<PAGE>
Northstar/NWNL Trust
NORTHSTAR GROWTH FUND
NORTHSTAR INCOME AND GROWTH FUND
NORTHSTAR MULTI-SECTOR BOND FUND
NORTHSTAR HIGH YIELD BOND FUND
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
<PAGE>
NORTHSTAR GROWTH FUND
GROWTH OF $10,000 INVESTED IN NORTHSTAR GROWTH FUND
FROM INCEPTION THROUGH THE FUND'S FISCAL YEAR END.
The graph below illustrates the hypothetical investment of $10,000 in the
Northstar Growth Fund from May 6, 1994 (inception of the Fund) through December
31, 1995, assuming the reinvestment of dividends and capital gains at net asset
value, compared to the S&P 500 Index for the same period. All performance data
shown represents past performance, and should not be considered indicative of
future performance.
GROWTH
[GRAPH]
<TABLE>
<CAPTION>
S&P 500 GROWTH
<S> <C> <C>
10,000 10,000
05/31/94 10,124 10,200
06/30/94 9,928 9,989
07/31/94 10,241 10,301
08/31/94 10,626 10,662
09/30/94 10,413 10,590
10/31/94 10,631 10,671
11/30/94 10,211 10,398
12/31/94 10,412 10,347
01/31/95 10,665 10,223
02/28/95 11,049 10,429
03/31/95 11,422 10,689
04/30/95 11,742 11,062
05/31/95 12,168 11,581
06/30/95 12,509 12,117
07/31/95 12,907 12,408
08/31/95 12,903 12,606
09/30/95 13,500 12,875
10/31/95 13,433 12,582
11/30/95 13,984 12,937
12/31/95 14,310 12,900
</TABLE>
Average Annual Total Return 16.75%
Total Return Since Inception 29.11%
The acompanying notes are an integral part of the financial statements.
1
<PAGE>
NORTHSTAR GROWTH FUND
INVESTMENT ENVIRONMENT
THE MARKETS
- The year 1995 was extraordinarily good for the stock market. The S&P
500 index gained 34.1%.
- Stock prices responded to strong corporate earnings increases, lower
interest rates, and the outlook for an extended economic expansion.
- In late 1995 a slowing in global economic activity led to inventory
corrections and reduced expectations for an increasing number of
companies. This, along with federal budget uncertainties, has caused
some increased price volatility.
THE FUND
- The Fund gained 24.7% compared to 31.0% for the Lipper Growth Fund
Index. Most of the shortfall relative to the broad averages occurred
in the first quarter when Latin American stocks declined sharply and
unfounded fears of recession weighed heavily on the cyclically
sensitive holdings.
- Very strong gains were achieved in a variety of well capitalized, high
quality stocks such as Citicorp, Merck, Xerox, Boeing, Lilly,
Halliburton, and British Sky Broadcasting.
- Underperforming areas such as consumer durables were sold early in the
year. Technology, which was very strong at mid-year, was cut back and
finished 1995 with disappointing returns. Basic materials were sold
and technology cut back after mid-year while additions were made to
more consistent growers in consumer staples, energy, and financial
services.
CURRENT STRATEGY
- We continue to expect stocks will provide positive results in 1996.
Slow economic growth should continue in the first half but strengthen
later in the year because of low interest rates and a more stimulative
monetary policy. Stock prices look attractive relative to interest
rates. The major stock indices should appreciate along with 5-10%
earnings growth. Selective individual stocks should benefit from
superior growth in earnings, restructurings, stock buy backs, and
acquisition activity.
- Stocks with long term consistent growth prospects have received more
emphasis with the largest holdings in consumer staples/health,
financial and energy. Technology was cut back further early in January
and cash reserves raised to be deployed opportunistically.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 12/31/95) TOTAL NET ASSETS: $3,813,294
- --------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS
NAME % FUND
1. Fannie Mae 3.6%
2. Philip Morris 3.6
3. Intel 3.4
4. Mellon Bank 3.2
5. Citicorp 3.0
6. Worldcom 3.0
7. National Semi 2.9
8. GME 2.7
9. BankAmerica 2.7
10. AMP 2.4
30.5%
5 TOP SECTORS
SECTORS
1. Technology 22.3%
2. Consumer Goods 18.8
3. Financial 17.8
4. Energy 10.6
5. Healthcare 10.2
79.7%
ASSET ALLOCATION
% FUND
Common Stock 88.3%
Convertible Bonds 1.8
Convertible Stock 0.5
Cash/other assets 9.4
100.0%
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 88.28%
AEROSPACE - 1.44%
Boeing Co. 700 $54,863
AUTOMOTIVE - 1.59%
Magna International, Inc. 1,400 60,549
BANKING - 10.00%
Ahmanson, (H.F.) & Co. 1,500 39,750
BankAmerica Corp. 1,600 103,600
Citicorp 1,700 114,325
Mellon Bank Corp. 2,300 123,625
381,300
COMPUTER SERVICES - 2.73%
General Motors Corp. Class E 2,000 104,000
CONSUMER STAPLES - 1.96%
Procter & Gamble Co. 900 74,700
COSMETICS - 0.46%
Estee Lauder Companies, Inc. (1) 500 17,437
ELECTRICAL EQUIPMENT - 3.91%
AMP, Inc. 2,400 92,100
Emerson Electric Co. 700 57,225
149,325
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ENERGY - 7.02%
Amoco Corp. 800 57,500
El Paso Natural Gas Co. 1,000 28,375
Enron Oil and Gas Co. 3,000 72,000
Mobil Corp. 600 67,200
Sonat, Inc. 1,200 42,750
267,825
ENTERTAINMENT/BROADCASTING - 1.28%
British Sky Broadcasting Group PLC (2) 1,300 48,913
FINANCIAL SERVICES - 8.66%
Federal National Mortgage Association 1,100 136,538
H&R Block, Inc. 1,900 76,950
MGIC Investment Corp. 900 48,825
PMI Group, Inc. 1,500 67,875
330,188
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/PHARMACEUTICAL - 9.58%
Bristol-Myers, Squibb Co. 1,000 $85,875
Lilly, (Eli) & Co. 532 29,925
Merck & Co., Inc. 1,000 65,750
Mylan Laboratories, Inc. 3,000 70,500
Pharmacia & Upjohn, Inc. 2,100 81,375
Sierra Health Services, Inc. (1) 1,000 31,750
365,175
LODGING & RESTAURANTS - 0.70%
Marriott International, Inc. 700 26,775
MACHINERY - 1.67%
Deere & Co. 1,000 35,250
Kennametal, Inc. 900 28,575
63,825
OFFICE EQUIPMENT - 1.44%
Xerox Corp. 400 54,800
OIL SERVICES - 2.88%
Halliburton Co. 800 40,500
Schlumberger LTD 1,000 69,250
109,750
PAPER & FOREST PRODUCTS - 0.51%
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Kimberly-Clark Corp. 234 19,363
RETAIL - 5.11%
Home Depot, Inc. 1,900 90,963
Office Depot, Inc. (1) 2,400 47,400
Pep Boys - Manny, Moe & Jack 2,200 56,375
194,738
SEMICONDUCTORS - 8.59%
Cirrus Logic, Inc. (1) 700 13,825
Intel Corp. 2,300 130,525
LSI Logic Corp. (1) 2,200 72,050
National Semiconductor Corp. 5,000 111,250
327,650
TECHNOLOGY - 8.11%
Applied Materials, Inc. (1) 2,000 78,750
Compaq Computer Corp. (1) 1,500 72,000
DSC Communications Corp. (1) 2,400 88,500
Nokia Corp. (2) 1,800 69,975
309,225
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS - 5.77%
Alltel Corp. 1,700 $50,150
GTE Corp. 1,300 57,200
WorldCom, Inc. (1) 3,200 112,800
220,150
TOBACCO - 3.56%
Philip Morris Companies, Inc. 1,500 135,750
TRANSPORTATION - 1.31%
Canadian National Railway Co. (1) 1,000 15,000
Conrail, Inc. 500 35,000
50,000
TOTAL COMMON STOCK
(cost $3,006,266) 3,366,301
CONVERTIBLE STOCK - 0.46%
CONSUMER STAPLES - 0.46%
AJL PEPS Trust
$1.44, Exchangeable Shares, 2/15/99 (3) 900 17,550
TOTAL CONVERTIBLE STOCK
(cost $17,245) 17,550
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
CONVERTIBLE BONDS - 1.78%
GAMING - 1.78%
Argosy Gaming Co.
12.00%, Subordinated Notes, 6/01/01 $75,000 68,063
TOTAL CONVERTIBLE BONDS
(cost $79,000) 68,063
TOTAL INVESTMENTS SECURITIES - 90.52%
(cost $3,102,511) 3,451,914
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
SECURITY PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 9.73%
Agreement with State Street Bank and Trust bearing interest at 5.25% dated
12/29/95, to be repurchased 1/02/96 in the amount of $371,216 and collateralized
by $380,000 U.S. Treasury Notes, 4.25% due 5/15/96, value $380,408
<TABLE>
<S> <C> <C>
(Cost $371,162) $371,000 $371,162
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.25%) (9,782)
NET ASSETS - 100.00% $3,813,294
</TABLE>
(1) Non-income producing securities.
(2) American Depository Receipts.
(3) Exchangeable into shares of common stock of Amway Japan Ltd. ADR's.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
GROWTH OF $10,000 INVESTED IN NORTHSTAR INCOME AND GROWTH FUND
FROM INCEPTION THROUGH THE FUND'S FISCAL YEAR END.
The graph below illustrates the hypothetical investment of $10,000 in the
Northstar Income and Growth Fund from May 6, 1994 (inception of the Fund)
through December 31, 1995, assuming the reinvestment of dividends and capital
gains at net asset value, compared to the S&P 500 Index and the Lehman Brothers'
Government/ Corporate Bond Index for the same period. All performance data
shown represents past performance, and should not be considered indicative of
future performance.
NORTHSTAR INCOME AND GROWTH FUND
[GRAPH]
INCOME AND GROWTH
<TABLE>
<CAPTION>
LEHMAN INCOME
S&P 500 GOV'T/CORP GROWTH
<S> <C> <C> <C>
05/06/94 $10,000 $10,000 $10,000
05/31/94 $10,124 $ 9,982 $10,170
06/30/94 $ 9,928 $ 9,959 $10,033
07/31/94 $10,241 $10,158 $10,314
08/31/94 $10,626 $10,162 $10,545
09/30/94 $10,413 $10,009 $10,436
10/31/94 $10,631 $ 9,998 $10,456
11/30/94 $10,211 $ 9,980 $10,233
12/31/94 $10,412 $10,046 $10,202
01/31/95 $10,665 $10,239 $10,140
02/28/95 $11,049 $10,476 $10,336
03/31/95 $11,422 $10,546 $10,500
04/30/95 $11,742 $10,693 $10,728
05/31/95 $12,168 $11,141 $11,152
06/30/95 $12,509 $11,230 $11,595
07/31/95 $12,907 $11,186 $11,615
08/31/95 $12,903 $11,329 $11,751
09/30/95 $13,500 $11,445 $11,989
10/31/95 $13,433 $11,613 $11,894
11/30/95 $13,984 $11,805 $12,220
12/31/95 $14,310 $11,978 $12,371
</TABLE>
Average Annual Total Return 13.77%
Total Return Since Inception 23.72%
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
INVESTMENT ENVIRONMENT
THE MARKETS
- The year 1995 was extraordinary for U.S. stocks and bonds. The S&P
500 stock index gained 34.1%. The Intermediate Corporate Bond Index
rose 16.7%.
- Stocks responded to strong corporate earnings increases, lower
interest rates, and the outlook for an extended economic expansion.
The yield on long term treasury bonds dropped from 7.9% in January to
5.9% at year end as inflation remained low, the global economy slowed,
and monetary policy was eased.
- In late 1995 the economic slowdown led to inventory corrections and
reduced expectations for an increasing number of companies. This
along with the federal budget uncertainties has caused some increased
price volatility.
THE FUND
- For the year, the Fund rose 21.3%, compared to the Lipper Balanced
Fund Index which was up 24.6%. It lagged the major averages because
of a particularly slow start in the first quarter. For the remainder
of the year, after March, the strategy worked better and the Fund was
up 17.7% compared to the Balanced Fund Index at 17.4%.
- Very strong gains were achieved in a variety of well capitalized, high
quality stocks such as Citicorp, Merck, Xerox, Boeing, Lilly, and
British Sky Broadcasting.
- Underperforming areas such as consumer durables and some Latin
American holdings were sold early in the year. Technology which was
very strong at mid-year was cut back and then finished the year with
disappointing returns. Holdings in basic materials were sold after
mid-year while additions were made to consumer staples and drug
stocks.
CURRENT STRATEGY
- We continue to have a positive view for equities and bonds in 1996.
Lower interest rates and an accommodative monetary policy should
result in slow economic growth, picking up more strength later in the
year. Stocks are attractive relative to interest rates. Without a
recession, stock prices should advance in line with 5-10% earnings
growth, possibly better. Individual stocks will also benefit from
restructurings, stock buy backs, and acquisition activity.
- The Fund is invested in high quality stocks, convertibles, and bonds
with an 8% cash reserve.
- Stocks with consistent growth have received more emphasis with the
largest holdings in consumer staples/health, financial services,
energy, and technology.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 12/31/95) TOTAL NET ASSETS: $7,410,493
- --------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS
NAME % FUND
1. Philip Morris 3.1%
2. Intel 2.2
3. Fannie Mae 2.2
4. Mellon Bank 1.8
5. Citicorp 1.6
6. Bristol Myers 1.6
7. AMP 1.5
8. Home Depot 1.5
9. GME 1.4
10. OMEGA 1.4
18.3%
5 TOP SECTORS
SECTORS
1. Consumer Goods 19.6%
2. Technology 15.8
3. Financial 15.0
4. Energy 13.0
5. Healthcare 9.2
72.6%
ASSET ALLOCATION
% FUND
Common Stock 51.4%
Bonds 30.8
Convertible Bonds 6.2
Convertible Preferred 1.8
Convertible Stock 1.3
Exchangeable Notes 0.5
Cash/other assets 8.0
100.0%
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 51.36%
AEROSPACE - 0.74%
Boeing Co. 700 $54,862
AUTOMOTIVE - 1.28%
Magna International, Inc. 2,200 95,150
BANKING - 5.56%
Ahmanson, (H.F.) & Co. 2,500 66,250
BankAmerica Corp. 1,400 90,650
Citicorp 1,800 121,050
Mellon Bank Corp. 2,500 134,375
412,325
COMPUTER SERVICES - 1.40%
General Motors Corp, Class E 2,000 104,000
CONSUMER STAPLES - 1.01%
Procter & Gamble Co. 900 74,700
ELECTRICAL EQUIPMENT - 2.16%
AMP, Inc. 2,900 111,288
Emerson Electric Co. 600 49,050
160,338
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
ENERGY - 6.12%
Amoco Corp. 1,000 71,875
El Paso Natural Gas Co. 3,000 85,125
ENI SpA (1) (2) 3,000 102,750
Mobil Corp. 600 67,200
Sonat, Inc. 2,000 71,250
Texaco, Inc. 700 54,950
453,150
ENTERTAINMENT\BROADCASTING - 0.61%
British Sky Broadcasting Group PLC (1) 1,200 45,150
FINANCIAL SERVICES - 3.88%
Federal National Mortgage Association 1,300 161,362
H&R Block, Inc. 1,900 76,950
MGIC Investment Corp. 900 48,825
287,137
HEALTHCARE/PHARMACEUTICAL - 5.82%
Bristol-Myers, Squibb Co. 1,400 120,225
Lilly, (Eli) & Co. 796 44,775
Merck & Co., Inc. 1,400 92,050
Mylan Laboratories, Inc. 3,450 81,075
Pharmacia & Upjohn, Inc. 2,400 93,000
431,125
</TABLE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
LODGING & RESTAURANTS - 0.41%
Marriott International, Inc. 800 $30,600
MACHINERY - 1.67%
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Deere & Co. 1,000 35,250
Kennametal, Inc. 1,400 44,450
McDermott International, Inc. 2,000 44,000
123,700
OFFICE EQUIPMENT - 0.93%
Xerox Corp. 500 68,500
OIL SERVICES - 0.93%
Schlumberger LTD 1,000 69,250
PAPER & FOREST PRODUCTS - 0.44%
Kimberly-Clark Corp. 390 32,273
REAL ESTATE INVESTMENT TRUSTS - 1.96%
General Growth Properties, Inc. 2,000 41,500
OMEGA Healthcare Investors, Inc. 3,900 103,838
145,338
RETAIL - 2.11%
Home Depot, Inc. 2,300 110,112
Pep Boys - Manny, Moe & Jack 1,800 46,125
156,237
SEMICONDUCTORS - 4.41%
Cirrus Logic, Inc. (2) 1,300 25,675
Intel Corp. 2,900 164,575
LSI Logic Corp. (2) 1,100 36,025
National Semiconductor Corp. 4,500 100,125
326,400
TECHNOLOGY - 2.50%
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Applied Materials, Inc. (2) 1,000 39,375
Compaq Computer Corp. (2) 900 43,200
DSC Communications Corp. (2) 2,800 103,250
185,825
TELECOMMUNICATIONS - 3.51%
Alltel Corp. 2,000 59,000
GTE Corp. 1,500 66,000
Nokia Corp. (1) 1,200 46,650
WorldCom, Inc. (2) 2,500 88,125
259,775
TOBACCO - 3.05%
Philip Morris Companies, Inc. 2,500 226,250
</TABLE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 0.86%
Canadian National Railway Co. (2) 1,000 $15,000
Conrail, Inc. 700 49,000
64,000
TOTAL COMMON STOCK
(cost $3,385,231) 3,806,085
CONVERTIBLE PREFERRED STOCK - 1.75%
BROADCASTING/CABLE TV - 1.10%
Cablevision Systems Corp.
8.50%, Exchangeable Shares, 12/31/49 3,000 81,750
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
OIL & GAS - 0.65%
Enron Corp.
6.25%, Exchangeable Shares, 12/13/98 2,000 48,000
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $120,560) 129,750
CONVERTIBLE STOCK - 1.29%
CONSUMER STAPLES - 1.29%
AJL PEPS Trust
$1.44, Exchangeable Shares, 2/15/99 (3) 4,900 95,550
TOTAL CONVERTIBLE STOCK
(cost $93,884) 95,550
EXCHANGEABLE NOTES - 0.55%
INSURANCE - 0.55%
Allstate Corp.
6.76%, Exchangeable Notes, 4/15/98 (4) 1,000 41,000
TOTAL EXCHANGEABLE NOTES
(cost $34,000) 41,000
CONVERTIBLE BONDS - 6.27%
ENTERTAINMENT - 1.44%
Time Warner, Inc.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
8.75%, Sr. Notes, 1/10/15 $102,400 106,240
GAMING - 0.74%
Argosy Gaming Co.
12.00%, Subordinated Notes, 6/01/01 60,000 54,450
</TABLE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE - 0.55%
American Travellers Corp.
6.50%, Subordinated Debentures, 10/01/05 $30,000 $40,898
REAL ESTATE INVESTMENT TRUSTS - 1.39%
Meditrust
7.50%, Debentures, 3/01/01 100,000 103,000
TRANSPORTATION - 0.67%
Alaska Air Group, Inc.
6.50%, Debentures, 6/15/05 50,000 49,875
UTILITY - 1.48%
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Boston Edison Co.
9.375%, Debentures, 8/15/21 100,000 109,857
TOTAL CONVERTIBLE BONDS
(cost $458,607) 464,320
CORPORATE BONDS - 1.80%
INSURANCE - 1.80%
Leucadia National Corp.
8.25%, Sr. Subordinated Notes, 6/15/05 125,000 133,551
TOTAL CORPORATE BONDS
(cost $125,000) 133,551
U.S. GOVERNMENT SECURITIES - 28.95%
U.S. Treasury Notes and Bonds
6.50%, 4/30/99 - 8/15/05 375,000 394,727
7.25%, 5/15/04 250,000 277,750
7.625%, 2/15/25 800,000 977,840
7.75%, 1/31/00 250,000 271,680
7.875%, 8/15/01 200,000 223,486
TOTAL U.S. GOVERNMENT SECURITIES
(cost $1,988,217) 2,145,483
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
TOTAL INVESTMENTS SECURITIES - 91.97%
(cost $6,205,499) 6,815,739
REPURCHASE AGREEMENTS - 7.52%
Agreement with State Street Bank and
Trust bearing interest at 5.25% dated
12/29/95, to be repurchased 1/02/96
in the amount of $557,325 and
collateralized by $570,000 U.S.
Treasury Notes, 4.25% due 5/15/96,
value $570,613
(cost $557,244) 557,000 557,244
</TABLE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS LESS LIABILITIES - 0.51% $37,510
NET ASSETS - 100.00% $7,410,493
</TABLE>
(1) American Depository Receipts.
(2) Non-income producing security.
(3) Exchangeable into shares of common stock of Amway Japan Ltd. ADR's
(4) Exchangeable into shares of common stock of PMI Group, Inc.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
GROWTH OF $10,000 INVESTED IN NORTHSTAR MULTI-SECTOR BOND FUND
FROM INCEPTION THROUGH THE FUND'S FISCAL YEAR END.
The graph below illustrates the hypothetical investment of $10,000 in the
Northstar Multi-Sector Bond Fund from May 6, 1994 (inception of the Fund)
through December 31, 1995, assuming the reinvestment of dividends and capital
gains at net asset value, compared to the Lehman Brothers' Government/Corporate
Bond Index for the same period. All performance data shown represents past
performance, and should not be considered indicative of future performance.
[GRAPH]
MULTI-SECTOR
LEHMAN MULTI-
GOVT/CORP SECTOR
10,000 10,000
05/31/94 $ 9,982 10,020
06/30/94 $ 9,959 10,009
07/31/94 $10,158 10,009
08/31/94 $10,162 10,050
09/30/94 $10,009 10,116
10/31/94 $ 9,998 10,075
11/30/94 $ 9,980 9,952
12/31/94 $10,046 10,141
01/31/95 $10,239 10,183
02/28/95 $10,476 10,350
03/31/95 $10,546 10,572
04/30/95 $10,693 10,721
05/31/95 $11,141 10,934
06/30/95 $11,230 11,157
07/31/95 $11,186 11,048
08/31/95 $11,329 11,026
09/30/95 $11,445 11,331
10/31/95 $11,613 11,265
11/30/95 $11,805 11,309
12/31/95 $11,978 11,659
Average Annual Total Return 9.75%
Total Return Since Inception 16.60%
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
INVESTMENT ENVIRONMENT
THE MARKETS
-- The Federal Reserve's interest rate policies helped the U.S. economy
achieve a soft landing in 1995. Lower inflation rates helped push the
yield on the 30-year Treasury bond down from 7.87% to 5.94%. Solid
growth in the U.S. economy and in corporate profits sent stock prices
to record levels throughout 1995. High yield bond prices marched up
along with treasury bond prices and common stock valuations. However,
spreads over Treasury yields rose 0.75 percentage points as slower
growth in 1995 increased fears of a recession in 1996.
-- Emerging markets were volatile. Prices for emerging market bonds
dropped steeply after Mexico devalued, but ended on a firm note due to
successful economic policy actions in Latin America. Foreign
corporates were unattractive due to spreads below one point and to a
U.S. dollar that rose between 10% and 25% after it hit lows in April
1995.
-- We and many others believe that the U.S. economy can now sustain
annual GDP growth and CPI inflation rates of 2.5% to 3%. Therefore,
the outlook for domestic debt and equity markets remains positive for
1996.
THE FUND
-- January through December 1995, the total return of the Fund's shares
was 14.97%; the Lipper average was 18.02%. Continued improvement in
the Fund's performance promoted sales that led to a 39% increase in
its net assets, which rose from $2.72MM to $3.77MM in 1995.
-- There were major changes in the Fund's allocations in 1995. We reduced
investments in the computer, entertainment, grocery, steel and textile
industries, and we cut cash from 18% to 5% of the portfolio. On the
other hand, we increased investments in the cable, banking,
manufacturing, telecommunications and insurance industries and in
emerging markets, while investments in Treasuries rose by 10
percentage points.
-- Straight equities and high yield bonds that were issued with equity
securities or rights attached ("equity kickers") benefited from high
stock prices and boosted the Fund's returns (e.g.,BCP/Essex and
Thermoscan).
CURRENT STRATEGY
-- Continue above-average exposure in non-cyclical industries and in
bonds that have equity kickers.
-- Invest in companies that will benefit from deregulation; and very
cautiously invest in emerging markets and cyclicals with due regard
for the volatility in those market segments; and increase exposure to
long term Treasuries.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 12/31/95) TOTAL NET ASSETS: $3,765,732
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS SECTOR ALLOCATIONS CREDIT QUALITY
NAME % FUND SECTOR % FUND RATING % FUND
<S> <C> <C> <C> <C> <C> <C>
1 U.S. Treasury Notes 27.7 U.S. Government Total 34 AAA-A 34.3
2 GNMA II 5.2 Investment Grade BBB 13.6
3 Boston Edison 2.9 - Domestic 12 BB 23.9
4 Leucadia National 2.9 - Foreign 0 B 20.8
5 LaRoche Industries 2.8 Total 12 CCC 0.0
6 Williamhouse-Regency 2.8 High Yield (HY) Not Rated 2.2
7 Nacolah Holdings 2.8 - Domestic 30 - Internal BB 0.0
8 Grand Casinos 2.8 - Foreign 13 - Internal B 2.2
9 Paramount Communications 2.7 Total 43 - Internal CCC 0.0
10 CE Casecnan Water&Energy 2.7 Equity 5 Cash/Other Assets 5.2
55.3% (Average Rating = BBB) 100.0%
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY PRINCIPAL AMOUNT VALUE
<S> <C> <C>
________________________________________________________________________________
INVESTMENT GRADE SECURITIES - 12.13%
CONTAINER - 1.51%
Owens-Illinois, Inc.
11.00%, Sr. Debentures, 12/01/03 $50,000 $56,750
ENTERTAINMENT - 2.73%
Paramount Communications, Inc.
8.25%, Debentures, 8/01/22 100,000 102,647
HEALTHCARE - 2.08%
Columbia/HCA Healthcare Corp.
6.91%, Notes, 6/15/05 75,000 78,299
INSURANCE - 2.89%
Leucadia National Corp.
10.375%, Sr. Subordinated Notes, 6/15/02 100,000 109,000
UTILITY - 2.92%
Boston Edison Co.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
9.375%, Debentures, 8/15/21 100,000 109,857
TOTAL INVESTMENT GRADE SECURITIES
(cost $432,128) 456,553
DOMESTIC HIGH YIELD SECURITIES - 30.16%
CONGLOMERATE - 2.83%
LaRoche Industries, Inc.
13.00%, Sr. Subordinated Notes, 8/15/04 100,000 106,750
CONSUMER PRODUCTS - 2.80%
Williamhouse - Regency, Inc.
13.00%, Sr. Subordinated Notes, 11/15/05 (1) 100,000 105,500
ENERGY - 2.51%
California Energy, Inc.
0/10.25%, Discount Notes, 1/15/04 (2) 100,000 94,500
FINANCE - 2.54%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 100,000 95,500
FOOD SERVICE - 2.07%
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
American Restaurant Group, Inc.
12.00%, Sr. Notes, 9/15/98 100,000 78,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY PRINCIPAL AMOUNT VALUE
________________________________________________________________________________
<S> <C> <C>
GROCERY - 4.49%
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 $100,000 $86,500
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 100,000 82,500
169,000
HOTELS & GAMING - 5.47%
Grand Casinos, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 100,000 104,750
HMC Acquisition Properties Inc.
9.00%, Sr. Notes, 12/15/07 (1) 100,000 101,250
206,000
INSURANCE - 2.80%
Nacolah Holding Corp.
9.50%, Sr. Notes, 12/01/03 100,000 105,500
STEEL - 2.43%
Sheffield Steel Corp.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
12.00%, 1st Mortgage Notes, 11/01/01 100,000 91,500
TELECOMMUNICATIONS - 2.22%
Mobile Telecommunication Technologies Corp.
13.50%, Sr. Notes, 12/15/02 75,000 83,625
TOTAL DOMESTIC HIGH YIELD SECURITIES
(cost $1,145,083) 1,135,875
FOREIGN HIGH YIELD SECURITIES - 13.10%
BANKING - 2.08%
Banco Nacional de Comercio Exterior
7.25%, Debentures, 2/02/04 100,000 78,375
BROADCASTING/CABLE - 1.55%
Comcast UK Cable Partners Ltd.
0/11.20%, Sr. Discount Debentures, 11/15/07 (2)100,000 58,250
FOREIGN GOVERNMENT - 2.41%
Federal Republic of Brazil Capitalization Bonds
8.00%, Government Guaranty, 4/15/14 (3) 159,181 90,733
PAPER - 4.37%
APP International Finance Co.
11.75%, Guaranteed Secured Notes, 10/01/05 100,000 98,000
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
Grupo Industrial Durango S.A.
12.00%, Notes, 7/15/01 75,000 66,750
164,750
</TABLE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY SHARES VALUE
________________________________________________________________________________
<S> <C> <C>
UTILITY - 2.69%
CE Casecnan Water and Energy Co.
11.45%, Sr. Notes, 11/15/05 (1) $100,000 $101,250
TOTAL FOREIGN HIGH YIELD SECURITIES
(cost $473,422) 493,358
PREFERRED STOCK - 5.11%
BANKING - 1.49%
First Nationwide Bank 11.50% 500 56,125
CONGLOMERATE - 2.19%
BCP/Essex Holdings, Inc.15.00% 3,112 82,468
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
OIL & GAS - 1.43%
Enron Capital Resources L.P. 9.00% 2,000 54,000
TOTAL PREFERRED STOCK
(cost $179,919) 192,593
WARRANTS - 0.07% (4)
CONSUMER PRODUCTS - 0.00%
Chattem, Inc. (expires 6/17/99) (1) 50 138
STEEL - 0.07%
Sheffield Steel Corp. (expires 11/01/01) 500 2,500
TOTAL WARRANTS
(cost $2,000) 2,638
U.S. GOVERNMENT & AGENCIES - 34.27%
GNMA II Arm 6.50% $194,212 197,379
Resolution Trust Corp., 8.00%, 6/25/26 47,607 48,467
U.S. Treasury Notes, 6.75%, 5/31/99 1,000,000 1,044,580
TOTAL U.S. GOVERNMENT & AGENCIES
(cost $1,232,275) 1,290,426
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
TOTAL INVESTMENTS SECURITIES - 94.84%
(cost $3,464,827) 3,571,443
</TABLE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY PRINCIPAL AMOUNT VALUE
________________________________________________________________________________
<S> <C> <C>
REPURCHASE AGREEMENTS - 4.38%
Agreement with State Street Bank and Trust bearing interest at 5.25% dated
12/29/95, to be repurchased 1/02/96 in the amount of $165,096 and collateralized
by $165,000 U.S. Treasury Notes, 6.875% due 10/31/96, value $168,901
(Cost $165,072) $165,000 $165,072
OTHER ASSETS LESS LIABILITIES - 0.78% 29,217
NET ASSETS - 100.00% $3,765,732
</TABLE>
(1) Sale restricted to qualified institutional investors.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
(2) Step Bond.
(3) Interest paid partial cash/partial capitalization.
(4) Non - income producing securities.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
GROWTH OF $10,000 INVESTED IN NORTHSTAR HIGH YIELD BOND FUND
FROM INCEPTION THROUGH THE FUND'S FISCAL YEAR END.
The graph below illustrates the hypothetical investment of $10,000 in the
Northstar High Yield Bond Fund from May 6, 1994 (inception of the Fund) through
December 31, 1995, assuming the reinvestment of dividends and capital gains at
net asset value, compared to the Lehman Brothers' Government/Corporate Bond
Index for the same period. All performance data shown represents past
performance, and should not be considered indicative of future performance.
[GRAPH]
HIGH YIELD
LEHMAN HIGH
GOVT/CORP YIELD
10,000 10,000
05/31/94 $ 9,982 10,040
06/30/94 $ 9,959 10,026
07/31/94 $10,158 9,905
08/31/94 $10,162 9,905
09/30/94 $10,009 9,991
10/31/94 $ 9,998 9,909
11/30/94 $ 9,980 9,683
12/31/94 $10,046 9,905
01/31/95 $10,239 9,905
02/28/95 $10,476 10,074
03/31/95 $10,546 10,426
04/30/95 $10,693 10,621
05/31/95 $11,141 10,750
06/30/95 $11,230 10,870
07/31/95 $11,186 11,025
08/31/95 $11,329 10,981
09/30/95 $11,445 11,279
10/31/95 $11,613 11,143
11/30/95 $11,805 11,256
12/31/95 $11,978 11,743
Average Annual Total Return 10.22%
Total Return Since Inception 17.43%
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
INVESTMENT ENVIRONMENT
THE MARKETS
-- The Federal Reserve's interest rate policies helped the U.S. economy
achieve a soft landing in 1995. Lower actual inflation rates and
expectations of continued declines in the CPI helped push Treasury bond
prices up to the levels reached in early 1994. The yield on the 30-year
Treasury bond fell from 7.87% to 5.94%. Solid growth in the U.S. economy
and in corporate profits sent stock prices to record levels throughout
1995.
-- High yield bond prices marched up along with those of Treasury bonds,
and were further boosted by higher stock valuations. However, spreads of
high yield bonds over Treasury yields and spreads of B-rated bond yields
over BB-rated bonds widened about 0.75 percentage points as slower
economic growth in 1995 increased fear of a recession in 1996.
-- We and many others believe that the U.S. economy can now sustain annual
GDP growth and CPI inflation rates of 2.5% to 3%. Therefore, the outlook
for domestic debt and equity markets remains positive for 1996.
THE FUND
-- From January through December 1995, the total return of the Fund's
shares was 18.55%; the Lipper average was 17.11%. Improvement in the
Fund's performance promoted sales that led to a 84% increase in its net
assets, which rose from $2.59MM to $4.77MM in 1995.
-- The Fund's performance was enhanced by changes in portfolio allocations
that anticipated changes in the markets. We cut investments in cash
equivalents from 18% to 4% of the portfolio and underweighted
investments in the retail, gaming and capital goods industries. We
increased investments in the telecommunications, cable and broadcasting
industries and in emerging markets.
-- High yield bonds that were issued with equity securities or rights
attached ("equity kickers") benefited from high stock prices and
contributed to the Fund's high total return (e.g., Echostar and
Thermoscan).
CURRENT STRATEGY
- Continue above-average exposure in non-cyclical industries and in bonds
that have equity kickers.
- Invest in companies that will benefit from deregulation, and very
cautiously invest in emerging markets and cyclicals with due regard for
the volatility in those market segments.
- --------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 12/31/95) TOTAL NET ASSETS: $4,773,469
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS TOP 5 INDUSTRIES CREDIT QUALITY
NAME % FUND INDUSTRY % FUND RATING % FUND
<S> <C> <C> <C> <C> <C>
1 BCP/Essex Holdings 4.1 1 Broadcasting/Cable 13.6 AAA-A 1.6
2 Intracel 3.2 2 Telecommunications 9.8 BBB 2.2
3 Rep. of Brazil 3.2 3 Steel 7.3 BB 21.0
4 IXC Communications 2.3 4 Paper 6.9 B 50.7
5 LaRoche Industries 2.2 5 Conglomerate 6.4 CCC 2.5
6 Williamhouse-Regency 2.2 44.0% Not Rated 13.6
7 Grand Casinos 2.2 - Internal BB 3.2
8 Paxson Communications 2.2 - Internal B 10.4
9 Paramount Communications 2.1 - Internal CCC/D 0.0
10 Norcal Waste Systems 2.1 Cash/Other Assets 8.4
25.8% 100.0%
(Average Rating = BB-)
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY UNITS VALUE
________________________________________________________________________________
<S> <C> <C>
DOMESTIC CORPORATE BONDS & NOTES - 62.76%
BANKING - 1.63%
Berkeley Federal Bank and Trust
12.00%, Subordinated Debentures, 6/15/05 $75,000 $77,625
BROADCASTING/CABLE - 11.26%
Chancellor Broadcasting Co.
12.50%, Sr. Subordinated Notes, 10/01/04 75,000 80,625
Echostar Communications Corp.
0/12.875%, Units, 6/01/04 (1) (2) 100 73,500
Panamsat Corp.
0/11.375%,Sr. Subordinated Notes, 100,000 82,000
8/01/03 (1) Paxson Communications Corp.
11.625%, Sr. Subordinated Notes, 100,000 103,000
10/01/02 (3) Pegasus Media & Communications
, Inc.
12.50%, Notes, 7/01/05 100,000 100,000
Spanish Broadcasting Systems, Inc.
7.50/12.50%, Sr. Notes, 6/15/02 (1) 100,000 98,500
537,625
CONGLOMERATE - 2.24%
LaRoche Industries, Inc.
13.00%, Sr. Subordinated Notes, 8/15/04 100,000 106,750
CONSUMER PRODUCTS - 3.72%
Marvel Holding, Inc.
0%, Sr. Secured Discount Notes, 4/15/98 100,000 72,000
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
Williamhouse - Regency, Inc.
13.00%, Sr. Subordinated Notes, 100,000 105,500
11/15/05 (3)
177,500
ENERGY - 1.98%
California Energy
0/10.25%, Discount Notes, 1/15/04 (1) 100,000 94,500
ENTERTAINMENT - 2.15%
Paramount Communications, Inc.
8.25%, Sr. Notes, 8/01/22 100,000 102,647
FINANCE - 5.60%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 100,000 95,500
GPA Delaware, Inc.
8.75%, Sr. Notes, 12/15/98 75,000 70,687
HMC Acquisition Properties, Inc.
9.00%, Sr. Notes, 12/15/07 (3) 100,000 101,250
267,437
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY UNITS VALUE
________________________________________________________________________________
<S> <C> <C>
FOOD SERVICE - 1.63%
American Restaurant Group, Inc.
12.00%, Sr. Notes, 9/15/98 $100,000 $78,000
FOOD WHOLESALER - 1.30%
Di Giorgio Corp.
12.00%, Sr. Notes, 2/15/03 75,000 62,250
GROCERY - 5.62%
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 100,000 86,500
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 100,000 82,500
Ralphs Grocery Co.
11.00%, Sr. Subordinated Notes, 6/15/05 100,000 99,250
268,250
HEALTHCARE - 1.64%
Columbia/HCA Healthcare Corp.
6.91%, Notes, 6/15/05 75,000 78,299
HOTELS & GAMING - 2.19%
Grand Casinos, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 100,000 104,750
RETAIL - 1.52%
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
Duane Reade Corp.
12.00%, Sr. Notes, 9/15/02 75,000 72,750
STEEL - 7.20%
Acme Metals, Inc.
0/13.50%, Sr. Secured Discount Notes, 100,000 80,625
8/01/04 (1) NS Group, Inc.
13.50%, Units, 7/15/03 (4) 100 90,000
Renco Metals, Inc.
12.00%, Sr. Notes, 7/15/00 75,000 81,375
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes, 11/01/01 100,000 91,500
343,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY UNITS VALUE
________________________________________________________________________________
<S> <C> <C>
TELECOMMUNICATIONS - 9.61%
Geotek Communication, Inc.
0/15.00%, Sr. Discount Notes, 7/15/05 (1) $100,000 $ 47,500
Heartland Wireless Communications, Inc.
13.00%, Units, 4/15/03 (3) (5) 75 85,500
IXC Communications, Inc.
12.50%, Sr. Notes, 10/01/05 (3) 100,000 107,250
Mobile Telecommunication Technologies Corp.
13.50%, Sr. Notes, 12/15/02 75,000 83,625
Nextel Communications, Inc.
0/9.75%, Sr. Discount Notes, 8/15/04 (1) 100,000 55,000
WinStar Communications, Inc.
0/14.00%, Units, 10/15/05 (1) (3) (6) 50 79,750
458,625
TRANSPORTATION - 1.35%
Burlington Motor Holdings, Inc.
11.50%, Sr. Subordinated Notes, 100,000 18,500
11/01/03 (8) (11) Great Dane Holdings, Inc.
12.75%, Sr. Subordinated Debentures, 50,000 45,875
8/01/01
64,375
WASTE MANAGEMENT - 2.12%
Norcal Waste Systems Inc.
12.50%, Sr. Subordinated Notes, 100,000 101,250
11/15/05 (3)
TOTAL DOMESTIC CORPORATE BONDS & NOTES
(cost $3,003,543) 2,996,133
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
FOREIGN BONDS & NOTES - 19.04%
BANKING - 1.64%
Banco Nacional de Comercio Exterior
7.25%, Unsecured Debentures, 2/02/04 100,000 78,375
BROADCASTING/CABLE - 1.83%
Comcast UK Cable Partners Ltd.
0/11.20%, Sr. Discount Debentures, 150,000 87,375
11/15/07 (1)
CONSUMER PRODUCTS - 1.15%
International Semi-Tech Corp.
0/11.50%, Sr. Secured Notes, 8/15/03 (1) 100,000 54,750
FOOD/BEVERAGE - 1.54%
Gruma SA de CV
9.75%, Sr. Notes, 3/09/98 75,000 73,312
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/
SECURITY SHARES VALUE
________________________________________________________________________________
<S> <C> <C>
FOREIGN GOVERNMENT - 3.17%
Federal Republic of Brazil Capitalization
Bonds 8.00%, Government Guaranty, $265,302 $151,222
4/15/14 (7)
PAPER - 6.03%
APP International Finance Co.
11.75%, Guaranteed Sr. Secured Notes, 100,000 98,000
10/01/05 Empaques Ponderosa SA
8.75%, Sr. Notes, 12/06/96 75,000 73,125
Grupo Industrial Durango
12.00%, Notes, 7/15/01 75,000 66,750
Indah Kiat International Finance
12.50%, Guaranteed Sr. Secured Notes, 50,000 49,750
6/15/06
287,625
UTILITIES - 3.68%
CE Casecnan Water and Energy Co.
11.45%, Sr. Notes, 11/15/05 (3) 100,000 101,250
Invergas SA
12.50%, Sr. Notes, 12/16/99 75,000 74,625
175,875
TOTAL FOREIGN BONDS & NOTES
(Cost $865,795) 908,534
DOMESTIC COMMON STOCK - 1.34% (8)
BROADCASTING/CABLE - 0.06%
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
Pegasus Media & Communications, Inc. (3) 10 3,000
ELECTRICAL EQUIPMENT - 1.28%
Berg Electronics Holding Corp. 8,160 61,200
HOTELS & GAMING - 0.00%
Capital Gaming International, Inc. 1,135 142
TOTAL DOMESTIC COMMON STOCK
(cost $61,706) 64,342
DOMESTIC PREFERRED STOCK - 9.73%
BANKING - 1.18%
First Nationwide Bank 11.50% 500 56,125
CONGLOMERATE - 4.10%
BCP/Essex Holdings 15.00% 7,378 195,517
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
________________________________________________________________________________
<S> <C> <C>
HEALTHCARE - 4.45%
Foxmeyer Health Corp $4.20 (9) 1,620 $ 60,548
Intracel Corp. 8.00%, Series A (10) 12,526 151,878
212,426
TOTAL DOMESTIC PREFERRED STOCK
(cost $392,159) 464,068
DOMESTIC WARRANTS - 1.65% (8)
BROADCASTING/CABLE - 0.44%
Spanish Broadcasting Systems, Inc. (expire 6/30/99) 100 21,000
CONSUMER PRODUCTS - 0.00%
Chattem, Inc. (expires 8/17/99) (3) 50 138
HOTELS & GAMING - 0.00%
Capital Gaming International, Inc. (expires 2/01/99) 1,012 35
PAPER - 0.87%
SDW Holdings Corp. (expiration 2006) (3) 6,400 41,600
RETAIL - 0.13%
Central Rents, Inc. (expiration 2003) 100 6,000
STEEL - 0.05%
Sheffield Steel Corp. (expires 11/01/01) 500 2,500
TELECOMMUNICATIONS - 0.16%
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
Geotek Communications Inc. (expiration 2000) 3,000 7,500
TOTAL DOMESTIC WARRANTS
(cost $67,063) 78,773
TOTAL INVESTMENTS SECURITIES - 94.52%
(cost $4,390,266) 4,511,850
REPURCHASE AGREEMENTS - 4.21%
Agreement with State Street Bank and
Trust bearing interest at 5.25% dated
12/29/95, to be repurchased 1/02/96
in the amount of $201,117 and
collateralized by $205,000 U.S. Treasury
Notes, 6.875% due 10/31/96, value $209,847
(cost $201,088) $201,000 201,088
OTHER ASSETS LESS LIABILITIES - 1.27% 60,531
NET ASSETS - 100.00% $4,773,469
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
________________________________________________________________________________
(1) Step bond.
(2) A unit consists of $1,000 par value 12.875%, Sr. Discount Notes, 6/01/04
and 6 warrants.
(3) Sale restricted to qualified institutional investors.
(4) A unit consists of $1,000 par value 13.50%, Sr. Secured Notes, 7/15/03
and 1 warrant.
(5) A unit consists of $1,000 par value 13.00%, Sr. Notes, 4/15/03 and 6
warrants.
(6) A unit consists of $2,000 par value 14.00%, Sr. Discount Notes, 10/15/05
and 1,000 par value Convertible Sr. Subordinated Notes.
(7) Interest paid partial cash/partial capitalization.
(8) Non-income producing securities.
(9) Payment-in-kind security.
(10) Private Placement.
(11) Defaulted security.
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
NORTHSTAR/NWNL TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $3,102,511, $6,205,499, $3,464,827
and $4,390,266, respectively). . . . . . . . . . . $3,451,914 $6,815,739 $3,571,443 $4,511,850
Repurchase agreements. . . . . . . . . . . . . . . 371,162 557,244 165,072 201,088
Cash . . . . . . . . . . . . . . . . . . . . . . . 95 668 603 288
Dividends and interest receivable. . . . . . . . . 5,978 66,630 49,481 85,531
Receivable due from adviser. . . . . . . . . . . . 1,621 - 1,095 914
Receivable for shares of beneficial interest sold - 1,062 - -
Prepaid expenses . . . . . . . . . . . . . . . . . 1,990 2,038 1,992 2,008
---------- ---------- ---------- ----------
Total Assets. . . . . . . . . . . . . . . . . 3,832,760 7,443,381 3,789,686 4,801,679
---------- ---------- ---------- ----------
LIABILITIES:
Management fees payable. . . . . . . . . . . . . . 6,850 13,049 6,706 8,719
Audit fee payable. . . . . . . . . . . . . . . . . 6,817 10,443 10,414 10,399
Custodians & fund accounting fees payable. . . . . 3,072 4,701 2,993 4,362
Administrative services fees payable . . . . . . . 913 1,740 894 1,163
Printing fees payable. . . . . . . . . . . . . . . 777 776 777 776
Other liabilities. . . . . . . . . . . . . . . . . 1,037 2,179 2,170 2,791
---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
Total Liabilities . . . . . . . . . . . . 19,466 32,888 23,954 28,210
---------- ---------- ---------- ----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . $3,813,294 $7,410,493 $3,765,732 $4,773,469
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest,
$.01 par value outstanding
(unlimited shares authorized)
Paid in capital . . . . . . . . . . . . . . . . . $3,415,671 $6,800,520 $3,669,418 $4,696,141
Undistributed (overdistributed)
net investment income . . . . . . . . . . . . . . 3,583 (275) 2,782 3,725
Accumulated net realized gain (loss) on investments 44,637 8 (13,084) (47,981)
Net unrealized appreciation of investments . . . . 349,403 610,240 106,616 121,584
---------- ---------- ---------- ----------
NET ASSETS. . . . . . . . . . . . . . . . . . $3,813,294 $7,410,493 $3,765,732 $4,773,469
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Asset Value Per Share ($3,813,294/329,728 shares,
$7,410,493/650,852 shares, $3,765,732/732,659 shares
and $4,773,469/946,532 shares, respectively).. . . $11.56 $11.39 $5.14 $5.04
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
NORTHSTAR/NWNL TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (net of withholding tax of $305, $288, $0,
and $0, respectively) . . . . . . . . . . . . . $61,233 $93,452 $13,106 $15,515
Interest (net of withholding tax of $0, $0, $657,
and $1,055, respectively) . . . . . . . . . . . 20,676 143,976 285,000 408,146
----------- ----------- ------------ ----------
Total investment income . . . . . . . . . . . . . 81,909 237,428 298,106 423,661
----------- ----------- ------------ ----------
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
EXPENSES
Investment advisory and management fees . . . . . 23,854 40,195 23,984 27,922
Custodian and fund accounting fees. . . . . . . . 19,845 24,505 17,266 24,330
Audit fees. . . . . . . . . . . . . . . . . . . . 10,142 13,768 13,739 13,724
Trustee fees and expenses . . . . . . . . . . . . 4,681 4,887 4,663 4,780
Administrative service fees . . . . . . . . . . . 3,180 5,359 3,198 3,723
Registration fees . . . . . . . . . . . . . . . . 1,080 1,894 1,183 1,622
Legal fees. . . . . . . . . . . . . . . . . . . . 901 1,184 893 982
Insurance expense . . . . . . . . . . . . . . . . 399 447 401 418
Miscellaneous expenses. . . . . . . . . . . . . . 825 1,094 824 824
----------- ----------- ------------ ----------
64,907 93,333 66,151 78,325
Less expenses reimbursed by investment adviser. . 39,351 50,661 40,437 48,482
----------- ----------- ------------ ----------
Total expenses. . . . . . . . . . . . . . . 25,556 42,672 25,714 29,843
----------- ----------- ------------ ----------
Net investment income . . . . . . . . . . . . . . 56,353 194,756 272,392 393,818
----------- ----------- ------------ ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
. . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gain(loss) on investments. . . . . . 283,906 170,332 (10,020) (46,687)
Net change in unrealized appreciation of investments 338,855 642,622 185,291 281,787
----------- ----------- ------------ ----------
Net realized and unrealized gain on investments 622,761 812,954 175,271 235,100
----------- ----------- ------------ ----------
Increase in net assets resulting from operations. $679,114 $1,007,710 $447,663 $628,918
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
NORTHSTAR/NWNL TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income . . . . . . . . . . . . . . $56,353 $194,756 $272,392 $393,818
Net realized gain (loss) on investments . . . . . 283,906 170,332 (10,020) (46,687)
Net change in unrealized appreciation
of investments . . . . . . . . . . . . . . . . 338,855 642,622 185,291 281,787
----------- ----------- ------------ ----------
Increase in net assets resulting
from operations. . . . . . . . . . . . . . . . 679,114 1,007,710 447,663 628,918
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . (52,710) (195,505) (269,960) (387,799)
Net realized gain on investments. . . . . . . . . (235,625) (163,759) - -
----------- ----------- ------------ ----------
(288,335) (359,264) (269,960) (387,799)
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares. . . . . . . . . 468,249 3,826,113 951,319 1,731,908
Net asset value of shares issued to
shareholders in reinvestment of dividends. . . 288,334 364,564 271,848 395,812
----------- ----------- ------------ ----------
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
756,583 4,190,677 1,223,167 2,127,720
Cost of shares redeemed . . . . . . . . . . . . . (35,007) (1,023,212) (351,281) (183,528)
----------- ----------- ------------ ----------
Net increase in net assets derived from capital
share transactions. . . . . . . . . . . . . 721,576 3,167,465 871,886 1,944,192
----------- ----------- ------------ ----------
Net increase in net assets. . . . . . . . . . . . 1,112,355 3,815,911 1,049,589 2,185,311
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . 2,700,939 3,594,582 2,716,143 2,588,158
----------- ----------- ------------ ----------
End of year (including (overdistributed)
undistributed net investment income of $3,583,
($275), $2,782 and $3,725 respectively) . . . . . $3,813,294 $7,410,493 $3,765,732 $4,773,469
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
NORTHSTAR/NWNL TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MAY 6, 1994 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income.. . . . . . . . . . . . . . $ 40,463 $ 56,590 $ 121,217 $ 144,652
Net realized gain (loss) on investments . . . . . 35,404 19,899 (3,064) (1,294)
Net change in unrealized appreciation
(depreciation) of investments. . . . . . . . . 10,548 (32,382) (78,675) (160,203)
----------- ----------- ------------ ----------
Increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . 86,415 44,107 39,478 (16,845)
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . (40,523) (56,116) (120,867) (146,946)
Net realized gain on investments. . . . . . . . . (39,048) (26,464) - -
----------- ----------- ------------ ----------
(79,571) (82,580) (120,867) (146,946)
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares. . . . . . . . . 2,603,764 3,550,327 2,658,072 2,610,124
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
Net asset value of shares issued to
shareholders in reinvestment of dividends. . . 79,571 82,580 118,629 138,933
----------- ----------- ------------ ----------
2,683,335 3,632,907 2,776,701 2,749,057
Cost of shares redeemed . . . . . . . . . . . . . (14,240) (24,852) (4,169) (22,108)
----------- ----------- ------------ ----------
Net increase in net assets derived from capital
share transactions . . . . . . . . . . . . . . 2,669,095 3,608,055 2,772,532 2,726,949
----------- ----------- ------------ ----------
Net increase in net assets. . . . . . . . . . . . 2,675,939 3,569,582 2,691,143 2,563,158
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . 25,000 25,000 25,000 25,000
----------- ----------- ------------ ----------
End of period (including (overdistributed)
undistributed net investment income of ($60),
$474, $350, and ($2,294), respectively) . . . . . $2,700,939 $3,594,582 $2,716,143 $2,588,158
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
NORTHSTAR/NWNL TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
RATIO OF RATIO OF NET
NET ASSET NET REALIZED & TOTAL DIVIDENDS DISTRIBUTIONS
RATIO OF
EXPENSE INVESTMENT
VALUE, NET UNREALIZED FROM DECLARED FROM NET DECLARED
NET ASSET NET ASSETS, EXPENSES
REIMBURSEMENT INCOME
BEGINNING INVESTMENT GAIN(LOSS) ON INVESTMENT INVESTMENT FROM NET
TOTAL VALUE, END END OF PERIOD TO AVERAGE
TO AVERAGE TO AVERAGE PORTFOLIO
PERIOD ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME REALIZED GAINS
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S) NET ASSETS(1)
NET ASSETS(1) NET ASSETS(1) TURNOVER
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NORTHSTAR GROWTH FUND
5/06/94-
12/31/94 $10.00 $0.16 $0.19 $0.35 ($0.16) ($0.15) ($0.31) $10.04 3.47% $2,701 1.00% 1.45% 2.31% 61%
12/31//95 10.04 0.20 2.27 2.47 (0.19) (0.76) (0.95) 11.56 24.78 3,813 0.80 1.24 1.77 123
NORTHSTAR INCOME AND GROWTH FUND
5/06/94-
12/31/94 10.00 0.20 (0.01) 0.19 (0.20) (0.07) (0.27) 9.92 2.02 3,595 1.00 1.43 3.11 45
12/31/95 9.92 0.37 1.73 2.10 (0.37) (0.26) (0.63) 11.39 21.39 7,410 0.80 0.94 3.63 74
NORTHSTAR MULTI-SECTOR BOND FUND
5/06/94-
12/31/94 5.00 0.23 (0.15) 0.08 (0.23) - (0.23) 4.85 1.41 2,716 1.00 1.41 7.03 29
12/31/95 4.85 0.42 0.29 0.71 (0.42) - (0.42) 5.14 14.97 3,766 0.80 1.26 8.52 83
NORTHSTAR HIGH YIELD BOND FUND
5/06/94-
12/31/94 5.00 0.28 (0.31) (0.03) (0.28) - (0.28) 4.69 (0.95) 2,588 1.00 1.55 8.62 62
12/31/95 4.69 0.50 0.34 0.84 (0.49) - (0.49) 5.04 18.55 4,773 0.80 1.31 10.61 157
</TABLE>
(1) Annualized for the period May 6, 1994 (commencement of operations) through
December 31, 1994.
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
NORTHSTAR/NWNL TRUST
Notes to Financial Statements - December 31, 1995
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. The Northstar/NWNL Trust is a business trust organized under the
laws of the Commonwealth of Massachusetts on December 17, 1993. The names of the
four investment series which comprise the Trust (the "Funds") and their
respective investment objectives are set forth below. Each Fund commenced
offering shares on May 6, 1994.
NORTHSTAR GROWTH FUND ("GROWTH FUND") is a diversified portfolio with
an investment objective of long-term growth of capital through investments
in common stocks and convertible securities that the Adviser believes
provide above average potential for capital appreciation.
NORTHSTAR INCOME AND GROWTH FUND ("INCOME AND GROWTH FUND") is a
diversified portfolio with the investment objective of current income
balanced with the objective of achieving capital appreciation. The Fund
will seek to achieve its objective through investments in a diversified
group of securities selected for their prospects of current yield and
capital appreciation.
NORTHSTAR MULTI-SECTOR BOND FUND ("MULTI-SECTOR FUND") is a
diversified portfolio whose investment objective is to maximize current
income. The Fund seeks to achieve its objective by investing in U.S.
Government Bonds, Foreign Government Bonds, Investment Grade Bonds and High
Yield Bonds, each as defined in the Prospectus for the Trust.
NORTHSTAR HIGH YIELD BOND FUND ("HIGH YIELD FUND") is a diversified
portfolio whose investment objective is to seek high income. The Fund
invests primarily in a diversified group of high yield, high risk fixed
income securities, convertible securities, securities issued by U.S.
companies in foreign currencies, and securities issued by foreign
governments and companies.
MANAGEMENT'S USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the dates of the financial statements and the reported amounts of
income and expenses during the reporting periods. Actual results could differ
from those estimates.
SECURITY VALUATION. Equity securities are valued at closing sales 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.
SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTION TO
SHAREHOLDERS. Security transactions are recorded on the trade date. Realized
gains or losses on sales of investments are calculated on the identified cost
basis. Interest income is recorded on the accrual basis except when collection
is not expected; discounts are accrued, and premiums amortized to par at
maturity; dividend income is recorded on the ex-dividend dates. Dividends from
net investment income were declared and paid quarterly by the Funds.
Distributions of net realized capital gains, if any, are declared annually;
however, to the extent that a net realized capital gain can be reduced by a
capital loss carryover, such gain will not be distributed. Distributions to
shareholders from net investment income and net realized gain from security
transactions are reinvested at net asset value by each Fund on the ex-dividend
date.
REPURCHASE AGREEMENTS. The Funds' custodian takes possession of collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a marked-to-market basis to assure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default on 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.
53
<PAGE>
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 respective shareholders. Therefore, no
Federal income tax provision is required.
ORGANIZATION COSTS. Costs incurred by the Trust in connection with its
organization of each Fund have been deferred and are being amortized over a
period of five years from the date the Funds commenced operations.
NOTE 2. INVESTMENT ADVISER AND ADMINISTRATOR. Northstar Investment Management
Corporation (the "Adviser") serves as each Fund's investment adviser. Each Fund
pays the Adviser an investment advisory fee calculated at an annual rate of .75%
of average daily net assets. For the twelve months ended December 31, 1995,
the Adviser earned $115,955 in investment advisory fees. Northstar
Administrators Corporation (the "Administrator"), an affiliate of the Adviser,
serves as each Fund's administrator. Each Fund pays the Administrator a fee
calculated at an annual rate of .10% of average daily net assets. For the
fiscal year ended December 31, 1995 the Administrator earned $15,460 in
administrative fees. The Adviser has agreed that if a Fund's total operating
expenses exceed .80% annually, the Adviser will reimburse the Fund for amounts
in excess of such limit. For the twelve months ended December 31, 1995, the
Adviser has reimbursed the Growth Fund $39,351, Income and Growth Fund $50,661,
Multi-Sector Fund $40,437 and High Yield Fund $48,482. At December 31, 1995, the
Adviser owed the Growth Fund $1,621, Multi-Sector Fund $1,095, and High Yield
Fund $914.
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 year ended December 31, 1995 were as
follows:
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
___________ ___________ ___________ ___________
Aggregate Purchases $3,916,137 $6,824,816 $3,637,469 $7,356,218
Aggregate Sales 3,606,845 3,575,520 2,466,343 5,347,046
U.S. government securities included above were as follows:
Aggregate Purchases 104,366 1,865,952 1,010,703 514,531
Aggregate Sales - 272,266 517,719 517,500
NOTE 4. PORTFOLIO SECURITIES (TAX BASIS)
The cost of securities for federal income tax purposes and the aggregate
appreciation and depreciation of securities at December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
Cost (tax basis) $3,107,040 $6,214,558 $3,464,827 $4,390,266
Appreciated Securities 490,064 763,301 151,139 289,742
Depreciated Securities (145,190) (162,120) (44,523) (168,158)
___________ ___________ ___________ ___________
Net Unrealized Appreciation/
Depreciation $ 344,874 $ 601,181 $ 106,616 $ 121,584
___________ ___________ ___________ ___________
</TABLE>
54
<PAGE>
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the year ended December 31, 1995
were as follows:
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
___________ ___________ ___________ ___________
Shares Sold 38,726 354,306 189,321 351,466
Reinvested Dividends 25,089 32,124 53,452 79,938
Shares Repurchased ( 2,987) (97,818) (70,223) (37,102)
___________ ___________ ___________ ___________
Net Increase 60,828 288,612 172,550 394,302
___________ ___________ ___________ ___________
Transactions in capital shares of each Fund for the period ended December 31,
1994 were as follows:
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
___________ ___________ ___________ ___________
Shares Sold 260,131 353,916 531,796 522,837
Reinvested Dividends 7,904 8,260 24,153 28,983
Shares Repurchased (1,385) (2,436) (840) (4,590)
___________ ___________ ___________ ___________
Net Increase 266,650 359,740 555,109 547,230
___________ ___________ ___________ ___________
NOTE 6. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Yield Fund had 62.76%
of its portfolio invested in lower rated and comparable quality unrated high
yield securities. Investments in higher yield securities are accompanied by a
greater degree of credit risk and such lower rated securities tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities, because such securities are generally unsecured and
are often subordinated to other creditors of the issuer. At December 31, 1995,
the High Yield Fund held Burlington Motor Holdings, Inc., a security in
default. The value of this security represented $18,500 or 0.39% of the High
Yield Fund's net assets. For financial reporting purposes, it is each Fund's
accounting practice to discontinue accrual of income and provide an estimate for
probable losses due to unpaid interest income on defaulted bonds for the current
reporting period.
NOTE 7. FEDERAL INCOME TAX - CAPITAL LOSS CARRYFORWARD
At December 31, 1995, High Yield Fund had capital loss carryforwards expiring
December 31, 2002 and 2003 of $1,294 and $20,337, respectively. Multi-Sector
Fund and High Yield Fund had post October capital loss deferrals of $13,084 and
$26,650, respectively.
55
<PAGE>
NORTHSTAR/NWNL TRUST
Report of Independent Accountants
To Shareholders and Trustees
of Northstar/NWNL Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of the Northstar/NWNL Trust, (comprising,
respectively, the Northstar Growth Fund, the Northstar Income and Growth Fund,
the Northstar Multi-Sector Bond Fund, and the Northstar High Yield Bond Fund
(the "Funds")), as of December 31, 1995 and the related statements of operations
for the year then ended, the statements of changes in net assets, and the
financial highlights for the year then ended and for the period May 6, 1994
(commencement of operations) to December 31, 1994. 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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/NWNL Trust as of December 31,
1995, 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
January 31, 1996
56
