<PAGE>
NORTHSTAR
TRUST
ANNUAL REPORT TO SHAREHOLDERS
OCTOBER 31, 1997
(5-PRONGED STAR APPEARS WITH SEVERAL FUNDS REPRESENTED)
<PAGE>
(PICTURE OF MARK L. LIPSON)
MARK L. LIPSON
(LOGO)
NORTHSTAR TRUST
ANNUAL REPORT
October 31, 1997
Dear Shareholders:
We are pleased to provide you with the annual report of the Northstar Trust for
the year ended October 31, 1997. We are gratified with your decision to entrust
your assets to the Northstar Funds and are confident that we can assist you
reaching your financial objectives. Our goal is to provide you with consistent,
long term, attractive returns achieved through fundamental research, analysis,
and traditional investment disciplines. Following this letter is a summary of
the results of each Fund by their respective portfolio manager. We hope you will
find it informative.
During the past year the U.S. financial markets remained quite strong despite
three temporary market corrections. The favorable investment returns for both
stocks and bonds were supported by continued growth in the economy, strong gains
in corporate profits, and a reduction in the inflation rate.
As the U.S. economy advanced at better than a 3% rate in real GDP growth, it
generated more jobs, reducing the unemployment rate to an historically low level
of 4.7%. This raised concerns that rising wage pressures would begin to impact
and reverse the favorable trends in both corporate profitability and inflation.
However, despite growing demand, the productive capacity of the increasingly
global economy increased even more due to capital investments and improved
efficiency. There are few, if any, shortages today impacting inflation, and
rising employment costs so far are being more than offset by productivity gains.
Corporate profit margins remain at historically high levels.
During the year, intermediate and long term treasury bonds appreciated as yields
declined about 50 basis points (0.5%). The total return for 10 year A rated
bonds was about 9.4%. Stock market returns were stronger, with the Dow
Industrials up 25.8%, benefiting from both higher earnings and higher valuations
due to the lower interest rates. High yield bonds also had a very good year
benefiting from both a narrowing in interest rate differentials compared to
treasury bonds and from increases in the underlying equity values.
Looking into 1998 the investment environment continues to appear favorable.
While the current financial crisis in Asia has introduced a new major
uncertainty which we are monitoring closely, its dampening effect on global
growth and inflation may actually prove to be positive for the U.S. bond and
stock prices. Growth in the U.S. economy and corporate profits should continue
in 1998, but at a slower rate. With inflation remaining low, some further
declines in interest rates are possible.
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
Dec. 1, 1997
1
<PAGE>
(PICTURE OF LOUIS NAVEILLER)
LOUIS NAVEILLER
(LOGO)
NORTHSTAR
GROWTH + VALUE FUND
THE MARKETS
(Bullet) Small-to-mid capitalization stocks lagged their large
capitalization counterparts until the S&P 500's earnings momentum
peaked in the first quarter of 1997. As soon as it became evident
that the S&P 500's earnings were slowing, small-to-mid
capitalization stocks took over the leadership role of the stock
market and performed magnificently in the second and third quarters
of 1997. Technology stocks performed especially well during the
second and third quarters of 1997. By the time the fourth quarter
of 1997 arrived, some profit-taking in the high-flying technology
stocks was expected, but the profit-taking proved to be more than
anticipated and many technology stocks used the currency and stock
market problems in Hong Kong as an excuse to "crash and burn".
Fortunately, before the technology stocks corrected sharply in
October 1997, the Growth + Value Fund had been reducing its
exposure in technology stocks and dramatically increasing its
exposure in oil-service and oil-drilling stocks. This shift away
from technology and into oil-related stocks helped the Growth +
Value Fund perform much better than many aggressive growth funds
during the volatile first part of the fourth quarter of 1997.
THE FUND
(Bullet) The Growth + Value Fund was opened in mid-November of 1996 and
ended its' year on October 31. Although the Fund is still
relatively new, we are quite pleased with its' results thus far.
Year to date (November 18 to October 31, 1997) the Fund was up
21.5%, 20.8%, and 20.8% for Class A, B, and C respectively,
compared to the S&P 500 which was up 32.1% and the Dow Jones
Industrials which were up 25.8%. The short history of the Fund has
been marked by an exciting and sometimes challenging market
environment.
(Bullet) This Fund attempted to "shift gears" as the stock market
environment changed. In the first quarter of 1997, the Growth +
Value Fund was predominantly invested in mid-capitalization growth
stocks, but from May 1997 on, small capitalization stocks started
to outperform and became more dominant in the Fund. Today, the
Growth + Value Fund is dominated by both small capitalization and
mid capitalization stocks.
(Bullet) The "biggest" factor affecting the Growth + Value Fund during 1997
was that after the S&P 500's earnings momentum peaked early in the
year, the stock market became increasingly selective. Today,
consistent earnings growth and reasonable earnings growth relative
to a stock's price/earnings ratio are extremely important. I enjoy
narrow challenging stock market environments. One fact that I am
especially proud of is that throughout 1997, the Growth + Value
Fund has remained fundamentally superior to both the Russell 2000
and S&P 500, in that the average projected price/earnings ratio of
the fund has remained in line or below comparable ratios for the
Russell 2000 and S&P 500.
CURRENT STRATEGY
(Bullet) The projected 1998 earnings for the Growth + Value Fund is far
stronger than either the Russell 2000 and S&P 500. As I approach
1998, I remain especially optimistic about the outlook for the
Growth + Value Fund, simply because the stocks in the Fund have
reasonable price/earnings ratios and superior earnings prospects
relative to the overall stock market.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/97) TOTAL NET ASSETS $137,916,139
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
1 ENSCO International, Inc. 2.8%
2 Ace, Ltd. 2.7
3 Orbotech Ltd. 2.5
4 BJ Services Co. 2.3
5 Cliffs Drilling Co. 2.3
6 Dell Computer Corp. 2.3
7 Dallas Semiconductor Corp. 2.1
8 Tekelec 2.1
9 Thiokol Corp. 2.0
10 Guidant Corp. 1.9
------
23.0%
======
</TABLE>
<TABLE>
<S> <C>
TOP 5 INDUSTRIES
(BY PERCENTAGE OF NET ASSET)
----------------
Insurance 7.1%
--------------
Electronics 6.0%
Oilfield Service/ ------------
Equipment 5.4%
---------
Computers 3.5%
Oil & Gas ---------
Exploration 3.5%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- -------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- -------------------------------------------
Class A 16.61% n/a n/a
- -------------------------------------------
Class B 16.70% n/a n/a
- -------------------------------------------
Class C 20.94% n/a n/a
- -------------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
<S> <C> <C> <C>
- -------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- -------------------------------------------
Class A 21.50% n/a n/a
- -------------------------------------------
Class B 20.80% n/a n/a
- -------------------------------------------
Class C 20.80% n/a n/a
- -------------------------------------------
</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,
1997. The average annualized total return for Class A shares of 16.61% 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 16.70% and
20.94% 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.
(Plot points appear below for Northstar Growth + Value Fund-Class A, Northstar
Growth + Value Fund-Class B and Northstar Growth + Value Fund-Class C.)
NORTHSTAR GROWTH + VALUE FUND-CLASS A
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION 16.61%
CLASS A S&P 500 LIPPER GROWTH FUND
11/18/96 9.525 10 10
4/30/97 8.952 11.362 10.852
10/31/97 11.571 12.969 12.842
NORTHSTAR GROWTH + VALUE FUND-CLASS B
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION 16.70%
CLASS B S&P 500 LIPPER GROWTH FUND
11/18/96 10 10 10
4/30/97 9.380 11.362 10.852
10/31/97 12.080 12.969 12.842
NORTHSTAR GROWTH + VALUE FUND-CLASS C
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION 20.94%
CLASS C S&P 500 LIPPER GROWTH FUND
11/18/96 10 10 10
4/30/97 9.380 11.362 10.852
10/31/97 12.080 12.969 12.842
4
<PAGE>
NORTHSTAR GROWTH + VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 93.22%
ADVANCED MEDICAL DEVICES -- 1.92%
Guidant Corp. 46,000 $ 2,645,000
------------
AEROSPACE/AIRCRAFT PARTS -- 1.45%
US Airways Group, Inc. @ 42,600 1,996,875
------------
AEROSPACE & DEFENSE -- 1.99%
Thiokol Corp. 30,000 2,746,875
------------
AIR FREIGHT/COURIERS -- 3.11%
Airbourne Freight Corp. 38,800 2,458,950
Expeditors International of Washington, Inc. 50,000 1,837,500
------------
4,296,450
------------
APPAREL/FABRIC -- 2.31%
Jones Apparel Group, Inc. @ 25,000 1,271,875
VF Corp. 21,400 1,912,625
------------
3,184,500
------------
BANKING -- 1.28%
GreenPoint Financial Corp. 27,500 1,770,313
------------
BUILDING MATERIALS -- 2.91%
Aztec Manufacturing Co. 77,900 1,407,069
Southdown, Inc. 47,000 2,602,625
------------
4,009,694
------------
COMPUTERS -- 3.48%
Compaq Computer Corp. 25,000 1,593,750
Dell Computer Corp. @ 40,000 3,205,000
------------
4,798,750
------------
COMPUTER HARDWARE -- 0.66%
Jabil Circuit, Inc. @ 20,000 907,500
------------
COMPUTER SERVICES -- 1.15%
Keane, Inc. @ 53,600 1,587,900
------------
COMPUTER SOFTWARE -- 1.48%
Compuware Corp. @ 30,900 2,043,262
------------
COMPUTER SOFTWARE & SERVICES -- 1.64%
Computer Learning Centers, Inc. 50,000 2,262,500
------------
CONSTRUCTION MATERIALS -- 1.31%
PACCAR, Inc. 40,000 1,802,500
------------
CONSTRUCTION & MINING EQUIPMENT -- 1.19%
Terex Corp. @ 77,900 1,640,769
------------
DIVERSIFIED MANUFACTURING -- 2.41%
Aeroquip-Vickers, Inc. 31,700 1,650,381
Tyco International Ltd. 44,200 1,668,550
------------
3,318,931
------------
DISCOUNT STORES -- 1.00%
Ames Department Stores, Inc. @ 89,100 1,386,619
------------
EDP PERIPHERALS -- 2.14%
Qlogic Corp. @ 12,900 419,250
Quantum Corp. @ 80,000 2,530,000
------------
2,949,250
------------
</TABLE>
5
<PAGE>
NORTHSTAR GROWTH + VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EDP SERVICES -- 2.72%
DSP Group, Inc. @ 53,000 $ 1,878,187
Systems & Computer Technology Corp. @ 43,400 1,871,625
------------
3,749,812
------------
ELECTRONIC PRODUCTION/EQUIPMENT -- 2.48%
Orbotech Ltd. @ 80,000 3,420,000
------------
ELECTRONICS -- 5.97%
Cellstar Corp. @ 45,000 1,527,187
CHS Electronics, Inc. 62,000 1,515,125
Innovex, Inc. 13,000 335,563
Smart Modular Technologies, Inc. @ 49,500 2,462,625
STB Systems, Inc. @ 35,000 1,028,125
Unitrode Corp. @ 50,800 1,362,075
------------
8,230,700
------------
FINANCIAL -- 1.02%
SLM Holding Corp. 10,000 1,403,750
------------
FINANCIAL SERVICES -- 1.79%
FirstPlus Financial Group, Inc. @ 45,000 2,475,000
------------
FLUID CONTROLS -- 1.82%
Parker-Hannifin Corp. 60,000 2,508,750
------------
FOOD -- 3.20%
Interstate Bakeries Corp. 37,000 2,363,375
Morningstar Group, Inc. @ 47,900 2,047,725
------------
4,411,100
------------
HOUSEHOLD PRODUCTS -- 0.61%
WestPoint Stevens, Inc. @ 20,700 848,700
------------
INSURANCE -- 7.09%
Ace, Ltd. 40,000 3,717,500
Mid Ocean Limited 40,600 2,633,925
Presidential Life Corp. 52,000 1,033,500
St. Paul Cos., Inc. 30,000 2,398,125
------------
9,783,050
------------
INVESTMENT COMPANIES -- 2.44%
Jefferies Group, Inc. 15,000 993,750
Merrill Lynch & Co., Inc. 35,000 2,366,875
------------
3,360,625
------------
METALS -- STEEL -- 3.25%
Maverick Tube Corp. @ 70,000 2,467,500
Timken Co. 60,000 2,010,000
------------
4,477,500
------------
NEWSPAPERS -- 1.31%
Knight Ridder, Inc. 34,600 1,807,850
------------
OFFICE EQUIPMENT/SUPPLIES -- 1.33%
Herman Miller, Inc. 37,600 1,837,700
------------
OIL -- 2.77%
ENSCO International, Inc. 90,700 3,815,069
------------
</TABLE>
6
<PAGE>
NORTHSTAR GROWTH + VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OIL & GAS DRILLING -- 1.13%
Global Marine, Inc. @ 50,000 $ 1,556,250
------------
OILFIELD SERVICES/EQUIPMENT -- 5.44%
BJ Services Co. @ 37,900 3,212,025
Key Energy Group, Inc. @ 70,000 2,196,250
Pool Energy Services Co. @ 61,700 2,093,944
------------
7,502,219
------------
OIL & GAS EXPLORATION -- 3.48%
Cliffs Drilling Co. 44,400 3,227,325
USX-Marathon Group 44,000 1,573,000
------------
4,800,325
------------
PLASTICS -- 0.99%
Premark International, Inc. 50,300 1,361,244
------------
PRINTING & PUBLISHING -- 1.35%
Consolidated Graphics, Inc. @ 35,900 1,862,312
------------
RETAILERS -- 1.62%
Goody's Family Clothing, Inc. @ 85,300 2,233,794
------------
SEMICONDUCTOR -- 2.13%
Dallas Semiconductor Corp. 60,100 2,937,387
------------
SPECIALTY FOODS/CANDY -- 1.79%
Earthgrains Co. 60,000 2,467,500
------------
STEEL -- 1.05%
Tubos de Acero de Mexico SA @ ** 72,000 1,453,500
------------
TELECOMMUNICATIONS -- 3.32%
Nokia Corp. ** 18,700 1,650,275
Tekelec @ 70,000 2,931,250
------------
4,581,525
------------
TRUCKING & FREIGHT -- 1.69%
USFreightways Corp. 72,000 2,331,000
------------
TOTAL COMMON STOCKS
(cost $118,047,610) 128,564,350
------------
TOTAL INVESTMENT SECURITIES -- 93.22%
(cost $118,047,610) 128,564,350
REPURCHASE AGREEMENT -- 6.84%
Agreement with State Street Bank and Trust bearing
interest at 5.50% dated 10/31/97, to be repurchased
11/03/97 in the amount of $9,436,323 and
collateralized by $7,290,000 U.S. Treasury Bonds,
8.875% due 2/15/19, value $9,623,762
(cost $9,432,000) $ 9,432,000 9,432,000
Liabilities in excess of other assets -- (0.06%) (80,211)
------------
NET ASSETS -- 100.00% $137,916,139
------------
------------
</TABLE>
@ Non-income producing.
** American Depositary Receipts.
See accompanying notes to financial statements.
7
<PAGE>
NORTHSTAR
INTERNATIONAL VALUE FUND
THE MARKETS
(Bullet) With the exception of Asia, the international markets experienced
generally favorable returns over the twelve-month period ended
October 31, 1997. The MSCI Europe Australasia Far East Index (EAFE)
rose 4.6% for the year, while the MSCI Emerging Markets Free Index
declined 8.5%. The best performing market for the period was
Turkey, which was up over 93%.
(Bullet) The European markets performed strongly, with Spain up 37.8%
followed by Denmark, Italy, and the Netherlands which were all over
30% for the period. Latin American markers performed well also,
with Mexico up 38.8% and Argentina up 24.4%. The Asian markers were
hard hit as a result of the currency turmoil, with Thailand down
over 67%. Malaysia and the Philippines both declined over 50%,
while the Japanese market returned a negative 18.2% for the period.
THE FUND
(Bullet) The Fund performed strongly over the past year, returning 27.6%,
8.7%, and 25.9% for Class A, B, and C, respectively. The Lipper
Index of International Equity Funds returned 13.1% for the period
ended October 31, 1997.
(Bullet) European holdings were the largest contributors to the Fund's
performance, with France, Switzerland, and Italy leading the way.
Asian holdings, led by Japan, negatively contributed to
performance. Telecommunications and Insurance holdings were the
strongest industry contributors.
(Bullet) Our largest regional commitment continues to be in Europe, with
France and the United Kingdom being the most significant
components. Telecommunications and Banking are the largest industry
commitments.
CURRENT STRATEGY
(Bullet) 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.
(Bullet) 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
of industry.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/97) TOTAL NET ASSETS $181,827,375
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
1 Nestle SA 4.8%
2 Tele Danmark A/S 4.6
3 Daimler-Benz AG 4.2
4 Groupe Danone 4.2
5 Telecom Italia SpA 3.9
6 Hitachi Ltd. 3.7
7 Den Danske Bank A/S 3.6
8 Intituto Mobiliare Italiano SpA 3.1
9 BTR PLC 3.0
10 Guinness PLC 3.0
------
38.1%
=======
</TABLE>
<TABLE>
<S> <C>
TOP 5 INDUSTRIES
(by percentage of net assets)
----------------
Telecommunications 14.6%
---------------
Banking 14.1%
------------
Insurance 12.3%
Food & Household ----------
Products 10.5%
-------
Automotive 6.6%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- --------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- --------------------------------------------
Class A 13.91% n/a 18.87%
- --------------------------------------------
Class B 6.77% n/a n/a
- --------------------------------------------
Class C 15.38% n/a 23.18%
- --------------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
<S> <C> <C> <C>
- --------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- --------------------------------------------
Class A 48.51% n/a 27.59%
- --------------------------------------------
Class B 8.70% n/a n/a
- --------------------------------------------
Class C 46.30% n/a 25.92%
- --------------------------------------------
</TABLE>
8
<PAGE>
NORTHSTAR
INTERNATIONAL VALUE FUND
(LOGO)
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,
1997, with all distributions reinvested in shares. The average annualized total
return for Class A shares of 13.91% 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 6.77% and 15.38% 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.
(Plot points appear below for Northstar International Value Fund-Class A,
Northstar International Value Fund-Class B and Northstar International Value
Fund-Class C.)
NORTHSTAR INTERNATIONAL VALUE FUND-CLASS A
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 18.87%
SINCE INCEPTION 13.91%
CLASS A EAFE INDEX
3/06/95 9.525 10
10/31/95 10.092 10.73
10/31/96 11.327 11.669
10/31/97 14.139 12.024
NORTHSTAR INTERNATIONAL VALUE FUND-CLASS B
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION 6.77%
CLASS B EAFE INDEX
4/18/97 10 10
10/31/97 10.86 10.266
NORTHSTAR INTERNATIONAL VALUE FUND-CLASS C
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 23.18%
SINCE INCEPTION 15.38%
CLASS C EAFE INDEX
3/08/95 10 10
10/31/95 10.56 10.73
10/31/96 11.781 11.669
10/31/97 14.63 12.024
9
<PAGE>
NORTHSTAR INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Country Value % of Net Assets
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Argentina $ 4,097,280 2.25%
Austria 1,578,176 0.87%
Brazil 6,287,960 3.46%
Denmark 14,932,919 8.21%
France 27,120,909 14.92%
Germany 7,638,357 4.20%
Israel 26,675 0.02%
Italy 20,918,085 11.50%
Japan 20,900,331 11.49%
Korea 1,731,984 0.95%
Mexico 2,146,498 1.18%
Netherlands 8,047,401 4.43%
Portugal 1,668,805 0.92%
Singapore 6,608,587 3.63%
South Africa 6,180,751 3.40%
Spain 7,453,198 4.10%
Switzerland 13,119,304 7.22%
Thailand 748,080 0.41%
United Kingdom 21,518,139 11.83%
Other assets less liabilities 9,103,936 5.01%
------------ ---------------------
Net Assets $181,827,375 100.00%
------------ ---------------------
------------ ---------------------
</TABLE>
10
<PAGE>
NORTHSTAR INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 94.99%
AUTOMOTIVE -- 6.59%
Daimler-Benz AG (Germany) 114,000 $ 7,638,357
PSA Peugeot Citroen SA (France) 38,310 4,336,919
------------
11,975,276
------------
BANKING -- 14.08%
Argentaria SA (Spain) 48,980 2,720,550
Banca Commeriale Italiana SpA (Italy) 1,403,500 3,829,988
Compagnie Financiere de Paribas (France) 32,400 2,352,943
Den Danske Bank A/S (Denmark) 58,280 6,580,287
Development Bank of Singapore Ltd. (Singapore) 185,000 1,726,667
Istituto Mobiliare Italiano SpA (Italy) 629,200 5,626,750
Societe Generale SA (France) 14,700 2,013,262
Thai Farmers Bank Public Company Ltd. (Thailand) 279,000 748,080
------------
25,598,527
------------
BEVERAGES/FOOD/TOBACCO -- 5.15%
B.A.T. Industries PLC (United Kingdom) 451,000 3,946,012
Guinness PLC (United Kingdom) 606,800 5,426,256
------------
9,372,268
------------
CHEMICALS -- 2.15%
Imperial Chemical Industries PLC (United Kingdom) 264,800 3,909,562
------------
DATA PROCESSING & REPRODUCTION -- 0.02%
Scitex Corp. Ltd. (Israel) 2,200 26,675
------------
ELECTRICAL & ELECTRONICS -- 6.03%
Alcatel Alsthom SA (France) 34,850 4,205,019
Hitachi Ltd. (Japan) 879,200 6,757,457
------------
10,962,476
------------
ENERGY -- 3.88%
Elf Aquitaine SA (France) 14,195 1,757,072
Nippon Oil Co. Ltd. (Japan) 295,000 1,208,434
YPF Sociedad Anonima ** (Argentina) 128,040 4,097,280
------------
7,062,786
------------
FINANCIAL SERVICES -- 3.21%
Daiwa Securities Co. Ltd. (Japan) 460,000 2,782,551
Yamaichi Securities Co. Ltd. (Japan) 1,610,000 3,050,103
------------
5,832,654
------------
FOOD & HOUSEHOLD PRODUCTS -- 10.54%
Grand Metropolitan PLC (United Kingdom) 308,400 2,783,711
Groupe Danone (France) 50,370 7,701,875
Nestle SA (Switzerland) 6,165 8,686,695
------------
19,172,281
------------
</TABLE>
11
<PAGE>
NORTHSTAR INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE -- 12.30%
Assurances Generales de France (France) 90,350 $ 4,753,821
Baloise Holding Ltd. @ (Switzerland) 2,463 4,432,608
INA SpA (Italy) 2,313,700 3,724,059
ING Groep N.V. (Netherlands) 98,660 4,141,535
Tokio Marine & Fire Insurance Co. (Japan) 532,400 5,308,517
------------
22,360,540
------------
METALS -- STEEL -- 1.28%
Iscor Ltd. (South Africa) 4,491,050 2,333,013
------------
MISCELLANOUS MATERIALS & COMMODITIES -- 2.12%
De Beers Centenary AG (South Africa) 161,300 3,847,738
------------
MULTI INDUSTRY -- 5.68%
BTR PLC (United Kingdom) 1,614,880 5,452,597
Jardine Matheson Holdings Ltd. (Singapore) 762,800 4,881,920
------------
10,334,517
------------
RECREATION PRODUCTS -- 0.99%
Fuji Photo Film Co. (Japan) 49,500 1,793,270
------------
TELECOMMUNICATIONS -- 14.55%
Royal PTT Nederland NV (Netherlands) 102,200 3,905,867
Tele Danmark A/S (Denmark) 142,190 8,352,632
Telecom Italia SpA (Italy) 1,118,200 7,007,739
Telecomunicacoes Brasileiras SA ** (Brazil) 21,940 2,226,910
Telefonica de Espana SA (Spain) 103,390 2,821,601
Telefonos de Mexico SA ** (Mexico) 49,630 2,146,497
------------
26,461,246
------------
UTILITIES -- ELECTRICAL & GAS -- 6.42%
Centrais Eletricas Brasileiras SA ** (Brazil) 198,100 4,061,050
EDP-Electricidade de Portugal SA @ (Portugal) 90,000 1,581,461
EDP-Electricidade de Portugal SA @ ** (Portugal) 2,500 87,344
EVN Energie-Versorgung Niederoesterreich AG (Austria) 13,600 1,578,176
Italgas SpA (Italy) 205,000 729,548
Korea Electric Power Corp. ** (South Korea) 211,540 1,731,984
Union Electrica Fenosa SA (Spain) 200,000 1,911,047
------------
11,680,610
------------
TOTAL COMMON STOCKS
(cost $171,455,433) 172,723,439
------------
TOTAL INVESTMENT SECURITIES -- 94.99%
(cost $171,455,433) 172,723,439
Other assets less liabilities -- 5.01% 9,103,936
------------
NET ASSETS -- 100.00% $181,827,375
------------
------------
</TABLE>
@ Non-income producing.
** American Depositary Receipts.
See accompanying notes to financial statements.
12
<PAGE>
<TABLE>
<S> <C>
(PICTURE OF (PICTURE OF
GEOFFREY WADSWORTH) JOHN W. FISHER)
GEOFFREY WADSWORTH JOHN W. FISHER
</TABLE>
(LOGO)
NORTHSTAR
INCOME AND GROWTH FUND
THE MARKETS
(Bullet) For the year ended October 31, 1997 the U.S. financial markets
remained quite strong. The S&P 500 was up about 32.1%, the Dow
Industrials + 25.8%, and 10 year A rated bonds were up about 9.4%.
(Bullet) These favorable investment returns were driven by a combination of
surprisingly strong economic growth of well over 3% and even more
surprisingly, a reduced level of inflation, down towards 2%.
Despite growing global competition, strong productivity gains
allowed corporations to maintain historically high profit margins
and produce earnings increases of better than 10% for the S&P 500.
THE FUND
(Bullet) The Fund maintained a balance of high quality dividend paying
stocks and investment grade bonds in close to a 60/40 ratio for
most of the year. The Fund had returns of 17.0%, 15.1%, and 15.0%
for Class A, B, and C shares, respectively, for the 12 months. This
was well above the average for investment grade bonds but somewhat
lagged the Lipper average of 18.9% for balanced Funds.
(Bullet) The Fund's relative performance was very strong earlier in the year
when market strength was focused on large capitalization blue chip
stocks. During the middle of the fiscal year performance lagged as
growth stocks and lower quality bonds took the lead in their
respective markets. Since the October year end, performance has
improved with renewed interest in high quality U.S. investments
while concerns about Asia increase.
(Bullet) Some of the best performing equity holdings included General
Electric Co., Bristol-Myers Squibb Co., Exxon Corp., and Ford Motor
Co., while others such as Eastman Kodak Co., Sears, Roebuck & Co.,
and Boeing Co. lagged.
CURRENT STRATEGY
(Bullet) Growing economic problems in Asia are likely to dampen global
growth in 1998, hold down inflation, and either reduce the level or
at least postpone the prospect of rising interest rates in the U.S.
The U.S. economy should continue to grow, but increases in S&P 500
profits are expected to slow and the financial markets to remain
volatile.
(Bullet) The Fund continues to hold dividend paying stocks with an average
yield above 2.5%, balanced with intermediate and long term domestic
investment grade bonds.
(Bullet) Some new holdings in real estate companies (REITS) have been
started which offer high dividend yields and attractive total
return potential. Equity holdings in slower growth cyclicals are
also being scaled back in favor of companies with better prospects
for revenue and profit margin growth.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/97) TOTAL NET ASSETS $197,127,494
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
1 General Electric Co. 6.2%
Minnesota, Mining &
2 Manufacturing Co. 4.9
Philip Morris Cos.,
3 Inc. 4.8
4 J.P. Morgan & Co. 3.6
5 Texaco, Inc. 3.5
6 Exxon Corp. 3.4
E.L. du Pont De Nemours
7 & Co. 3.3
8 Eastman Kodak Co. 3.1
9 AT&T Corp. 3.0
10 Chevron Corp. 3.0
------
38.8%
======
</TABLE>
<TABLE>
<S> <C>
TOP 5 SECTORS
(by percentage of net assets)
----------------
Energy 14.2%
---------------
Basic Materials 9.9%
------------
Consumer Staples 9.6%
----------
Financial 9.3%
-------
Consumer Cyclical 8.3%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- --------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- --------------------------------------------
Class A 10.20% n/a 11.32%
- --------------------------------------------
Class B 9.33% n/a 11.15%
- --------------------------------------------
Class C 10.85% n/a 15.12%
- --------------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
<S> <C> <C> <C>
- --------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- --------------------------------------------
Class A 54.56% n/a 17.02%
- --------------------------------------------
Class B 41.47% n/a 15.06%
- --------------------------------------------
Class C 45.19% n/a 15.04%
- --------------------------------------------
</TABLE>
13
<PAGE>
NORTHSTAR
INCOME AND GROWTH FUND
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,
1997, with all distributions reinvested in shares. The average annualized total
return for Class A shares of 10.20% 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 9.33% and 10.85% 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.
(Plot points appear below for Northstar Income and Growth Fund-Class A,
Northstar Income and Growth Fund-Class B and Northstar Income and
Growth Fund-Class C.)
NORTHSTAR INCOME AND GROWTH FUND-CLASS A
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 11.32%
SINCE INCEPTION 10.20%
LEHMAN BROTHERS LIPPER BALANCED
CLASS A GOV'T/CORP. BOND FUND INDEX S&P 500
11/08/93 9.525 10 10 10
10/31/94 9.751 9.674 9.939 10.097
10/31/95 10.948 11.237 11.686 12.431
10/31/96 12.591 11.843 13.38 15.077
10/31/97 14.719 12.886 16.069 19.553
NORTHSTAR INCOME AND GROWTH FUND-CLASS B
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 11.15%
SINCE INCEPTION 9.33%
LEHMAN BROTHERS LIPPER BALANCED
CLASS B GOV'T/CORP. BOND FUND INDEX S&P 500
2/09/94 10 10 10 10
10/31/94 9.58 9.596 9.68 9.808
10/31/95 10.673 11.146 11.382 12.075
10/31/96 12.181 11.747 13.032 14.646
10/31/97 14.148 12.782 15.651 18.993
NORTHSTAR INCOME AND GROWTH FUND-CLASS C
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 15.12%
SINCE INCEPTION 10.85%
LEHMAN BROTHERS LIPPER BALANCED
CLASS C GOV'T/CORP. BOND FUND INDEX S&P 500
3/21/94 10 10 10 10
10/31/94 9.825 9.809 9.874 10.112
10/31/95 10.948 11.394 11.61 12.45
10/31/96 12.503 12.008 13.293 15.1
10/31/97 14.519 13.066 15.964 19.583
14
<PAGE>
NORTHSTAR INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Industry Value % of Net Assets
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Aerospace & Defense $ 4,115,613 2.09%
Airlines 4,041,481 2.05%
Automotive 9,574,128 4.86%
Broadcasting & Media 1,764,906 0.90%
Capital Goods Manufacturing 12,124,837 6.15%
Chemicals 6,558,825 3.33%
Consumer Products 26,706,230 13.54%
Energy 24,256,486 12.30%
Energy Services 3,705,228 1.88%
Finance & Banking 10,298,098 5.22%
Financial 6,636,213 3.37%
Forest & Paper Products 3,341,700 1.70%
Insurance 1,464,265 0.74%
Pharmaceutical 11,418,296 5.79%
Photography 6,064,439 3.08%
Retail 4,952,442 2.51%
Technology 3,615,336 1.83%
Telecommunications 5,981,386 3.03%
Tobacco 1,945,929 0.99%
U.S. Government and Agencies 43,775,804 22.21%
Repurchase Agreement 3,100,000 1.57%
Other assets less liabilities 1,685,852 0.86%
------------ --------
Net Assets $197,127,494 100.00%
============ ========
</TABLE>
15
<PAGE>
NORTHSTAR INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 59.02%
AEROSPACE & DEFENSE -- 0.94%
Boeing Co. 38,740 $ 1,854,678
------------
AUTOMOTIVE -- 4.86%
Chrysler Corp. 77,215 2,721,829
Ford Motor Co. 72,565 3,170,183
General Motors Corp. 57,365 3,682,116
------------
9,574,128
------------
CAPITAL GOODS MANUFACTURING -- 6.15%
General Electric Co. 187,800 12,124,837
------------
CHEMICALS -- 3.33%
E.I. du Pont De Nemours & Co. 115,320 6,558,825
------------
CONSUMER PRODUCTS -- 11.69%
Kimberly-Clark Corp. 76,455 3,970,882
Minnesota, Mining & Manufacturing Co. 106,160 9,713,640
Philip Morris Cos., Inc. 236,340 9,364,972
------------
23,049,494
------------
ENERGY -- 12.30%
Chevron Corp. 71,100 5,896,856
Exxon Corp. 109,680 6,738,465
Mobil Corp. 65,900 4,798,344
Texaco, Inc. 119,830 6,822,821
------------
24,256,486
------------
FINANCE & BANKING -- 5.22%
Bankers Trust New York Corp. 26,770 3,158,860
J. P. Morgan & Co., Inc. 65,050 7,139,238
------------
10,298,098
------------
FOREST & PAPER PRODUCTS -- 1.70%
International Paper Co. 74,260 3,341,700
------------
PHARMACEUTICAL -- 4.85%
Bristol-Myers Squibb Co. 66,000 5,791,500
Merck & Co., Inc. 42,200 3,766,350
------------
9,557,850
------------
PHOTOGRAPHY -- 3.08%
Eastman Kodak Co. 101,285 6,064,439
------------
RETAIL -- 0.88%
Sears, Roebuck & Co. 41,665 1,744,722
------------
TELECOMMUNICATIONS -- 3.03%
AT&T Corp. 122,225 5,981,386
------------
TOBACCO -- 0.99%
RJR Nabisco Holdings Corp. 61,410 1,945,929
------------
TOTAL COMMON STOCKS
(cost $85,905,976) 116,352,572
------------
</TABLE>
16
<PAGE>
NORTHSTAR INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
DOMESTIC CORPORATE BONDS -- 16.34%
AEROSPACE & DEFENSE -- 1.15%
Raytheon Co.
6.45%, Notes, 8/15/02 $ 2,250,000 $ 2,260,935
------------
AIRLINES -- 2.05%
Continental Airlines, Inc.
7.82%, Pass-Thru Certificates, 4/15/15 3,774,510 4,041,481
------------
BROADCASTING & MEDIA -- 0.90%
A.H. Belo Corp.
7.125%, Sr. Notes, 6/01/07 1,700,000 1,764,906
------------
CONSUMER PRODUCTS -- 1.85%
Avon Products, Inc. #
6.55%, Notes, 8/01/07 3,600,000 3,656,736
------------
ENERGY SERVICES -- 1.88%
Smith International, Inc.
7.00%, Sr. Notes, 9/15/07 3,600,000 3,705,228
------------
FINANCIAL -- 3.37%
Chase Manhattan Corp.
7.25%, Subordinated Notes, 6/01/07 2,700,000 2,819,205
First Union Corp.
7.50%, Subordinated Notes, 7/15/06 3,600,000 3,817,008
------------
6,636,213
------------
INSURANCE -- 0.74%
Leucadia National Corp.
8.25%, Sr. Subordinated Notes, 6/15/05 1,375,000 1,464,265
------------
PHARMACEUTICAL -- 0.94%
American Home Products
7.90%, Notes, 2/15/05 1,700,000 1,860,446
------------
RETAIL -- 1.63%
Penney (J. C.) Co., Inc.
7.60%, Notes, 4/01/07 3,000,000 3,207,720
------------
TECHNOLOGY -- 1.83%
International Business Machines Corp.
6.45%, Notes, 8/01/07 3,600,000 3,615,336
------------
TOTAL DOMESTIC CORPORATE BONDS
(cost $30,941,738) 32,213,266
------------
U.S. GOVERNMENT AND AGENCIES -- 22.21%
Fannie Mae, 7.00%, due 7/17/07 1,600,000 1,627,664
Fannie Mae, 7.33%, due 6/19/07 3,600,000 3,697,128
GNMA, 6.50%, due 2/15/26 21,313,634 21,087,282
U.S. Treasury Notes, 6.50%, due 5/31/01 4,500,000 4,610,745
U.S. Treasury Notes, 6.50%, due 10/15/06 12,250,000 12,752,985
------------
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $43,145,897) 43,775,804
------------
TOTAL INVESTMENT SECURITIES -- 97.57%
(cost $159,993,611) 192,341,642
</TABLE>
17
<PAGE>
NORTHSTAR INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Principal Amount Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 1.57%
Agreement with State Street Bank and Trust bearing interest
at 5.50% dated 10/31/97, to be repurchased 11/03/97 in the
amount of $3,101,421 and collateralized by $2,400,000 U.S.
Treasury Bonds, 8.875% due 2/15/19, value $3,168,317
(cost $3,100,000) $ 3,100,000 $ 3,100,000
Other assets less liabilities -- 0.86% 1,685,852
------------
NET ASSETS -- 100.00% $197,127,494
------------
------------
</TABLE>
# Sale restricted to qualified institutional investors.
See accompanying notes to financial statements.
18
<PAGE>
NORTHSTAR
HIGH TOTAL RETURN FUND
(PICTURE OF THOMAS OLE DIAL)
THOMAS OLE DIAL
(LOGO)
THE MARKETS
(Bullet) U.S. economic growth accelerated from an annual rate of 3% to
nearly 4% in the 12 months ended October 31, 1997. Despite that
unexpectedly high growth, consumer prices rose only 2.1% in the
same period, the smallest increase in 5 years; so interest rates
fell too. In those 12 months, yields of 10-year and 30-year
Treasury bonds traded in a 115 basis points (bps) range. By October
31, 1997, those yields were down approximately 50 bps to 5.8% and
6.2%, respectively. Lower interest rates and strong economic growth
combined to propel both stock and bond prices higher. In
particular, record-high small cap stock prices helped increase the
credit quality and prices of high yield bonds.
(Bullet) High yield bond returns in the 12 months ended October 31, 1997
were 13.7%, compared to 8.9% for all domestic bonds, primarily due
to strong demand for high coupons, rising underlying stock
valuations and declining credit concerns. Among high yield bonds,
the lower-rated bonds outperformed the higher-rated bonds.
(Bullet) Despite recent economic and financial weakness in some foreign
countries, total returns on bonds from smaller foreign markets
still rose 12.5% in the 12 months ended October 31, 1997. Those
returns were based mainly on overall better political and economic
fundamentals in many foreign countries and a continuing worldwide
hunt for yield by investors.
(Bullet) Current forecasts of slower global economic growth caused many
investors around the world to review their investments. That
interrupted the rise in prices of stocks and corporate bonds here
and abroad.
THE FUND
(Bullet) The Fund was closed to new investors on April 30, 1997. We did this
to protect the value of the Fund's equity kickers to shareholders
from being reduced by large sales of more shares. For the year
ended October 31, 1997, the total return of the Fund's Class A, B,
and C shares were 15.0%, 14.5%, and 14.4% respectively; the Lipper
average for high yield funds was 14.5%. The portfolio's strong
performance and continuing purchases by existing shareholders led
to a 57% increase in its net assets, which rose from $567MM to $890
MM during that period.
(Bullet) The Fund's performance in the 12 months ended October 31, 1997
improved due primarily to rising stock prices, which added great
value to our equity kickers and boosted the prices of our
lower-rated bonds. Broadcasting, cable, telecommunications, and
energy bonds did very well. Furthermore, timely action by the
Fund's manager protected the Fund from foreign turmoil, which hurt
other asset classes much more than it affected domestic high yield
bonds.
(Bullet) Several of the stocks or equity rights attached to bonds ("equity
kickers") held by the Fund strongly contributed to its high returns
in the 12 months ended October 31, 1997 ( e.g., ACSI, Capstar,
Chancellor Media, EchoStar, Packaged Ice and Source Media).
CURRENT STRATEGY
(Bullet) Continue above-average exposure in non-cyclical industries and in
bonds that have equity kickers.
(Bullet) Prudently deploy existing cash in anticipation of higher high yield
bond prices. Focus on investments in undervalued bonds that have
high yields and above-average potential for capital appreciation.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/97) TOTAL NET ASSETS $890,168,350
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
EchoStar Satellite
1 Broadcasting Corp. 2.3%
Electronic Retailing Systems
2 International, Inc. 2.0
3 Ainsworth Lumber Ltd., 1.8
4 Jordan Telecommunications 1.8
5 WinStar Communications, Inc. 1.8
6 Anacomp, Inc. 1.7
7 Chancellor Media Corp. 1.7
8 Ionica PLC 1.7
9 Panda Global Energy Co. 1.7
Pindo Deli Finance Mauritius
10 Ltd. 1.7
------
18.2%
======
</TABLE>
<TABLE>
<S> <C>
TOP 5 SECTORS
(by percentage of net assets)
---------------
Telecommunications 23.5%
------
Cable Television 8.4%
------
Broadcasting & Media 7.3%
-----
Paper 6.1%
-----
Services 6.1%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- ---------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- ---------------------------------------------
Class A 9.16% n/a 9.54%
- ---------------------------------------------
Class B 8.28% n/a 9.47%
- ---------------------------------------------
Class C 9.61% n/a 13.43%
- ---------------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
<S> <C> <C> <C>
- ---------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- ---------------------------------------------
Class A 48.80% n/a 15.03%
- ---------------------------------------------
Class B 36.48% n/a 14.46%
- ---------------------------------------------
Class C 39.39% n/a 14.42%
- ---------------------------------------------
</TABLE>
19
<PAGE>
NORTHSTAR
HIGH TOTAL RETURN FUND
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,
1997, with all distributions reinvested in shares. The average annualized total
return for Class A shares of 9.16% 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 8.28% and 9.61% 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.
(Plot points appear below for Northstar Income and Growth Fund-Class A,
Northstar Income and Growth Fund-Class B and Northstar Income and
Growth Fund-Class C.)
[zz]
NORTHSTAR HIGH TOTAL RETURN FUND-CLASS A
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 9.54%
SINCE INCEPTION 9.16%
LEHMAN BROTHERS LEHMAN BROTHERS
CLASS A GOV'T/CORP. BOND HIGH YIELD
11/08/93 9.605 10.03 10.048
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
NORTHSTAR HIGH RETURN FUND-CLASS B
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 9.47%
SINCE INCEPTION 8.28%
LEHMAN BROTHERS LEHMAN BROTHERS
CLASS B GOV'T/CORP. BOND HIGH YIELD
2/09/94 10 10 10
10/31/94 9.076 9.596 9.74
10/31/95 10.163 11.146 11.269
10/31/96 11.923 11.747 12.518
10/31/97 13.648 12.782 14.235
NORTHSTAR HIGH TOTAL RETURN FUND-CLASS C
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 13.43%
SINCE INCEPTION 9.61%
LEHMAN BROTHERS LEHMAN BROTHERS
CLASS C GOV'T/CORP. BOND HIGH YIELD
3/21/94 10 10 10
10/31/94 9.237 9.809 9.766
10/31/95 10.386 11.394 11.298
10/31/96 12.181 12.008 12.551
10/31/97 13.939 13.066 14.272
20
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
DOMESTIC BONDS & NOTES -- 55.55%
AEROSPACE & DEFENSE -- 1.11%
Willcox & Gibbs, Inc.
12.25%, Company Guarantee, 12/15/03 $10,096,000 $ 9,843,600
------------
AUTOMOTIVE -- 0.39%
Speedy Muffler King, Inc.
10.875%, Sr. Notes, 10/01/06 5,000,000 3,475,000
------------
BEVERAGES/FOOD/TOBACCO -- 0.89%
Toms Foods, Inc. #
10.50%, Sr. Secured Notes, 11/01/04 7,800,000 7,878,000
------------
BROADCASTING & MEDIA -- 1.91%
Benedek Communications Corp. $
0/13.25%, Sr. Subordinated Discount Notes, 5/15/06 6,000,000 4,230,000
Fox Kids Worldwide, Inc. # $
0/10.25%, Subordinated Discount Notes, 11/01/07 8,000,000 4,580,000
SFX Broadcasting, Inc.
10.75%, Sr. Subordinated Notes, 5/15/06 7,500,000 8,175,000
------------
16,985,000
------------
CABLE TELEVISION -- 4.87%
Australis Media Ltd. $
0/15.75%, Sr. Secured Discount Notes, 5/15/03 17,716 13,553
CAI Wireless Systems, Inc.
12.25%, Sr. Discount Notes, 9/15/02 7,500,000 2,625,000
EchoStar Satellite Broadcasting Corp. $
0/13.125%, Sr. Discount Notes, 3/15/04 24,993,000 20,119,365
Heartland Wireless Communications, Inc.
14.00%, Sr. Notes, 10/15/04 7,000,000 3,325,000
Heartland Wireless Communications, Inc. $
0/13.00%, Sr. Notes, 4/15/03 12,800,000 5,440,000
Source Media, Inc. #
12.00%, Sr. Secured Notes, 11/01/04 7,500,000 7,537,500
Wireless One, Inc.
13.00%, Sr. Notes, 10/15/03 8,500,000 4,292,500
------------
43,352,918
------------
CAPITAL GOODS MANUFACTURING -- 0.87%
Alvey Systems, Inc.
11.375%, Sr. Subordinated Notes, 1/31/03 7,350,000 7,735,875
------------
CONSUMER PRODUCTS -- 2.32%
Packaged Ice, Inc.
12.00%, Sr. Subordinate Notes, 4/15/04 14,350,000 13,847,750
Packaged Ice, Inc. # (1)
12.00%, Units, 4/15/04 6,350 6,762,750
------------
20,610,500
------------
CONTAINERS AND PACKAGING -- 0.89%
Packaging Resources, Inc. #
13.00%, Sr. Notes, 6/30/03 8,290,294 7,958,682
------------
</TABLE>
21
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED FINANCIAL SERVICES -- 2.83%
Central Rents, Inc.
12.875%, Sr. Notes, 12/15/03 $10,550,000 $ 10,761,000
Olympic Financial Ltd. (2)
11.50%, Units, 3/15/07 5,000 5,062,500
Resource America, Inc. #
12.00%, Notes, 8/01/04 8,950,000 9,352,750
------------
25,176,250
------------
ELECTRONICS -- 2.01%
Electronic Retailing Systems International, Inc. $
0/13.25%, Sr. Discount Notes, 2/01/04 25,750,000 17,896,250
------------
ENERGY -- 0.73%
Energy Corp. America
9.50%, Sr. Subordinated Notes, 5/15/07 6,500,000 6,532,500
------------
FOOD & BEVERAGE -- 1.33%
Colorado Prime Corp.
12.50%, Sr. Notes, 5/01/04 7,000,000 7,070,000
Specialty Foods Corp.
11.25%, Sr. Subordinated Notes, 8/15/03 5,000,000 4,787,500
------------
11,857,500
------------
HEALTHCARE -- 1.03%
Intracel Corp.
9.00%, Sr. Notes, 12/31/00 6,986,970 6,043,729
Unilab Corp.
11.00%, Sr. Notes, 4/01/06 3,000,000 3,090,000
------------
9,133,729
------------
HOTEL & GAMING -- 1.21%
Ameristar Casinos, Inc. #
10.50%, Sr. Subordinated Notes, 8/01/04 9,750,000 9,506,250
GB Property Funding Corp.
10.875%, 1st Mortgage Notes, 1/15/04 1,410,000 1,290,150
------------
10,796,400
------------
INSURANCE -- 0.69%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 6,000,000 6,165,000
------------
LEISURE -- 0.08%
Cobblestone Holdings, Inc.
0%, Sr. Notes, 6/01/04 1,500,000 727,500
------------
MANUFACTURING -- 0.82%
Jordan Industries, Inc.
11.75%, Sr. Subordinated Discount Debentures, 4/01/09 12,865,000 7,333,050
------------
METALS & MINING -- 0.80%
Echo Bay Mines Ltd.
11.00%, Jr. Subordinated Notes, 4/01/27 7,500,000 7,087,500
------------
</TABLE>
22
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OIL & GAS -- 4.03%
Dailey Petroleum Services Corp. #
9.75%, Company Guarantee, 8/15/07 $ 7,000,000 $ 7,315,000
Panda Global Energy Co.
12.50%, Sr. Secured Notes, 4/15/04 16,000,000 14,960,000
Transamerican Energy Corp. # $
0/13.00%, Sr. Discount Notes, 6/15/02 16,500,000 13,612,500
------------
35,887,500
------------
SERVICES -- 4.52%
Allied Waste North America, Inc.
10.25%, Sr. Subordinated Notes, 12/01/06 3,000,000 3,270,030
Anacomp, Inc.
10.875%, Sr. Subordinated Notes, 4/01/04 14,250,000 14,748,750
Coinstar, Inc. # $
0/13.00%, Sr. Subordinated Notes, 10/01/06 4,200,000 3,297,000
Core Mark International, Inc.
11.375%, Sr. Subordinated Notes, 9/15/03 2,250,000 2,356,875
ICF Kaiser International, Inc. $
0/13.00%, Sr. Subordinated Notes, 12/31/03 9,154,000 9,474,390
International Logistics Ltd. #
9.75%, Sr. Notes, 10/15/07 5,000,000 4,987,500
Sabreliner Corp.
12.50%, Sr. Notes, 4/15/03 2,000,000 2,110,000
------------
40,244,545
------------
SHIPPING -- 1.07%
Equimar Shipholdings Ltd. #
9.875%, Company Guarantee, 7/01/07 10,000,000 9,550,000
------------
SPECIALTY RETAILING -- 0.63%
Pamida, Inc.
11.75%, Sr. Subordinated Notes, 3/15/03 5,400,000 5,562,000
------------
STEEL -- 1.59%
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes, 11/01/01 13,700,000 14,179,500
------------
SUPERMARKETS -- 1.26%
Food 4 Less Supermarkets, Inc. &
13.625%, Sr. Subordinated Debentures, 6/15/07 9,395,708 11,227,871
------------
TELECOMMUNICATIONS -- 15.35%
Cellnet Data Systems, Inc. # $ (3)
0/14.00%, Units, 10/01/07 14,100 7,120,500
CS Wireless Systems, Inc. $
0/11.375%, Sr. Notes, 3/01/06 12,000,000 3,540,000
Globalstar LP
11.375%, Sr. Notes, 2/15/04 11,395,000 11,281,050
ICG Holdings, Inc. $
0/13.50%, Sr. Discount Notes, 9/15/05 7,000,000 5,591,250
International Wireless Commerce
0%, Sr. Discount Notes, 8/15/01 8,500,000 5,312,500
Iridium Capital Corp.
13.00%, Sr. Notes, 7/15/05 7,500,000 7,725,000
</TABLE>
23
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS -- CONTINUED
Jordan Telecommunication Products #
9.875%, Sr. Notes, 8/01/07 $16,000,000 $ 16,320,000
Knology Holdings, Inc. $ (4)
0/11.875%, Units, 10/15/07 4,000 2,300,000
McCaw International Ltd.
13.00%, Sr. Discount Notes, 4/15/07 9,500,000 5,652,500
Nextlink Communications, Inc.
12.50%, Sr. Notes, 4/15/06 6,000,000 6,795,000
RCN Corp. #
10.00%, Sr. Notes, 10/15/07 1,000,000 990,000
RCN Corp. #
11.125%, Sr. Notes, 10/15/07 12,500,000 7,250,000
SA Telecommunications, Inc.
10.00%, Sr. Debentures, 8/15/06 3,800,000 2,113,750
TCI Satellite Entertainment, Inc. # $
0/12.25%, Sr. Subordinated Discount Notes, 2/15/07 10,900,000 7,030,500
Transtel Pass-Thru Trust SA #
12.50%, Pass-Thru Trust Certificate, 11/01/07 7,500,000 6,937,500
UNIFI Communications, Inc.
14.00%, Sr. Notes, 3/01/04 12,295,000 12,018,362
Verio, Inc. # (5)
13.50%, Units, 6/15/04 6,900 8,314,500
WinStar Communications, Inc. $
0/14.00%, Sr. Discount Notes, 10/15/05 22,000,000 16,170,000
WinStar Equipment II Corp. #
12.50%, Company Guarantee, 3/15/04 4,000,000 4,200,000
------------
136,662,412
------------
TEXTILE/APPAREL -- 1.31%
Anvil Knitwear, Inc.
10.875%, Sr. Notes, 3/15/07 3,575,000 3,664,375
Brazos Sportswear, Inc.
10.50%, Company Guarantee, 7/01/07 8,000,000 8,000,000
------------
11,664,375
------------
TOYS -- 0.53%
Hedstrom Holdings, Inc. # $ (6)
0/12.00%, Units, 6/01/09 7,500 4,725,000
------------
TRANSPORTATION -- 0.48%
Ameritruck Distribution Corp.
12.25%, Sr. Subordinated Notes, 11/15/05 4,000,000 4,240,000
------------
TOTAL DOMESTIC BONDS & NOTES
(cost $505,656,155) 494,488,457
------------
FOREIGN BONDS & NOTES -- 20.06%
BEVERAGES/FOOD/TOBACCO -- 0.84%
Bepensa SA #
9.75%, Sr. Notes, 9/30/04 7,750,000 7,449,688
------------
</TABLE>
24
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
CABLE TELEVISION -- 2.12%
Multicanal Participacoes SA
12.625%, Company Guarantee, 6/18/04 $ 9,250,000 $ 9,296,250
Multicanal Participacoes SA
12.625%, Sr. Notes, 6/18/04 2,000,000 2,010,000
Pratama Datakom Asia BV #
12.75%, Company Guarantee, 7/15/05 8,625,000 7,546,875
------------
18,853,125
------------
CONSUMER PRODUCTS -- 0.05%
International Semi-Tech Corp. $
0/11.50%, Sr. Secured Discount Notes, 8/15/03 900,000 423,000
------------
CONTAINERS AND PACKAGING -- 0.47%
Stone Container Finance Co. of Canada #
11.50%, Sr. Notes, 8/15/06 4,000,000 4,230,000
------------
ENTERTAINMENT -- 0.32%
TV Filme, Inc.
12.875%, Sr. Notes, 12/15/07 3,000,000 2,835,000
------------
HEALTHCARE -- 1.36%
Train (London) Ltd. &
13.00%, Debentures, 7/01/08 7,000,000 12,155,306
------------
PAPER -- 6.00%
Ainsworth Lumber Ltd. # &
12.50%, Sr. Secured Notes, 7/15/07 15,500,000 15,655,000
APP Finance II Mauritius Ltd. $
0/12.00%, Notes, 2/15/04 5,900,000 5,487,000
APP International Finance Co.
11.75%, Secured Notes, 10/01/05 8,055,000 8,216,100
Grupo Industrial Durango SA
12.00%, Notes, 7/15/01 6,250,000 6,531,250
Indah Kiat International Finance Corp.
12.50%, Company Guarantee, 6/15/06 2,500,000 2,606,250
Pindo Deli Finance Mauritius Ltd. #
10.75%, Sr. Notes, 10/01/07 15,950,000 14,913,250
------------
53,408,850
------------
SERVICES -- 1.54%
Localiza Rent A Car SA #
10.25%, Notes, 10/01/05 8,200,000 7,831,000
Statia Terms International
11.75%, 1st Mortgage Notes, 11/15/03 5,500,000 5,885,000
------------
13,716,000
------------
</TABLE>
25
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Units/Principal Amount Value
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 5.15%
Colt Telecom Group PLC $ (7)
0/12.00%, Units, 12/15/06 3,200 $ 2,400,000
Ionica PLC $
0/15.00%, Sr. Discount Notes, 5/01/07 $27,000,000 15,052,500
Microcell Telecommunications # $
0/11.125%, Sr. Discount Notes, 10/15/07 8,350,000 3,288,218
Netia Holdings B. V. #
10.25%, Sr. Notes, 11/01/07 2,000,000 1,890,000
Netia Holdings B. V. # $
0/11.25%, Sr. Notes, 11/01/07 3,750,000 2,193,750
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes, 3/15/04 18,011,000 13,778,415
Paging Network Do Brasil SA # (8)
13.50%, Units, 6/06/05 1,000 935,000
Petersburg Long Distance, Inc. # $ (9)
0/14.00%, Units, 6/01/04 7,000 6,335,000
------------
45,872,883
------------
TRANSPORTATION -- 0.60%
Sea Containers Ltd.
10.50%, Sr. Notes, 7/01/03 5,000,000 5,337,500
------------
UTILITIES -- 1.61%
CE Casecnan Water & Energy Co.
11.95%, Sr. Secured Notes, 11/15/10 8,800,000 9,152,000
Invergas SA
12.50%, Sr. Notes, 12/16/99 4,925,000 5,183,562
------------
14,335,562
------------
TOTAL FOREIGN BONDS & NOTES
(cost $176,464,539) 178,616,914
------------
CONVERTIBLE BONDS -- 2.37%
AEROSPACE & DEFENSE -- 1.09%
Simula, Inc.
8.00%, Sr. Subordinated Notes, 5/01/04 4,496,000 4,945,600
Simula, Inc.
10.00%, Sr. Subordinated Notes, 9/15/99 4,250,000 4,781,207
------------
9,726,807
------------
TELECOMMUNICATIONS -- 1.28%
GST Telecommunciations, Inc. # $
0/13.875%, Sr. Discount Notes, 12/15/05 650,000 685,750
SA Telecommunications, Inc.
10.00%, Debentures, 8/15/06 5,000,000 2,768,750
SA Telecommunications, Inc. #
10.00%, Notes, 8/15/06 8,500,000 4,728,125
WinStar Communications, Inc. # $
0/12.50%, Sr. Discount Notes, 10/15/05 3,500,000 3,167,500
------------
11,350,125
------------
TOTAL CONVERTIBLE BONDS
(cost $23,553,647) 21,076,932
------------
</TABLE>
26
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 0.33% @
BROADCASTING & MEDIA -- 0.02%
Pegasus Communications Corp. 9,928 $ 208,488
------------
CABLE TELEVISION -- 0.08%
EchoStar Communications Corp. 40,050 760,950
------------
DIVERSIFIED FINANCIAL SERVICES -- 0.05%
Central Rents, Inc. # 7,150 432,575
------------
PRINTING & PUBLISHING -- 0.03%
Affiliated Newspapers Investments, Inc. 2,500 251,250
------------
SERVICES -- 0.07%
Coinstar, Inc. 60,900 612,806
------------
TELECOMMUNICATIONS -- 0.08%
CS Wireless Systems, Inc. # 3,300 4
Nextel Communications, Inc. (10) 27,112 711,690
------------
711,694
------------
TOTAL COMMON STOCKS
(cost $830,670) 2,977,763
------------
CONVERTIBLE PREFERRED STOCK -- 0.39%
HEALTHCARE -- 0.39%
Intracel Corp., 8.00% 225,868 3,500,954
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $1,871,774) 3,500,954
------------
PREFERRED STOCKS -- 11.30%
BROADCASTING & MEDIA -- 5.15%
Capstar Broadcasting Partners, 12.00% 114,390 12,611,498
Chancellor Media Corp., 12.00% & 127,058 14,897,550
Paxson Communications Corp., 12.50% & 122,570 13,176,275
SFX Broadcasting, Inc., 12.625% & 44,000 5,126,000
------------
45,811,323
------------
CABLE TELEVISION -- 0.31%
EchoStar Communications Corp., 12.125% # & 27,000 2,794,500
------------
CAPITAL GOODS MANUFACTURING -- 0.04%
Telos Corp. of Maryland, 12.00% 129,687 356,639
------------
CONSUMER PRODUCTS -- 1.30%
Commemorative Brands, Inc., 12.00% 100,000 11,525,000
------------
FOOD & BEVERAGE -- 1.28%
North Atlantic Trading, Inc., 12.00% # & 410,934 11,403,430
------------
HEALTHCARE -- 0.48%
Intracel Corp., 10.00% 42,624 4,283,712
------------
SUPERMARKETS -- 0.98%
Supermarkets General Holdings Corp., $3.52 & 340,000 8,755,000
------------
TELECOMMUNICATIONS -- 1.24%
IXC Communications, Inc., 12.50% # & 72,500 8,663,750
Jordan Telecommunication Products, 13.25% # & 21,000 2,352,000
------------
11,015,750
------------
</TABLE>
27
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TEXTILE/APPAREL -- 0.52%
Anvil Holdings, Inc., 13.00% & 190,000 $ 4,607,500
------------
TOTAL PREFERRED STOCKS
(cost $90,199,907) 100,552,854
------------
WARRANTS -- 2.16% @
AIRLINES -- 0.00%
CHC Helicopter Corp., (expires 12/15/00) 2,000 7,000
------------
BROADCASTING & MEDIA -- 0.21%
Benedek Communications Corp., (expires 7/01/07) 44,000 93,500
Spanish Broadcasting Systems, Inc., (expires 6/30/99) 5,000 1,750,000
------------
1,843,500
------------
CABLE TELEVISION -- 0.98%
American Telecasting, Inc., (expires 8/10/00) 4,000 0
Heartland Wireless Communications, Inc.,
(expires 4/15/00) 46,402 464
Source Media, Inc., (expires 3/31/04) 1,250,000 8,750,000
------------
8,750,464
------------
CAPITAL GOODS MANUFACTURING -- 0.00%
Roller Bearing Company America, Inc., (expires
6/15/09) 1,262 126
------------
CONSUMER PRODUCTS -- 0.17%
Chattem, Inc., (expires 6/17/99) 1,300 63,271
Commemorative Brands, Inc., (expires 12/16/97) 19,820 198
Packaged Ice, Inc., (expires 4/15/04) # 14,350 1,435,000
------------
1,498,469
------------
ELECTRONICS -- 0.15%
Electronic Retailing Systems International, (expires
2/01/04) # 25,750 1,287,500
------------
FOOD & BEVERAGE -- 0.00%
Colorado Prime Holdings, Inc., (expires 12/31/03) 7,000 0
North Atlantic Trading, Inc., (expires 6/15/07) # 400 4
------------
4
------------
HEALTHCARE -- 0.07%
Intracel Corp., (expires 12/28/00) 173,547 629,108
------------
PAPER -- 0.05%
SD Warren Holdings Corp., (expires 12/15/06) 80,000 420,000
------------
SERVICES -- 0.00%
ICF Kaiser International, Inc., (expires 12/31/98) 54,019 13,505
ICF Kaiser International, Inc., (expires 12/31/99) 24,500 245
Sabreliner Corp., (expires 4/15/03) 2,450 24,500
------------
38,250
------------
STEEL -- 0.05%
Bar Technologies, Inc., (expires 4/01/01) 7,000 420,000
Gulf States Steel, Inc., (expires 4/15/03) 5,010 22,545
Sheffield Steel Corp., (expires 11/01/01) 12,500 37,500
------------
480,045
------------
</TABLE>
28
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUPERMARKETS -- 0.00%
Dairy Mart Convenience Stores, Inc., (expires
12/01/01) 23,632 $ 29,540
------------
TELECOMMUNICATIONS -- 0.48%
American Communications Services, Inc., (expires
11/01/05) 14,500 1,232,500
Applied Voice Technology, Inc., (expires 1/03/02) 31,958 324,054
Cellular Communications International, Inc., (expires
8/15/03) 6,250 125,000
Clearnet Communications, Inc., (expires 9/15/05) 38,280 344,520
Geotek Communications, Inc., (expires 6/20/00) 177,000 265,500
Globalstar Telecommunications Ltd., (expires 2/15/04)
# 4,495 448,376
Hyperion Telecommunications, Inc., (expires 4/15/01) 10,200 765,000
Intelcom Group, Inc. B C, (expires 9/15/05) 6,600 95,700
International Wireless Communications Holdings, Inc.,
(expires 8/15/01) 8,500 85
Ionica PLC, (expires 6/16/98) @@ 27,000 0
Iridium World Communications, Inc., (expires 7/25/05)
# 4,475 604,125
McCaw International Ltd., (expires 4/15/07) 9,500 26,125
Nextlink Communications, Inc., (expires 2/01/09) # 140,000 1,400
Occidente Y Caribe Celular SA, (expires 3/15/04) # @@ 72,044 721
UNIFI Communications, Inc., (expires 2003) # 12,295 0
Wireless One, Inc., (expires 10/19/00) 1,500 0
------------
4,233,106
------------
TOTAL WARRANTS
(cost $3,434,752) 19,217,112
------------
TOTAL INVESTMENT SECURITIES -- 92.16%
(cost $802,011,444) 820,430,986
------------
REPURCHASE AGREEMENT -- 4.76%
Agreement with State Street Bank and Trust bearing
interest at 5.50% dated 10/31/97, to be repurchased
11/03/97 in the amount of $42,362,407 and
collateralized by $32,720,000 U.S. Treasury Bonds,
8.875% due 2/15/19, value $43,194,719
(cost $42,343,000) $42,343,000 42,343,000
Other assets less liabilities -- 3.08% 27,394,364
------------
NET ASSETS -- 100.00% $890,168,350
------------
------------
</TABLE>
# Sale restricted to qualified institutional investors.
$ Step bond.
& Payment-in-kind security.
@ Non-income producing.
@@ Foreign security.
1) A unit consists of $1,000 par value Sr. Notes, 12.00% due 4/15/04, and 1
warrant.
2) A unit consists of $1,000 par value Sr. Notes, 11.50% due 3/15/07, and 1
warrant.
3) A unit consists of $1,000 par value Sr. Discount Notes, 14.00% due
10/01/07, and 1 warrant.
4) A unit consists of $1,000 par value Sr. Discount Notes, 11.875% due
10/15/07, and 1 warrant.
5) A unit consists of $1,000 par value Sr. Notes, 13.50% due 6/15/04, and 1
warrant.
6) A unit consists of $1,000 par value Sr. Discount Notes, 12.00% due 6/01/09,
and 1 warrant.
7) A unit consists of $1,000 par value Sr. Discount Notes, 12.00% due
12/15/06, and 1 warrant.
8) A unit consists of $1,000 par value Sr. Discount Notes, 13.50% due 6/06/05,
and 1 warrant.
9) A unit consists of $1,000 par value Sr. Discount Notes, 14.00% due 6/01/04,
and 1 warrant.
10) Restricted security until January 1, 1998.
See accompanying notes to financial statements.
29
<PAGE>
NORTHSTAR
HIGH TOTAL RETURN FUND II
(PICTURE OF THOMAS OLE DIAL)
THOMAS OLE DIAL
THE MARKETS
(Bullet) U.S. economic growth accelerated from an annual rate of 3% to
nearly 4% in the 12 months ended October 31, 1997. Despite that
unexpectedly high growth, consumer prices rose only 2.1% in the
same period, the smallest increase in 5 years; so interest rates
fell too. In those 12 months, yields of 10-year and 30-year
Treasury bonds traded in a 115 basis points (bps) range. By October
31, 1997, those yields were down approximately 50 bps to 5.8% and
6.2%, respectively. Lower interest rates and strong economic growth
combined to propel both stock and bond prices higher. In
particular, record-high small cap stock prices helped increase the
credit quality and prices of high yield bonds.
(Bullet) High yield bond returns in the 12 months ended October 31, 1997
were 13.7%, compared to 8.9% for all domestic bonds, primarily due
to strong demand for high coupons, rising underlying stock
valuations and declining credit concerns. Among high yield bonds,
the lower-rated bonds outperformed the higher-rated bonds.
(Bullet) Despite recent economic and financial weakness in some foreign
countries, total returns on bonds from smaller foreign markets
still rose 12.5% in the 12 months ended October 31, 1997. Those
returns were based mainly on overall better political and economic
fundamentals in many foreign countries and a continuing worldwide
hunt for yield by investors.
(Bullet) Current forecasts of slower global economic growth caused many
investors around the world to review their investments. That
interrupted the rise in prices of stocks and corporate bonds here
and abroad.
THE FUND
(Bullet) The Fund began operations on January 31, 1997. From January 31,
1977 through October 31, 1997, the total return of the Fund's Class
A, B, C shares were 16.5%,15.9%, and 16.1% respectively; the Lipper
average for high yield funds was 10.0%. Aggressive marketing and
investing caused the portfolio's net assets to increase from zero
to $59.0 million in those nine months.
(Bullet) The Fund's performance since inception has been outstanding despite
the receipt of very large amounts of cash to invest. The fund has
been increasingly able to buy larger pieces of attractive bond
issues. This has enabled the Fund to benefit from the strong rise
in prices for both old and new high yield bonds in 1997.
(Bullet) Stocks or equity rights attached to bonds ("equity kickers") held
by the Fund made very significant contributions to the Fund's
performance (e.g.; EchoStar, Hyperion, IXC, and Packaged Ice).
CURRENT STRATEGY
(Bullet) Continue above-average exposure in non-cyclical industries and in
bonds that have equity kickers.
(Bullet) Continue to reduce cash holdings by using a patient, prudent and
disciplined approach to build investment positions as cash flows
in. Focus on investments in undervalued bonds that have high yields
and above-average potential for capital appreciation.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 10/31/97) TOTAL NET ASSETS $58,957,975
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
NAME % FUND
<C> <S> <C>
1 Ainsworth Lumber Ltd. 2.6%
2 Pindo Deli Finance Mauritius Ltd. 2.4
3 Transtel Pass-Thru Trust SA 2.4
4 TCI Satellite Entertainment, Inc. 2.2
5 Fox Kids Worldwide, Inc. 1.9
6 Dailey Petroleum Services Corp 1.8
7 EchoStar Communications Corp. 1.8
8 Hyperion Telecommunications, Inc. 1.8
9 Package Ice, Inc. 1.8
Stone Container Finance Co. of
10 Canada 1.8
------
20.5%
======
</TABLE>
<TABLE>
<S> <C>
TOP 5 SECTORS
(by percentage of net assets)
----------------
Telecommunications 20.9%
--------
Services 7.5%
------
Cable Television 5.3%
------
Paper 5.0%
-----
Oil & Gas 3.1%
</TABLE>
<TABLE>
<CAPTION>
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
<S> <C> <C> <C>
- --------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- --------------------------------------------
Class A 15.79% n/a n/a
- --------------------------------------------
Class B 14.81% n/a n/a
- --------------------------------------------
Class C 20.36% n/a n/a
- --------------------------------------------
<CAPTION>
CUMULATIVE TOTAL RETURN
(do not reflect sales charge)
<S> <C> <C> <C>
- --------------------------------------------
<CAPTION>
Inception 5 years 1 year
<S> <C> <C> <C>
- --------------------------------------------
Class A 16.53% n/a n/a
- --------------------------------------------
Class B 15.91% n/a n/a
- --------------------------------------------
Class C 16.12% n/a n/a
- --------------------------------------------
</TABLE>
30
<PAGE>
NORTHSTAR
HIGH TOTAL RETURN FUND II
(LOGO)
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,
1997, with all distributions reinvested in shares. The average annualized total
return for Class A shares of 15.79% 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 14.81% and 20.36% since inception for Class B and
Class C shares of January 31, 1997 and 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.
(Plot points appear below for Northstar High Return Fund II-Class A,
Northstar High Return Fund II-Class B and Northstar High Return
Fund II-Class C.)
NORTHSTAR HIGH TOTAL RETURN FUND II-CLASS A
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION 15.79%
LEHMAN BROTHERS LEHMAN BROTHERS
CLASS A GOV'T/CORP. BOND HIGH YIELD
1/31/97 9.524 10.012 10.098
4/30/97 9.473 10.058 10.218
10/31/97 11.078 10.804 11.072
NORTHSTAR HIGH TOTAL RETURN FUND II-CLASS B
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION 14.81%
LEHMAN BROTHERS LEHMAN BROTHERS
CLASS B GOV'T/CORP. BOND HIGH YIELD
1/31/97 10 10.012 10.098
4/30/97 9.929 10.058 10.218
10/31/97 11.591 10.804 11.072
NORTHSTAR HIGH TOTAL RETURN FUND II-CLASS C
(IN THOUSANDS)
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION 20.36%
LEHMAN BROTHERS LEHMAN BROTHERS
CLASS C GOV'T/CORP. BOND HIGH YIELD
1/31/97 10 10.012 10.098
4/30/97 9.929 10.058 10.218
10/31/97 11.591 10.804 11.072
31
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
DOMESTIC BONDS & NOTES -- 44.77%
AEROSPACE & DEFENSE -- 0.01%
Willcox & Gibbs, Inc.
12.25%, Company Guarantee, 12/15/03 $ 4,000 $ 3,900
-----------
AUTOMOTIVE -- 0.88%
Speedy Muffler King, Inc.
10.875%, Sr. Notes, 10/01/06 750,000 521,250
-----------
BEVERAGES/FOOD/TOBACCO -- 2.31%
Standard Commercial Corp. #
8.875%, Company Guarantee, 8/01/05 350,000 351,750
Toms Foods, Inc. #
10.50%, Sr. Secured Notes, 11/01/04 1,000,000 1,010,000
-----------
1,361,750
-----------
BROADCASTING & MEDIA -- 1.94%
Fox Kids Worldwide, Inc. # $
0/10.25%, Subordinated Discount Notes, 11/01/07 2,000,000 1,145,000
-----------
CABLE TELEVISION -- 3.51%
EchoStar Satellite Broadcasting Corp. $
0/13.125%, Sr. Discount Notes, 3/15/04 1,007,000 810,635
Heartland Wireless Communications, Inc.
14.00%, Sr. Notes, 10/15/04 4,000 1,900
Source Media, Inc. #
12.00%, Sr. Secured Notes, 11/01/04 1,000,000 1,005,000
Wireless One, Inc.
13.00%, Sr. Notes, 10/15/03 500,000 252,500
-----------
2,070,035
-----------
CHEMICALS -- 0.53%
Hydrochem Industrial Services, Inc. #
10.375%, Sr. Subordinated Notes, 8/01/07 300,000 311,250
-----------
CONSUMER PRODUCTS -- 1.81%
Packaged Ice, Inc.
12.00%, Sr. Subordinate Notes, 4/15/04 5,000 4,825
Packaged Ice, Inc. # (1)
12.00%, Units, 4/15/04 1,000 1,065,000
-----------
1,069,825
-----------
DIVERSIFIED FINANCIAL SERVICES -- 0.09%
Resource America, Inc. #
12.00%, Sr. Notes, 8/01/04 50,000 52,250
-----------
ELECTRONICS -- 1.18%
Electronic Retailing Systems International, Inc. $
0/13.25%, Sr. Discount Notes, 2/01/04 1,000,000 695,000
-----------
ENERGY -- 0.85%
Energy Corp. America
9.50%, Sr. Subordinated Notes, 5/15/07 500,000 502,500
-----------
</TABLE>
32
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
ENTERTAINMENT -- 0.86%
Speedway Motorsports, Inc.
8.50%, Sr. Subordinated Notes, 8/15/07 $ 500,000 $ 507,500
-----------
HEALTHCARE -- 1.78%
Kinetic Concepts, Inc. #
9.625%, Sr. Subordinated Notes, 11/01/07 1,000,000 1,000,000
Vencor, Inc. #
8.625%, Sr. Subordinated Notes, 7/15/07 50,000 48,750
-----------
1,048,750
-----------
HOTEL & GAMING -- 1.24%
Ameristar Casinos, Inc. #
10.50%, Sr. Subordinated Notes, 8/01/04 750,000 731,250
-----------
LEISURE -- 1.03%
Cobblestone Holdings, Inc.
0%, Sr. Notes, 6/01/04 1,250,000 606,250
-----------
METALS & MINING -- 0.80%
Echo Bay Mines Ltd.
11.00%, Jr. Subordinated Notes, 4/01/27 500,000 472,500
-----------
OIL & GAS -- 3.09%
Dailey Petroleum Services Corp. #
9.75%, Company Guarantee, 8/15/07 1,000,000 1,045,000
Transamerican Energy Corp. #
11.50%, Sr. Notes, 6/15/02 750,000 768,750
Transamerican Energy Corp. # $
0/13.00%, Sr. Discount Notes, 6/15/02 6,000 4,950
-----------
1,818,700
-----------
PRINTING & PUBLISHING -- 0.84%
Garden State Newspapers, Inc. #
8.75%, Sr. Subordinated Notes, 10/01/09 500,000 497,500
-----------
SERVICES -- 3.42%
International Logistics Ltd. #
9.75%, Sr. Notes, 10/15/07 1,000,000 997,500
Iron Mountain, Inc. #
8.75%, Sr. Subordinated Notes, 9/30/09 1,000,000 1,015,000
Sabreliner Corp.
12.50%, Sr. Notes, 4/15/03 4,000 4,220
-----------
2,016,720
-----------
SPECIALTY RETAILING -- 1.75%
Pamida, Inc.
11.75%, Sr. Subordinated Notes, 3/15/03 1,000,000 1,030,000
-----------
STEEL -- 0.01%
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes, 11/01/01 4,000 4,140
-----------
</TABLE>
33
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Units/Principal Amount Value
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 16.32%
Cellnet Data Systems, Inc. # $ (2)
0/14.00%, Units, 10/01/07 750 $ 378,750
Globalstar LP
11.375%, Sr. Notes, 2/15/04 $ 5,000 4,950
Hyperion Telecommunications, Inc.
12.25%, 9/01/04 1,000,000 1,070,000
International Wireless Commerce
0%, Sr. Discount Notes, 8/15/01 1,500,000 937,500
Iridium Capital Corp.
13.00%, Sr. Notes, 7/15/05 1,000,000 1,030,000
ITC Deltacom, Inc. #
11.00%, Sr. Notes, 6/01/07 5,000 5,325
Knology Holdings, Inc. $ (3)
0/11.875%, Units, 10/15/07 1,000 575,000
RCN Corp. #
10.00%, Sr. Notes, 10/15/07 1,000,000 990,000
TCI Satellite Entertainment, Inc. # $
0/12.25%, Sr. Subordinated Discount Notes, 2/15/07 2,000,000 1,290,000
Transtel Pass-Thru Trust SA #
12.50%, Pass-Thru Trust Certificate, 11/01/07 1,500,000 1,387,500
UNIFI Communications, Inc.
14.00%, Sr. Notes, 3/01/04 505,000 493,638
WinStar Equipment II Corp. #
12.50%, Company Guarantee, 3/15/04 500,000 525,000
-----------
8,687,663
-----------
TEXTILE/APPAREL -- 0.52%
Anvil Knitwear, Inc.
10.875%, Sr. Notes, 3/15/07 300,000 307,500
-----------
TOTAL DOMESTIC BONDS & NOTES
(cost $25,419,486) 25,461,233
-----------
FOREIGN BONDS & NOTES -- 15.04%
CONTAINERS AND PACKAGING -- 1.80%
Stone Container Finance Co. of Canada #
11.50%, Sr. Notes, 8/15/06 1,000,000 1,057,500
-----------
METALS & MINING -- 1.74%
Murrin Murrin Holdings Property Ltd. #
9.375%, Sr. Notes, 8/31/07 1,000,000 1,027,500
-----------
PAPER -- 4.95%
Ainsworth Lumber Ltd. # &
12.50%, Sr. Secured Notes, 7/15/07 1,500,000 1,515,000
Pindo Deli Finance Mauritius Ltd. #
10.75%, Sr. Notes, 10/01/07 1,500,000 1,402,500
-----------
2,917,500
-----------
</TABLE>
34
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Security Principal Amount/Units/Shares Value
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
SERVICES -- 4.09%
Autopistas Del Sol SA #
10.25%, Sr. Notes, 8/01/09 $ 200,000 $ 183,000
Guangzhou-Shen Superhighway Holdings Ltd. #
10.25%, Sr. Notes, 8/15/07 500,000 472,500
Localiza Rent A Car SA #
10.25%, Notes, 10/01/05 1,000,000 955,000
Statia Terms International
11.75%, 1st Mortgage Notes, 11/15/03 750,000 802,500
-----------
2,413,000
-----------
SHIPPING -- 0.56%
Navigator Gas Transport # (4)
12.00%, Units, 6/30/07 300 331,500
-----------
TELECOMMUNICATIONS -- 1.90%
Ionica PLC $
0/15.00%, Sr. Discount Notes, 5/01/07 1,010,000 563,075
Microcell Telecommunications # $
0/11.125%, Sr. Discount Notes, 10/15/07 1,400,000 551,318
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes, 3/15/04 7,000 5,355
Paging Network Do Brasil SA # (5)
13.50%, Units, 6/06/05 1,000 935,000
-----------
2,054,748
-----------
TOTAL FOREIGN BONDS & NOTES
(cost $10,021,448) 9,801,748
-----------
CONVERTIBLE BONDS -- 0.01%
AEROSPACE & DEFENSE -- 0.01%
Simula, Inc.
8.00%, Sr. Subordinated Notes, 5/01/04 4,000 4,400
-----------
TOTAL CONVERTIBLE BONDS
(cost $4,000) 4,400
-----------
PREFERRED STOCKS -- 4.86%
CABLE TELEVISION -- 1.76%
EchoStar Communications Corp., 12.125% # & 10,000 1,035,000
-----------
TELECOMMUNICATIONS -- 2.69%
Hyperion Telecommunications, Inc., 12.875% # & 7,000 689,500
IXC Communications, Inc., 12.50% # & 7,500 896,250
-----------
1,585,750
-----------
TEXTILE/APPAREL -- 0.41%
Anvil Holdings, Inc., 13.00% & 10,000 242,500
-----------
TOTAL PREFERRED STOCKS
(cost $2,695,000) 2,863,250
-----------
WARRANTS -- 0.09% @
CONSUMER PRODUCTS -- 0.00%
Packaged Ice, Inc. (expires 4/15/04) # 5 500
-----------
ELECTRONICS -- 0.08%
Electronic Retailing Systems International,
(expires 2/01/04) # 1,000 50,000
-----------
</TABLE>
35
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 0.01%
Globalstar Telecommunications Ltd., (expires 2/15/04) # 5 $ 499
International Wireless Communications Holdings, Inc.,
(expires 8/15/01) 1,500 15
Ionica PLC, (expires 6/16/98) @@ 1,010 0
Iridium World Communications, Inc., (expires 7/25/05) # 25 3,375
Occidente Y Caribe Celular SA, (expires 3/15/04) # @@ 28 0
UNIFI Communications, Inc., (expires 2003) # 505 0
-----------
3,889
-----------
TOTAL WARRANTS
(cost $10,036) 54,389
-----------
TOTAL INVESTMENT SECURITIES -- 64.77%
(cost $38,149,970) 38,185,020
-----------
REPURCHASE AGREEMENT -- 32.67%
Agreement with State Street Bank and Trust bearing
interest at 5.50% dated 10/31/97, to be repurchased
11/03/97 in the amount of $19,273,830 and
collateralized by $14,890,000 U.S. Treasury Bonds,
8.875% due 2/15/19, value $19,656,765
(cost $19,265,000) $19,265,000 19,265,000
Other assets less liabilities -- 2.56% 1,507,955
-----------
NET ASSETS -- 100.00% $58,957,975
===========
</TABLE>
# Sales restricted to qualified institutional investors.
$ Step bond.
& Payment-in-kind security.
@ Non-income producing.
@@ Foreign security.
1) A unit consists of $1,000 par value Sr. Notes, 12.00% due 4/15/04, and 1
warrant.
2) A unit consists of $1,000 par value Sr. Discount Notes, 14.00% due
10/01/07, and 1 warrant.
3) A unit consists of $1,000 par value Sr. Discount Notes, 11.875% due
10/15/07, and 1 warrant.
4) A unit consists of $1,000 par value Sr. Discount Notes, 12.00% due 6/01/07,
and 1 warrant.
5) A unit consists of $1,000 par value Sr. Discount Notes, 13.50% due 6/06/05,
and 1 warrant.
See accompanying notes to financial statements.
36
<PAGE>
NORTHSTAR TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
Northstar Northstar Northstar Northstar Northstar
Growth + International Income and High Total High Total
Value Fund Value Fund Growth Fund Return Fund Return Fund II
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------
ASSETS:
Investments in securities, at value (cost
$118,047,610, $171,455,433, $159,993,611,
$802,011,444, and $38,149,970, respectively) $128,564,350 $172,723,439 $192,341,642 $820,430,986 $ 38,185,020
Repurchase agreements 9,432,000 0 3,100,000 42,343,000 19,265,000
Cash 795 0 901 1,074,065 1,093,137
Foreign cash, at value (cost $53,198) 0 53,434 0 0 0
Receivable for investments sold 2,419,789 3,660,470 1,131,133 23,562,241 206,633
Receivable for shares of beneficial interest
sold 2,995,162 6,373,511 230,405 1,601,668 2,454,034
Dividends and interest receivable 5,962 323,961 1,036,672 13,596,315 504,287
Prepaid expenses 11,165 49,161 12,384 19,889 1,726
----------------------------------------------------------------------
Total Assets 143,429,223 183,183,976 197,853,137 902,628,164 61,709,837
----------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 4,848,874 0 0 7,245,147 2,533,198
Payable for shares of beneficial interest
reacquired 339,460 626,748 349,583 3,419,778 74,629
Investment advisory fee payable 114,602 157,485 128,728 529,448 32,595
Distribution fee payable 95,702 122,329 138,747 644,390 38,796
Administrative services fee payable 32,610 15,748 33,623 169,466 9,186
Transfer agent fee payable 16,838 23,735 32,541 216,036 6,464
Due to Custodian 0 296,254 0 0 0
Unrealized depreciation on forward foreign
currency contracts 0 5,611 0 0 0
Accrued expenses 64,998 108,691 42,421 235,549 56,994
----------------------------------------------------------------------
Total Liabilities 5,513,084 1,356,601 725,643 12,459,814 2,751,862
----------------------------------------------------------------------
NET ASSETS $137,916,139 $181,827,375 $197,127,494 $890,168,350 $ 58,957,975
======================================================================
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of benefical
interest, $.01 par value outstanding
(unlimited shares authorized) $124,926,603 $178,541,040 $156,153,581 $841,126,060 $ 58,922,925
Undistributed net investment income 0 5,612 327,877 3,207,758 0
Accumulated net realized gain on investments 2,472,796 2,012,039 8,298,005 27,394,066 0
Net unrealized appreciation of investments and
foreign currency 10,516,740 1,268,684 32,348,031 18,440,466 35,050
----------------------------------------------------------------------
Net Assets $137,916,139 $181,827,375 $197,127,494 $890,168,350 $ 58,957,975
======================================================================
CLASS A:
Net Assets $ 34,346,096 $ 60,539,283 $53,804,711 $215,360,728 $ 8,548,251
----------------------------------------------------------------------
Shares outstanding 2,826,901 5,553,363 4,315,672 43,055,435 1,558,449
----------------------------------------------------------------------
Net asset value and redemption value per share
(net assets/shares outstanding) $ 12.15 $ 10.90 $ 12.47 $ 5.00 $ 5.49
======================================================================
Maximum offering price per share (net asset
value plus sales charge of 4.75% of offering
price) $ 12.76 $ 11.44 $ 13.09 $ 5.25 $ 5.76
======================================================================
CLASS B:
Net Assets $ 76,608,288 $ 59,185,271 $73,828,752 $577,350,908 $ 38,075,700
----------------------------------------------------------------------
Shares outstanding 6,342,137 5,447,199 5,936,924 115,525,347 6,933,833
----------------------------------------------------------------------
Net asset value and offering price per share $ 12.08 $ 10.87 $ 12.44 $ 5.00 $ 5.49
======================================================================
CLASS C:
Net Assets $ 26,961,755 $ 62,102,821 $69,494,031 $ 97,456,714 $ 12,334,024
----------------------------------------------------------------------
Shares outstanding 2,232,553 5,719,654 5,595,897 19,418,148 2,244,019
----------------------------------------------------------------------
Net asset value and offering price per share $ 12.08 $ 10.86 $ 12.42 $ 5.02 $ 5.50
======================================================================
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
NORTHSTAR TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
Northstar Northstar Northstar Northstar Northstar
Growth + Value International Income and High Total High Total
Fund (1) Value Fund Growth Fund Return Fund Return Fund II (2)
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of withholding tax of $743,
$135,755, $0, $21,842, and $0,
respectively) $ 260,745 $ 1,358,720 $4,668,906 $ 7,546,850 $ 0
Interest (net of withholding tax of $0, $0,
$0, $0, and $9,480, respectively) 212,502 357,590 4,130,621 81,132,046 656,307
----------------------------------------------------------------------------
Total investment income 473,247 1,716,310 8,799,527 88,678,896 656,307
----------------------------------------------------------------------------
EXPENSES:
Investment advisory and management fees 538,291 789,163 1,513,778 5,442,788 68,888
Distribution fees:
Class A 42,140 97,955 184,527 603,203 4,141
Class B 296,385 148,366 745,510 4,999,257 59,715
Class C 101,432 329,989 657,770 838,891 18,332
Transfer agent fees and expenses:
Class A 14,652 58,292 99,584 354,466 1,839
Class B 35,911 23,905 129,460 897,680 8,191
Class C 13,726 61,101 94,991 159,919 2,648
Registration fees 83,731 61,314 47,575 142,397 52,841
Administrative service fees 74,529 116,315 233,759 989,855 14,025
Custodian and fund accounting expenses 41,901 133,636 117,011 396,768 15,361
Audit expenses 19,720 23,381 27,839 35,192 19,884
Trustee expenses 9,448 11,392 12,616 24,212 6,008
Printing and postage expenses 9,247 15,428 36,044 251,598 2,288
Miscellaneous expenses 5,251 60,224 38,194 82,639 1,048
----------------------------------------------------------------------------
1,286,364 1,930,461 3,938,658 15,218,865 275,209
Less expenses reimbursed by management
company 11,165 173,911 0 0 105,669
----------------------------------------------------------------------------
Total expenses 1,275,199 1,756,550 3,938,658 15,218,865 169,540
----------------------------------------------------------------------------
Net investment income (loss) (801,952) (40,240) 4,860,869 73,460,031 486,767
----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments 3,274,748 3,952,760 8,423,068 27,484,100 342,601
Net realized gain (loss) on foreign currency 0 (706,679) 0 39,530 0
Net change in unrealized appreciation of
investments and foreign currency 10,516,740 669,652 18,154,797 9,355,358 35,050
----------------------------------------------------------------------------
Net realized and unrealized gain on
investments 13,791,488 3,915,733 26,577,865 36,878,988 377,651
----------------------------------------------------------------------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 12,989,536 $ 3,875,493 $31,438,734 $110,339,019 $864,418
============================================================================
</TABLE>
(1) Growth + Value Fund commenced operations on November 18, 1996.
(2) High Total Return Fund II commenced operations on January 31, 1997.
See accompanying notes to financial statements.
38
<PAGE>
NORTHSTAR TRUST
STATEMENT OF CHANGES IN NET ASSETS
(LOGO)
<TABLE>
<CAPTION>
Northstar Northstar
Growth + International Value Northstar
Value Fund (1) Fund Income and Growth Fund
---------------- ---------------------------------- ----------------------------------
For the period For the year For the year For the year For the year
ended ended ended ended ended
October 31, 1997 October 31, 1997 October 31, 1996 October 31, 1997 October 31, 1996
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ (801,952) $ (40,240) $ 294,379 $ 4,860,869 $ 4,848,014
Net realized gain on
investments 3,274,748 3,952,760 1,078,369 8,423,068 23,384,520
Net realized loss on foreign
currency 0 (706,679) 0 0 (63)
Net change in unrealized
appreciation (depreciation)
of investments and foreign
currency 10,516,740 669,652 756,605 18,154,797 (354,693)
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase in net assets
resulting from
operations 12,989,536 3,875,493 2,129,353 31,438,734 27,877,778
FROM DIVIDENDS TO
SHAREHOLDERS:
Net investment income:
Class A 0 (262,842) (31,554) (1,758,881) (2,181,639)
Class B 0 0 0 (1,535,284) (1,332,583)
Class C 0 (74,358) (22,395) (1,387,594) (1,190,706)
Net realized gain from
investments 0 (790,064) 0 (22,088,154) 0
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total distributions 0 (1,127,264) (53,949) (26,769,913) (4,704,928)
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale of
shares 133,578,481 177,693,876 39,494,886 31,477,216 32,261,734
Net asset value of shares
issued to shareholders in
reinvestment of dividends 0 1,087,022 53,949 19,661,408 3,175,945
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
133,578,481 178,780,898 39,548,835 51,138,624 35,437,679
Cost of shares redeemed (8,651,878) (31,008,648) (21,254,944) (75,510,753) (31,818,353)
----------------------------------------------------------------------------------------
Net increase (decrease) in
net assets derived from
capital share transactions 124,926,603 147,772,250 18,293,891 (24,372,129) 3,619,326
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net increase (decrease) in
net assets 137,916,139 150,520,479 20,369,295 (19,703,308) 26,792,176
NET ASSETS:
Beginning of period 0 31,306,896 10,937,601 216,830,802 190,038,626
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
End of period $137,916,139 $181,827,375 $ 31,306,896 $197,127,494 $216,830,802
<CAPTION>
========================================================================================
<S> <C> <C> <C> <C> <C>
Undistributed net investment
income $ 0 $ 5,612 $ 286,879 $ 327,877 $ 143,023
<CAPTION>
========================================================================================
</TABLE>
(1) Growth + Value Fund commenced operations on November 18, 1996.
See accompanying notes to financial statements.
39
<PAGE>
NORTHSTAR TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Northstar
High Total
Northstar Return
High Total Return Fund Fund II (2)
---------------------------------- ----------------
For the year For the year For the period
ended ended ended
October 31, 1997 October 31, 1996 October 31, 1997
<S> <C> <C> <C>
----------------------------------------------------
FROM OPERATIONS:
Net investment income $ 73,460,031 $ 33,820,265 $ 486,767
Net realized gain on investments 27,484,100 6,942,609 342,601
Net realized gain on foreign currency 39,530 0 0
Net change in unrealized appreciation of investments and
foreign currency 9,355,358 12,167,393 35,050
<CAPTION>
----------------------------------------------------
<S> <C> <C> <C>
Increase in net assets resulting from operations 110,339,019 52,930,267 864,418
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (19,197,944) (13,178,032) (127,869)
Class B (44,408,129) (19,778,603) (536,348)
Class C (7,446,587) (2,906,227) (165,151)
Return of capital
Class A 0 0 (17,201)
Class B 0 0 (76,530)
Class C 0 0 (24,768)
<CAPTION>
----------------------------------------------------
<S> <C> <C> <C>
Total distributions (71,052,660) (35,862,862) (947,867)
<CAPTION>
----------------------------------------------------
<S> <C> <C> <C>
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 371,371,162 387,483,470 62,136,277
Net asset value of shares issued to shareholders in
reinvestment of dividends 23,235,292 12,475,223 249,885
<CAPTION>
----------------------------------------------------
<S> <C> <C> <C>
394,606,454 399,958,693 62,386,162
Cost of shares redeemed (112,723,639) (43,950,880) (3,344,738)
<CAPTION>
----------------------------------------------------
<S> <C> <C> <C>
Net increase in net assets derived from capital share
transactions 281,882,815 356,007,813 59,041,424
<CAPTION>
----------------------------------------------------
<S> <C> <C> <C>
Net increase in net assets 321,169,174 373,075,218 58,957,975
NET ASSETS:
Beginning of period 568,999,176 195,923,958 0
<CAPTION>
----------------------------------------------------
<S> <C> <C> <C>
End of period $890,168,350 $568,999,176 $ 58,957,975
<CAPTION>
====================================================
<S> <C> <C> <C>
Undistributed net investment income $ 3,207,758 $ 0 $ 0
<CAPTION>
====================================================
</TABLE>
(2) High Total Return Fund II commenced operations on January 31, 1997.
See accompanying notes to financial statements.
40
<PAGE>
NORTHSTAR TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST
OUTSTANDING THROUGHOUT EACH PERIOD
(LOGO)
<TABLE>
<CAPTION>
Net realized Dividends
Net Asset & unrealized declared Distributions
Value, Net gain (loss) Total from from net declared from Distributions
beginning investment on investment investment net realized declared from
Period ended of period income (loss) investment operations income gain capital
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Growth + Value Fund, Class A
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/18/96-
10/31/97 $ 10.00 ($ 0.05) $ 2.20 $ 2.15 $ 0.00 $ -- $ --
<CAPTION>
Growth + Value Fund, Class B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/18/96-
10/31/97 10.00 (0.08) 2.16 2.08 0.00 -- --
<CAPTION>
Growth + Value Fund, Class C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/18/96-
10/31/97 10.00 (0.08) 2.16 2.08 0.00 -- --
<CAPTION>
International Value Fund, Class A
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/06/95-
10/31/95 7.64 0.09 0.37 0.46 0.00 -- --
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)
<CAPTION>
International Value Fund, Class B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
4/17/97-
10/31/97 10.00 (0.02) 0.89 0.87 0.00 -- --
<CAPTION>
International Value Fund, Class C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/06/95-
10/31/95 7.61 0.06 0.38 0.44 0.00 -- --
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)
<CAPTION>
Income and Growth Fund, Class A
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
<CAPTION>
Income and Growth Fund, Class B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
<CAPTION>
Income and Growth Fund, Class C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <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)
<CAPTION>
High Total Return Fund, Class A
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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) -- --
<CAPTION>
High Total Return Fund, Class B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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) -- --
<CAPTION>
High Total Return Fund, Class C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <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) -- --
<CAPTION>
High Total Return Fund II, Class A
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1/31/97-
10/31/97 5.00 0.28 0.53 0.81 (.28) -- (.04)
<CAPTION>
High Total Return Fund II, Class B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1/31/97-
10/31/97 5.00 0.25 0.53 0.78 (.25) -- (.04)
<CAPTION>
High Total Return Fund II, Class C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1/31/97-
10/31/97 5.00 0.25 0.54 0.79 (.25) -- (.04)
<CAPTION>
Ratio of
Net Asset Assets, Ratio of expense income to
Value, end of expenses to reimbursement average Average
end of Total period average net to average net Portfolio commissions
Period ended period Return (000's) assets(1) net assets(1) assets(1) turnover per share
<S> <C> <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% $0.0394
- -------------
11/18/96
10/31/97 12.08 20.80 76,608 2.55 0.02 (1.68) 144 0.0394
- -------------
11/18/96
10/31/97 12.08 20.80 26,962 2.56 0.02 (1.70) 144 0.0394
- -------------
3/06/95
10/31/95 8.10 6.98 5,188 1.85 6.08 1.67 0 --
10/31/96 9.05 6.09 16,777 1.85 0.97 1.52 74 0.0314
10/31/97 10.90 27.59 60,539 1.80 0.27 0.46 26 0.0218
- -------------
4/17/97
10/31/97 10.87 8.70 59,185 2.50 0.08 (0.71) 26 0.0218
- -------------
3/06/95
10/31/95 8.05 6.61 5,749 2.50 6.08 1.13 0 --
10/31/96 8.93 5.46 14,530 2.50 1.21 0.62 74 0.0314
10/31/97 10.86 25.92 62,103 2.50 0.24 (0.23) 26 0.0218
- -------------
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 0.0600
10/31/97 12.47 17.02 53,805 1.47 -- 2.90 56 0.0600
- -------------
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 0.0600
10/31/97 12.44 15.06 73,829 2.18 -- 2.18 56 0.0600
- -------------
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 0.0600
10/31/97 12.42 15.04 69,494 2.15 -- 2.21 56 0.0600
- -------------
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 --
- -------------
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 --
- -------------
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 --
- -------------
1/31/97
10/31/97 5.49 16.53 8,548 1.26 3.36 5.89 164 --
- -------------
1/31/97
10/31/97 5.49 15.91 38,076 1.95 0.75 5.20 164 --
- -------------
1/31/97
10/31/97 5.50 16.12 12,334 1.95 0.78 5.17 164 --
</TABLE>
(1) Annualized
See accompanying notes to financial statements
41
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1997
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization -- The Northstar 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 five investment series which comprise the
Trust (the "Funds") 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"), formerly
the Brandes International 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 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 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, ("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.
NORTHSTAR HIGH TOTAL RETURN FUND II, ("High Total Return Fund II") 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 the 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
42
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1997
(LOGO)
(except class specific expenses), and realized/unrealized gains/losses, are
allocated proportionately to each Fund or class of shares based upon the
relative net asset value.
Distributions to Shareholders -- Dividends from net investment income are
declared and paid monthly by the High Total Return Fund and High Total Return
Fund II, and declared and paid quarterly by the Income and Growth Fund, and
declared and paid annually by the Growth + Value Fund and International 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.
The Funds may periodically make reclassifications among certain of their
capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance with
federal tax regulation which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of net
operating losses and foreign currency transactions. As of October 31, 1997, 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
NET REALIZED
INVESTMENT GAIN ON PAID-IN-
INCOME INVESTMENTS CAPITAL
------------- ----------- -----------
<S> <C> <C> <C>
Growth + Value
Fund $ 801,952 $ (801,952 ) $ 0
International
Value Fund 96,173 (1,522,246 ) 1,426,073
Income & Growth
Fund 5,744 (5,744 ) 0
High Total
Return Fund 800,387 (800,387 ) 0
High Total
Return Fund
II 461,100 (342,601 ) (118,499)
</TABLE>
These restatements did not affect net investment income, net realized gain
on investments, or net assets for the year ended October 31, 1997.
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 and unrealized gain(loss) on foreign currency transactions
represents the foreign exchange: (1) gains and losses from the sale of holdings
of foreign currencies, (2) gains and losses between trade date and settlement
date on investment securities transactions and forward exchange contracts, and
(3) gains and losses from the difference between amounts of interest and
dividends recorded and the amounts actually received.
Forward Foreign Currency Contracts and Options and Futures -- The Funds may
enter into forward foreign currency contracts ("contracts") to purchase or sell
currencies at a specified rate at a future date. The Funds may enter into these
contracts solely for hedging purposes.
The Funds write and purchase put and call options on foreign currencies. The
premium paid by the Funds for the purchase of a call or put option is recorded
as an investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the Funds have purchased expires
on the stipulated expiration date, the Funds realize a loss in the amount of the
cost of the option.
The amount of potential gain or loss to the Funds upon exercise of a written
call option is the value (in U.S. dollars) of the currency sold, less the value
of the U.S. dollars received in exchange. The amount of potential gain or loss
to the Funds upon exercise of a written put option is the value (in U.S.
dollars) of the currency received, less the value of the U.S. dollars paid in
exchange.
Risks may arise upon entering these contracts from the potential inability
of counterparties to meet the terms of their contract and from unanticipated
movement in the value of a foreign currency relative to the U.S. dollar.
Initial margin deposits made upon entering into futures contracts are
recognized as assets due from the broker (the Fund's agent in acquiring the
futures position). During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
"marking-to-market" on a daily basis to reflect the market value of the contract
at the end of each day's trading.
43
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1997
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 being amortized over a
period of five years from the date the Fund commenced operations. Each Fund
offers three classes of shares.
NOTE 2. INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
Northstar, Inc. (and its wholly owned operating subsidiaries, Northstar
Investment Management Corp., Northstar Distributors, Inc. and Northstar
Administrator Corp.) is an 80% owned subsidiary of Reliastar Financial Corp.
Northstar Investment Management Corp. (the "Adviser") serves as each Fund's
investment adviser. The Growth + Value and International Value Funds pays the
Adviser an investment advisory fee calculated at an annual rate of 1.00% of
average daily net assets. Income and Growth 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 remaining
aggregate daily net assets of each Fund in excess of $1 billion. 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 period ended October
31, 1997, the Adviser earned $8,352,908 in investment advisory fees. The Adviser
has voluntarily undertaken to limit the expenses of the Growth + Value Fund
1.85% (Class A), 2.55% (Class B) and 2.56% (Class C); International Value Fund
1.80% (Class A) and 2.50% (Class B&C); and High Total Return Fund II 1.26%
(Class A) and 1.95% (Class B&C) of each respective class's average net assets.
The Adviser will reimburse the Funds for amounts in excess of such limits, up to
the total amount of fees received during the period. At October 31, 1997, the
Advisor's reimbursements aggregated $11,165, $173,911 and $105,669 for the
Growth + Value Fund, International 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, 1997, the Administrator earned $1,138,574 in
administrative and account servicing fees. Northstar Distributors, Inc. (the
"Distributor"), an affiliate of the Adviser and the Administrator, is the
distributor of each Fund's shares. Under separate Plans of Distribution
pertaining to Class A, Class B, and Class C shares, the Trust pays the
Distributor monthly service fees at an annual rate of 0.25% of the average daily
net assets in the case of Class A, Class B and Class C shares, and monthly
distribution fees at the annual rate of 0.05% of the average daily net assets of
Class A shares, and 0.75% of the average daily net assets of Class B and Class C
shares. At October 31, 1997, the Trust owed the Distributor $1,039,964 in
service and distribution fees. The Distributor also receives the proceeds of the
initial sales charges paid by shareholders upon the purchase of Class A shares,
and the contingent deferred sales charge paid by shareholders upon certain
redemptions of Class A, Class B and Class C shares. For the period ended October
31, 1997, the Distributor earned the following amounts in sales charges:
44
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-------- ---------- -------
<S> <C> <C> <C>
Initial sales charges $786,764 n/a n/a
Contingent deferred
sales charges 19,288 $1,672,463 $89,586
</TABLE>
NOTE 3. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the period ended October 31, 1997, were
as follows:
<TABLE>
<CAPTION>
GROWTH + INTERNATIONAL INCOME & HIGH TOTAL HIGH TOTAL
VALUE FUND VALUE FUND GROWTH FUND RETURN FUND RETURN FUND II
------------ ------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $193,071,109 $158,381,333 $67,116,363 $1,570,622,481 $ 52,607,688
Aggregate sales $ 78,298,247 $ 19,572,817 $108,332,282 $1,298,022,977 $ 14,891,064
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<CAPTION>
GROWTH + INTERNATIONAL INCOME & HIGH TOTAL HIGH TOTAL
VALUE FUND VALUE FUND GROWTH FUND RETURN FUND RETURN FUND II
---------- ------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $0 $ 0 $22,163,694 $ 0 $0
Aggregate sales $0 $ 0 $ 0 $ 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, 1997 were as follows:
<TABLE>
<CAPTION>
GROWTH + INTERNATIONAL INCOME & HIGH TOTAL HIGH TOTAL
VALUE FUND VALUE FUND GROWTH FUND RETURN FUND RETURN FUND II
------------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Cost (tax basis) $118,047,610 $171,517,415 $159,993,611 $802,102,278 $ 38,149,970
------------ ------------- ------------ ------------ --------------
Appreciated securities 14,490,411 12,125,530 34,234,250 55,867,599 712,657
Depreciated securities (3,973,671) (10,919,506 ) (1,886,219 ) (37,538,891 ) (677,607)
------------ ------------- ------------ ------------ --------------
Net unrealized appreciation $ 10,516,740 $ 1,206,024 $32,348,031 $18,328,708 $ 35,050
------------ ------------- ------------ ------------ --------------
</TABLE>
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the period ended October 31,
1997, were as follows:
<TABLE>
<CAPTION>
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>
45
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1997
<TABLE>
<CAPTION>
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
----------- ------------ ----------- ------------ ----------- -----------
<CAPTION>
INCOME & 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
----------- ------------ ----------- ------------ ----------- -----------
<CAPTION>
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
----------- ------------ ----------- ------------ ----------- -----------
<CAPTION>
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>
Transactions in capital shares of each class of shares of each Fund for the
period ended October 31, 1996, were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL VALUE FUND
----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
--------------------------- --------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 3,415,183 $ 30,122,061 n/a n/a 1,079,936 $ 9,347,820
Reinvested dividends 3,692 31,554 n/a n/a 2,642 22,395
Shares redeemed (2,204,784) (19,730,781) n/a n/a (171,132) (1,498,538)
----------- ------------ ----------- ------------ ----------- -----------
Net increase 1,214,091 $ 10,422,834 n/a n/a 911,446 $ 7,871,677
----------- ------------ ----------- ------------ ----------- -----------
</TABLE>
46
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1997
(LOGO)
<TABLE>
<CAPTION>
INCOME & GROWTH FUND
----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
--------------------------- --------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 1,198,735 $ 13,791,336 1,141,776 $ 13,002,930 479,099 $ 5,467,468
Reinvested dividends 107,624 1,241,919 67,273 775,255 100,714 1,158,771
Shares redeemed (1,296,115) (14,970,646) (914,164) (10,500,448) (546,984) (6,347,259)
----------- ------------ ----------- ------------ ----------- -----------
Net increase 10,244 $ 62,609 294,885 $ 3,277,737 32,829 $ 278,980
----------- ------------ ----------- ------------ ----------- -----------
<CAPTION>
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 19,103,809 $ 90,286,429 53,275,516 $251,447,650 9,644,386 $45,749,391
Reinvested dividends 1,198,552 5,639,075 1,254,865 5,910,931 195,560 925,217
Shares redeemed (4,968,565) (23,506,025) (3,380,239) (15,980,031) (944,003) (4,464,824)
----------- ------------ ----------- ------------ ----------- -----------
Net increase 15,333,796 $ 72,419,479 51,150,142 $241,378,550 8,895,943 $42,209,784
----------- ------------ ----------- ------------ ----------- -----------
</TABLE>
NOTE 6. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Total Return Fund
and High Total Return Fund II had 77.98% and 60.18%, 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, 1997,
neither the High Total Return Fund nor High Total Return Fund II had any
bankrupt securities.
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 31,1997, the Funds did not have any securities on
loan.
NOTE 8. FORWARD FOREIGN CURRENCY CONTRACTS AS OF OCTOBER 31, 1997 FOR THE
INTERNATIONAL VALUE FUND.
<TABLE>
<CAPTION>
NET UNREALIZED
CURRENCY TO SETTLEMENT IN EXCHANGE APPRECIATION
DELIVER DATE FOR VALUE $ (DEPRECIATION)
------------ ------------ ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
French Franc FRF 5,103,190 11/28/97 USD 880,554 886,155 (5,611)
Japanese Yen JPY 334,063,586 11/6/97 USD 2,775,767 2,775,767 0
---------------- ------------ --------------
3,656,311 3,661,922 (5,611)
</TABLE>
47
<PAGE>
NORTHSTAR TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1997
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 dated
February 4, 1997. Brandes International Fund is the surviving Fund for the
purposes of maintaining the financial statements and performance history in the
post reorganization, but was reorganized as a Fund issued by Northstar Trust. 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 shares. 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
Class C shares.
NOTE 10. SUBSEQUENT EVENT
On December 1, 1997 Reliastar Financial Corp. purchased the remaining 20% of
Northstar, Inc. (and its wholly owned operating subsidiaries, Northstar
Investment Management Corp., Northstar Distributors, Inc. and Northstar
Administrator Corp.).
The High Total Return Fund held SA Telecommunications, Inc., security in
bankruptcy, at November 18, 1997.
The International Value Fund held Yamaichi Securities Co. LTD. (Japan),
security in bankruptcy, at November 21, 1997.
- --------------------------------------------------------------------------------
PROXY RESULTS (UNAUDITED)
During the year ended October 31, 1997 High Total Return Fund shareholders
voted on the following proposal. The proposal was approved at a special meeting
of shareholders on February 13, 1997.
<TABLE>
<CAPTION>
Shares Voted For Shares Voted Against Abstentions
----------------- --------------------- ------------
<S> <C> <C> <C>
To approve a modification of the investment objective of
the Fund. 64,623,980 1,520,761 3,721,853
</TABLE>
48
<PAGE>
NORTHSTAR TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
(LOGO)
To the Shareholders and Trustees of Northstar Trust:
We have audited the accompanying statement of assets and liabilities of the
Northstar Trust, comprising the Northstar Growth + Value Fund, Northstar
International Value Fund (formerly the Brandes International Fund), Northstar
Income and Growth Fund, Northstar High Total Return Fund and Northstar High
Total Return Fund II (collectively, the "Funds"), including the portfolios of
investments, as of October 31, 1997, the related statement of operations for the
year then ended except for the Northstar Growth + Value Fund, and Northstar High
Total Return II Fund for which the periods were November 18, 1996 and January
31, 1997 (commencement of operations), respectively, to October 31, 1997, the
statements of changes in net assets for each of the two years in the period then
ended except for the Northstar International Value Fund for which the period was
November 1, 1996 to October 31, 1997 and Northstar Growth + Value Fund and
Northstar High Total Return Fund II for which the periods were November 18, 1996
and January 31, 1997 (commencement of operations), respectively, to October 31,
1997, and the financial highlights for each of the periods presented except for
the Northstar International Value Fund for periods ending before November 1,
1996. These financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The statement
of changes in net assets for the year ended October 31, 1996 and the financial
highlights for the year ended October 31, 1996 and the period March 6, 1995 to
October 31, 1995 of Northstar International Value Fund were audited by other
auditors whose report dated December 4, 1996 expressed an unqualified opinion on
these statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects the financial position of each
of the respective Funds constituting the Northstar Trust as of October 31, 1997,
the results of their operations, the changes in their net assets, and the
financial highlights for each of the periods referred to above, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
December 6, 1997
49
<PAGE>
(LOGO)
NORTHSTAR
TRUST
<PAGE>
