi Heavy Industries Ltd. (Japan) 4,059,000 15,667,781
-----------
22,698,404
-----------
</TABLE>
11
<PAGE>
NORTHSTAR INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------- ------------ --------------
<S> <C> <C>
MATERIALS & COMMODITIES -- 2.15%
De Beers Centenary AG (South Africa) 765,000 $ 10,660,116
------------
MEDIA -- 0.60%
Reuters Group PLC (United Kingdom) 289,000 2,974,749
------------
METALS -- STEEL -- 1.94%
British Steel PLC (United Kingdom) 2,740,000 4,700,584
Iscor Ltd. (South Africa) 4,491,050 1,139,310
Pohang Iron & Steel Co. Ltd. ** (South Korea) 210,000 3,780,000
------------
9,619,894
------------
MULTI-INDUSTRY -- 13.55%
BTR PLC @ (United Kingdom) 6,319,933 11,053,660
Citic Pacific Ltd. (Hong Kong) 3,395,000 8,350,517
Hutchison Whampoa Ltd. (Hong Kong) 3,755,500 26,911,588
Jardine Matheson Holdings Ltd. (Singapore) 1,224,800 3,429,440
Swire Pacific Ltd. (Hong Kong) 3,253,000 17,262,531
------------
67,007,736
------------
NON-FERROUS METALS -- 0.63%
Rio Tinto PLC @ (United Kingdom) 256,000 3,108,528
------------
TELECOMMUNICATIONS -- 12.73%
Compania Anonima Nacional Telefonos de Venezuela ** 334,700 5,187,850
(Venezuela)
Deutsche Telekom AG (Germany) 655,500 17,854,609
Royal PTT Nederland NV (Netherlands) 111,400 4,328,529
Swisscom AG @ (Switzerland) 14,800 5,012,322
Telecom Italia SpA (Italy) 2,356,200 17,029,654
Telefonos de Mexico SA ** (Mexico) 257,030 13,574,397
------------
62,987,361
------------
UTILITIES -- ELECTRICAL & GAS -- 4.50%
Centrais Eletricas Brasileiras SA ** (Brazil) 884,700 8,459,944
Centrais Geradoras do Sul do Brasil SA ** @ (Brazil) 53,730 274,759
EVN Energie-Versorgung Niederoesterreich AG (Austria) 22,600 3,219,567
Korea Electric Power Corp. ** (South Korea) 432,540 5,514,885
Union Electrica Fenosa SA (Spain) 294,000 4,769,203
------------
22,238,358
------------
TOTAL COMMON STOCKS
(cost $467,330,506) 452,811,699
------------
PREFERRED STOCKS -- 3.77%
BANKING -- 0.83%
Banco Bradesco SA ** (Brazil), $0.1356 718,000 4,092,959
------------
BEVERAGES/TOBACCO -- 1.00%
Companhia Cervejaria Brahma ** (Brazil), $0.1308 513,000 4,937,625
------------
ENERGY -- 1.33%
Petroleo Brasileiro SA ** (Brazil), $0.5391 523,300 6,580,340
------------
TELECOMMUNICATIONS -- 0.61%
Telecomunicacoes Brasileiras SA ** (Brazil), $1.9760 39,940 3,032,944
------------
TOTAL PREFERRED STOCKS
(cost $27,982,732) 18,643,868
------------
TOTAL INVESTMENT SECURITIES -- 95.31%
(cost $495,313,238) 471,455,567
------------
</TABLE>
12
<PAGE>
NORTHSTAR INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------- ------------------ ----------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 5.03%
Agreement with State Street Bank and Trust bearing interest at 5.25%
dated 10/30/98, to be repurchased 11/02/98 in the amount of
$24,893,886 and collateralized by $23,725,000 U.S. Treasury Bonds,
6.25% due 2/28/02, value $25,383,140
(cost $24,883,000) $24,883,000 $ 24,883,000
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.34%) (1,693,084)
------------
NET ASSETS -- 100.00% $494,645,483
============
</TABLE>
<TABLE>
<CAPTION>
Foreign Currency Forward Contracts Open at October 31, 1998
- ------------------------------------------------------------------
Contract In Delivery Gross Unrealized
To Deliver Exchange for Date Depreciation
- --------------- --------------- ---------- -----------------
<S> <C> <C> <C>
GBP 2,676,148 USD 4,485,223 11/03/98 (7,117)
</TABLE>
@ Non-income producing security.
** American Depositary Receipts.
See accompanying notes to financial statements.
13
<PAGE>
NORTHSTAR
EMERGING MARKETS VALUE FUND
- --------------------------------------------------------------------------------
THE MARKETS
o Emerging market equities from Asia to Latin America plunged amid a
massive exodus of capital into perceived safer havens such as cash and
U.S. Treasury bonds during the six-month period ending October 31, 1998.
Sparking the outflow of funds was the fear of political and economic chaos
in Russia and the possible devaluation of Latin American currencies.
October brought some respite to Latin American markets as the fears of a
currency crisis in Brazil were tempered by the announcement of an aid
package by the IMF and G7 nations. Asian stock markets managed to stay
flat or even recover moderately from their lows during the last two months
of this period.
o Deteriorating economic fundamentals in Japan which threatened to
intensify and prolong the broader economic slump in Asia was also
responsible for the performance of these markets. South Korea (4.4)%,
Greece (9.0)% and Israel (15.6)% were among the better performers during a
particularly difficult period.
THE FUND
o The Fund returned (23.10)%, (23.50)%, and (23.70)% for Class A, B, and C
shares, respectively, for the period ended October 31, 1998. The MSCI
Emerging Markets index posted a return of (42.2)% for the year influenced
largely by Latin American markets.
o The Fund's holdings in South Korea and Hong Kong had the greatest
positive impact on performance with some holdings in these countries
increasing in excess of 25% during this period. Latin American holdings as
a group had the largest negative impact on performance followed by
holdings in Russia and India. On a sector basis, Building Materials,
Insurance, and Beverages were the strongest performing sectors in the
Fund, while Utilities and Energy Sources were among sectors that had the
largest declines.
CURRENT STRATEGY
o The bottom-up, value philosophy used in managing the Fund will be
consistently applied to find the best opportunities available in non-U.S.
markets. There is no focus on top-down macroeconomic evaluations or
forecasts in structuring the Fund. Country and industry exposure are
exclusively a residual of the purchase of individual businesses that meet
the strict value criteria.
o The fundamental valuations of the Fund reflect, and will continue to
reflect, significant discounts to the world market averages. This absolute
value focus has performed very favorably in declining market environments
as well as doing well over long-term market cycles.
o The Fund will endeavor to stay fully invested in non-U.S. equities and
will not attempt to anticipate short-term market movements. We will hold
the best values available without bias to either country or industry.
o We see the current volatility in emerging market stocks as an
opportunity to acquire leading emerging market companies at attractive
prices.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/98) TOTAL NET ASSETS $9,701,908
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<S> <C> <C>
1 Southeast Asia Cement 3.4%
Holdings, Inc.
2 Solid Group, Inc. 3.2%
3 Telefonos de Mexico SA 2.8%
4 Centrais Eletricas 2.7%
Brasileiras SA
5 Kwong On Bank Ltd. 2.7%
6 De Beers Centenary AG 2.6%
7 YPF Sociedad Anonima 2.6%
8 Iscor Ltd. 2.5%
9 SK Telecom Co. Ltd. 2.4%
10 Uniao de Bancos Brasileiros SA 2.4%
----
27.3%
====
</TABLE>
<TABLE>
<CAPTION>
TOP 5 INDUSTRIES
(by percentage of net assets)
<S> <C>
Telecommunications 12.1%
Multi-Industry 9.8%
Energy 9.4%
Banking 8.6%
Chemicals 7.9%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Inception 5 years 1 year
Class A (26.76)% N/A N/A
Class B (27.32)% N/A N/A
Class C (24.46)% N/A N/A
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
- -----------------------------------------------------------------------------
Inception 5 years 1 year
Class A (23.10)% N/A N/A
Class B (23.50)% N/A N/A
Class C (23.70)% N/A N/A
</TABLE>
14
<PAGE>
NORTHSTAR
EMERGING MARKETS VALUE FUND
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
EMERGING MARKETS VALUE FUND AND COMPARATIVE INDICES FROM INCEPTION OF
EACH CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended October
31, 1998. The average annualized total return for Class A shares of (26.76%)
for the period since the Fund's inception of January 1, 1998 reflects payment
of the maximum sales charge of 4.75%. Average annualized total returns of
(27.32%) and (24.46%) since inception for Class B and Class C shares of January
1, 1998, respectively, reflect applicable contingent deferred sales charges
(maximum contingent deferred sales charge for Class B shares of 5.00% declines
to 0% after five years; and maximum charge for Class C shares is 1.00% during
the first year of investment only.) All performance data shown represents past
performance, and should not be considered indicative of future performance.
[THREE LINE CHARTS APPEAR BELOW WITH THE FOLLOWING INFORMATION:]
NORTHSTAR EMERGING MARKETS VALUE -- CLASS A
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION (26.76%)
Class A EAFE
------- ------
(in thousands)
01/01/98 9.525 9.525
06/30/98 7.743 10.963
10/31/98 7.324 10.330
NORTHSTAR EMERGING MARKETS VALUE -- CLASS B
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION (27.32%)
Class B EAFE
------- ------
(in thousands)
01/01/98 10 10
06/30/98 8.100 11.510
10/31/98 7.650 10.846
NORTHSTAR EMERGING MARKETS VALUE -- CLASS C
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION (24.46%)
Class C EAFE
------- ------
(in thousands)
01/01/98 10 10
06/30/98 8.090 11.510
10/31/98 7.630 10.846
15
<PAGE>
NORTHSTAR EMERGING MARKETS VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country Value % of Net Assets
- ------------------------------- ------------- ----------------
<S> <C> <C>
Argentina $ 447,179 4.61%
Brazil 1,661,599 17.13
Chile 299,837 3.09
China 632,616 6.52
Colombia 127,938 1.32
Czech Republic 186,840 1.92
Hong Kong 776,482 8.00
India 753,755 7.77
Indonesia 7,366 0.08
Israel 144,766 1.49
Korea 431,681 4.45
Malaysia 390,900 4.03
Mexico 412,127 4.25
Philippines 1,276,675 13.16
Poland 45,200 0.47
Singapore 156,510 1.61
South Africa 824,631 8.50
Thailand 4,429 0.04
United States 429,000 4.42
USSR 344,419 3.55
Venezuela 193,750 2.00
Other assets less liabilities 154,208 1.59
---------- ------
NET ASSETS $9,701,908 100.00%
========== ======
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
NORTHSTAR EMERGING MARKETS VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------- ------------- -----------
<S> <C> <C>
COMMON STOCKS -- 78.31%
AUTOMOBILES -- 1.62%
Toyota South Africa Ltd. (South Africa) 59,500 $157,320
--------
BANKING -- 4.92%
Banco Santiago SA ** (Chile) 10,300 140,338
Bank Handlowy w Warszawie ## (Poland) 4,000 45,200
Bank Leumi Le-Israel (Israel) 15,800 20,122
Kwong On Bank Ltd. (Hong Kong) 281,000 259,412
PT Bank Pan Indonesia TBK (Indonesia) 279,900 7,366
Thai Farmers Bank Public Co. Ltd. (Thailand) 3,500 4,429
--------
476,867
--------
BEVERAGES/TOBACCO -- 1.98%
Massalin Particulares SA (Argentina) 32,900 192,529
--------
BUILDING MATERIALS & COMPONENTS -- 3.35%
Southeast Asia Cement Holdings, Inc. @(Philippines) 19,276,000 324,850
--------
CHEMICALS -- 6.48%
Beijing Yanhua Petrochemical Co. Ltd. (China) 2,200,000 190,316
Indian Petrochemicals Corp. Ltd. ## (India) 56,500 218,938
Shanghai Petrochemical Co. Ltd. ** (China) 21,800 219,362
--------
628,616
--------
ELECTRICAL & ELECTRONICS -- 3.23%
Solid Group, Inc. (Philippines) 14,708,100 313,481
--------
ENERGY -- 7.71%
LUKoil Holding ** (Russia) 7,400 120,250
Petron Corp. (Philippines) 100,400 11,446
RAO Gazprom ** (Russia) 20,360 189,857
Sasol Ltd. (South Africa) 28,000 137,311
Sasol Ltd. ** (South Africa) 7,000 35,000
YPF Sociedad Anonima ** (Argentina) 8,800 254,650
--------
748,514
--------
FINANCIAL SERVICES -- 2.23%
Grupo Financiero Inbursa SA de CV ** (Mexico) 15,500 137,502
Industrial Credit & Investment Corp. of India Ltd. ## (India) 16,570 79,017
--------
216,519
--------
FOOD & HOUSEHOLD PRODUCTS -- 2.02%
RFM Corp. (Philippines) 1,551,900 196,151
--------
INSURANCE -- 2.32%
Pacific and Orient Berhad (Malaysia) 347,000 224,637
--------
LEISURE & TOURISM -- 2.89%
Resorts World Berhad (Malaysia) 195,000 166,263
Shangri-La Asia Ltd. (Hong Kong) 128,000 114,035
--------
280,298
--------
MACHINERY & ENGINEERING -- 1.51%
Larsen & Toubro Ltd. ## (India) 21,000 147,000
--------
MATERIALS & COMMODITIES -- 2.57%
De Beers Centenary AG (South Africa) 17,900 249,433
--------
</TABLE>
17
<PAGE>
NORTHSTAR EMERGING MARKETS VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Shares Value
- ----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
MERCHANDISING -- 2.63%
Dairy Farm International Holdings Ltd. (Singapore) 61,000 $ 75,030
Dickson Concepts International Ltd. (Hong Kong) 185,900 180,019
----------
255,049
----------
METALS -- STEEL -- 4.09%
Iscor Ltd. (South Africa) 968,000 245,567
Pohang Iron & Steel Co. Ltd. ** (South Korea) 8,400 151,200
----------
396,767
----------
MULTI-INDUSTRY -- 9.79%
First Pacific Co. Ltd. @(Hong Kong) 470,000 223,015
Indian Rayon and Industries Ltd. ## (India) 64,000 150,400
Jardine Matheson Holdings Ltd. (Singapore) 28,600 80,080
Jardine Matheson Holdings Ltd. ** (Singapore) 500 1,400
JG Summit Holding, Inc. (Philippines) 5,442,000 210,397
Koors Industries Ltd. ** (Israel) 7,700 124,644
Quinenco SA ** (Chile) 22,000 159,500
----------
949,436
----------
TELECOMMUNICATIONS -- 9.84%
Compania Anonima Nacional Telefonos de Venezuela ** (Venezuela) 12,500 193,750
Philippine Long Distance Telephone Co. ** (Philippines) 9,040 220,350
Rostelecom ** (Russia) 9,000 34,313
SK Telecom Co. Ltd. ** (South Korea) 22,500 232,031
Telefonos de Mexico SA ** (Mexico) 5,200 274,625
----------
955,069
----------
TEXTILE/APPAREL -- 1.63%
Bombay Dyeing and Manufacturing Co. Ltd. ## (India) 144,000 158,400
----------
UTILITIES -- ELECTRICAL & GAS -- 7.50%
Centrais Eletricas Brasileiras SA ** (Brazil) 27,300 261,056
Centrais Geradoras do Sul do Brasil SA **@(Brazil) 1,490 7,619
Ceske Energeticke Zavody (Czech Republic) 8,200 186,840
Korea Electric Power Corp. ** (South Korea) 3,800 48,450
Shandong Huaneng Power Co. Ltd. ** (China) 43,500 222,938
----------
726,903
----------
TOTAL COMMON STOCKS
(cost $9,044,060) 7,597,839
----------
PREFERRED STOCKS -- 15.68%
BANKING -- 3.68%
Banco Ganadero SA ** (Colombia), $0.2220 17,800 127,937
Uniao de Bancos Brasileiros SA ## (Brazil), $0.7141 13,100 229,250
----------
357,187
----------
BEVERAGES/TOBACCO -- 2.05%
Companhia Cervejaria Brahma ** (Brazil), $0.1308 20,700 199,238
----------
CHEMICALS -- 1.40%
Copene-Petroquimica do Nordeste SA ** (Brazil), $0.4335 23,400 135,844
----------
ENERGY -- 1.69%
Petroleo Brasileiro SA ** (Brazil), $0.5391 13,000 163,471
----------
</TABLE>
18
<PAGE>
NORTHSTAR EMERGING MARKETS VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- --------------------------------------------------------------------------- ------------------------- -------------
<S> <C> <C>
FOREST & PAPER PRODUCTS -- 1.56%
Aracruz Celulose SA ** (Brazil), $0.2061 18,000 $ 150,750
----------
METALS -- STEEL -- 1.18%
Usinas Siderurgicas de Minas Gerais SA ** (Brazil), $0.3323 36,300 114,418
----------
TELECOMMUNICATIONS -- 2.27%
Telecomunicacoes Brasileiras SA ** (Brazil), $1.9760 2,900 220,219
----------
UTILITIES -- ELECTRICAL & GAS -- 1.85%
Centrais Eletricas de Santa Catarina SA ** (Brazil), $1.1400 3,200 179,734
----------
TOTAL PREFERRED STOCKS
(cost $2,259,964) 1,520,861
----------
TOTAL INVESTMENT SECURITIES -- 93.99%
(cost $11,304,024) 9,118,700
REPURCHASE AGREEMENT -- 4.42%
Agreement with State Street Bank and Trust bearing interest at 5.25% dated
10/30/98, to be repurchased 11/02/98 in the amount of $429,188 and
collateralized by $375,000 U.S. Treasury Bonds, 7.00% due 7/15/06, value
$441,226
(cost $429,000) $429,000 429,000
OTHER ASSETS LESS LIABILITIES -- 1.59% 154,208
----------
NET ASSETS -- 100.00% $9,701,908
==========
</TABLE>
** American Depositary Receipts.
## Global Depositary Receipts.
@ Non-income producing security.
See accompanying notes to financial statements.
19
<PAGE>
NORTHSTAR
INCOME AND GROWTH FUND
- ---------------------------------------------------------------------------
[PHOTOGRAPH OF MARY LISANTI APPEARS HERE]
MARY LISANTI
THE MARKETS
o For the six months ended October 31, 1998 the Dow Industrials fell 4.8%
and the S&P 500 declined 1.2%. The markets experienced their most volatile
period since 1994, as the default of Russia in late August and Long Term
Capital's problems roiled both the equity and bond markets.
o The favorable factors affecting equity prices during the first half of
1998 continued briefly until July 20th, when the Dow peaked at 9,368 and
the S&P 500 at 1,190. As the scope and severity of the structural problems
in Japan and lesser developed countries continued to escalate, the
negative impact on the global economy, U.S. financial institutions, and
multinational corporations became increasingly visible. In this
environment, concerns over the sustainability of corporate profits grew,
which led to a 21% decline in the S&P 500 from its peak in July to the
trough in September.
o Yields on 10- and 30-year Treasuries declined to 4.42% and 4.98%,
respectively, down 122 basis points and 97 basis points, respectively as
investors sought the safety of U.S. government bonds. Investment grade
corporate yields also declined, but less than Treasuries as spreads
widened significantly in the wake of Long Term Capital's problems.
THE FUND
o The Fund's one year total return was 1.12%, 0.44%, and 0.51% for Class A,
B, and C shares compared to the average of Lipper balanced funds which
increased 10.8%. This underperformance was due in part to the Fund's
overweight in REITs. While the REITs held in the Fund were of large,
well-capitalized companies with good growth prospects, investor psychology
soured on the sector in general as development picked up and acquisition
prices rose. The Fund was also hurt by its position in oil service stocks
and large, industrial multinationals.
o A significant repositioning of the Fund's equity portion was undertaken
in the third quarter with a goal of producing more consistent returns.
Concentrations on individual stocks and market sectors were reduced. New
purchases of equities were focused on companies with more consistency in
their business models and low exposure to emerging markets.
o We seek to use the volatility of the marketplace to shareholders'
advantage by initiating or adding to equity positions during periods of
market weakness. New purchases of equities during market correction
brought the equity mix up to 63% by the end of September. Additionally, we
also sought to take advantage of the widening of the yield curve by
reducing our holdings in Treasuries and agencies to fund the increased
position in equities.
CURRENT STRATEGY
o The restructuring of the Fund's equity positions has resulted in a more
sector neutral Fund compared to the S&P 500. The Fund's weighting in
REIT's, Finance & Banking, and other financial sectors was significantly
reduced and more emphasis was placed on stable domestic growth issues. We
took advantage of the correction in the fall to increase our weighting in
Technology, which was particularly hard hit and thus particularly
attractive on a risk/reward basis. Significant positions were added to the
Telecommunications and Computer Services sectors; many of these companies
have very stable business models but were selling at multiples typically
afforded to more cyclical issues in the wake of the correction.
o We believe the Fund is very well positioned in the current environment.
As of October 31, 1998, equity holdings as a group have a yield of 2.1%
(about 0.4% higher than the S&P 500) and have an average projected growth
rate of 15%, also above that of the S&P 500. However, the Fund's P/E is
only 14.6x, which is significantly below that of the S&P 500. The overall
"P/E to growth" or "the price of growth", sits at slightly under 1.0 x,
versus 1.8 x for the S&P 500.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/98) TOTAL NET ASSETS $144,436,621
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<S> <C> <C>
1 Federal Home Loan Mtg. Corp. 7.6%
2 Continental Airlines, Inc. 2.9%
3 Smith International, Inc. 2.7%
4 Avon Products, Inc. 2.6%
5 Merck & Co., Inc. 2.6%
6 Bristol-Meyers Squibb Co. 2.5%
7 Penn Power & Light Capital 2.5%
8 General Electric Co. 2.4%
9 Compaq Computer Corp. 2.2%
10 Xerox Corp. 2.2%
----
30.2%
====
</TABLE>
<TABLE>
<CAPTION>
TOP 5 INDUSTRIES
(by percentage of net assets)
<S> <C>
Federal Agencies 7.6%
Transportation 2.9%
Energy 2.7%
Consumer Staples 2.6%
Pharmaceuticals 2.6%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
- -------------------------------------------------------------
<S> <C> <C> <C>
Inception 5 years 1 year
Class A 8.31% N/A (3.67)%
Class B 7.39% N/A (4.26)%
Class C 8.52% N/A (.43)%
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
- ------------------------------------------------------------
Inception 5 years 1 year
Class A 56.29% N/A 1.12%
Class B 42.09% N/A .44%
Class C 45.93% N/A .51%
</TABLE>
20
<PAGE>
NORTHSTAR
INCOME AND GROWTH FUND
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
INCOME AND GROWTH FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH
CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended October
31, 1998, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 8.31% for the period since the Fund's
inception of November 8, 1993 reflects payment of the maximum sales charge of
4.75%. Average annualized total returns of 7.39% and 8.52% since inception for
Class B and Class C shares of February 9, 1994 and March 21, 1994,
respectively, reflect applicable contingent deferred sales charges (maximum
contingent deferred sales charge for Class B shares of 5.00% declines to 0%
after five years; and maximum charge for Class C shares is 1.00% during the
first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
[THREE LINE CHARTS APPEAR BELOW WITH THE FOLLOWING INFORMATION:]
NORTHSTAR INCOME AND GROWTH FUND -- CLASS A
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (3.67%)
SINCE INCEPTION 8.31%
Lehman Brothers Lipper Balanced
Class A Gov't/Corp. Bond Fund Index S&P 500
------- ---------------- --------------- -------
(in thousands)
11/08/93 10000.0 10000.0 9525.0 10000.0
10/31/94 9674.0 9939.0 9751.0 10097.0
10/31/95 11237.0 11686.0 10948.0 12431.0
10/31/96 11843.0 13380.0 12591.0 15077.0
10/31/97 12886.0 16069.0 14719.0 19553.0
10/31/98 14211.0 17798.0 14884.0 23487.0
NORTHSTAR INCOME AND GROWTH FUND -- CLASS B
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (4.26%)
SINCE INCEPTION 7.39%
Lehman Brothers Lipper Balanced
Class B Gov't/Corp. Bond Fund Index S&P 500
------- ---------------- --------------- -------
(in thousands)
02/09/94 10000.0 10000.0 10000.0 10000.0
10/31/94 9275.0 9641.0 9545.0 9536.0
10/31/95 11165.0 11496.0 11921.0 12791.0
10/31/96 12787.0 11830.0 13472.0 15382.0
10/31/97 14148.0 12782.0 15651.0 18993.0
10/31/98 14209.0 14095.0 17335.0 22815.0
NORTHSTAR INCOME AND GROWTH FUND -- CLASS C
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (0.43%)
SINCE INCEPTION 8.52%
Lehman Brothers Lipper Balanced
Class C Gov't/Corp. Bond Fund Index S&P 500
------- ---------------- --------------- -------
(in thousands)
03/21/94 10000.0 10000.0 10000.0 10000.0
10/31/94 9510.0 9856.0 9736.0 9832.0
10/31/95 11455.0 11752.0 12160.0 13188.0
10/31/96 13117.0 12093.0 13741.0 15860.0
10/31/97 14519.0 13066.0 15964.0 19583.0
10/31/98 14593.0 14408.0 17682.0 23523.0
21
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Industry Value % of Net Assets
- --------------------------------------- ---------------- ----------------
<S> <C> <C>
Bank Investment Contracts $ 14,731,000 10.20%
Basic Material 1,978,875 1.37
Capital Goods 7,839,783 5.43
Communication Service 7,858,413 5.44
Consumer Cyclicals 12,186,620 8.44
Consumer Staples 17,257,095 11.95
EDP Peripherals 1,042,875 0.72
EDP Services 1,411,425 0.98
Electrical Equipment 955,798 0.66
Electronic Data Processing 3,168,825 2.19
Energy 10,190,581 7.06
Financial 16,410,479 11.36
Food & Beverage 1,058,400 0.73
Healthcare 3,801,250 2.63
Healthcare/Pharmaceutical 989,959 0.68
Office Equipment/Supplies 3,754,769 2.60
Package Goods/Cosmetics 1,256,375 0.87
Pharmaceuticals 7,360,638 5.10
Real Estate Investment Trust 4,345,637 3.01
Retailing 1,000,000 0.69
Savings & Loan 905,500 0.63
Services to Health Industry 994,725 0.69
Technology 8,766,097 6.07
Telecommunications Equipment 1,099,425 0.76
Transportation 4,249,815 2.94
U.S. Government and Agencies 12,769,504 8.84
Utilities 10,258,988 7.10
Liabilities in excess of other assets (13,206,230) ( 9.14)
------------- ------
NET ASSETS $ 144,436,621 100.00%
============= ======
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------ -------------- ------------
<S> <C> <C>
COMMON STOCKS -- 63.49%
BASIC MATERIAL -- 1.37%
Aluminum Co. of America 8,500 $673,625
E.I. du Pont De Nemours & Co. 22,700 1,305,250
----------
1,978,875
----------
CAPITAL GOODS -- 5.43%
Briggs & Stratton Corp. 11,100 521,700
General Electric Co. 39,300 3,438,750
Ingersoll Rand Co. 10,800 545,400
Pitney Bowes, Inc. 18,100 996,631
U.S. Filter Corp. @ 59,600 1,260,795
Waste Management, Inc. 24,100 1,076,507
----------
7,839,783
----------
COMMUNICATION SERVICE -- 5.44%
Ameritech Corp. 34,300 1,850,056
AT&T Corp. 31,225 1,943,756
Frontier Corp. 32,800 986,050
GTE Corp. 16,400 962,475
MCI Worldcom, Inc. @ 38,300 2,116,075
----------
7,858,412
----------
CONSUMER CYCLICALS -- 5.08%
Dana Corp. 23,700 990,956
Danaher Corp. 25,000 998,438
Dayton Hudson Corp. 24,300 1,029,713
Linens N Things, Inc. @ 33,600 1,039,500
Lowes Cos., Inc. 25,500 859,031
Magna International, Inc. @@ 30,600 1,899,112
Sunrise Assisted Living, Inc. @ 12,000 516,750
----------
7,333,500
----------
CONSUMER STAPLES -- 9.37%
CBS Corp. 33,200 950,891
Comcast Corp. 20,100 992,437
ConAgra, Inc. 32,100 977,044
Cox Communications, Inc. @ 18,000 987,750
Kimberly-Clark Corp. 57,455 2,772,204
Manpower, Inc. 39,600 952,289
Newell Co. 20,400 897,600
Philip Morris Cos., Inc. 54,540 2,788,357
Procter & Gamble Co. 13,600 1,208,700
Sara Lee Corp. 16,900 1,008,719
----------
13,535,991
----------
EDP PERIPHERALS -- 0.72%
EMC Corp. 16,200 1,042,875
----------
EDP SERVICES -- 0.98%
Ceridian Corp. 24,600 1,411,425
----------
ELECTRICAL EQUIPMENT -- 0.66%
AMP, Inc. 23,200 955,798
----------
ELECTRONIC DATA PROCESSING -- 2.19%
Compaq Computer Corp. 100,200 3,168,825
----------
</TABLE>
23
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Shares Value
- -------------------------------------- --------- ------------
<S> <C> <C>
ENERGY -- 4.39%
Atlantic Richfield Co. 13,800 $950,475
Burlington Resources, Inc. 24,400 1,004,975
Halliburton Co. 55,500 1,994,532
Mobil Corp. 25,500 1,930,031
R & B Falcon Corp. @ 34,000 461,125
---------
6,341,138
---------
FINANCIAL -- 5.66%
Associates First Capital Corp. 23,400 1,649,700
Chase Manhattan Corp. 30,000 1,693,355
Mellon Bank Corp. 31,800 1,911,975
Nationwide Financial Services, Inc. 27,000 1,120,500
North Fork Bancorp, Inc. 45,000 894,375
Regions Financial Corp. 24,600 908,662
---------
8,178,567
---------
FOOD & BEVERAGE -- 0.73%
General Mills, Inc. 14,400 1,058,400
---------
HEALTHCARE -- 1.30%
Abbott Laboratories 21,100 990,381
Tenet Healthcare Corp. @ 31,700 885,619
---------
1,876,000
---------
HEALTHCARE/PHARMACEUTICAL -- 0.68%
Baxter International, Inc. 16,500 989,959
---------
OFFICE EQUIPMENT/SUPPLIES -- 2.60%
Lexmark International Group, Inc. @ 7,700 538,519
Xerox Corp. 33,200 3,216,250
---------
3,754,769
---------
PACKAGE GOODS/COSMETICS -- 0.87%
The Clorox Co. 11,500 1,256,375
---------
PHARMACEUTICALS -- 5.10%
Bristol-Myers Squibb Co. 32,200 3,560,112
Merck & Co., Inc. 28,100 3,800,525
---------
7,360,637
---------
REAL ESTATE INVESTMENT TRUST -- 3.01%
Developers Diversified Realty Corp. 100,000 1,887,500
Highwoods Properties, Inc. 44,500 1,243,219
Liberty Property Trust 52,800 1,214,918
---------
4,345,637
---------
RETAILING -- 0.69%
Office Depot, Inc. @ 40,000 1,000,000
---------
SAVINGS & LOAN -- 0.63%
Sovereign Bancorp, Inc. 68,000 905,500
---------
SERVICES TO HEALTH INDUSTRY -- 0.69%
Shared Medical Systems Corp. 20,200 994,725
---------
</TABLE>
24
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- ---------------------------------------- --------------------------- ------------
<S> <C> <C>
TECHNOLOGY -- 2.53%
Equifax, Inc. 23,500 $909,156
Intel Corp. 10,600 945,388
Sun Microsystems, Inc. 16,000 932,000
Texas Instruments, Inc. 13,500 863,156
----------
3,649,700
----------
TELECOMMUNICATIONS EQUIPMENT -- 0.76%
General Instrument Corp. 42,800 1,099,425
----------
UTILITIES -- 2.61%
El Paso Energy Corp. 59,400 2,104,988
Enron Corp. 18,300 965,325
Texas Utilities Co. 16,000 700,000
----------
3,770,313
----------
TOTAL COMMON STOCKS
(cost $76,356,630) 91,706,629
----------
DOMESTIC CORPORATE BONDS -- 26.61%
CONSUMER CYCLICALS -- 3.36%
A.H. Belo Corp.
7.125%, Sr. Notes, 6/01/07 $2,600,000 2,674,880
J.C. Penney Co., Inc.
7.60%, Notes, 4/01/07 2,000,000 2,178,240
----------
4,853,120
----------
CONSUMER STAPLES -- 2.58%
Avon Products, Inc.
6.55%, Notes, 8/01/07 3,600,000 3,721,104
----------
ENERGY -- 2.67%
Smith International, Inc.
7.00%, Sr. Notes, 9/15/07 3,600,000 3,849,444
----------
FINANCIAL -- 5.70%
First Union Corp.
7.50%, Subordinated Notes, 7/15/06 2,600,000 2,854,722
Fleet Financial Group, Inc.
7.19%, Subordinated Notes, 10/02/12 2,600,000 2,725,060
General Motors Acceptance Corp.
6.125%, Notes, 1/22/08 2,600,000 2,652,130
----------
8,231,912
----------
HEALTHCARE -- 1.33%
American Home Products Corp.
7.90%, Notes, 2/15/05 1,700,000 1,925,250
----------
TECHNOLOGY -- 3.54%
International Business Machines Corp.
6.45%, Notes, 8/01/07 2,600,000 2,788,344
Raytheon Co.
6.45%, Notes, 8/15/02 2,250,000 2,328,053
----------
5,116,397
----------
TRANSPORTATION -- 2.94%
Continental Airlines, Inc.
7.82%, Pass-Thru Certificates, 4/15/15 3,700,221 4,249,815
----------
</TABLE>
25
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------- ------------------ ----------------
<S> <C> <C>
UTILITIES -- 4.49%
IES Utilities, Inc.
6.625%, Sr. Debentures, 8/01/09 $2,700,000 $ 2,833,596
Penn Power & Light Capital Funding, Inc.
6.79%, Company Guarantee, 11/22/04 3,600,000 3,655,080
--------------
6,488,676
--------------
TOTAL DOMESTIC CORPORATE BONDS
(cost $36,444,344) 38,435,718
--------------
U.S. GOVERNMENT AND AGENCIES -- 8.84%
Federal Home Loan Mortgage Corp.
5.125%, 10/15/08 11,000,000 10,919,920
--------------
U.S. Treasury Notes
6.50%, 10/15/06 1,650,000 1,849,584
--------------
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $12,596,615) 12,769,504
--------------
TOTAL INVESTMENT SECURITIES -- 98.94%
(cost $125,397,589) 142,911,851
REPURCHASE AGREEMENT -- 10.20%
Agreement with State Street Bank and Trust bearing interest at 5.25%
dated 10/30/98, to be repurchased 11/02/98 in the amount of
$14,737,445 and collateralized by $14,345,000 U.S. Treasury Bonds,
5.625% due 4/30/00, value $15,026,431
(cost $14,731,000) 14,731,000 14,731,000
LIABILITIES IN EXCESS OF OTHER ASSETS -- (9.14%) (13,206,230)
--------------
NET ASSETS -- 100.00% $ 144,436,621
==============
</TABLE>
@ Non-income producing security.
@@ Foreign security.
See accompanying notes to financial statements.
26
<PAGE>
NORTHSTAR
HIGH TOTAL RETURN FUND II
- ----------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
[PHOTOGRAGH OF THOMAS OLE DIAL APPEARS HERE]
THOMAS OLE DIAL
[PHOTOGRAGH OF JEFFREY AURIGEMMA APPEARS HERE]
JEFFREY AURIGEMMA
THE MARKETS
o Economic and financial crises in emerging markets were pronounced in the
1st and 4th fiscal quarters of the Fund's fiscal year ended October 31,
1998. Nonetheless, the U.S. economy grew about 3.5% during those 12
months. Commodity deflation and cheap imports caused inflation in the U.S.
to drop from 2.1% to 1.5%. Low inflation, slower growth, budget surpluses
and a major flight to quality pushed U.S. Treasury bond yields down to
levels not seen since the 1960s. In the 1998 fiscal year, yields of 10-
and 30-year Treasury bonds dropped steadily. Their yields on October 31,
1998 were 4.6% and 5.2%, respectively, down 1.2% and 1%, respectively.
Increased fears of global turmoil and downward revisions of corporate
earnings estimates hurt the total returns of high yield bonds, caused
small cap stock prices to decline, and progressively made cash and the
highest quality bonds the strong preference of most investors worldwide.
o High yield bond returns in the 12 months ended October 31, 1998 were
(0.5%) compared to 9.3% for all domestic bonds. As economic and financial
problems spread, investors fled from "high-risk" securities to the safety
of U.S. Treasuries. In general, the lower the credit rating and the longer
the maturity, the worse bonds performed. In fact, not only did their
spreads widen, but the yields of high yield bonds actually increased
during those 12 months.
o Emerging market bonds fell 11.8% from October 31, 1997 to October 31,
1998. Recession in Japan, riots in Indonesia, Russia's economic collapse
and cash outflows from Brazil caused a loss of confidence that crushed
such bonds' prices.
THE FUND
o From October 31, 1997 through October 31, 1998, the total return of the
Fund's Class A, B, and C shares were (4.2%), (4.9%), and (4.9%),
respectively; the Lipper average for high yield funds was (3.4%). Despite
lower asset values and some redemptions, new sales helped the Fund's
assets grow over 350%, from $58MM to $263MM.
o Despite a strong first nine months of fiscal 1998, the Fund's exposure to
lower-rated bonds, Telecom, Shipping and emerging market bonds later
combined to push the Fund's performance slightly below average.
o Given the severe declines in the values of small cap equity securities in
fiscal 1998, the Fund's limited holdings of stocks or equity rights
attached to bonds ("equity kickers") protected its returns from being
lower.
CURRENT STRATEGY
o Continue above-average exposure in non-cyclical industries. Focus on
investments in undervalued bonds that have high yields and above-average
potential for capital appreciation. Avoid purchases of emerging market
bonds and bonds with equity kickers until there is a substantial
improvement in the investment environment.
o Until the factors causing high market volatility and a flight to quality
further subside, we will continue to be highly selective about the credit
risks the Fund takes and the Fund will continue to hold high cash
balances.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/98) TOTAL NET ASSETS $263,485,712
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<S> <C> <C>
1 Intracel Corp. 2.6%
2 HMH Properties, Inc. 2.2%
3 Packaged Ice, Inc. 1.8%
4 Health Insurance Plan of
1.6%
Greater NY
5 Virgin Cinemas 1.6%
6 Forcenergy, Inc. 1.5%
7 Romacorp, Inc. 1.5%
8 Worldport International, 1.5%
Inc.
9 Intermedia 1.4%
Communications, Inc.
10 Conproca SA 1.3%
----
17.0%
====
</TABLE>
<TABLE>
<CAPTION>
TOP 5 INDUSTRIES
(by percentage of net assets)
<S> <C>
Telecommunications 15.9%
Healthcare 7.3%
Hotel & Gaming 6.8%
Oil & Gas 6.3%
Cable Television 6.0%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
- -------------------------------------------------------------------
<S> <C> <C> <C>
Inception 5 years 1 year
Class A 3.43% N/A (8.73)%
Class B 3.61% N/A (9.26)%
Class C 5.73% N/A (5.77)%
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
- --------------------------------------------------------------------
Inception 5 years 1 year
Class A 11.39% N/A (4.23)%
Class B 10.23% N/A (4.90)%
Class C 10.24% N/A (4.90)%
</TABLE>
27
<PAGE>
NORTHSTAR
HIGH TOTAL RETURN FUND II
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
HIGH TOTAL RETURN FUND II AND COMPARATIVE INDICES FROM INCEPTION OF
EACH CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended October
31, 1998, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 3.43% for the period since the Fund's
inception of January 31, 1997 reflects payment of the maximum sales charge of
4.75%. Average annualized total returns of 3.61% and 5.73% since inception for
Class B and Class C shares of January 31, 1997, respectively, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B shares of 5.00% declines to 0% after five years; and maximum
charge for Class C shares is 1.00% during the first year of investment only).
All performance data shown represents past performance, and should not be
considered indicative of future performance.
[THREE LINE CHARTS APPEAR BELOW WITH THE FOLLOWING INFORMATION:]
NORTHSTAR HIGH TOTAL RETURN FUND II -- CLASS A
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (8.73%)
SINCE INCEPTION 3.43%
Lehman Brothers Lehman Brothers
Class A Gov't/Corp. Bond High Yield
------- ---------------- ---------------
(in thousands)
01/31/97 9.525 10 10
10/31/97 11.078 10.804 11.072
10/31/98 10.609 11.914 11.017
NORTHSTAR HIGH TOTAL RETURN FUND II -- CLASS B
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (9.26%)
SINCE INCEPTION 3.61%
Lehman Brothers Lehman Brothers
Class B Gov't/Corp. Bond High Yield
------- ---------------- ---------------
(in thousands)
01/31/97 10 10 10
10/31/97 11.591 10.804 11.072
10/31/98 11.023 11.914 11.017
NORTHSTAR HIGH TOTAL RETURN FUND II -- CLASS C
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (5.77%)
SINCE INCEPTION 5.73%
Lehman Brothers Lehman Brothers
Class C Gov't/Corp. Bond High Yield
------- ---------------- ---------------
(in thousands)
01/31/97 10 10 10
10/31/97 11.591 10.804 11.072
10/31/98 11.023 11.914 11.017
28
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- -------------------------------------------------------- ------------------------ -------------
<S> <C> <C>
DOMESTIC BONDS & NOTES -- 64.07%
AEROSPACE & DEFENSE -- 1.26%
Aviation Sales Co.
8.125%, Sr. Subordinated Notes, 2/15/08 $2,000,000 $ 1,830,000
Compass Aerospace Corp. #
10.125%, Sr. Subordinated Notes, 4/15/05 1,500,000 1,477,500
Willcox & Gibbs, Inc.
12.25%, Company Guarantee, 12/15/03 4,000 2,740
-----------
3,310,240
-----------
AUTOMOTIVE MANUFACTURING -- 0.69%
Prestolite Electric, Inc.
9.625%, Guaranteed Sr. Notes, 2/01/08 2,000,000 1,810,000
-----------
BROADCASTING -- 1.92%
Brill Media Co. LLC $
0/7.50%, Sr. Subordinated Appreciation Notes, 12/15/07 85,714 3,000
Brill Media Co. LLC $
0/7.50%, Sr. Notes, 12/15/07 3,000,000 2,595,000
Unisite, Inc. ++
13.00%, Notes, 12/15/04 2,197,415 2,452,315
-----------
5,050,315
-----------
BUILDING MATERIALS -- 0.46%
Nortek, Inc. #
8.875%, Sr. Notes, 8/01/08 1,250,000 1,218,750
-----------
CABLE TELEVISION -- 4.53%
Century Communications Corp.
0%, Sr. Discount Notes, 1/15/08 1,800,000 873,000
Coaxial Communications, Inc. #
10.00%, Company Guarantee, 8/15/06 3,000,000 3,000,000
Diva Systems Corp. # $(1)
0/12.625%, Units, 3/01/08 7,000 2,275,000
EchoStar Communications Corp. $
0/12.875%, Sr. Discount Notes, 6/01/04 1,000,000 977,500
EchoStar Communications Corp. $
0/13.125%, Sr. Secured Discount Notes, 3/15/04 1,007,000 881,125
Heartland Wireless Communications, Inc. *
14.00%, Sr. Notes, 10/15/04 4,000 920
Medicom LLC
8.50%, Sr. Notes, 4/15/08 2,500,000 2,475,000
TVN Entertainment Corp. (2)
14.00%, Units, 8/01/08 1,500 1,380,000
Wireless One, Inc.
13.00%, Sr. Notes, 10/15/03 500,000 67,500
-----------
11,930,045
-----------
CAPITAL GOODS MANUFACTURING -- 1.39%
Indesco International, Inc.
9.75%, Sr. Subordinated Notes, 4/15/08 2,000,000 1,820,000
Moll Industries, Inc. #
10.50%, Sr. Subordinated Notes, 7/01/08 2,000,000 1,850,000
-----------
3,670,000
-----------
</TABLE>
29
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------- -------------------- -------------
<S> <C> <C>
CHEMICALS -- 1.76%
American Eco Corp.
9.625%, Company Guarantee, 5/15/08 $2,200,000 $1,441,000
American Pacific Corp.
9.25%, Sr. Notes, 3/01/05 3,000,000 2,925,000
Hydrochem Industrial Services, Inc.
10.375%, Company Guarantee, 8/01/07 300,000 265,500
----------
4,631,500
----------
COMPUTER/ELECTRONICS -- 1.42%
Cooperative Computing, Inc. #
9.00%, Sr. Subordinated Notes, 2/01/08 3,000,000 2,475,000
Details, Inc.
10.00%, Sr. Subordinated Notes, 11/15/05 1,000,000 925,000
Electronic Retailing Systems International, Inc. $
0/13.25%, Sr. Discount Notes, 2/01/04 1,000,000 355,000
----------
3,755,000
----------
CONSUMER PRODUCTS -- 4.59%
Amscan Holdings, Inc.
9.875%, Sr. Subordinated Notes, 12/15/07 2,000,000 1,650,000
Decora Industries, Inc.
11.00%, Sr. Secured Notes, 5/01/05 2,000,000 1,730,000
Jackson Products, Inc.
9.50%, Company Guarantee, 4/15/05 3,000,000 2,865,000
Packaged Ice, Inc.
9.75%, Sr. Notes, 2/01/05 5,000,000 4,675,000
Syratech Corp.
11.00%, Sr. Notes, 4/15/07 1,500,000 1,177,500
----------
12,097,500
----------
ENERGY -- 0.73%
Michael Petroleum Corp.
11.50%, Sr. Notes, 4/01/05 2,500,000 1,912,500
----------
ENTERTAINMENT/FILM -- 0.53%
Production Resource Group LLC
11.50%, Sr. Subordinated Notes, 1/15/08 1,500,000 1,402,500
----------
FOOD/BEVERAGE/TOBACCO -- 1.35%
Favorite Brands International, Inc.
10.25%, Sr. Notes, 7/20/07 2,000,000 810,000
North Atlantic Trading, Inc.
11.00%, Company Guarantee, 6/15/04 1,600,000 1,512,000
Standard Commercial Corp.
8.875%, Company Guarantee, 8/01/05 350,000 336,000
Tom's Foods, Inc.
10.50%, Sr. Secured Notes, 11/01/04 1,000,000 905,000
----------
3,563,000
----------
</TABLE>
30
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ------------------------------------------ ------------------------ -------------
<S> <C> <C>
HEALTHCARE -- 6.83%
Health Insurance Plan of Greater New York
11.25%, Notes, 7/01/10 $4,000,000 $4,230,000
Intracel Corp. ++
12.00%, Escrow Notes, 8/25/03 1,317,073 1,188,658
Intracel Corp. ++
12.00%, Notes, 8/25/03 7,682,927 6,933,842
Mediq, Inc. # $ (3)
0/13.00%, Units, 6/01/09 7,000 3,395,000
Packard Bioscience, Inc.
9.375%, Sr. Subordinated Notes, 3/01/07 2,500,000 2,262,500
----------
18,010,000
----------
HOMEBUILDERS/HOME CONSTRUCTION -- 1.27%
Engle Homes, Inc.
9.25%, Sr. Notes, 2/01/08 3,500,000 3,351,250
----------
HOTEL & GAMING -- 6.83%
Aladdin Gaming Corp. (4)
13.50%, Units, 3/01/10 3,000 915,000
Ameristar Casinos, Inc.
8.00%, Sr. Secured Notes, 1/02/04 2,000,000 1,810,000
Ameristar Casinos, Inc.
10.50%, Company Guarantee, 8/01/04 750,000 671,250
Hard Rock Hotel, Inc.
9.25%, Sr. Subordinated Notes, 4/01/05 2,000,000 1,950,000
HMH Properties, Inc.
7.875%, Sr. Secured Notes, 8/01/08 6,000,000 5,820,000
Lady Luck Gaming Finance Corp.
11.875%, 1st Mortgage Notes, 3/01/01 2,500,000 2,487,500
Venetian Casino Resort LLC
12.25%, Company Guarantee, 11/15/04 3,000,000 2,670,000
Venetian Casino Resort LLC.
10.00%, Sr. Subordinated Notes, 11/15/05 2,000,000 1,670,000
----------
17,993,750
----------
INSURANCE -- 0.52%
Superior National Insurance Group, Inc.
10.75%, Company Guarantee, 12/01/17 15,000 1,365,000
----------
LEISURE -- 1.33%
Globix Corp.
13.00%, Sr. Notes, 5/01/05 3,000,000 2,347,500
Silverleaf Resorts, Inc.
10.50%, Company Guarantee, 4/01/08 500,000 402,500
Source Media, Inc.
12.00%, Sr. Notes, 11/01/04 1,000,000 755,000
----------
3,505,000
----------
METALS & MINING -- 1.00%
Doe Run Resources Corp. #
11.25%, Company Guarantee, 3/15/05 2,000,000 1,790,000
Murrin Murrin Holdings Property Ltd.
9.375%, Sr. Notes, 8/31/07 1,000,000 855,000
----------
2,645,000
----------
</TABLE>
31
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ----------------------------------------------- ------------------------ -------------
<S> <C> <C>
OIL & GAS -- 3.60%
Forcenergy, Inc.
8.50%, Sr. Subordinated Notes, 2/15/07 $5,250,000 $3,858,750
Forman Petroleum Corp.
13.50%, Company Guarantee, 6/01/04 2,000,000 1,510,000
Transamerican Energy Corp.
11.50%, Sr. Secured Notes, 6/15/02 2,000,000 710,000
Transamerican Energy Corp. $
0/13.00%, Sr. Secured Discount Notes, 6/15/02 1,500,000 487,500
Windsor Petroleum Transport Corp. #
7.84%, Notes, 1/15/21 4,000,000 2,920,000
----------
9,486,250
----------
PACKAGING -- 0.70%
Graham Packaging Holdings Co. $
0/10.75%, Sr. Discount Notes, 1/15/09 3,000,000 1,845,000
----------
RESTAURANTS -- 1.48%
Romacorp, Inc. #
12.00%, Sr. Notes, 7/01/06 4,000,000 3,890,000
----------
SERVICES -- 5.04%
Comforce Corp. & (5)
15.00%, Units, 12/01/09 2,692 2,786,220
Corporate Express Holdings, Inc. #
9.625%, Sr. Subordinated Notes, 6/01/08 3,000,000 2,850,000
Mentus Media Corp. &
12.00%, Sr. Secured Notes, 2/01/03 1,581,000 1,573,095
NBC Acquisition Corp.
10.75%, Sr. Discount Debentures, 2/15/09 3,000,000 1,515,000
Sabreliner Corp. #
11.00%, Sr. Notes, 6/15/08 3,000,000 2,595,000
U.S. Office Products Co. #
9.75%, Sr. Subordinated Notes, 6/15/08 2,500,000 1,975,000
----------
13,294,315
----------
SHIPPING -- 0.76%
Simcala, Inc.
9.625%, Sr. Notes, 4/15/06 1,500,000 1,050,000
Ultrapetrol Bahamas Ltd.
10.50%, 1st Mortgage Notes, 4/01/08 1,500,000 945,000
----------
1,995,000
----------
SPECIALTY RETAILING -- 1.48%
Pamida, Inc.
11.75%, Sr. Subordinated Notes, 3/15/03 1,000,000 955,000
Phillips Van-Heusen Corp.
9.50%, Sr. Subordinated Notes, 5/01/08 3,000,000 2,940,000
----------
3,895,000
----------
STEEL -- 0.50%
Geneva Steel Co.
9.50%, Sr. Notes, 1/15/04 3,000,000 855,000
NSM Steel Company Ltd. #
12.00%, Company Guarantee, 2/01/06 1,500,000 457,500
----------
1,312,500
----------
</TABLE>
32
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ------------------------------------------------------- ------------------------ --------------
<S> <C> <C>
TELECOMMUNICATIONS -- 11.35%
Global Crossing Holdings Ltd. #
9.625%, Sr. Notes, 5/15/08 $3,000,000 $ 2,910,000
Hyperion Telecommunications, Inc.
12.25%, Sr. Notes, 9/01/04 1,000,000 985,000
Intermedia Communications, Inc.
8.60%, Sr. Notes, 6/01/08 3,750,000 3,553,125
International Wireless Communications Holdings, Inc. *
0%, Sr. Secured Discount Notes, 8/15/01 1,500,000 157,500
Iridium Capital Corp.
13.00%, Sr. Secured Notes, 7/15/05 2,000,000 1,590,000
Iridium Capital Corp.
14.00%, Company Guarantee, 7/15/05 2,500,000 2,062,500
ITC Deltacom, Inc.
11.00%, Sr. Notes, 6/01/07 3,000 3,195
IXC Communications, Inc.
9.00%, Sr. Subordinated Notes, 4/15/08 3,000,000 2,970,000
Level 3 Communications, Inc.
9.125%, Sr. Notes, 5/01/08 3,000,000 2,842,500
Nextlink Communications, Inc. $
0/9.45%, Sr. Discount Notes, 4/15/08 3,500,000 1,907,500
Northeast Optic Network, Inc.
12.75%, Sr. Notes, 8/15/08 3,000,000 2,655,000
Price Communication Cellular Holding, Inc. &
11.25%, Sr. Notes, 8/15/08 1,500,000 1,312,500
RCN Corp.
10.00%, Sr. Notes, 10/15/07 1,000,000 885,000
RCN Corp. $
0/9.80%, Sr. Notes, 2/15/08 2,500,000 1,200,000
TCI Satellite Entertainment, Inc. $
0/12.25%, Sr. Discount Notes, 2/15/07 2,000,000 1,090,000
Transtel Pass-Thru Trust SA #
12.50%, Pass-Thru Trust Certificates, 11/01/07 1,500,000 622,500
Viatel, Inc. # (6)
11.25%, Units, 4/15/08 3,000 2,685,000
Winstar Equipment II Corp.
12.50%, Company Guarantee, 3/15/04 500,000 467,500
-------------
29,898,820
-------------
TEXTILE/APPAREL -- 0.75%
Norton McNaughton, Inc. #
12.50%, Sr. Notes, 6/01/05 2,250,000 1,968,750
-------------
TOTAL DOMESTIC BONDS & NOTES
(cost $193,205,329) 168,806,985
-------------
FOREIGN BONDS & NOTES -- 14.17%
AIR TRANSPORTATION -- 0.95%
Canadian Airlines Corp.
12.25%, Sr. Notes, 8/01/06 3,000,000 2,505,000
-------------
</TABLE>
33
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ----------------------------------------- ------------------------ ------------
<S> <C> <C>
CABLE TELEVISION -- 1.04%
Pratama Datakom Asia BV #
12.75%, Company Guarantee, 7/15/05 $2,000,000 $ 450,000
Star Choice Communications
13.00%, Sr. Secured Notes, 12/15/05 2,500,000 2,287,500
---------
2,737,500
---------
CHEMICALS -- 0.21%
Tri Polyta Finance BV
11.375%, Company Guarantee, 12/01/03 3,000,000 555,000
---------
ENTERTAINMENT/FILM -- 1.59%
Virgin Cinemas Group Ltd ++ (7)
13.00%, Subordinated Notes, 6/30/09 2,500,000 4,184,247
---------
FOOD/BEVERAGE/TOBACCO -- 0.21%
Grupo Azucarero Mexico SA
11.50%, Sr. Notes, 1/15/05 2,000,000 545,000
---------
METALS & MINING -- 1.09%
Great Central Mines Ltd.
8.875%, Sr. Notes, 4/01/08 3,000,000 2,880,000
---------
OIL & GAS -- 2.67%
Conproca SA #
12.00%, Sr. Secured Notes, 6/16/10 4,000,000 3,480,000
Hurricane Hydrocarbons #
11.75%, Sr. Notes, 11/01/04 2,750,000 1,443,750
Northern Offshore ASA #
10.00%, Company Guarantee, 5/15/05 3,000,000 2,115,000
---------
7,038,750
---------
PAPER -- 0.50%
Ainsworth Lumber &
12.50%, Sr. Secured Notes, 7/15/07 1,500,000 1,327,500
---------
SERVICES -- 0.50%
Autopistas Del Sol SA #
10.25%, Sr. Notes, 8/01/09 500,000 317,500
Guangzhou Shenzhen Superhighway Holdings
10.25%, Sr. Notes, 8/15/07 500,000 192,500
Localiza Rent A Car
10.25%, Notes, 10/01/05 2,000,000 810,000
---------
1,320,000
---------
SHIPPING -- 1.56%
Alpha Shipping PLC
9.50%, Sr. Notes, 2/15/08 3,000,000 1,635,000
Equimar Shipholdings Ltd.
9.875%, Company Guarantee, 7/01/07 2,700,000 2,173,500
Navigator Gas Transport # (8)
12.00%, Units, 6/30/07 3,000 289,500
---------
4,098,000
---------
</TABLE>
34
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Principal Amount/Shares Value
- ---------------------------------------------- ------------------------- -------------
<S> <C> <C>
TELECOMMUNICATIONS -- 2.62%
Esprit Telecom Group PLC
11.50%, Sr. Notes, 12/15/07 $2,000,000 $ 1,810,000
Microcell Telecommunications, Inc. $
0/11.125%, Sr. Discount Notes, 10/15/07 1,400,000 430,978
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes, 3/15/04 7,000 4,769
Paging Do Brazil Holdings Co. LLC
13.50%, Sr. Notes, 6/06/05 1,000,000 395,000
Poland Telecom Finance BV
14.00%, Company Guaranteed, 12/01/07 2,000,000 1,925,000
RSL Communications (7)
10.00%, Sr. Discount Notes, 3/15/08 8,900,000 2,337,157
------------
6,902,904
------------
UTILITIES -- 1.23%
CE Casecnan Water & Energy Co.
11.95%, Sr. Secured Notes, 11/15/10 2,000,000 1,565,000
Panda Global Energy Co.
12.50%, Company Guarantee, 4/15/04 3,000,000 1,665,000
------------
3,230,000
------------
TOTAL FOREIGN BONDS & NOTES
(cost $51,163,762) 37,323,901
------------
CONVERTIBLE BONDS -- 0.47%
AEROSPACE & DEFENSE -- 0.00%
Simula, Inc.
8.00%, Sr. Subordinated Notes, 5/01/04 4,000 3,300
------------
FOOD/BEVERAGE/TOBACCO -- 0.47%
International Fast Food Corp. &
11.00%, Sr. Subordinated Notes, 10/31/07 1,750,000 1,246,875
------------
TOTAL CONVERTIBLE BONDS
(cost $1,416,180) 1,250,175
------------
COMMON STOCKS -- 0.00% @
TELECOMMUNICATIONS -- 0.00%
Jordan Telecommunications Products, Inc. # 250 5,125
Paging Do Brazil Holdings Co. LLC @@ 1,000 0
------------
TOTAL COMMON STOCKS
(cost $0) 5,125
------------
PREFERRED STOCKS -- 4.58%
BROADCASTING -- 1.23%
Paxson Communications Corp. 12.50% & 35,000 3,237,500
------------
CABLE TELEVISION -- 0.44%
21st Century Telecom Group, Inc. 13.75% 910 65,065
EchoStar Communications Corp., 12.125% & 11,251 1,096,973
------------
1,162,038
------------
CAPITAL GOODS MANUFACTURING -- 0.38%
Clark Material Handling Co. # &, 13.00% 10,000 1,012,500
------------
ENTERTAINMENT/FILM -- 0.04%
Virgin Entertainment Group Ltd. 13.00% ++ @@ 272,133 114,323
------------
</TABLE>
35
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Shares/Units Value
- --------------------------------------------------------------------- -------------- -------------
<S> <C> <C>
FOOD/BEVERAGE/TOBACCO -- 0.57%
North Atlantic Trading, Inc., 12.00% & 61,962 $ 1,487,079
-----------
SUPERMARKETS -- 0.51%
Nebco Evans Holding Co. 11.25% & 26,385 1,332,431
------------
TELECOMMUNICATIONS -- 0.31%
Hyperion Telecommunications, Inc., 12.875% & 7,710 481,902
Jordan Telecommunication Products, Inc., 13.25% & 2,500 251,250
Viatel, Inc., 10.00% & 1,488 79,611
------------
812,763
------------
TEXTILE/APPAREL -- 0.76%
Anvil Holdings, Inc., 13.00% & 99,419 2,013,243
------------
UTILITIES -- 0.34%
International Utility Structures, Inc. & #, 13.00% 65 0
International Utility Structures, Inc. & #, 13.00% (9) 10,000 885,000
------------
885,000
------------
TOTAL PREFERRED STOCKS
(cost $14,270,672) 12,056,877
------------
WARRANTS -- 0.68% @
BROADCASTING -- 0.00%
Unisite, Inc. ++, (expires 12/15/04) 18 5
Unisite, Inc. ++, (expires 12/15/04) (10) 1,003 10
------------
15
------------
CABLE TELEVISION -- 0.00%
Star Choice Communications @@, (expires 12/15/05) 57,900 0
------------
COMPUTER/ELECTRONICS -- 0.00%
Electronic Retailing Systems International, Inc., (expires 2/01/04) 1,000 5,000
------------
CONSUMER PRODUCTS -- 0.04%
Packaged Ice, Inc., (expires 4/15/04) 5 500
Packaged Ice, Inc. #, (expires 4/15/04) 1,000 100,000
------------
100,500
------------
FOOD/BEVERAGE/TOBACCO -- 0.02%
North Atlantic Trading, Inc. #, (expires 6/15/07) 550 55,000
------------
HEALTHCARE -- 0.50%
Intracel Corp. ++, (expires 8/25/03) 49,066 159,464
Intracel Corp. ++, (expires 8/25/03) 356,707 1,159,298
Intracel Corp. ++, (expires 8/25/03) 190,888 0
Mediq, Inc. #, (expires 6/01/09) 7,000 0
------------
1,318,762
------------
HOTEL & GAMING -- 0.00%
Aladdin Gaming Enterprises, Inc., (expires 3/01/10) 30,000 0
------------
LEISURE -- 0.00%
Globix Corp., (expires 5/01/05) 3,000 0
------------
OIL & GAS -- 0.00%
Forman Petroleum Corp. #, (expires 6/01/04) 2,000 2
------------
SERVICES -- 0.00%
Mentus Media Corp. #, (expires 2/01/08) 4,174 2,129
------------
</TABLE>
36
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- --------------------------------------------------------------------------- ------------------------- ---------------
<S> <C> <C>
TELECOMMUNICATIONS -- 0.12%
Globalstar Telecommunications Ltd. #, (expires 2/15/04) 5 $ 126
International Wireless Communications Holdings, Inc. # *,
(expires 8/15/01) 1,500 15
Iridium World Communications, Inc. #, (expires 7/15/05) 25 3,500
Occidente Y Caribe Celular SA # @@, (expires 3/15/04) 28 0
Poland Telecom Finance BV # @@, (expires 12/01/07) 2,000 80,000
UNIFI Communications, Inc. #, (expires 5/01/07) 505 0
Worldport Communications, Inc. ++, (expires 6/23/08) 24,666 233,094
-------------
316,735
-------------
TOTAL WARRANTS
(cost $1,763,362) 1,798,143
-------------
TOTAL INVESTMENT SECURITIES -- 83.97%
(cost $261,819,305) 221,241,206
-------------
SHORT-TERM SECURITIES -- 1.50%
Worldport International, Inc. ++
13.8125%, Sr Secured Notes, 6/23/99 $4,128,183 3,970,431
-------------
TOTAL SHORT-TERM SECURITIES
(cost $3,970,431) 3,970,431
REPURCHASE AGREEMENT -- 11.97%
Agreement with State Street Bank and Trust bearing interest at 5.25% dated
10/30/98, to be repurchased 11/02/98 in the amount of $31,551,798 and
collateralized by $30,710,000 U.S. Treasury Bonds, 5.625% due 4/30/00,
value $32,168,817
(cost $31,538,000) 31,538,000 31,538,000
OTHER ASSETS LESS LIABILITIES -- 2.56% 6,736,075
-------------
NET ASSETS -- 100.00% $263,485,712
=============
</TABLE>
# Sales restricted to qualified institutional investors.
$ Step bond.
* Defaulted security.
++ Private Placement.
& Payment-in-kind security.
@ Non-income producing security.
@@ Foreign security.
(1) A unit consists of $1,000 par value Sr. Discount Notes, 12.625% due
3/01/08 and 3 warrants.
(2) A unit consists of $1,000 par value Sr. Notes, 14.00% due 8/01/08 and 1
warrant.
(3) A unit consists of $1,000 par value Sr. Discount Debentures, 13.00% due
6/01/09 and 1 warrant.
(4) A unit consists of $1,000 par value Sr. Discount Notes, 13.50% due 3/01/10
and 10 warrants.
(5) A unit consists of $1,000 par value Sr. Secured Debenture, 15.00% due
12/01/09 and 8.45 warrants.
(6) A unit consists of $1,000 par value Sr. Notes, 11.25% due 4/15/08 and 1
warrant.
(7) The principal amount shown is shown in the respective country's currency.
(8) A unit consists of $1,000 par value Notes, 12.00% due 6/30/07 and 7.66
warrants.
(9) A unit consists of 1,000 shares of 13.00% Sr. Exchangeable Preferred stock
and 1 warrant.
(10) Second series Warrants.
See accompanying notes to financial statements.
37
<PAGE>
NORTHSTAR
HIGH TOTAL RETURN FUND
- ------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
[PHOTOGRAGH OF THOMAS OLE DIAL APPEARS HERE]
THOMAS OLE DIAL
[PHOTOGRAGH OF JEFFREY AURIGEMMA APPEARS HERE]
JEFFREY AURIGEMMA
THE MARKETS
o Economic and financial crises in emerging markets were pronounced in the
first and fourth fiscal quarters of the Fund's fiscal year ended October
31, 1998. Nonetheless, the U.S. economy grew about 3.5% during those 12
months. Commodity deflation and cheap imports caused inflation in the U.S.
to drop from 2.1% to 1.5%. Low inflation, slower growth, budget surpluses
and a major flight to quality pushed U.S. Treasury bond yields down to
levels not seen since the 1960s. In the 1998 fiscal year, yields of 10-
and 30-year Treasury bonds dropped steadily. Their yields on October 31,
1998 were 4.60% and 5.15%, respectively, down 1.23% and 1%, respectively.
Increased fears of global turmoil and downward revisions of corporate
earnings estimates hurt the total returns of high yield bonds, caused
small cap stock prices to decline, and progressively made cash and the
highest quality bonds the strong preference of most investors worldwide.
o High yield bond returns in the 12 months ended October 31, 1998 was
(0.50%) compared to 9.34% for all domestic bonds. As economic and
financial problems spread, investors fled from "high-risk" securities to
the safety of U.S. Treasuries. In general, the lower the credit rating and
the longer the maturity, the worse bonds performed. In fact, not only did
their spreads widen, but also the yields of high yield bonds actually
increased during those 12 months.
o Emerging market bonds fell 11.8% from October 31, 1997 to October 31,
1998. Recession in Japan, riots in Indonesia, Russia's economic collapse
and cash outflows from Brazil caused a loss of confidence that crushed
such bonds' prices.
THE FUND
o From October 31, 1997 through October 31, 1998, the total return of the
Fund's Class A, B, and C shares was (13.65%), (14.28%), and (14.41%)
respectively; the Lipper average for high yield funds was (3.35%). This
Fund's lower NAV, redemptions and exchanges into High Total Return Fund II
caused its net assets to fall 28% in those 12 months, from $891MM to
$641MM.
o Since the Fund invests mainly in lower-rated bonds, it underperformed its
peers as a result of severely eroded credit confidence. Furthermore,
falling small cap stock prices depressed its equity positions. Very weak
performance by Telecom, Shipping, and emerging market names also hurt the
Fund in fiscal 1998. The Fund made defensive investments in Health Care,
Broadcasting, and Services to help improve future results.
o Many of the stocks and equity rights attached to bonds ("equity kickers")
held by the Fund hurt its returns in fiscal 1998, but they are poised to
make major contributions to NAV when stock prices inevitably recover.
CURRENT STRATEGY
o Continue above-average exposure in non-cyclical industries. Hold bonds
that have equity kickers. Focus on investments in undervalued bonds that
have high yields and above-average potential for capital appreciation.
o Given the threat that market volatility may resume and the continued
preference for quality, we will be highly selective about the credit risks
we incur and retain. We will raise more cash if our economy slows.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/98) TOTAL NET ASSETS: $641,692,798
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<S> <C> <C>
1 Intracel Corp. 3.1%
2 Packaged Ice, Inc. 2.5%
3 North Atlantic Trading, Inc. 2.4%
4 Unisite, Inc. 2.4%
5 Anacomp, Inc. 2.2%
6 Mediq, Inc. 2.2%
7 Ainsworth Lumber Co. 2.1%
8 Echostar Communications Corp. 2.0%
9 Occidente y Caribe Celular SA 1.9%
10 Paxson Communication Corp. 1.8%
----
22.6%
====
</TABLE>
<TABLE>
<CAPTION>
TOP 5 SECTORS
(by percentage of net assets)
<S> <C>
Telecommunications 18.1%
Healthcare 8.6%
Broadcasting 7.9%
Cable Television 7.5%
Food, Beverage/
Tobacco 7.2%
</TABLE>
<TABLE>
<S> <C> <C> <C>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
Class A 4.14% N/A (17.76)%
Class B 3.10% N/A (18.05)%
Class C 3.89% N/A (15.16)%
</TABLE>
<TABLE>
<S> <C> <C> <C>
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
Inception 5 years 1 year
Class A 28.49% N/A (13.65)%
Class B 16.99% N/A (14.28)%
Class C 19.30% N/A (14.41)%
</TABLE>
38
<PAGE>
NORTHSTAR
HIGH TOTAL RETURN FUND
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
HIGH TOTAL RETURN FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH
CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended October
31, 1998, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 4.14% for the period since the Fund's
inception of November 8, 1993 reflects payment of the maximum sales charge of
4.75%. Average annualized total returns of 3.10% and 3.89% since inception for
Class B and Class C shares of February 9, 1994 and March 21, 1994,
respectively, reflect applicable contingent deferred sales charges (maximum
contingent deferred sales charge for Class B shares of 5.00% declines to 0%
after five years; and maximum charge for Class C shares is 1.00% during the
first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
[THREE LINE CHARTS APPEAR BELOW WITH THE FOLLOWING INFORMATION:]
NORTHSTAR HIGH TOTAL RETURN FUND -- CLASS A
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (17.76%)
SINCE INCEPTION 4.14%
Lehman Brothers Lehman Brothers
Class A Gov't/Corp. Bond High Yield
------- ---------------- ---------------
(in thousands)
11/08/93 9.525 10 10
10/31/94 9.226 9.674 10.123
10/31/95 10.427 11.237 11.712
10/31/96 12.319 11.843 13.01
10/31/97 14.172 12.886 14.795
10/31/98 12.237 14.211 14.721
NORTHSTAR HIGH TOTAL RETURN FUND -- CLASS B
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (18.05%)
SINCE INCEPTION 3.10%
Lehman Brothers Lehman Brothers
Class B Gov't/Corp. Bond High Yield
------- ---------------- ---------------
(in thousands)
11/08/93 10 10 10
10/31/94 8.796 9.641 9.689
10/31/95 10.293 11.33 11.368
10/31/96 12.016 11.963 12.765
10/31/97 13.498 12.849 14.371
10/31/98 11.699 14.095 14.164
NORTHSTAR HIGH TOTAL RETURN FUND -- CLASS C
AVERAGE ANNUAL TOTAL RETURN
1-YEAR (15.16%)
SINCE INCEPTION 3.89%
Lehman Brothers Lehman Brothers
Class C Gov't/Corp. Bond High Yield
------- ---------------- ---------------
(in thousands)
11/08/93 10 10 10
10/31/94 9.412 10.278 10.184
10/31/95 10.793 11.752 11.576
10/31/96 12.275 12.229 12.798
10/31/97 13.939 13.066 14.272
10/31/98 11.93 14.408 14.201
39
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- -------------------------------------------------------- ------------------------ -------------
<S> <C> <C>
DOMESTIC BONDS & NOTES -- 55.19%
AEROSPACE & DEFENSE -- 1.08%
Willcox & Gibbs, Inc.
12.25%, Company Guarantee, 12/15/03 $10,096,000 $ 6,915,760
-----------
BROADCASTING -- 3.69%
Brill Media Co. LLC $
0/7.50%, Sr. Notes, 12/15/07 9,800,000 8,477,000
Brill Media Co. LLC $
0/7.50%, Sr. Subordinated Appreciation Notes, 12/15/07 280,000 9,800
Unisite, Inc. ++
13.00%, Notes, 12/15/04 13,625,249 15,205,777
-----------
23,692,577
-----------
CABLE TELEVISION -- 5.72%
21st Century Telecom Group, Inc. $
0/12.25%, Sr. Discount Notes, 2/15/08 13,500,000 5,602,500
CAI Wireless Systems, Inc. *
12.25%, Sr. Notes, 10/14/04 7,500,000 1,762,500
CS Wireless Systems, Inc. $
0/11.375%, Sr. Discount Notes, 3/01/06 12,000,000 2,340,000
Diva Systems Corp. $ # (1)
0/12.625%, Units, 3/01/08 15,200 4,940,000
EchoStar Communications Corp. $
0/13.125%, Sr. Secured Discount Notes, 3/15/04 14,993,000 13,118,875
Heartland Wireless Communications, Inc. *
13.00%, Sr. Notes, 4/15/03 12,800,000 2,944,000
Heartland Wireless Communications, Inc. *
14.00%, Sr. Notes, 10/15/04 7,000,000 1,610,000
TVN Entertainment Corp. (2)
14.00%, Units, 8/01/08 3,500 3,220,000
Wireless One, Inc.
13.00%, Sr. Notes, 10/15/03 8,500,000 1,147,500
-----------
36,685,375
-----------
CAPITAL GOODS MANUFACTURING -- 1.15%
Alvey Systems, Inc.
11.375%, Sr. Subordinated Notes, 1/31/03 7,350,000 7,386,750
-----------
CHEMICAL -- 0.22%
American Eco Corp.
9.625%, Company Guarantee, 5/15/08 2,200,000 1,441,000
-----------
COMPUTER/ELECTRONICS -- 1.42%
Electronic Retailing Systems International, Inc. $
0/13.25%, Sr. Discount Notes, 2/01/04 25,750,000 9,141,250
-----------
CONSUMER PRODUCTS -- 4.43%
Decora Industries, Inc.
11.00%, Sr. Secured Notes, 5/01/05 3,750,000 3,243,750
Jackson Products, Inc.
9.50%, Company Guarantee, 4/15/05 605,000 577,775
Packaged Ice, Inc.
9.75%, Sr. Notes, 2/01/05 17,200,000 16,082,000
Syratech Corp.
11.00%, Sr. Notes, 4/15/07 10,850,000 8,517,250
-----------
28,420,775
-----------
</TABLE>
40
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Principal Amount Value
- ----------------------------------------------- ------------------ -------------
<S> <C> <C>
CONTAINERS AND PACKAGING -- 1.31%
Packaging Resources, Inc. #
13.00%, Sr. Notes, 6/30/03 $ 9,403,059 $ 8,415,738
-----------
ENTERTAINMENT/FILM -- 1.24%
Production Resource Group LLC
11.50%, Sr. Subordinated Notes, 1/15/08 8,500,000 7,947,500
-----------
FOOD/BEVERAGE/TOBACCO -- 2.46%
American Restaurant Group, Inc.
11.50%, Sr. Notes, 2/15/03 3,900,000 3,529,500
Colorado Prime Corp.
12.50%, Company Guarantee, 5/01/04 5,000,000 2,275,000
North Atlantic Trading, Inc.
11.00%, Company Guarantee, 6/15/04 3,100,000 2,929,500
Tom's Foods, Inc.
10.50%, Sr. Secured Notes, 11/01/04 7,800,000 7,059,000
-----------
15,793,000
-----------
HEALTHCARE -- 7.21%
Health Insurance Plan of Greater New York
11.25%, Notes, 7/01/10 3,000,000 3,172,500
Intracel Corp. ++
12.00%, Escrow Notes, 8/25/03 3,804,878 3,433,902
Intracel Corp. ++
12.00%, Notes, 8/25/03 22,195,122 20,031,098
Mediq, Inc. #
13.00%, Sr. Discount Debentures, 6/01/09 29,000,000 14,065,000
Unilab Corp.
11.00%, Sr. Notes, 4/01/06 3,000,000 3,015,000
Universal Hospital Services, Inc.
10.25%, Sr. Notes, 3/01/08 3,000,000 2,565,000
-----------
46,282,500
-----------
HOTEL & GAMING -- 3.42%
Aladdin Gaming Holdings Corp. $
0/13.50%, Sr. Secured Discount Notes, 3/01/10 6,750,000 2,058,750
Ameristar Casinos, Inc.
8.00%, Sr. Secured Notes, 1/02/04 11,650,000 10,543,250
Venetian Casino Resort LLC
10.00%, Sr. Subordinated Notes, 11/15/05 8,000,000 6,680,000
Venetian Casino Resort LLC
12.25%, Company Guarantee, 11/15/04 3,000,000 2,670,000
-----------
21,952,000
-----------
INSURANCE -- 0.16%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 1,000,000 1,025,000
-----------
</TABLE>
41
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ------------------------------------------------ ------------------------ -------------
<S> <C> <C>
LEISURE -- 2.76%
Globix Corp.
13.00%, Sr. Notes, 5/01/05 $ 6,000,000 $ 4,695,000
Silverleaf Resorts, Inc.
10.50%, Company Guarantee, 4/01/08 2,500,000 2,012,500
Source Media, Inc.
12.00%, Sr. Notes, 11/01/04 7,500,000 5,662,500
U.S. Interactive LLC
12.00%, Sr. Secured Notes, 4/17/05 5,297,345 5,322,345
-----------
17,692,345
-----------
MANUFACTURING -- 1.08%
Jordan Industries, Inc. $
0/11.75%, Sr. Subordinated Debentures, 4/01/09 10,865,000 6,899,275
-----------
OIL & GAS -- 1.61%
Forman Petroleum Corp.
13.50%, Company Guarantee, 6/01/04 5,000,000 3,775,000
Transamerican Energy Corp. $
0/13.00%, Sr. Secured Discount Notes, 6/15/02 5,500,000 1,787,500
Windsor Petroleum Transport Corp. #
7.84%, Notes, 1/15/21 6,500,000 4,745,000
-----------
10,307,500
-----------
SERVICES -- 4.84%
Anacomp, Inc.
10.875%, Sr. Subordinated Notes, 4/01/04 14,250,000 14,250,000
Comforce Corp. & (3)
15.00%, Units, 12/01/09 9,155 9,475,425
Mentus Media Corp. &
12.00%, Sr. Secured Notes, 2/01/03 7,380,000 7,343,100
-----------
31,068,525
-----------
SHIPPING -- 0.51%
Ultrapetrol Bahamas Ltd.
10.50%, 1st Mortgage Notes, 4/01/08 5,200,000 3,276,000
-----------
SPECIALTY RETAILING -- 0.80%
Pamida, Inc.
11.75%, Sr. Subordinated Notes, 3/15/03 5,400,000 5,157,000
-----------
STEEL -- 0.40%
Geneva Steel Co.
9.50%, Sr. Notes, 1/15/04 7,500,000 2,137,500
NSM Steel Company Ltd. #
12.00%, Company Guarantee, 2/01/06 1,500,000 457,500
-----------
2,595,000
-----------
</TABLE>
42
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Principal Amount Value
- ------------------------------------------------------- ------------------ --------------
<S> <C> <C>
TELECOMMUNICATIONS -- 9.04%
Advanced Radio Telecom Corp.
14.00%, Sr. Secured Notes, 2/15/07 $ 5,000,000 $ 3,975,000
ICG Holdings, Inc. $
0/13.50%, Sr. Discount Notes, 9/15/05 7,000,000 5,503,750
International Wireless Communications Holdings, Inc. *
0%, Sr. Secured Discount Notes, 8/15/01 8,500,000 892,500
Iridium Capital Corp.
13.00%, Sr. Secured Notes, 7/15/05 14,500,000 11,527,500
Level 3 Communications, Inc.
9.125%, Sr. Notes, 5/01/08 500,000 473,750
McCaw International Ltd.
13.00%, Sr. Discount Notes, 4/15/07 9,500,000 4,322,500
Northeast Optic Network Inc.
12.75%, Sr. Notes, 8/15/08 2,000,000 1,770,000
RCN Corp.
10.00%, Sr. Notes, 10/15/07 1,000,000 885,000
RCN Corp. $
0/9.80%, Sr. Notes, 2/15/08 8,100,000 3,888,000
RCN Corp. $
0/11.125%, Sr. Discount Notes, 10/15/07 12,500,000 6,687,500
SA Telecommunications, Inc. *
10.00%, Sr. Debentures, 8/15/06 3,800,000 0
Transtel Pass-Thru Trust SA #
12.50%, Pass-Thru Trust Certificates, 11/01/07 7,500,000 3,112,500
Verio, Inc.
13.50%, Sr. Notes, 6/15/04 6,900,000 7,624,500
Viatel, Inc.
11.25%, Sr. Notes, 4/15/08 4,000,000 3,580,000
Winstar Equipment II Corp.
12.50%, Company Guarantee, 3/15/04 4,000,000 3,740,000
------------
57,982,500
------------
TOYS -- 0.64%
Hedstrom Holdings, Inc. $
0/12.00%, Sr. Discount Notes, 6/01/09 7,500,000 4,078,125
------------
TOTAL DOMESTIC BONDS & NOTES
(cost $458,149,400) 354,155,495
------------
FOREIGN BONDS & NOTES -- 19.49%
AIR TRANSPORTATION -- 0.52%
Canadian Airlines Corp.
12.25%, Sr. Notes, 8/01/06 4,000,000 3,340,000
------------
CABLE TELEVISION -- 1.12%
Multicanal Participacoes SA
12.625%, Sr. Notes, 6/18/04 2,000,000 1,385,000
Pratama Datakom Asia BV #
12.75%, Company Guarantee, 7/15/05 9,625,000 2,165,625
Star Choice Communications, Inc.
13.00%, Sr. Secured Notes, 12/15/05 4,000,000 3,660,000
------------
7,210,625
------------
</TABLE>
43
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount Value
- ----------------------------------------------- ------------------ -------------
<S> <C> <C>
CHEMICALS -- 0.14%
Tri Polyta Finance BV
11.375%, Company Guarantee, 12/01/03 $ 5,000,000 $ 925,000
-----------
CONSUMER PRODUCTS -- 0.02%
International Semi-Tech Corp. $
0/11.50%, Sr. Secured Discount Notes, 8/15/03 900,000 112,500
-----------
ENTERTAINMENT/FILM -- 1.14%
TV Filme, Inc.
12.875%, Sr. Notes, 12/15/04 3,000,000 615,000
Virgin Cinemas Group Ltd ++ (4)
13.00%, Subordinated Notes, 6/30/09 4,000,000 6,694,796
-----------
7,309,796
-----------
FOOD/BEVERAGE/TOBACCO -- 0.59%
Grupo Azucarero Mexico SA
11.50%, Sr. Notes, 1/15/05 14,000,000 3,815,000
-----------
METALS & MINING -- 0.71%
Echo Bay Mines Ltd.
11.00%, Jr. Subordinated Debentures, 4/01/27 9,000,000 4,545,000
-----------
OIL & GAS -- 1.45%
Hurricane Hydrocarbons #
11.75%, Sr. Notes, 11/01/04 11,000,000 5,775,000
Northern Offshore ASA #
10.00%, Company Guarantee, 5/15/05 5,000,000 3,525,000
-----------
9,300,000
-----------
PAPER -- 2.14%
Ainsworth Lumber Co. &
12.50%, Sr. Secured Notes, 7/15/07 15,500,000 13,717,500
-----------
SERVICES -- 0.87%
Autopistas Del Sol SA #
10.25%, Sr. Notes, 8/01/09 2,950,000 1,873,250
Localiza Rent A Car
10.25%, Notes, 10/01/05 9,150,000 3,705,750
-----------
5,579,000
-----------
SHIPPING -- 2.10%
Alpha Shipping PLC
9.50%, Sr. Notes, 2/15/08 2,800,000 1,526,000
Equimar Shipholdings Ltd.
9.875%, Company Guarantee, 7/01/07 10,000,000 8,050,000
Pegasus Shipping Hellas Ltd.
11.875%, Company Guarantee, 11/15/04 4,500,000 3,892,500
-----------
13,468,500
-----------
</TABLE>
44
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ------------------------------------------ ------------------------ --------------
<S> <C> <C>
TELECOMMUNICATIONS -- 5.98%
Esprit Telecom Group (4)
11.50%, Sr. Notes, 12/15/07 $11,000,000 $6,009,659
Esprit Telecom Group PLC
11.50%, Sr. Notes, 12/15/07 2,000,000 1,810,000
Globo Communicacoes E Participacoes SA #
10.625%, Unsubordinated Notes, 12/05/08 2,000,000 1,085,000
Microcell Telecommunications, Inc. $ (4)
0/11.125%, Sr. Discount Notes, 10/15/07 8,350,000 2,570,479
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes, 3/15/04 18,011,000 12,269,994
Paging Do Brazil Holdings Co. LLC
13.50%, Sr. Notes, 6/06/05 1,000,000 395,000
Petersburg Long Distance, Inc. # $ (5)
0/14.00%, Units, 6/01/04 7,000 3,535,000
Poland Telecom Finance BV
14.00%, Company Guaranteed, 12/01/07 7,000,000 6,737,500
RSL Communications (4)
10.00%, Sr. Discount Notes, 3/15/08 15,100,000 3,965,288
-----------
38,377,920
-----------
UTILITIES -- 2.71%
CE Casecnan Water & Energy Co.
11.45%, Sr. Secured Notes, 11/15/05 2,000,000 1,625,000
CE Casecnan Water & Energy Co.
11.95%, Sr. Secured Notes, 11/15/10 8,800,000 6,886,000
Panda Global Energy Co.
12.50%, Company Guarantee, 4/15/04 16,000,000 8,880,000
-----------
17,391,000
-----------
TOTAL FOREIGN BONDS & NOTES
(cost $185,112,515) 125,091,841
-----------
CONVERTIBLE BONDS -- 3.43%
AEROSPACE & DEFENSE -- 1.12%
Simula, Inc.
8.00%, Sr. Subordinated Notes, 5/01/04 4,496,000 3,709,200
Simula, Inc.
10.00%, Sr. Subordinated Notes, 9/15/99 4,250,000 3,506,250
-----------
7,215,450
-----------
FOOD/BEVERAGE/TOBACCO -- 1.63%
International Fast Food Corp. &
11.00%, Sr. Subordinated Notes, 10/31/07 14,650,000 10,438,125
-----------
</TABLE>
45
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Principal Amount/Shares Value
- ---------------------------------------------- ------------------------- -------------
<S> <C> <C>
TELECOMMUNICATIONS -- 0.68%
GST Telecommunications, Inc. # $
0/13.875%, Sr. Discount Notes, 12/15/05 $ 650,000 $ 542,750
SA Telecommunications, Inc. # *
10.00%, Notes, 8/15/06 8,500,000 0
SA Telecommunications, Inc. *
10.00%, Notes, 8/15/06 5,000,000 0
WinStar Communications, Inc. # $
0/14.00%, Sr. Discount Notes, 10/15/05 3,500,000 3,797,500
-----------
4,340,250
-----------
TOTAL CONVERTIBLE BONDS
(cost $35,759,617) 21,993,825
-----------
COMMON STOCKS -- 0.59%
BROADCASTING -- 0.03%
Pegasus Communications Corp. @ 9,928 171,258
-----------
CABLE TELEVISION -- 0.17%
CAI Wireless Systems, Inc. @ ## 372,273 0
CS Wireless Systems, Inc. @ 3,300 0
EchoStar Communications Corp. @ 40,050 1,081,350
-----------
1,081,350
-----------
DIVERSIFIED FINANCIAL SERVICES -- 0.03%
Central Rents, Inc. @ # 7,150 218,075
-----------
HEALTHCARE -- 0.19%
General Healthcare Group Ltd. @@ 801 0
Intracel Corp. ++ 79,537 1,212,939
-----------
1,212,939
-----------
PUBLISHING/PRINTING -- 0.02%
Affiliated Newspapers Investments, Inc. @ 2,500 150,000
-----------
SERVICES -- 0.07%
Coinstar, Inc. @ 60,900 449,138
Sabreliner Corp. @ 2,450 0
-----------
449,138
-----------
TELECOMMUNICATIONS -- 0.01%
Jordan Telecommunications Products, Inc. @ # 2,100 43,050
Paging Do Brazil Holdings Co. LLC @ @@ 1,000 0
-----------
43,050
-----------
TOYS -- 0.07%
Hedstrom Holdings, Inc. # @ 454,905 454,905
-----------
TOTAL COMMON STOCKS
(cost $1,240,014) 3,780,715
-----------
CONVERTIBLE PREFERRED STOCKS -- 1.19%
BROADCASTING -- 0.59%
Unisite, Inc. ++, 8.50% 75,600 3,806,158
-----------
HEALTHCARE -- 0.60%
Intracel Corp. ++, 8.00% 249,170 3,862,135
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $5,701,675) 7,668,293
-----------
</TABLE>
46
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------- -------------- -------------
<S> <C> <C>
PREFERRED STOCKS -- 9.92%
BROADCASTING -- 3.18%
Capstar Broadcasting Partners Corp., 12.00% & 79,094 $ 8,878,301
Paxson Communications Corp., 12.50% & 119,600 11,541,400
-----------
20,419,701
-----------
CABLE TELEVISION -- 0.46%
EchoStar Communications Corp., 12.125% & 30,394 2,963,435
-----------
CAPITAL GOODS MANUFACTURING -- 0.07%
Telos Corp., 12.00% & 129,687 453,905
-----------
CONSUMER PRODUCTS -- 1.80%
Commemorative Brands, Inc. ++, 12.00% 100,000 11,525,000
-----------
ENTERTAINMENT/FILM -- 0.03%
Virgin Entertainment Group Ltd., 13.00% ++ @@ 435,414 182,917
-----------
FOOD/BEVERAGE/TOBACCO -- 2.41%
North Atlantic Trading, Inc., 12.00% & 645,279 15,486,695
-----------
SUPERMARKETS -- 0.50%
Supermarkets General Holdings Corp., $3.52 & 165,000 3,217,500
-----------
TELECOMMUNICATIONS -- 0.35%
Jordan Telecommunication Products, Inc., 13.25% & 21,000 2,110,500
Viatel, Inc., 10.00% & 1,984 106,147
-----------
2,216,647
-----------
TEXTILE/APPAREL -- 1.12%
Anvil Holdings, Inc., 13.00% & 355,168 7,192,144
-----------
TOTAL PREFERRED STOCKS
(cost $63,561,640) 63,657,944
-----------
WARRANTS -- 3.42% @
AIR TRANSPORTATION -- 0.00%
CHC Helicopter Corp., (expires 12/15/00) 2,000 6,000
-----------
BANKS & THRIFTS -- 0.00%
Arcadia Financial Ltd., (expires 3/15/07) 5,000 8,750
-----------
BROADCASTING -- 0.38%
Spanish Broadcasting Systems, Inc., (expires 6/30/99) 5,000 2,450,000
Unisite, Inc. ++, (expires 12/15/04) 6,217 62
Unisite, Inc. ++ (6), (expires 12/15/04) 114 30
-----------
2,450,092
-----------
CABLE TELEVISION -- 0.00%
American Telecasting, Inc., (expires 8/10/00) 4,000 0
Heartland Wireless Communications, Inc. #, (expires 4/15/00) 46,402 464
Star Choice Communications, Inc. , @@ (expires 12/15/05) 92,640 0
Wireless One, Inc., (expires 10/19/00) 1,500 0
-----------
464
-----------
CAPITAL GOODS MANUFACTURING -- 0.02%
Roller Bearing Co. America, Inc., (expires 6/15/09) 1,262 116,104
-----------
COMPUTER/ELECTRONICS -- 0.02%
Electronic Retailing Systems International, Inc., (expires 2/01/04) 25,750 128,750
-----------
</TABLE>
47
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Shares Value
- -------------------------------------------------------- -------------- ------------
<S> <C> <C>
CONSUMER PRODUCTS -- 0.35%
Chattem, Inc., (expires 6/17/99) 1,300 $ 150,917
Commemorative Brands, Inc., (expires 12/16/97) 19,820 198
Packaged Ice, Inc., (expires 4/15/04) 14,350 1,435,000
Packaged Ice, Inc. #, (expires 4/15/04) 6,350 635,000
---------
2,221,115
---------
FOOD/BEVERAGE/TOBACCO -- 0.09%
Colorado Prime Corp. #, (expires 12/31/03) 7,000 0
North Atlantic Trading, Inc. #, (expires 6/15/07) 5,550 555,000
---------
555,000
---------
HEALTHCARE -- 0.58%
Intracel Corp. ++, (expires 08/25/03) 94,010 340,786
Intracel Corp. ++, (expires 8/25/03) 1,030,488 3,349,086
Mediq, Inc. #, (expires 6/01/09) 29,000 0
---------
3,689,872
---------
LEISURE -- 0.73%
Source Media, Inc., (expires 3/31/04) 500,000 1,875,000
Source Media, Inc., (expires 6/23/00) 750,000 2,812,500
U.S. Interactive LLC, (expires 3/31/05) 3,833 38
---------
4,687,538
---------
OIL & GAS -- 0.00%
Forman Petroleum Corp. #, (expires 6/01/04) 5,000 5
---------
PAPER -- 0.06%
SD Warren Holdings Corp., (expires 12/15/06) 80,000 380,000
---------
SERVICES -- 0.00%
ICF Kaiser International, Inc., (expires 12/31/98) 54,019 1,621
ICF Kaiser International, Inc., (expires 12/31/99) 24,500 245
Mentus Media Corp. #, (expires 2/01/08) 19,481 9,935
---------
11,801
---------
STEEL -- 0.06%
Bar Technologies, Inc., (expires 4/01/01) 7,000 385,000
Gulf States Steel, Inc., (expires 4/15/03) 5,010 50
Sheffield Steel Corp., (expires 11/01/01) 12,500 12,500
---------
397,550
---------
SUPERMARKETS -- 0.00%
Dairy Mart Convenience Stores, Inc., (expires 1/01/01) 23,632 12,052
---------
</TABLE>
48
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- --------------------------------------------------------------------------- ------------------------- ---------------
<S> <C> <C>
TELECOMMUNICATIONS -- 1.13%
Applied Voice Technology, Inc., (expires 1/03/02) 63,916 $ 939,246
Cellnet Data Systems, Inc. #, (expires 10/01/07) 10,000 102,500
Clearnet Communications, Inc., (expires 9/15/05) 38,280 267,960
Colt Telecom Group PLC #, (expires 12/31/06) 3,200 1,077,504
E Spire Communications, Inc., (expires 11/01/05) 14,500 1,885,000
Geotek Communications, Inc., (expires 6/20/01) 177,000 0
Globalstar Telecommunications Ltd. #, (expires 2/15/04) 4,495 113,499
Hyperion Telecommunications, Inc., (expires 4/15/01) 10,200 274,513
ICG Holdings, Inc., (expires 10/15/05) 6,600 95,700
International Wireless Communications Holdings, Inc. #, (expires 8/15/01) 8,500 85
Iridium World Communications, Inc. #, (expires 7/15/05) 4,475 626,500
Nextel International, Inc., (expires 4/15/07) 9,500 30,875
Occidente Y Caribe Celular SA # @@, (expires 3/15/04) 72,044 0
Poland Telecom Finance Bv # @@, (expires 12/01/07) 7,000 280,000
UNIFI Communications, Inc. #, (expires 5/01/07) 7,795 0
Verio, Inc., (expires 6/15/04) 55,200 1,214,400
Worldport Communications, Inc. ++, (expires 6/23/08) 36,999 349,640
------------
7,257,422
------------
TOTAL WARRANTS
(cost $8,678,326) 21,922,515
------------
TOTAL INVESTMENT SECURITIES -- 93.23%
(cost $758,203,187) 598,270,628
------------
SHORT-TERM INVESTMENTS -- 0.93%
Worldport International, Inc. ++
13.8125%, Sr Secured Notes, 6/23/99 $6,192,275 5,955,646
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $5,955,646) 5,955,646
------------
REPURCHASE AGREEMENT -- 2.90%
Agreement with State Street Bank and Trust bearing interest at 5.25% dated
10/30/98, to be repurchased 11/02/98 in the amount of $18,604,136 and
collateralized by $16,695,000 U.S. Treasury Bonds, 6.50% due 8/15/98,
value $18,969,694
(cost $18,596,000) 18,596,000 18,596,000
OTHER ASSETS LESS LIABILITIES -- 2.94% 18,870,524
------------
NET ASSETS -- 100.00% $641,692,798
============
</TABLE>
$ Step bond.
++ Private placement.
# Sales restricted to qualified institutional Investors. 144A
## Bankrupt company.
* Defaulted Security.
& Payment-in-kind security.
@ Non-income producing security.
@@ Foreign security.
1) A unit consists of $1,000 par value Sr. Discount Notes, 12.625% due
3/01/08, and 3 warrants.
2) A unit consists of $1,000 par value Sr. Notes, 14.00% due 8/01/08, and 1
warrant.
3) A unit consists of $1,000 par value Sr. Secured Debentures, 15.00% due
12/01/09, and 8.45 warrants.
4) The principal amount shown is shown in the respective country's currency.
5) A unit consists of $1,000 par value Sr. Discount Notes, 14.00% due
6/01/04, and 1 warrant.
6) Second Series Warrants.
See accompanying notes to financial statements.
49
<PAGE>
NORTHSTAR TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Growth + International Emerging
Value Fund Value Fund Markets Fund
--------------- ---------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost
$158,709,989, $495,313,238, $11,304,024,
$125,397,589, $261,819,305 and $758,203,187,
respectively) $ 171,260,041 $ 471,455,567 $ 9,118,700
Short-term securities, at value (cost $0, $0, $0, $0,
$3,970,431, and $5,955,646, respectively) 0 0 0
Repurchase agreements 4,186,000 24,883,000 429,000
Cash 131 791 1,053
Foreign cash, at value (cost $0, $1,102,399,
$35,544, $0, $0 and $0, respectively) 0 1,106,433 36,496
Receivable for investments sold 5,166,178 0 64,037
Receivable for shares of beneficial interest sold 632,118 2,296,801 174,728
Dividends and interest receivable 26,921 1,914,144 25,224
Prepaid expenses 11,410 34,597 1,042
------------- ------------- ------------
Total Assets 181,282,799 501,691,333 9,850,280
------------- ------------- ------------
LIABILITIES:
Payable for investments purchased 3,400,830 4,478,106 0
Payable for shares of beneficial interest reacquired 615,080 1,434,922 27,373
Investment advisory fee payable 136,641 385,241 7,219
Distribution fee payable 118,633 271,028 5,181
Transfer agent fee payable 14,097 54,923 2,212
Administrative services fee payable 13,664 38,524 722
Tax withholding liability 0 36,067 628
Unrealized depreciation of foreign currency forward
contracts 0 7,117 0
Due to custodian 0 0 64,037
Income distribution payable 0 0 0
Accrued expenses 111,786 339,922 41,000
------------- ------------- ------------
Total Liabilities 4,410,731 7,045,850 148,372
------------- ------------- ------------
NET ASSETS $ 176,872,068 $ 494,645,483 $ 9,701,908
============= ============= ============
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of benefical interest, $.01 par
value outstanding (unlimited shares authorized) $ 190,604,894 $ 486,522,955 $ 11,869,072
Undistributed net investment income 0 3,746,253 131,303
Accumulated net realized gain (loss) on investments (26,282,878) 28,160,162 (114,095)
Net unrealized appreciation (depreciation) of
investments and foreign currency 12,550,052 (23,783,887) (2,184,372)
------------- ------------- ------------
Net Assets $ 176,872,068 $ 494,645,483 $ 9,701,908
============= ============= ============
CLASS A:
Net Assets $ 33,424,920 $ 211,018,001 $ 3,815,179
------------- ------------- ------------
Shares outstanding 3,201,119 17,759,117 496,058
------------- ------------- ------------
Net asset value and redemption value per share (net
assets/shares outstanding) $ 10.44 $ 11.88 $ 7.69
============= ============= ============
Maximum offering price per share* (net asset value
plus sales charge of 4.75% of offering price) $ 10.96 $ 12.47 $ 8.07
============= ============= ============
CLASS B:
Net Assets $ 105,991,442 $ 145,976,294 $ 3,582,688
------------- ------------- ------------
Shares outstanding 10,299,461 12,412,732 468,398
------------- ------------- ------------
Net asset value and offering price per share (net
assets/shares outstanding) $ 10.29 $ 11.76 $ 7.65
============= ============= ============
CLASS C:
Net Assets $ 37,455,706 $ 137,651,188 $ 2,304,041
------------- ------------- ------------
Shares outstanding 3,640,603 11,713,401 301,869
------------- ------------- ------------
Net asset value and offering price per share (net
assets/shares outstanding) $ 10.29 $ 11.75 $ 7.63
============= ============= ============
<CAPTION>
Northstar Northstar Northstar
Income and High Total High Total
Growth Fund Return Fund II Return Fund
----------------- ---------------- -----------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost
$158,709,989, $495,313,238, $11,304,024,
$125,397,589, $261,819,305 and $758,203,187,
respectively) $ 142,911,851 $ 221,241,206 $ 598,270,628
Short-term securities, at value (cost $0, $0, $0, $0,
$3,970,431, and $5,955,646, respectively) 0 3,970,431 5,955,646
Repurchase agreements 14,731,000 31,538,000 18,596,000
Cash 633 377 128
Foreign cash, at value (cost $0, $1,102,399,
$35,544, $0, $0 and $0, respectively) 0 0 0
Receivable for investments sold 8,321,489 0 2,921,333
Receivable for shares of beneficial interest sold 183,757 2,047,669 1,419,119
Dividends and interest receivable 631,992 7,137,095 17,677,621
Prepaid expenses 5,275 6,323 10,821
------------- ------------- ---------------
Total Assets 166,785,997 265,941,101 644,851,296
------------- ------------- ---------------
LIABILITIES:
Payable for investments purchased 19,315,481 980,778 0
Payable for shares of beneficial interest reacquired 1,261,857 849,494 1,892,805
Investment advisory fee payable 90,632 167,109 392,500
Distribution fee payable 93,793 198,736 465,157
Transfer agent fee payable 21,610 30,601 89,457
Administrative services fee payable 12,084 22,281 139,331
Tax withholding liability 0 0 0
Unrealized depreciation of foreign currency forward
contracts 0 0 0
Due to custodian 1,479,827 0 0
Income distribution payable 0 18,045 9,233
Accrued expenses 74,092 188,345 170,015
------------- ------------- ---------------
Total Liabilities 22,349,376 2,455,389 3,158,498
------------- ------------- ---------------
NET ASSETS $ 144,436,621 $ 263,485,712 $ 641,692,798
============= ============= ===============
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of benefical interest, $.01 par
value outstanding (unlimited shares authorized) $ 114,396,506 $ 304,055,912 $ 807,848,735
Undistributed net investment income 82,834 0 1,508,011
Accumulated net realized gain (loss) on investments 12,443,019 0 (7,757,158)
Net unrealized appreciation (depreciation) of
investments and foreign currency 17,514,262 (40,570,200) (159,906,790)
------------- ------------- ---------------
Net Assets $ 144,436,621 $ 263,485,712 $ 641,692,798
============= ============= ===============
CLASS A:
Net Assets $ 47,377,954 $ 40,924,307 $ 148,649,770
------------- ------------- ---------------
Shares outstanding 4,049,029 8,555,524 39,419,274
------------- ------------- ---------------
Net asset value and redemption value per share (net
assets/shares outstanding) $ 11.70 $ 4.78 $ 3.77
============= ============= ===============
Maximum offering price per share* (net asset value
plus sales charge of 4.75% of offering price) $ 12.28 $ 5.02 $ 3.96
============= ============= ===============
CLASS B:
Net Assets $ 55,872,921 $ 168,858,757 $ 428,902,524
------------- ------------- ---------------
Shares outstanding 4,784,516 35,272,243 113,825,328
------------- ------------- ---------------
Net asset value and offering price per share (net
assets/shares outstanding) $ 11.68 $ 4.79 $ 3.77
============= ============= ===============
CLASS C:
Net Assets $ 41,185,746 $ 53,702,648 $ 64,140,504
------------- ------------- ---------------
Shares outstanding 3,530,773 11,203,496 16,947,954
------------- ------------- ---------------
Net asset value and offering price per share (net
assets/shares outstanding) $ 11.66 $ 4.79 $ 3.78
============= ============= ===============
</TABLE>
* Redemption price varies by length of time shares are held.
See accompanying notes to financial statements.
50
<PAGE>
NORTHSTAR TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Northstar Northstar
Growth+ International
Value Fund Value Fund
----------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of $1,924,
$1,040,897, $9,848, $3,568, $9,480 and $0,
respectively) $ 863,950 $ 10,252,842
Interest 459,275 1,106,998
------------- --------------
Total investment income 1,323,225 11,359,840
------------- --------------
EXPENSES:
Investment advisory and management fees 1,696,786 3,501,309
Distribution fees:
Class A 112,335 420,852
Class B 979,399 1,068,936
Class C 342,938 1,029,533
Transfer agent fees and expenses:
Class A 58,580 182,262
Class B 173,233 179,984
Class C 64,381 170,273
Administrative service fees 169,679 486,422
Registration fees 69,003 145,375
Custodian and fund accounting expenses 58,657 275,771
Printing and postage expenses 37,809 89,359
Audit expenses 26,548 25,351
Trustee expenses 8,713 11,257
Miscellaneous expenses 88,992 43,768
------------- --------------
3,887,053 7,630,452
Less expenses reimbursed by management
company 0 0
------------- --------------
Total expenses 3,887,053 7,630,452
------------- --------------
Net investment income (loss) (2,563,828) 3,729,388
------------- --------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain (loss) on investments (26,282,879) 28,663,723
Net realized gain (loss) on foreign currency 0 (957,107)
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency 2,033,312 (25,052,571)
------------- --------------
Net realized and unrealized gain (loss) on
investments and foreign currency (24,249,567) 2,654,045
------------- --------------
INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (26,813,395) $ 6,383,433
============= ==============
<CAPTION>
Northstar Northstar Northstar Northstar
Emerging Markets Income and High Total High Total
Value Fund(1) Growth Fund Return Fund II Return Fund
----------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of $1,924,
$1,040,897, $9,848, $3,568, $9,480 and $0,
respectively) $ 208,562 $ 2,947,607 $ 831,590 $ 6,685,801
Interest 22,044 5,265,534 19,429,107 85,875,482
------------ -------------- ------------- --------------
Total investment income 230,606 8,213,141 20,260,697 92,561,283
------------ -------------- ------------- --------------
EXPENSES:
Investment advisory and management fees 45,079 1,399,807 1,470,229 5,691,286
Distribution fees:
Class A 5,230 156,253 89,638 586,170
Class B 16,707 689,593 1,234,071 5,414,302
Class C 10,940 655,973 427,440 877,968
Transfer agent fees and expenses:
Class A 3,279 68,004 39,447 236,776
Class B 2,961 101,166 196,305 798,469
Class C 2,352 79,643 67,799 136,895
Administrative service fees 4,508 186,641 196,031 995,897
Registration fees 14,350 29,953 115,202 39,008
Custodian and fund accounting expenses 52,454 60,257 77,468 222,811
Printing and postage expenses 12,804 27,335 51,753 126,205
Audit expenses 18,349 32,316 23,435 35,002
Trustee expenses 6,893 9,180 8,773 10,888
Miscellaneous expenses 4,233 64,191 64,974 95,775
------------ -------------- ------------- --------------
200,139 3,560,312 4,062,565 15,267,452
Less expenses reimbursed by management
company 99,612 0 27,865 0
------------ -------------- ------------- --------------
Total expenses 100,527 3,560,312 4,034,700 15,267,452
------------ -------------- ------------- --------------
Net investment income (loss) 130,079 4,652,829 16,225,997 77,293,831
------------ -------------- ------------- --------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain (loss) on investments (114,095) 12,372,668 239,074 (7,859,695)
Net realized gain (loss) on foreign currency 1,224 0 199,374 353,140
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency (2,184,372) (14,833,769) (40,605,250) (178,347,256)
------------ -------------- ------------- --------------
Net realized and unrealized gain (loss) on
investments and foreign currency (2,297,243) (2,461,101) (40,166,802) (185,853,811)
------------ -------------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (2,167,164) $ 2,191,728 $ (23,940,805) $ (108,559,980)
============ ============== ============= ==============
</TABLE>
(1) For the period January 1, 1998 (commencement of operations) to October 31,
1998.
See accompanying notes to financial statements.
51
<PAGE>
NORTHSTAR TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Northstar
Growth+Value
Fund
--------------------------------
For the year November 18,
ended 1996(1)
October 31, to October 31,
1998 1997
---------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ (2,563,828) $ (801,952)
Net realized gain (loss) on investments (26,282,879) 3,274,748
Net realized gain (loss) on foreign currency 0 0
Net change in unrealized appreciation (depreciation) of
investments and foreign currency 2,033,312 10,516,740
------------- ------------
Increase (decrease) in net assets resulting from
operations (26,813,395) 12,989,536
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A 0 0
Class B 0 0
Class C 0 0
Net realized gain from investments (2,294,760) 0
------------- ------------
Total distributions (2,294,760) 0
------------- ------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 142,517,062 133,578,481
Net asset value of shares issued to shareholders in
reinvestment of dividends 1,274,079 0
------------- ------------
143,791,141 133,578,481
Cost of shares redeemed (75,727,057) (8,651,878)
------------- ------------
Net increase in net assets derived from capital share
transactions 68,064,084 124,926,603
------------- ------------
Net increase in net assets 38,955,929 137,916,139
NET ASSETS:
Beginning of period 137,916,139 0
------------- ------------
End of period $ 176,872,068 $137,916,139
============= ============
Undistributed net investment income $ 0 $ 0
============= ============
<CAPTION>
Northstar
Northstar Emerging
International Value Markets
Fund Value Fund
--------------------------------- ---------------
For the year For the year January 1,
ended ended 1998(1)
October 31, October 31, to October 31,
1998 1997 1998
----------------- --------------- ---------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 3,729,388 $ (40,240) $ 130,079
Net realized gain (loss) on investments 28,663,723 3,952,760 (114,095)
Net realized gain (loss) on foreign currency (957,107) (706,679) 1,224
Net change in unrealized appreciation (depreciation) of
investments and foreign currency (25,052,571) 669,652 (2,184,372)
--------------- ------------- -------------
Increase (decrease) in net assets resulting from
operations 6,383,433 3,875,493 (2,167,164)
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A 0 (262,842) 0
Class B 0 0 0
Class C 0 (74,358) 0
Net realized gain from investments (1,549,040) (790,064) 0
--------------- ------------- -------------
Total distributions (1,549,040) (1,127,264) 0
--------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 482,660,108 177,693,876 13,039,367
Net asset value of shares issued to shareholders in
reinvestment of dividends 1,115,780 1,087,022 0
--------------- ------------- -------------
483,775,888 178,780,898 13,039,367
Cost of shares redeemed (175,792,173) (31,008,648) (1,170,295)
--------------- ------------- -------------
Net increase in net assets derived from capital share
transactions 307,983,715 147,772,250 11,869,072
--------------- ------------- -------------
Net increase in net assets 312,818,108 150,520,479 9,701,908
NET ASSETS:
Beginning of period 181,827,375 31,306,896 0
--------------- ------------- -------------
End of period $ 494,645,483 $ 181,827,375 $ 9,701,908
=============== ============= =============
Undistributed net investment income $ 3,746,253 $ 5,612 $ 131,303
=============== ============= =============
</TABLE>
(1) Commencement of operations.
See accompanying notes to financial statements.
52
<PAGE>
NORTHSTAR TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Northstar
Northstar High Total Return
Income and Growth Fund Fund II
-------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
For the year For the year For the year For the period
ended ended ended January 31, 1997(1)
October 31, October 31, October 31, to October 31,
1998 1997 1998 1997
------------- ------------- ------------- -----------
FROM OPERATIONS:
Net investment income $ 4,652,829 $ 4,860,869 $ 16,225,997 $ 486,767
Net realized gain (loss) on investments 12,372,668 8,423,068 239,074 342,601
Net realized gain on foreign currency 0 0 199,374 0
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency (14,833,769) 18,154,797 (40,605,250) 35,050
------------- ------------- ------------- -----------
Increase (decrease) in net assets
resulting from operations 2,191,728 31,438,734 (23,940,805) 864,418
FROM DIVIDENDS TO
SHAREHOLDERS:
Net investment income:
Class A (1,645,418) (1,758,881) (2,724,046) (127,869)
Class B (1,649,267) (1,535,284) (10,361,927) (536,348)
Class C (1,532,895) (1,387,594) (3,578,472) (165,151)
Return of capital
Class A 0 0 (184,498) (17,201)
Class B 0 0 (760,637) (76,530)
Class C 0 0 (241,600) (24,768)
Net realized gain from investments (8,297,946) (22,088,154) 0 0
------------- ------------- ------------- -----------
Total distributions (13,125,526) (26,769,913) (17,851,180) (947,867)
------------- ------------- ------------- -----------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale of shares 23,793,209 31,477,216 288,856,753 62,136,277
Net asset value of shares issued to
shareholders in reinvestment
of dividends 10,902,341 19,661,408 5,327,944 249,885
------------- ------------- ------------- -----------
34,695,550 51,138,624 294,184,697 62,386,162
Cost of shares redeemed (76,452,625) (75,510,753) (47,864,975) (3,344,738)
------------- ------------- ------------- -----------
Net increase (decrease) in net assets
derived from capital share transactions (41,757,075) (24,372,129) 246,319,722 59,041,424
------------- ------------- ------------- -----------
Net increase (decrease) in net assets (52,690,873) (19,703,308) 204,527,737 58,957,975
NET ASSETS:
Beginning of period 197,127,494 216,830,802 58,957,975 0
------------- ------------- ------------- -----------
End of period $144,436,621 $197,127,494 $263,485,712 $58,957,975
============= ============= ============= ===========
Undistributed net investment income $ 82,834 $ 327,877 $ 0 $ 0
============= ============= ============= ===========
<CAPTION>
Northstar
High Total Return
Fund
-----------------------------------
<S> <C> <C>
For the year For the year
ended ended
October 31, October 31,
1998 1997
------------ ------------
FROM OPERATIONS:
Net investment income $ 77,293,831 $ 73,460,031
Net realized gain (loss) on investments (7,859,695) 27,484,100
Net realized gain on foreign currency 353,140 39,530
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency (178,347,256) 9,355,358
------------- -------------
Increase (decrease) in net assets
resulting from operations (108,559,980) 110,339,019
FROM DIVIDENDS TO
SHAREHOLDERS:
Net investment income:
Class A (19,771,933) (19,197,944)
Class B (51,139,518) (44,408,129)
Class C (8,241,961) (7,446,587)
Return of capital
Class A 0 0
Class B 0 0
Class C 0 0
Net realized gain from investments (27,484,835) 0
------------- -------------
Total distributions (106,638,247) (71,052,660)
------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale of shares 111,204,153 371,371,162
Net asset value of shares issued to
shareholders in reinvestment
of dividends 37,990,952 23,235,292
------------- -------------
149,195,105 394,606,454
Cost of shares redeemed (182,472,430) (112,723,639)
------------- -------------
Net increase (decrease) in net assets
derived from capital share transactions (33,277,325) 281,882,815
------------- -------------
Net increase (decrease) in net assets (248,475,552) 321,169,174
NET ASSETS:
Beginning of period 890,168,350 568,999,176
------------- -------------
End of period $641,692,798 $890,168,350
============= =============
Undistributed net investment income $ 1,508,011 $ 3,207,758
============= =============
</TABLE>
(1) Commencement of operations.
See accompanying notes to financial statements.
53
<PAGE>
NORTHSTAR TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net realized Dividends Distributions
Net Asset & unrealized Total declared declared
Value, Net gain (loss) from from net from net
Period beginning investment on investment investment realized
ended of period income (loss) investments operations income gain
- --------- ---------- ------------- ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Growth + Value Fund, Class A
11/18/96-
10/31/97 $ 10.00 $ 0.05) $ 2.20 $ 2.15 $ -- $ --
10/31/98 12.15 (0.11) (1.42) (1.53) -- (0.18)
Growth + Value Fund, Class B
11/18/96-
10/31/97 10.00 (0.08) 2.16 2.08 -- --
10/31/98 12.08 (0.16) (1.45) (1.61) -- (0.18)
Growth + Value Fund, Class C
11/18/96-
10/31/97 10.00 (0.08) 2.16 2.08 -- --
10/31/98 12.08 (0.16) (1.45) (1.61) -- (0.18)
International Value Fund, Class A
3/06/95 -
10/31/95 7.64 0.09 0.37 0.46 -- --
10/31/96 8.10 0.14 0.85 0.99 (0.04) --
10/31/97 9.05 (0.09) 2.30 2.21 (0.14) (0.22)
10/31/98 10.90 0.11 0.96 1.07 -- (0.09)
International Value Fund, Class B
4/17/97 -
10/31/97 10.00 (0.02) 0.89 0.87 -- --
10/31/98 10.87 0.07 0.91 0.98 -- (0.09)
International Value Fund, Class C
3/06/95 -
10/31/95 7.61 0.06 0.38 0.44 -- --
10/31/96 8.05 0.05 0.86 0.91 (0.03) --
10/31/97 8.93 (0.06) 2.20 2.14 (0.04) (0.17)
10/31/98 10.86 0.06 0.92 0.98 -- (0.09)
Emerging Markets Value Fund, Class A
1/01/98 -
10/31/98 10.00 0.12 (2.43) (2.31) -- --
Emerging Markets Value Fund, Class B
1/01/98 -
10/31/98 10.00 0.09 (2.44) (2.35) -- --
Emerging Markets Value Fund, Class C
1/01/98 -
10/31/98 10.00 0.09 (2.46) (2.37) -- --
<CAPTION>
Net Net Ratio of Ratio of Ratio of net
Asset Assets, expenses expense investment
Value, end of to average reimbursement income to
Period end of Total period net to average average Portfolio
ended period return (000's) assets(1) net assets(1) net assets(1) turnover
- ---------- --------- ---------- --------- --------- ------------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
11/18/96-
10/31/97 $ 12.15 21.50% $ 34,346 1.84% 0.02% (0.94%) 144%
10/31/98 10.44 (12.63) 33,425 1.72 -- (0.92) 162
11/18/96-
10/31/97 12.08 20.80 76,608 2.55 0.02 (1.68) 144
10/31/98 10.29 (13.38) 105,991 2.45 -- (1.67) 162
11/18/96-
10/31/97 12.08 20.80 26,962 2.56 0.02 (1.70) 144
10/31/98 10.29 (13.38) 37,456 2.46 -- (1.69) 162
3/06/95 -
10/31/95 8.10 9.39 5,188 1.85 6.08 1.67 0
10/31/96 9.05 12.15 16,777 1.85 0.97 1.52 74
10/31/97 10.90 27.59 60,539 1.80 0.27 0.46 26
10/31/98 11.88 9.86 211,018 1.74 -- 1.62 32
4/17/97 -
10/31/97 10.87 8.70 59,185 2.50 0.08 (0.71) 26
10/31/98 11.76 9.16 145,976 2.47 -- 0.69 32
3/06/95 -
10/31/95 8.05 8.89 5,749 2.50 6.08 1.13 0
10/31/96 8.93 11.39 14,530 2.50 1.21 0.62 74
10/31/97 10.86 25.92 62,103 2.50 0.24 (0.23) 26
10/31/98 11.75 9.07 137,651 2.47 -- 0.68 32
1/01/98 -
10/31/98 7.69 (23.10) 3,815 1.80 2.08 3.38 7
1/01/98 -
10/31/98 7.65 (23.50) 3,583 2.50 2.24 2.55 7
1/01/98 -
10/31/98 7.63 (23.70) 2,304 2.50 2.37 2.60 7
</TABLE>
(1) Annualized See accompanying notes to financial statements.
54
<PAGE>
NORTHSTAR TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD -- (CONTINUED)
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Net realized Dividends Distributions
Net Asset & unrealized Total declared declared
Value, Net gain (loss) from from net from net
Period beginning investment on investment investment realized
ended of period income (loss) investments operations income gain
- --------- ---------- ------------- ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Income and Growth Fund, Class A
11/08/93 -
10/31/94 $ 10.00 $ 0.30 $ 0.05) $ 0.25 $ 0.25) $ --
10/31/95 10.00 0.35 0.84 1.19 (0.33) --
10/31/96 10.86 0.32 1.29 1.61 (0.31) --
10/31/97 12.16 0.38 1.53 1.91 (0.34) (1.26)
10/31/98 12.47 0.37 (0.22) 0.15 (0.39) (0.53)
Income and Growth Fund, Class B
2/09/94 -
10/31/94 10.64 0.20 (0.65) (0.45) (0.20) --
10/31/95 9.99 0.27 0.85 1.12 (0.27) --
10/31/96 10.84 0.24 1.28 1.52 (0.23) --
10/31/97 12.13 0.27 1.55 1.82 (0.25) (1.26)
10/31/98 12.44 0.29 (0.22) 0.07 (0.30) (0.53)
Income and Growth Fund, Class C
3/21/94 -
10/31/94 10.37 0.20 (0.38) (0.18) (0.20) --
10/31/95 9.99 0.27 0.85 1.12 (0.28) --
10/31/96 10.83 0.24 1.28 1.52 (0.23) --
10/31/97 12.12 0.28 1.54 1.82 (0.26) (1.26)
10/31/98 12.42 0.31 (0.24) 0.07 (0.30) (0.53)
High Total Return Fund II, Class A
1/31/97 -
10/31/97 5.00 0.28 0.53 0.81 (0.28) --
10/31/98 5.49 0.50 (0.70) (0.20) (0.48) --
High Total Return Fund II, Class B
1/31/97 -
10/31/97 5.00 0.25 0.53 0.78 (0.25) --
10/31/98 5.49 0.47 (0.70) (0.23) (0.44) --
High Total Return Fund II, Class C
1/31/97 -
10/31/97 5.00 0.25 0.54 0.79 (0.25) --
10/31/98 5.50 0.47 (0.71) (0.24) (0.44) --
High Total Return Fund, Class A
11/08/93 -
10/31/94 5.00 0.41 (0.60) (0.19) (0.40) --
10/31/95 4.41 0.48 0.07 0.55 (0.48) --
10/31/96 4.48 0.46 0.32 0.78 (0.48) --
10/31/97 4.78 0.48 0.20 0.68 (0.46) --
10/31/98 5.00 0.46 (1.07) (0.61) (0.47) (0.15)
High Total Return Fund, Class B
2/09/94 -
10/31/94 5.20 0.33 (0.80) (0.47) (0.32) --
10/31/95 4.41 0.45 0.06 0.51 (0.45) --
10/31/96 4.47 0.43 0.32 0.75 (0.45) --
10/31/97 4.77 0.44 0.22 0.66 (0.43) --
10/31/98 5.00 0.43 (1.07) (0.64) (0.44) (0.15)
High Total Return Fund, Class C
3/21/94 -
10/31/94 5.06 0.26 (0.65) (0.39) (0.26) --
10/31/95 4.41 0.44 0.09 0.53 (0.45) --
10/31/96 4.49 0.43 0.32 0.75 (0.45) --
10/31/97 4.79 0.44 0.22 0.66 (0.43) --
10/31/98 5.02 0.43 (1.08) (0.65) (0.44) (0.15)
<CAPTION>
Net Net Ratio of Ratio of Ratio of net
Asset Assets, expenses expense investment
Distributions Value, end of to average reimbursement income to
Period declared end of Total period net to average average Portfolio
ended from Capital period return (000's) assets(1) net assets(1) net assets(1) turnover
- --------- ------------------ --------- ---------- --------- --------- ------------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/08/93 -
10/31/94 $ -- $ 10.00 2.48% $ 72,223 1.50% 0.47% 3.73% 26%
10/31/95 -- 10.86 13.19 76,031 1.51 -- 3.39 91
10/31/96 -- 12.16 14.48 85,250 1.52 -- 2.78 147
10/31/97 -- 12.47 17.02 53,805 1.47 -- 2.90 56
10/31/98 -- 11.70 1.12 47,378 1.40 -- 2.99 102
2/09/94 -
10/31/94 -- 9.99 (4.20) 37,767 2.20 0.16 3.00 26
10/31/95 -- 10.84 12.31 60,347 2.23 -- 2.66 91
10/31/96 -- 12.13 13.60 71,123 2.26 -- 2.04 147
10/31/97 -- 12.44 15.06 73,829 2.18 -- 2.18 56
10/31/98 -- 11.68 0.44 55,873 2.12 -- 2.28 102
3/21/94 -
10/31/94 -- 9.99 (1.75) 4,823 2.20 0.06 2.87 26
10/31/95 -- 10.83 12.33 53,661 2.22 -- 2.67 91
10/31/96 -- 12.12 13.68 60,458 2.20 -- 2.10 147
10/31/97 -- 12.42 15.04 69,494 2.15 -- 2.21 56
10/31/98 -- 11.66 0.51 41,186 2.09 -- 2.32 102
1/31/97 -
10/31/97 (0.04) 5.49 16.53 8,548 1.26 3.36 5.89 164
10/31/98 (0.03) 4.78 (4.23) 40,924 1.44 0.01 8.90 150
1/31/97 -
10/31/97 (0.04) 5.49 15.91 38,076 1.95 0.75 5.20 164
10/31/98 (0.03) 4.79 (4.90) 168,859 2.17 0.02 8.17 150
1/31/97 -
10/31/97 (0.04) 5.50 16.12 12,334 1.95 0.78 5.17 164
10/31/98 (0.03) 4.79 (4.90) 53,703 2.17 0.01 8.16 150
11/08/93 -
10/31/94 -- 4.41 (4.11) 50,797 1.50 0.99 10.09 163
10/31/95 -- 4.48 13.02 88,552 1.55 -- 10.90 145
10/31/96 -- 4.78 18.14 167,698 1.52 -- 9.86 158
10/31/97 -- 5.00 15.03 215,361 1.42 -- 9.88 183
10/31/98 -- 3.77 (13.65) 148,650 1.30 -- 9.93 123
2/09/94 -
10/31/94 -- 4.41 (9.30) 25,880 2.20 0.20 9.72 163
10/31/95 -- 4.47 11.97 96,362 2.25 -- 10.20 145
10/31/96 -- 4.77 17.08 346,919 2.23 -- 9.14 158
10/31/97 -- 5.00 14.46 577,351 2.12 -- 9.18 183
10/31/98 -- 3.77 (14.28) 428,903 2.02 -- 9.20 123
3/21/94 -
10/31/94 -- 4.41 ((7.21) 2,330 2.20 0.11 9.46 163
10/31/95 -- 4.49 12.44 11,011 2.27 -- 10.18 145
10/31/96 -- 4.79 17.28 54,382 2.23 -- 9.14 158
10/31/97 -- 5.02 14.42 97,457 2.13 -- 9.18 183
10/31/98 -- 3.78 (14.41) 64,141 2.03 -- 9.19 123
</TABLE>
(1) Annualized See accompanying notes to financial statements.
55
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization -- The Northstar Trust (the "Trust"), a business trust, was
organized under the laws of the Commonwealth of Massachusetts and registered
under the Investment Company Act of 1940 as a diversified open-end management
investment company. The names of each of the six investment series
(collectively the "Funds") which comprise the Trust and their respective
investment objectives are set forth below.
NORTHSTAR GROWTH+VALUE FUND, ("Growth+Value Fund") is a diversified
portfolio with the investment objective of capital appreciation by investing in
equity securities. The Fund seeks to achieve its objective through investments
in companies the portfolio manager identifies as either growth or value through
quantitative analysis.
NORTHSTAR INTERNATIONAL VALUE FUND, ("International Value Fund") is a
diversified portfolio with the investment objective of long-term capital
appreciation. The Fund invests primarily in foreign companies with a market
valuation of greater than $1 billion, but may hold up to 25% of its assets in
companies with smaller market capitalization. Portfolio managers apply the
technique of "value investing".
NORTHSTAR EMERGING MARKETS VALUE FUND, ("Emerging Markets Value Fund") is
a diversified portfolio with the investment objective of long-term capital
appreciation. The Fund invests primarily in foreign companies located in
countries with emerging markets. Portfolio managers apply the technique of
"value investing".
NORTHSTAR INCOME AND GROWTH FUND, ("Income and Growth Fund") is a
diversified portfolio with the investment objective of current income balanced
with capital appreciation. The Fund seeks to achieve its objective through
investments in a diversified group of securities selected for their prospects
of providing both current income and long-term growth of capital.
NORTHSTAR HIGH TOTAL RETURN FUND II, ("High Total Return Fund II") is a
diversified portfolio with the investment objective of high income and captial
appreciation. The Fund invests primarily in a diversified group of fixed income
securities which are selected for high current income and the potential for
capital growth, including lower-rated fixed income securities, convertible
securities, securities issued by U.S. companies in foreign currencies, and
securities issued by foreign governments and companies.
NORTHSTAR HIGH TOTAL RETURN FUND, ("High Total Return Fund") is a
diversified portfolio with the investment objective of high income and capital
appreciation. The Fund invests primarily in a diversified group of fixed income
securities which are selected for high current income and the potential for
capital growth, including lower-rated fixed income securities, convertible
securities, securities issued by U.S. companies in foreign currencies, and
securities issued by foreign governments and companies.
Security Valuation -- Equity securities are valued at the closing sale
prices reported on recognized securities exchanges or lacking any sales, at the
last available bid price. Prices of long-term debt securities are valued on the
basis of last reported sales price, or if no sales are reported, the value is
determined based upon the mean of representative quoted bid or asked prices for
such securities, or, if such prices are not available, at prices provided by
market makers, or at prices for securities of comparable maturity, quality and
type. Short-term debt instruments with remaining maturities of less than 60
days are valued at amortized cost, unless the Trustees determine that amortized
cost does not reflect the fair value of such obligations. Securities for which
market quotations are not readily available are valued at fair value determined
in good faith by or under direction of the Trustees of the Trust. The books and
records of the Funds are maintained in U.S. dollars. Securities quoted in
foreign currencies are translated into U.S. dollars based on the prevailing
exchange rates on that day. The Adviser uses independent pricing services to
price the Funds' securities.
Management's Use of Estimates -- The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
Security Transactions, Investment Income, Expenses -- Security
transactions are recorded on the trade date. Realized gains or losses on sales
of investments are calculated on the identified cost basis. Interest income is
recorded on the accrual basis except when collection is not expected; discounts
are accrued, and premiums amortized to par at maturity; dividend income is
recorded on the ex-dividend dates. Income, expenses (except class specific
expenses), and realized/unrealized gains/losses, are allocated proportionately
to each Fund or class of shares based upon the relative daily net asset value.
Distributions to Shareholders -- Dividends from net investment income are
declared and paid monthly by the High Total Return Fund II and High Total
Return Fund, and declared and paid quarterly by the Income and Growth Fund, and
declared and paid annually by the Growth+Value Fund, International Value Fund,
and Emerging Markets Value Fund. Distributions of net realized capital gains,
if any, are declared annually; however, to the extent that a net realized
capital gain can be reduced by a capital loss carryover, such gain will not be
distributed.
56
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
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. These differences are primarily due to differing treatments of net
operating losses and foreign currency transactions. As of October 31, 1998, the
following amounts have been reclassified between undistributed net investment
income, accumulated net realized gain on investments and paid-in-capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED NET REALIZED
NET INVESTMENT GAIN ON PAID-IN-
INCOME INVESTMENTS CAPITAL
--------------- ------------- ---------------
<S> <C> <C> <C>
Growth+Value Fund 2,563,828 (178,035) (2,385,793)
International Value Fund 11,253 (9,453) (1,800)
Emerging Markets Value
Fund 1,224 (1,224) 0
Income and Growth
Fund (70,292) 70,292 0
High Total Return Fund II 1,625,183 (438,448) (1,186,735)
High Total Return Fund 159,834 (159,834) 0
</TABLE>
These restatements did not affect net investment income, net realized
gain on investments, or net assets for the year ended October 31, 1998.
Foreign Currency -- The Funds isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held.
Net realized gain(loss) on foreign currency transactions 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. Net change in unrealized
appreciation(depreciation) of investments and foreign currency arise from
changes in the value of assets and liabilities including investments in
securities at fiscal year end, resulting from changes in the exchange rate.
Foreign Currency Forward Contracts and Options and Futures -- The Funds
may enter into foreign currency forward 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 or collected by the Funds for the purchase or sale 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 or sold expires on the stipulated expiration date, the Funds
realize a gain or loss in the amount of the cost of the option.
The amount of potential gain or loss to the Funds upon exercise of a
written call option is the value (in U.S. dollars) of the currency sold, less
the value of the U.S. dollars received in exchange. The amount of potential
gain or loss to the Funds upon exercise of a written put option is the value
(in U.S. dollars) of the currency received, less the value of the U.S. dollars
paid in exchange.
Risks may arise upon entering these contracts from the potential
inability of counterparties to meet the terms of their contract and from
unanticipated movement in the value of a foreign currency relative to the U.S.
dollar.
Initial margin deposits made upon entering into futures contracts are
recognized as assets due from the broker (the Fund's agent in acquiring the
futures position). During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
"marking-to-market" on a daily basis to reflect the market value of the
contract at the end of each day's trading.
Variation margin payments are received or made, depending upon whether
unrealized gains or losses are incurred. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
Repurchase Agreements -- The Funds' Custodian takes possession of
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to assure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Funds have the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Funds may be delayed or limited.
Federal Income Taxes -- The Trust intends to comply with the special
provisions of the Internal Revenue Code available to investment companies and
to distribute all of the taxable net income to their respective shareholders.
Therefore, no Federal income tax provision or excise tax provision is required.
Organization Costs -- Costs incurred by the Trust in connection with its
organization of each Fund have been deferred and are
57
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
being amortized over a period of five years from the date the Funds commenced
operations.
NOTE 2. INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
Northstar Holding, Inc. (and its wholly-owned operating subsidiaries,
Northstar Investment Management Corp., Northstar Distributors, Inc. and
Northstar Administrator Corp.) is an indirect wholly-owned subsidiary of
Reliastar Financial Corp. Northstar Investment Management Corp. (the "Adviser")
serves as each Fund's investment adviser. The Growth+Value Fund, International
Value Fund, and Emerging Markets Value Fund pay the Adviser an investment
advisory fee calculated at an annual rate of 1.00% of average daily net assets.
The Income and Growth Fund and High Total Return Fund pay the Adviser an
investment advisory fee calculated at an annual rate of 0.75% on the first
$250,000,000 of aggregate average daily net assets, 0.70% on the next
$250,000,000 of such assets, 0.65% on the next $250,000,000 of such assets,
0.60% on the next $250,000,000 of such assets, and 0.55% on the assets of each
Fund in excess of $1 billion. The High Total Return Fund II pays the Adviser an
investment advisory fee calculated at an annual rate of 0.75% of average daily
net assets. For the year ended October 31, 1998, the Adviser earned $13,804,496
in investment advisory fees. Navellier Fund Management, Inc. ("Navellier"), a
registered investment adviser, serves as subadviser to the Growth+Value Fund
pursuant to a Subadvisory Agreement dated July 31, 1996, between the Adviser
and Navellier. For its services, Navellier received from the Adviser, a fee
equal to 0.64% of the average daily net assets of the Fund from November 1,
1997 through June 30, 1998 and 0.50% of the average daily net assets of the
Fund from July 1, 1998 thru October 31, 1998. For the year ended October 31,
1998, Navellier received $998,812 in subadvisory fees from the Adviser. Brandes
Investment Partners, L.P. ("Brandes"), a registered investment adviser, serves
as subadviser to the International Value Fund and Emerging Markets Value Fund
pursuant to Subadvisory Agreements dated February 28, 1997 and November 8,
1997, respectively, between the Adviser and Brandes. For its services, Brandes
receives from the Adviser an annual fee equal to 50% of the management fee that
each of the Funds' it subadvises pays the Adviser (currently 0.50% of the
average daily net assets of each Fund). For the year ended October 31, 1998,
Brandes received $1,750,654 and $20,985 in subadvisory fees from the Adviser
for the International Value Fund and Emerging Markets Value Fund, respectively.
Wilson/Bennett Capital Management, Inc. ("Wilson/Bennett"), a registered
investment adviser, served as subadviser with respect to the common stock
portion of the Income and Growth Fund pursuant to a Subadvisory Agreement dated
July 31, 1996 and terminated December 31, 1997 between the Adviser and
Wilson/Bennett. For its services, Wilson/Bennett received from the Adviser an
annual fee equal to 0.20% of the first $125 million of the average daily net
assets it managed, 0.25% of the next $125 million, and 0.30% for assets in
excess of $250 million. For the period November 1, 1997 thru December 31, 1997,
Wilson/Bennett received $39,209 in subadvisory fees from the Adviser. The
Adviser has voluntarily undertaken to limit the expenses of the Emerging
Markets Value Fund to 1.80% (Class A) and 2.50% (Class B and C) of each
respective class's average net assets. The Adviser had voluntarily limited the
expenses of High Total Return Fund II to 1.25% (Class A) and 1.95% (Class B and
C) until December 31, 1997 of each respective class's average net assets. The
Adviser will reimburse the funds for amounts in excess of such limits. As of
October 31, 1998, the Adviser's reimbursements totaled $99,612 and $27,865 for
the Emerging Markets Value Fund and High Total Return Fund II, respectively.
Northstar Administrators Corp. (the "Administrator"), an affiliate of the
Adviser, serves as each Fund's administrator. The Funds pay the Administrator a
fee calculated at an annual rate of 0.10% of each Fund's average daily net
assets, and an annual shareholder account servicing fee of $5.00, payable semi-
annually, for each account of beneficial owners of shares. For the period ended
October 31, 1998, the Administrator earned $2,039,178 in administrative and
account servicing fees. Northstar Distributors, Inc. (the "Distributor"), an
affiliate of the Adviser and the Administrator, is the distributor of each
Fund's shares. Under separate Distribution Plans pertaining to Class A, B, and
C shares, the Trust pays the Distributor monthly service fees at an annual rate
of 0.25% of the average daily net assets in Class A, B and C shares and monthly
distribution fees at the annual rate of 0.05% of the average daily net assets
of Class A shares and 0.75% of the average daily net assets of Class B and C
shares. As of October 31, 1998, the Trust owed the Distributor $1,152,528 in
service and distribution fees. The Distributor also receives the proceeds of
initial sales charges paid by shareholders upon the purchase of Class A shares
and contingent deferred sales charges paid by shareholders upon certain
redemptions of Class A, B and C shares. For the period ended October 31, 1998,
the Distributor earned the following amounts in sales charges:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
----------- ------------- -----------
<S> <C> <C> <C>
Initial sales charges $570,894 N/A N/A
Contingent deferred sales
charges $ 68,945 $3,560,106 $215,124
</TABLE>
58
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
NOTE 3. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the period ended October 31, 1998, were
as follows:
<TABLE>
<CAPTION>
EMERGING INCOME AND HIGH TOTAL HIGH TOTAL
GROWTH+VALUE INTERNATIONAL MARKETS GROWTH RETURN RETURN
FUND VALUE FUND VALUE FUND FUND FUND II FUND
------------- -------------- ------------ ----------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Aggregate purchases $326,565,556 $400,225,350 $11,782,129 $182,947,621 $475,140,016 $ 959,567,681
Aggregate sales $259,620,298 $104,043,711 $ 363,973 $229,365,309 $254,608,488 $1,016,787,372
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<CAPTION>
EMERGING INCOME AND HIGH TOTAL HIGH TOTAL
GROWTH+VALUE INTERNATIONAL MARKETS GROWTH RETURN RETURN
FUND VALUE FUND VALUE FUND FUND FUND II FUND
------------- -------------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Aggregate purchases $0 $0 $0 $14,548,850 $0 $0
Aggregate sales $0 $0 $0 $47,757,966 $0 $0
</TABLE>
NOTE 4. PORTFOLIO SECURITIES (TAX BASIS)
The cost of securities for federal income tax purposes and the aggregate
appreciation and depreciation of securities at October 31, 1998 were as
follows:
<TABLE>
<CAPTION>
EMERGING
GROWTH+VALUE INTERNATIONAL MARKETS
FUND VALUE FUND VALUE FUND
-------------- -------------- ---------------
<S> <C> <C> <C>
Cost (tax basis) $158,709,989 $ 495,338,340 $ 11,304,024
------------ ------------- ------------
Appreciated securities 20,645,083 40,204,588 397,143
Depreciated securities 8,095,031 64,037,157 2,582,467
------------ ------------- ------------
Net unrealized appreciation/depreciation $ 12,550,052 $ (23,832,569) $ (2,185,324)
------------ ------------- ------------
<CAPTION>
INCOME AND HIGH TOTAL HIGH TOTAL
GROWTH RETURN RETURN
FUND FUND II FUND
--------------- ----------------- ------------------
<S> <C> <C> <C>
Cost (tax basis) $125,380,435 $ 265,789,736 $ 765,808,867
------------ ------------- --------------
Appreciated securities 17,776,323 1,702,169 31,622,154
Depreciated securities 279,215 42,280,268 189,904,679
------------ ------------- --------------
Net unrealized appreciation/depreciation $ 17,497,108 $ (40,578,099) $ (158,282,525)
------------ ------------- --------------
</TABLE>
59
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the period ended October
31, 1998, were as follows:
<TABLE>
<CAPTION>
NORTHSTAR GROWTH+VALUE FUND
------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
-------------------------------- -------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 4,527,627 $ 52,348,896 5,430,943 $ 62,929,378 2,339,701 $ 27,238,788
Reinvested dividends 35,555 384,794 62,402 668,329 20,745 220,956
Shares redeemed (4,188,964) (47,906,940) (1,536,021) (17,178,931) (952,396) (10,641,186)
---------- ------------- ---------- ------------- --------- -------------
Net increase 374,218 $ 4,826,750 3,957,324 $ 46,418,776 1,408,050 $ 16,818,558
---------- ------------- ---------- ------------- --------- -------------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR INTERNATIONAL VALUE FUND
---------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
---------------------------------- -------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 23,471,551 $ 278,306,972 8,027,215 $ 96,730,318 8,950,805 $ 107,622,818
Reinvested dividends 36,151 393,327 31,621 342,751 35,060 379,702
Shares redeemed (11,301,948) (128,653,076) (1,093,303) (12,477,274) (2,992,118) (34,661,823)
----------- -------------- ---------- ------------- ---------- -------------
Net increase 12,205,754 $ 150,047,223 6,965,533 $ 84,595,795 5,993,747 $ 73,340,697
----------- -------------- ---------- ------------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR EMERGING MARKETS VALUE FUND
------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
---------------------------- ---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 586,703 $5,310,769 487,684 $4,541,148 348,558 $3,187,450
Reinvested dividends 0 0 0 0 0 0
Shares redeemed (90,645) (709,667) (19,286) (143,736) (46,689) (316,892)
------- ---------- ------- ---------- ------- ----------
Net increase 496,058 $4,601,102 468,398 $4,397,412 301,869 $2,870,558
------- ---------- ------- ---------- ------- ----------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR INCOME AND GROWTH FUND
--------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
-------------------------------- -------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 1,460,784 $ 17,299,976 385,541 $ 4,710,280 143,591 $ 1,782,953
Reinvested dividends 286,311 3,468,930 250,270 3,026,653 364,493 4,406,758
Shares redeemed (2,013,738) (24,214,525) (1,788,219) (21,794,555) (2,573,208) (30,443,545)
---------- ------------- ---------- ------------- ---------- -------------
Net decrease (266,643) $ (3,445,619) (1,152,408) $ (14,057,622) (2,065,124) $ (24,253,834)
---------- ------------- ---------- ------------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR HIGH TOTAL RETURN FUND II
-------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
-------------------------------- ------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------------- ---------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 9,464,888 $ 52,213,452 30,726,099 $ 169,510,680 12,093,890 $ 67,132,621
Reinvested dividends 195,435 1,047,749 533,502 2,853,263 265,028 1,426,932
Shares redeemed (2,663,248) (14,330,427) (2,921,191) (15,435,403) (3,399,441) (18,099,145)
---------- ------------- ---------- ------------- ---------- -------------
Net increase 6,997,075 $ 38,930,774 28,338,410 $ 156,928,540 8,959,477 $ 50,460,408
---------- ------------- ---------- ------------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR HIGH TOTAL RETURN FUND
----------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
--------------------------------- --------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------------- ---------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 7,307,502 $ 33,700,237 13,631,735 $ 63,015,584 3,164,086 $ 14,488,332
Reinvested dividends 2,832,172 13,014,409 4,666,940 21,417,535 773,187 3,559,008
Shares redeemed (13,775,835) (63,140,734) (19,998,694) (90,185,269) (6,407,467) (29,146,427)
----------- ------------- ----------- ------------- ---------- -------------
Net decrease (3,636,161) $ (16,426,088) (1,700,019) $ (5,752,150) (2,470,194) $ (11,099,087)
----------- ------------- ----------- ------------- ---------- -------------
</TABLE>
60
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
Transactions in capital shares of each class of shares of each Fund for
the period ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
NORTHSTAR GROWTH+VALUE FUND
------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------------ ------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------------- -------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 3,198,589 $ 35,128,129 6,594,961 $ 72,326,051 2,376,801 $ 26,124,301
Reinvested dividends 0 0 0 0 0 0
Shares redeemed (371,688) (4,227,202) (252,824) (2,794,803) (144,248) (1,629,873)
--------- ------------ --------- ------------ --------- ------------
Net increase 2,826,901 $ 30,900,927 6,342,137 $ 69,531,248 2,232,553 $ 24,494,428
--------- ------------ --------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR INTERNATIONAL VALUE FUND
--------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
---------------------------------- ------------------------------ ----------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------------- ---------------- ------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 4,935,067 $ 54,622,981 5,542,720 $ 62,354,855 5,488,633 $ 60,716,040
Reinvested dividends 65,938 647,027 0 0 44,366 439,995
Shares redeemed (1,302,050) (14,082,310) (95,521) (1,073,954) (1,439,291) (15,852,384)
---------- ------------- --------- ------------ ---------- -------------
Net increase 3,698,955 $ 41,187,698 5,447,199 $ 61,280,901 4,093,708 $ 45,303,651
---------- ------------- --------- ------------ ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR INCOME AND GROWTH FUND
-----------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
-------------------------------- -------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 1,243,862 $ 14,890,910 841,761 $ 10,066,857 532,573 $ 6,519,449
Reinvested dividends 562,660 6,530,795 482,072 5,581,664 652,245 7,548,949
Shares redeemed (4,502,701) (53,333,104) (1,249,464) (15,194,870) (577,643) (6,982,779)
---------- ------------- ---------- ------------- -------- ------------
Net increase/(decrease) (2,696,179) $ (31,911,399) 74,369 $ 453,651 607,175 $ 7,085,619
---------- ------------- ---------- ------------- -------- -----------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR HIGH TOTAL RETURN FUND II
------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------------ ------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------------- -------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 2,030,839 $ 11,223,031 7,001,479 $38,488,120 2,255,476 $12,425,126
Reinvested dividends 11,470 62,725 26,673 146,533 7,387 40,627
Shares redeemed (483,860) (2,718,468) (94,319) (522,918) (18,844) (103,352)
--------- ------------ --------- ----------- --------- -----------
Net increase 1,558,449 $ 8,567,288 6,933,833 $38,111,735 2,244,019 $12,362,401
--------- ------------ --------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR HIGH TOTAL RETURN FUND
--------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
-------------------------------- -------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------------- ---------------- ---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 15,013,653 $ 72,250,956 50,969,211 $ 244,941,244 11,157,080 $ 54,178,962
Reinvested dividends 1,761,535 8,526,615 2,606,832 12,616,158 431,760 2,092,519
Shares redeemed (8,829,614) (42,947,742) (10,740,737) (52,447,215) (3,517,940) (17,328,682)
---------- ------------- ----------- ------------- ---------- -------------
Net increase 7,945,574 $ 37,829,829 42,835,306 $ 205,110,187 8,070,900 $ 38,942,799
---------- ------------- ----------- ------------- ---------- -------------
</TABLE>
61
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
NOTE 6. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Total Return
Fund II and High Total Return Fund had 70.83% and 77.28%, respectively, of
their portfolios invested in lower rated and comparable quality unrated high
yield securities. Investments in higher yield securities are accompanied by a
greater degree of credit risk and such lower rated securities tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities, because such securities are generally unsecured and
are often subordinated to other creditors of the issuer. At October 31, 1998,
the High Total Return Fund II held Heartland Wireless and International
Wireless, securities in default. The aggregate value for these securities is
$158,420. At October 31, 1998, the High Total Return Fund held Heartland
Wireless, International Wireless, securities in default and SA Telecom and CAI
Wireless, bankrupt companies. The aggregate value for these securities is
$7,209,464.
For financial reporting purposes, it is each Fund's accounting practice
to discontinue accrual of income and provide an estimate for probable losses
due to unpaid interest income on defaulted bonds for the current reporting
period.
NOTE 7. SECURITY LOANS
Each Fund may lend its securities to brokers, dealers and other financial
institutions in amounts up to one third of the value of its total assets. The
loans are fully collateralized at all times by cash or liquid high grade
securities. As with other extensions of credit, each Fund may bear risk of
delay in recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. The Funds receive compensation for lending
its securities in the form of fees or all or a portion of the income from
investments of the collateral. The Funds also continue to earn income on the
securities loaned. At October 31, 1998, the Funds did not have any securities
on loan.
NOTE 8. FEDERAL INCOME TAX -- CAPITAL LOSS CARRYFORWARD
At October, 31, 1998, the Growth + Value Fund, Emerging Markets Value
Fund, and High Total Return Fund had capital loss carryforwards of $26,282,878,
$114,095, and $6,107,124, respectively, expiring on October 31, 2006.
NOTE 9. ACQUISITION
At the close of business on April 17, 1997 (the "Closing"), the Northstar
International Value Fund ("International Value Fund") acquired the net assets
of the Brandes International Fund, pursuant to an Agreement of Reorganization
(the "Agreement") dated February 4, 1997. In accordance with the Agreement, the
International Value Fund, at the Closing, issued 4,152,725 shares of the
International Value Fund having an aggregate value of $41,547,387 which
included unrealized appreciation on investments of $4,299,350. As a result, the
International Value Fund issued 1.637 shares for each Brandes International
Fund Class A and 1.643 shares for each Brandes International 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 International Value Fund were $41,547,387 with a net
asset value of $10.00 for Class A and C shares.
NOTE 10. LETTER OF CREDIT
The Funds have entered into an unsecured committed revolving line of
credit agreement (the "Credit Agreement") with State Street Bank and Trust
Company for an aggregate amount of $50,000,000. The proceeds may be used only
to (1) temporarily finance the purchase and sale of securities; (2) finance the
redemption of shares of an investor in the Funds; and (3) enable the Funds to
meet other emergency expenses as defined in the Credit Agreement. The Funds pay
a commitment fee equal to 0.08% per annum on the daily unused portion of the
committed line amount payable quarterly in arrears. During the year ended
October 31, 1998, the Funds did not have any loans outstanding.
TAX INFORMATION (UNAUDITED)
The amount of long-term capital gain paid for the fiscal year ended
October 31, 1998 was $4,804,657 and $999,946 for the International Value Fund
and Income and Growth Fund, respectively.
Of the ordinary distributions made during the fiscal year ended October
31, 1998, the following percentages qualify for the dividends received
deduction available to corporate shareholders; 35%, 5%, and 6% for the Income
and Growth Fund, High Total Return Fund II, and High Total Return Fund,
respectively.
The above figures may differ from those cited elsewhere in this report
due to differences in the calculation of income and gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax)
purposes.
The foreign taxes paid or withheld per share, $1,040,897 in total and
$0.02 per share for the International Value Fund, represent taxes incurred by
the Fund on interest and dividends received by the Fund from foreign sources.
Foreign taxes paid or withheld should be included in taxable income with an
offsetting deduction from gross income or as a credit for taxes paid to foreign
governments. You should consult your tax advisor regarding the appropriate
treatment of foreign taxes paid.
62
<PAGE>
NORTHSTAR TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
[NORTHSTAR TRUST LOGO APPEARS HERE]
To the Shareholders and Trustees
of Northstar Trust:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolios of investments, of the Northstar Trust, comprising the Northstar
Growth+Value Fund, Northstar International Value Fund, Northstar Emerging
Markets Value Fund, Northstar Income and Growth Fund, Northstar High Total
Return Fund II and Northstar High Total Return Fund, (collectively, the
"Funds") as of October 31, 1998, and the related statement of operations,
changes in net assets and financial highlights for each of the periods
presented except for the financial highlights for Northstar International Value
Fund for the year ended October 31, 1996 and the period from March 6, 1995 to
October 31,1995 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Funds'management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at October 31, 1998 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
The financial highlights for the year ended October 31, 1996 and the period
from March 6, 1995 to October 31, 1995 of the Northstar International Value
Fund were audited by other auditors whose report dated December 4, 1996
expressed an unqualified opinion on these financial highlights.
PricewaterhouseCoopers LLP
New York, NY
December 11, 1998
63
