<PAGE>
NORTHSTAR/NWNL TRUST
NORTHSTAR GROWTH FUND
NORTHSTAR INCOME AND GROWTH FUND
NORTHSTAR MULTI-SECTOR BOND FUND
NORTHSTAR HIGH YIELD BOND FUND
SEMI-ANNUAL REPORT TO SHAREHOLDERS
JUNE 30, 1996
<PAGE>
NORTHSTAR/NWNL TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1996
Dear Shareholders:
We are pleased to provide you with the semiannual report of the Northstar Funds
for the six month period ended June 30, 1996. We are gratified with your
decision to entrust your assets to Northstar and are confident that we can
assist you in reaching your financial objectives. Our goal is to provide you
with consistently superior investment results through the investment disciplines
we employ and the breadth and skill of our investment professionals. Following
this overview is a summary of the results of each Fund by its respective
portfolio manager. We hope you will find this letter and report informative.
The financial markets have been volatile in 1996. Significant changes in world
economic events have caused sharp changes in investor behavior so far this year.
The beginning of the year was marked by growing concerns that the U.S. economy
was slipping into a recession. This outlook kept interest rates on longer term
U.S. Treasuries near the low levels they reached in October 1995. Reacting to
the economy's slow growth in the fourth quarter of 1995, the Federal Reserve
lowered short term interest rates in late January 1996. All major stock indices,
which had moved sideways to close out 1995, started a record breaking rise with
the lowering of interest rates and reversal of confidence in continued growth.
During the first six months of 1996, the S&P 500 rose 8.88%, the NASDAQ
composite rose 12.63% and the Russell 2000 index rose 10.5%.
This low level of interest rates began to reverse itself in February as the
market reacted to robust job creation reports and additional indicators pointing
to potentially higher levels of inflation. Yields on ten year U.S. Treasury
Notes, which got as low as 5.5% on January 18, 1996, peaked at over 7% by early
June 1996. At the end of June, the combination of higher interest rates and
growing concerns over corporate profit margins sparked a significant correction
in the stock market during July. The S&P 500 declined more than 5%, but has now
recovered most of the loss.
Within the bond market, the high yield sector was a bright spot. Early in the
year, the higher yields supported the bond prices although demand was tempered
due to credit concerns. When the economic outlook improved, demand for high
yield bonds rose accordingly. This sector outperformed bonds in general and
treasuries in particular.
Now, as we look to the remainder of the second half, our portfolio managers
generally expect, to varying degrees, that the growth rate of the economy is
slowing, but is unlikely headed for recession. This suggests a continuing
reasonable environment for the financial markets.
We note with great conviction that attempts to "time" the market often prove
counterproductive. Investors are strongly urged to focus on the long term.
Consistent disciplined investing is the proven method of achieving attractive
returns and meeting your financial objectives. We continue to pursue this
philosophy and look forward to serving your investment needs in the future.
Sincerely,
Mark L. Lipson
President
August 14, 1996
<PAGE>
NORTHSTAR GROWTH FUND
THE MARKETS
(Bullet) During the first six months of 1996 the S&P 500 rose 8.88%, the NASDAQ
composite rose 12.63%, and the Dow Jones Industrials rose 10.50%.
(Bullet) The market was extremely volatile during the second quarter. April was
characterized by heavy institutional buying pressure, especially in
stocks with outstanding forecasted earnings's growth. This buying
pressure continued into May as Wall Street began to focus more on
small-to-mid cap stocks, and drove these markets to record highs in
early June. The markets then corrected sharply for the remainder of
June, as stronger than expected economic reports caused inflation
fears.
THE FUND
(Bullet) The Fund rose 22.08% compared to 10.08% for the Lipper Growth Fund
(Bullet) The Fund's performance was primarily fueled by having exposure to
small and mid cap stocks, while also focusing on stocks with superior
earnings characteristics.
CURRENT STRATEGY
(Bullet) After the correction in June, stocks look very attractive going
forward.
(Bullet) Interest rates are hovering near the 7% level, and earnings on most
fund holdings are coming in better than expected. Little downside risk
remains, with strong upside potential present in the stock market
currently.
(Bullet) We continue to aggressively purchase those stocks with the best
prospects to surprise Wall Street with their earnings to the upside.
The fund continues to be extremely diversified as the stock market
remains very volatile day-to-day.
FUND INFORMATION (ALL DATA ARE AS OF 6/30/96) TOTAL NET ASSETS: $8,367,399
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOP 10 EQUITY HOLDINGS 5 TOP SECTORS ASSET ALLOCATION
NAME % FUND SECTORS % FUND % FUND
1. PMT Services, Inc. 2.2% 1. Consumer Cyclical 15% Equities 81.3%
2. Chesapeake Energy 2.0 2. Healthcare 15 Cash/Other Assets 18.7
3. Jones Medical Industries 2.0 3. Technology 14 ----
4. Pairgain Technologies 1.9 4. Financial 9 100%
5. Protocol Systems 1.9 5. Consumer Staples 7
6. CIGNA Corp. 1.8 ---
7. Liz Claiborne, Inc. 1.8 60%
8. Becton Dickinson 1.7
9. Gap, Inc. 1.7
10. Iomega Corp. 1.7
---
18.7%
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
COMMON STOCKS - 81.33%
ADVANCED MEDICAL DEVICES - 5.11%
Guidant Corp. 1,500 $ 73,875
Hologic, Inc. @ 2,500 110,625
Protocol Systems, Inc. 7,000 161,000
VISX, Inc. @ 2,400 81,900
--------
427,400
AEROSPACE & DEFENSE - 0.85%
Oregon Metallurgical Corp. @ 2,400 70,800
--------
AGRICULTURAL MACHINERY - 1.14%
Delta & Pine Land Co. 2,250 95,063
--------
AIRLINES - 3.05%
Atlantic Coast Airlines, Inc. @ 5,000 65,312
Comair Holdings, Inc. 3,600 97,200
Continental Airlines, Inc. @ 1,500 92,625
-------
255,137
BANKING - 0.87%
Zions BanCorp. 1,000 72,750
--------
BIOTECHNOLOGY - 1.36%
Genetics Institute, Inc. @ 1,800 113,625
CHEMICALS - 1.61%
Albemarle Corp. 2,700 49,275
Cytec Industries, Inc. @ 1,000 85,500
--------
134,775
CLOTHING/FABRIC - 4.81%
Fila Holdings SpA ** 1,300 112,125
Gap, Inc. 4,400 141,350
Liz Claiborne, Inc. 4,300 148,888
-------
402,363
COMPUTER HARDWARE - 1.73%
Iomega Corp. @ 5,000 145,000
-------
COMPUTER SOFTWARE - 4.69%
Cadence Design Systems, Inc. @ 2,550 86,062
Control Data Systems, Inc. @ 3,900 83,362
HBO & Co. 1,000 67,750
Security Dynamics Technologies, Inc. @ 1,300 106,925
Structural Dynamics Research Corp. @ 2,200 48,400
--------
392,499
DATA COMMUNICATION/NETWORKING - 1.01%
Ascend Communications, Inc. 1,500 84,375
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
EDUCATION - 1.77%
Apollo Group, Inc. @ 2,550 $ 71,400
National Education Corp. @ 5,400 76,950
--------
148,350
ELECTRONICS - 2.39%
Cable Design Technologies Corp. @ 1,500 49,125
Computer Products, Inc. @ 4,500 77,063
Rexel, Inc. @ 5,200 73,450
--------
199,638
ENVIRONMENTAL CONTROL - 0.88%
U.S.A. Waste Services, Inc. @ 2,500 74,063
--------
FINANCIAL SERVICES - 3.60%
PMT Services, Inc. @ 6,500 186,063
Student Loan Marketing Association 600 44,400
The Money Store, Inc. 3,200 70,800
--------
301,263
FOOD - 2.88%
Hershey Foods Corp. 1,000 73,375
Safeway, Inc. @ 2,800 92,400
Supervalu, Inc. 2,400 75,600
--------
241,375
HEALTHCARE - 3.56%
ABR Information Services, Inc. @ 1,600 80,400
Access Health, Inc. @ 1,700 80,325
Healthsouth Corp. @ 1,600 57,600
Johnson & Johnson 1,600 79,200
--------
297,525
HOMEBUILDERS/HOME CONSTRUCTION - 1.35%
Cavalier Homes, Inc. 4,900 113,312
--------
HOUSEHOLD DURABLES - 0.55%
Aon Corp. 900 45,675
--------
INSURANCE - 4.58%
American Bankers Insurance Group, Inc. 2,600 111,663
CIGNA Corp. 1,300 153,237
Exel Ltd. 1,000 70,500
Penncorp Financial Group, Inc. 1,500 47,625
--------
383,025
LODGING - 1.00%
HFS, Inc. 1,200 84,000
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
MEDICAL SUPPLIES - 3.90%
Becton, Dickinson & Co. 1,800 $144,450
Kinetic Concepts, Inc. 3,500 54,250
OrthoLogic Corp. @ 10,000 127,500
--------
326,200
NATURAL GAS - 0.91%
Sonat Offshore Drilling Co. 1,500 75,750
--------
OFFICE EQUIPMENT/ SUPPLIES - 0.91%
Herman Miller, Inc. 2,500 76,563
--------
OIL - 2.77%
Chesapeake Energy Corp. @ 1,900 170,762
ENSCO International, Inc. @ 1,900 61,750
--------
232,512
OIL & GAS EXPLORATION - 2.75%
Diamond Offshore Drilling, Inc. @ 1,584 90,684
Global Marine, Inc. @ 7,700 106,837
Tuboscope Vetco International Corp. @ 2,900 32,263
--------
229,784
PHARMACEUTICAL - 1.99%
Jones Medical Industries, Inc. 5,000 166,250
-------
PRINTING/PAPER PRODUCTS - 1.02%
Day Runner, Inc. @ 3,300 85,387
--------
RECREATION PRODUCTS - 2.34%
Callaway Golf Co. 3,100 103,075
Nike, Inc. 900 92,475
--------
195,550
RESTAURANTS - 0.84%
Longhorn Steaks, Inc. @ 2,800 70,000
--------
RETAIL - 2.94%
Mercantile Stores Co., Inc. 1,200 70,350
Tiffany & Co. 1,200 87,600
Zale Corp. @ 5,200 87,750
--------
245,700
SEMICONDUCTOR - 0.77%
Vitesse Semiconductor Corp. @ 2,700 64,800
--------
TECHNICAL SERVICES - 0.60%
Raychem Corp. 700 50,313
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Shares/
Security Principal Amount Value
<S> <C> <C>
TECHNOLOGY - 2.44%
Input/Output, Inc. @ 2,400 $ 77,700
Quintiles Transnational Corp. @ 1,200 78,900
Zoltek Co., Inc. @ 1,400 47,950
--------
204,550
TELECOMMUNICATION - 2.86%
Aspect Telecommunications Corp. @ 1,300 64,350
Loral Space & Communications Corp. @ 1,000 13,625
Pairgain Technologies, Inc. @ 2,600 161,200
-------
239,175
TELEPHONE SYSTEMS - 1.86%
Cincinnati Bell, Inc. 2,100 109,463
Sprint Corp. 1,100 46,200
--------
155,663
TEMPORARY STAFFING - 0.94%
AccuStaff, Inc. @ 2,900 79,025
--------
TOYS & AMUSEMENTS - 1.35%
Lewis Galoob Toys, Inc. @ 4,000 113,000
-------
UTILITIES - 1.35%
AGL Resources, Inc. 6,100 113,103
-------
TOTAL COMMON STOCKS
(cost $ 6,090,497) 6,805,338
----------
TOTAL INVESTMENT SECURITIES - 81.33%
(cost $ 6,090,497) 6,805,338
REPURCHASE AGREEMENT - 15.80%
Agreement with State Street Bank and Trust bearing interest at 4.90% dated
6/28/96, to be repurchased 7/01/96 in the amount of $1,322,540 and
collateralized by $1,325,000 U.S. Treasury Notes, 6.00% due 8/31/97, value
$1,350,717
(cost $1,322,000) $1,322,000 1,322,000
Other assets less liabilities - 2.87% 240,061
NET ASSETS - 100.00% $8,367,399
==========
</TABLE>
@ Non-income producing.
** American Depository Receipts.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
THE MARKETS
(Bullet) Much of the economic strength was the lagged result of low interest
rates in 1995, as financially sensitive sectors experienced
improvement.
(Bullet) While short term rates remained around 5.25% for the period, longer
term rates sharply increased, as market participants were concerned
about the possibility of rising inflation.
(Bullet) Equity markets moved up in the period, although the amount of gain
varied widely by sector. The Dow Jones Industrial Average was up
10.50%, while the S&P 500 gained 8.88%, and the NASDAQ rose 12.63%.
(Bullet) In contrast to equities, the bond market experienced falling prices as
interest rates rose, with Treasuries due in 30 years rising from 6.67%
at the end of March to 6.87% at the end of June.
THE FUND
(Bullet) For the six months ended June 30, the Fund provided a total rate of
return of +3.74%, reflecting moderate capital appreciation plus income
received.
(Bullet) Asset allocation for stocks remained relatively unchanged over the six
months at approximately 50% of assets. We somewhat reduced our
holdings of straight long term bonds in the period from 31% at the end
of December to 18% at the end of June. Proceeds were invested in
convertible bonds and convertible preferred issues. Equity holdings
with little or no dividends were substantially lowered, and proceeds
reinvested in stocks of companies paying somewhat larger dividends.
(Bullet) The Fund's concentration among industry groups continued to favor
consumer staples, pharmaceuticals, healthcare, financial services,
energy, and selected industrial issues.
CURRENT STRATEGY
(Bullet) In view of the substantial run-up in prices of many equity and equity
related convertible issues, we continue to search for securities which
provide a good combination of reasonable price, growth potential, and
dividend or interest income.
(Bullet) Since economic conditions may well slow in the second half of the
year, we are focusing on areas of the economy which should have above
average growth, such as the drug and healthcare areas, certain
financial services, and selected industrial companies who are leaders
in their fields.
(Bullet) We expect to continue to emphasize issues with above average income
for both equity and fixed income holdings in our asset allocation over
the balance of the year.
FUND INFORMATION (ALL DATA ARE AS OF 6/30/96) TOTAL NET ASSETS: $9,909,367
TOP 10 HOLDINGS 5 TOP SECTORS ASSET ALLOCATION
NAME % FUND SECTORS % FUND % FUND
1. GNMA 14.0% 1. Capital Goods 16% Equities 68.5%
2. General Electric 4.9 2. Basic Industries 16 Bonds 27.8
3. Merrill Lynch 3.4 3. Energy 16 Cash/Other Assets 3.7
4. MMM 2.8 4. Financial 15 100.0%
5. Hilton Hotels Corp.2.7 5. Consumer Non-Durables 14
6. SFX Broadcasting 2.6 --
7. Philip Morris Co. 2.3 77%
8. Mobil 2.3
9. Eastman Kodak Co. 2.1
10. Eastman Chemical 1.9
39.0%
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
COMMON STOCK - 61.22%
AEROSPACE - 2.82%
Allied Signal, Inc. 1,500 $ 85,688
Boeing Co. 1,300 113,263
United Technologies Corp. 700 80,500
--------
279,451
AUTOMOTIVE - 3.10%
Chrysler Corp. 2,000 124,000
General Motors Corp. 1,300 68,088
Magna International, Inc. 2,500 115,000
-------
307,088
BANKING - 4.51%
Bankers Trust New York Corp. 1,300 96,038
Citicorp 1,800 148,725
J.P. Morgan & Co. 900 76,163
Mellon Bank Corp. 1,200 68,400
NationsBank Corp. 700 57,837
--------
447,163
BROADCASTING/CABLE TV - 5.99%
Merrill Lynch Co. "Cox Broadcasting" (1) 15,000 331,875
SFX Broadcasting, Inc. 5,000 261,250
-------
593,125
CHEMICAL - 4.47%
Dow Chemical Co. 1,200 91,200
Du Pont (E.I.) De Nemours & Co. 2,100 166,163
Eastman Chemical Co. 3,050 185,668
-------
443,031
CONSUMER STAPLE - 3.02%
Pepsico, Inc. 2,000 70,750
Philip Morris Companies, Inc. 2,200 228,799
-------
299,549
ELECTRICAL EQUIPMENT - 5.25%
AMP, Inc. 900 36,113
General Electric Co. 5,600 484,400
-------
520,513
ENERGY - 6.05%
Amoco Corp. 1,000 72,375
El Paso Natural Gas Co. 2,300 88,550
Exxon Corp. 100 8,688
Mobil Corp. 2,000 224,250
Sonat, Inc. 1,400 63,000
Texaco, Inc. 1,700 142,588
-------
599,451
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
ENERGY SERVICES - 1.68%
Baker Hughes, Inc. 2,500 $ 82,188
Schlumberger Ltd. 1,000 84,250
--------
166,438
FINANCIAL SERVICES - 3.69%
American Express Co. 1,800 80,325
Capital One Financial Corp. 4,000 114,000
Federal National Mortgage Association 1,700 56,950
Household International, Inc. 1,500 114,000
-------
365,275
HEALTHCARE/PHARMACEUTICAL - 3.12%
Bristol-Myers, Squibb Co. 1,400 126,000
Merck & Co., Inc. 1,400 90,475
Pharmacia & Upjohn, Inc. 2,100 93,188
--------
309,663
MACHINERY - 1.65%
Deere & Co. 2,000 80,000
McDermott International, Inc. 4,000 83,500
--------
163,500
MISCELLANEOUS - 2.75%
Minnesota Mining & Manufacturing Co. 3,950 272,550
-------
PAPER & FOREST PRODUCTS - 2.71%
International Paper Co. 2,150 79,281
Kimberly-Clark Corp. 1,790 138,278
Weyerhaeuser Co. 1,200 51,000
--------
268,559
REAL ESTATE INVESTMENT TRUSTS - 1.82%
General Growth Properties, Inc. 3,000 72,375
OMEGA Healthcare Investors, Inc. 3,900 107,738
-------
180,113
RETAIL - 2.14%
Home Depot, Inc. 2,300 124,200
Sears, Roebuck & Co. 1,200 87,861
--------
212,061
TECHNOLOGY - 4.89%
Eastman Kodak Co. 2,700 209,925
Electronic Data Systems Corp. 2,500 134,375
Engineering Animation, Inc. 400 8,000
Microsoft Corp. 1,100 132,138
-------
484,438
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Shares/
Security Principal Amount Value
<S> <C> <C>
TELECOMMUNICATIONS - 1.56%
AT&T Corp. 2,500 $155,000
--------
TOTAL COMMON STOCK
(cost $5,550,425) 6,066,968
---------
CONVERTIBLE PREFERRED STOCK - 7.31%
BROADCASTING/CABLE TV - 1.31%
Cablevision Systems Corp.
8.50%, Exchangeable Shares, 12/31/49 5,000 130,000
-------
CHEMICALS - 0.98%
Atlantic Richfield Co.
9.00%, Exchangeable Shares, 9/15/97 4,000 97,500
--------
ENERGY - 4.12%
Enron Corp.
6.25%, Exchangeable Shares, 12/13/98 2,000 51,750
Noram Financing Trust
6.25%, Exchangeable Shares, 6/30/26 2,000 108,500
Occidental Petroleum Corp.
3.875%, Exchangeable Shares, 12/31/49 # 2,000 119,432
MCN Corp.
8.75%, Exchangeable Shares, 4/30/99 5,000 127,500
-------
407,182
DIVERSIFIED INDUSTRIES - 0.90%
Westinghouse Electric Corp.
$1.30, Exchangeable Notes, 5/31/96 # 5,000 89,374
--------
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $715,651) 724,056
-------
CONVERTIBLE BONDS - 10.25%
ENVIRONMENTAL CONTROL - 1.10%
United Waste Systems, Inc.
4.50%, Subordinated Notes, 6/01/01 # $100,000 108,708
-------
FINANCIAL SERVICES - 0.74%
CII Financial, Inc.
7.50%, Debentures, 9/15/01 80,000 73,050
-------
GAMING - 0.28%
Argosy Gaming Co.
12.00%, Subordinated Notes, 6/01/01 30,000 27,750
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
ELECTRICAL EQUIPMENT - 0.31%
Richey Electronics, Inc.
7.00%, Subordinated Notes, 3/01/06 # $ 30,000 $ 31,050
ENERGY - 1.64%
Pogo Producing Co.
5.50%, Subordinated Notes, 6/15/06 # 150,000 162,401
HOTELS & LODGING - 2.68%
Hilton Hotels Corp.
5.00%, Subordinated Notes, 5/15/06 250,000 266,250
-------
HEALTHCARE - 0.39%
Healthsource, Inc.
5.00%, Subordinated Notes, 3/01/03 # 50,000 38,622
REAL ESTATE INVESTMENT TRUST - 1.03%
Meditrust
7.50%, Debentures, 3/01/01 100,000 101,967
-------
SEMICONDUCTOR - 0.76%
Cyrix Corp.
5.50%, Subordinated Notes, 6/01/01 # 100,000 75,625
TECHNOLOGY - 0.97%
Apple Computer, Inc.
6.00%, Subordinated Notes, 6/01/01 # 100,000 96,045
TRANSPORTATION - 0.35%
Alaska Air Group, Inc.
6.50%, Debentures, 6/15/05 25,000 34,381
--------
TOTAL CONVERTIBLE BONDS
(cost $1,007,572) 1,015,849
---------
CORPORATE BONDS - 2.70% INSURANCE - 1.27% Leucadia National Corp.
8.25%, Sr. Subordinated Notes, 6/15/05 125,000 125,550
TRANSPORTATION - 1.43%
Continental Airlines Trust
7.82%, Pass Through Certificate, 10/15/13 # 150,000 142,163
TOTAL CORPORATE BONDS
(cost $277,568) 267,713
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
U.S. GOVERNMENT SECURITIES - 14.85%
GNMA, 6.50%, 2/15/26 $1,493,614 $1,390,913
GNMA, 6.50%, 3/01/03 86,464 80,518
--------
TOTAL U.S. GOVERNMENT SECURITIES
(cost $1,572,695) 1,471,431
TOTAL INVESTMENTS SECURITIES - 96.33%
(cost $9,123,911) 9,546,017
---------
REPURCHASE AGREEMENTS - 3.75%
Agreement with State Street Bank and Trust bearing interest at 4.90% dated
6/28/96, to be repurchased 7/01/96 in the amount of $372,152 and collateralized
by $375,000 U.S. Treasury Notes, 6,00% due 8/31/97, value $382,278 (cost
$372,000) 372,000 372,000
Liabilities in excess of other assets - (0.08%) -- (8,650)
NET ASSETS - 100.00% $9,909,367
==========
</TABLE>
# Sale restricted to qualified institutional investors.
(1) Strypes - Structured yield product exchangeable for stock.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
THE MARKETS
(Bullet) Most bond prices fell sharply in the first six months of 1996.
Treasury yields rose above 7% and closed the semester just below that
level. That happened because accelerating growth raised expectations
for the beginning of a new round of increases in the fed funds rate
and inflation. High yield bond prices fell the least of all domestic
bonds, due to strong demand for their high coupons and rising stock
valuations. Spreads of high yield bonds over 10-year Treasury yields
remained about 3.2% and spreads of B-rated bonds' yields over those of
BB-rated bonds remained about 2.0% during the period. Strength in
corporate profits and in liquidity supported stock prices against the
ill-effects of rising rates.
(Bullet) Emerging markets bonds greatly outperformed domestic bonds. They were
fundamentally stronger due to a broadened base of institutional buyers
and continued improvements in economic trends in those markets. Most
foreign corporates remained too expensive due to tight spreads and the
strengthening U.S. dollar.
(Bullet) We and others still believe that the U.S. economy will sustain annual
GDP growth and CPI inflation rates of 2.5% to 3%. Therefore, the
outlook for domestic debt and equity markets remains positive for
1996.
THE FUND
(Bullet) From January through June 1996, the total return of the Fund's shares
was 5.04%; the Lipper average was 3.25%. Net assets rose 35% from
$3.8MM to $5.1MM in the last six months. We expect the Fund's superior
performance to attract additional yet manageable amounts of new cash
to invest.
(Bullet) We made significant changes in the Fund's allocations in the last six
months. We reduced interest-sensitive investments, and investments in
U.S. government notes fell 11%. We increased investments in the
telecommunications and cable industries and in investment grade
foreign government bonds.
(Bullet) High yield bonds that were issued with equity securities or rights
attached ("equity kickers") benefited from high stock prices and
helped increase the Fund's total return (e.g., Geotek, Hyperion and
WinStar).
CURRENT STRATEGY
(Bullet) Continue above-average exposure in non-cyclical industries. Continue
to replace U.S. government bonds with higher-yielding investment grade
bonds that do not pose disproportionately higher risks. Reduce cash.
(Bullet) 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. Keep the Fund's duration
moderate.
FUND INFORMATION (ALL DATA ARE AS OF 6/30/96) TOTAL NET ASSETS: $5,064,679
<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 Note 18.0% U.S. Government Total 23% AAA-A 29.3%
2. GNMA 3.7 Investment Grade BBB 16.0
3. Italy Government 3.6 Domestic 7 BB 10.2
4. New Zealand Govt. 3.2 Foreign 9 B 29.1
5. APP Int'l Finance 3.0 Total 16 CCC 0.0
6. Panamerican Beverage 3.0 High Yield Not Rated 3.3
7. Poland Government 2.8 Domestic 27 Internal BB 0.0
8. Multicanal Particip. 2.6 Foreign 15 Internal B 3.3
9. EchoStar Satellite 2.5 Total 42 Internal CCC 0.0
10. Clearnet Communicat. 2.5 Equities 3 Cash/Other Assets 12.1
44.9% Cash 16
100.0% 100%
(Average Rating = BBB-)
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
DOMESTIC INVESTMENT GRADE SECURITIES - 7.10%
CONTAINER - 1.07%
Owens-Illinois, Inc.
11.00%, Sr. Debentures, 12/01/03 $ 50,000 $ 53,875
ENTERTAINMENT - 1.85%
Paramount Communications, Inc.
8.25%, Debentures, 8/01/22 100,000 93,635
-------
INSURANCE - 2.13%
Leucadia National Corp.
10.375%, Sr. Subordinated Notes, 6/15/02 100,000 108,000
-------
UTILITY - 2.05%
Boston Edison Co.
9.375%, Debentures, 8/15/21 100,000 103,876
-------
TOTAL DOMESTIC INVESTMENT GRADE SECURITIES
(cost $352,917) 359,386
-------
FOREIGN INVESTMENT GRADE SECURITIES - 8.96%
FOOD AND BEVERAGE - 2.98%
Panamerican Beverages, Inc.
8.125%, Sr. Notes, 4/01/03 150,000 150,634
-------
FOREIGN GOVERNMENT - 5.98%
Republic of New Zealand
8.00%, Government Guaranty, 11/15/06 250,000 163,592
Poland Government
2.75%/5.00%, Government Guaranty, 10/27/24 $ # 250,000 139,375
-------
302,967
TOTAL FOREIGN INVESTMENT GRADE SECURITIES
(cost $458,577) 453,601
-------
DOMESTIC HIGH YIELD SECURITIES - 26.87%
BROADCASTING - 6.55%
Commodore Media, Inc.
7.50%/13.25%, Sr. Subordinated Notes, 5/01/03 $ 100,000 103,500
EchoStar Satellite Broadcasting Corp.
0%/13.125%, Sr. Secured Discount Notes, 3/15/04 $ # 200,000 128,000
Spanish Broadcasting System, Inc.
7.50%/12.50%, Sr. Notes, 6/15/02 $ 100,000 100,250
-------
331,750
CHEMICALS - 2.13%
LaRoche Industries, Inc.
13.00%, Sr. Subordinated Notes, 8/15/04 100,000 107,750
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Principal Amount/
Security Units Value
<S> <C> <C>
CONSUMER PRODUCTS - 1.96%
Sweetheart Cup, Inc.
10.50%, Sr. Subordinated Notes, 9/01/03 $100,000 $ 99,500
FINANCE - 3.85%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 100,000 94,500
Central Rents, Inc.
12.875%, Sr. Notes, 12/15/03 100,000 100,500
-------
195,000
GROCERY - 3.57%
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 100,000 94,000
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 100,000 87,000
-------
181,000
STEEL - 1.76%
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes, 11/01/01 100,000 89,125
--------
TELECOMMUNICATIONS - 7.05%
Hyperion Telecommunications, Inc.
0%/13.00%, Units, 4/15/03 $ # (1) 150 84,375
Intelcom Group, Inc.
0%/12.50%, Sr. Discount Notes, 5/01/06 $ # 100,000 55,500
Intercel, Inc.
0%/12.00%, Sr. Discount Notes, 5/01/06 $ 150,000 82,500
Pagemart Nationwide, Inc.
0%/15.00%, Sr. Discount Notes, 2/01/05 $ 120,000 78,300
WinStar Communications, Inc.
0%/14.00%, Sr. Discount Notes, 10/15/05 $ 100,000 56,250
--------
356,925
TOTAL DOMESTIC HIGH YIELD SECURITIES
(cost $1,469,013) 1,361,050
----------
FOREIGN HIGH YIELD SECURITIES - 15.13%
PAPER - 4.53%
APP International Finance Co.
11.75%, Guaranteed Secured Notes, 10/01/05 150,000 153,750
Grupo Industrial Durango SA
12.00%, Notes, 7/15/01 5,000 75,563
--------
229,313
TELECOMMUNICATIONS - 2.47%
Clearnet Communications, Inc.
0%/14.75%, Units, 12/15/05 $ (2) 200 125,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Principal Amount/
Security Shares Value
<S> <C> <C>
UTILITIES - 4.55%
CE Casecnan Water and Energy Co.
11.95%, Sr. Notes, 11/15/10 # $100,000 $101,125
Multicanal Participacoes SA
12.625% Sr. Notes, 6/18/04 # 125,000 129,375
-------
230,500
FOREIGN GOVERNMENT - 3.58%
Republic of Italy
12.00%, Debentures, 1/01/03 (3) 245,000,000 181,552
TOTAL FOREIGN HIGH YIELD SECURITIES
(cost $639,066) 766,365
-------
CONVERTIBLE BONDS - 0.67% TELECOMMUNICATIONS - 0.67% WinStar Communications,
Inc.
0%/14.00%, Sr. Discount Notes, 10/15/05 $ # 50,000 34,125
--------
TOTAL CONVERTIBLE BONDS
(cost $31,902) 34,125
--------
PREFERRED STOCK - 2.82% @
CONGLOMERATE - 1.79%
BCP/Essex Holdings, Inc. 15.00% 3,350 90,450
OIL & GAS - 1.03%
Enron Capital Resources L.P. 9.00% 2,000 52,000
-------
TOTAL PREFERRED STOCK
(cost $131,588) 142,450
-------
WARRANTS - 0.05% @
CONSUMER PRODUCTS - 0.02%
Chattem, Inc. (expires 8/17/99) # 50 813
STEEL - 0.03%
Sheffield Steel Corp. (expires 11/01/01) 500 1,625
TOTAL WARRANTS
(cost $2,000) 2,438
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES - 22.56%
GNMA, 7.00%, 2/15/26 $195,366 $187,427
Resolution Trust Corp., 8.00%, 6/25/26 46,427 44,668
U.S. Treasury Notes, 6.75%, 5/31/99 900,000 910,584
-------
TOTAL U.S. GOVERNMENT & AGENCIES
(cost $1,138,141) 1,142,679
---------
TOTAL INVESTMENTS SECURITIES - 84.16%
(cost $4,223,204) 4,262,094
---------
REPURCHASE AGREEMENTS - 9.12%
Agreement with State Street Bank and Trust bearing interest at 4.90% dated
06/28/96, to be repurchased 07/01/96 in the amount $462,189 and collateralized
$465,000 U.S. Treasury Notes, 6.00% due 8/31/97, value $474,025
(cost $462,200) 462,000 462,000
Other assets less liabilities - 6.72% 340,585
-------
NET ASSETS - 100.00% $5,064,679
==========
</TABLE>
# Sale restricted to qualified institutional investors.
$ Step Bond.
@ Non-income producing securities.
& Payment in kind
(1) Unit consist of $1,000 par value 13.00%, Sr. Discount Notes, 4/15/03 and
1 warrant.
(2) Unit consist of $1000 par value 14.75%, Sr. Discount Notes, 12/15/05 and 33
warrants.
(3) The principal amount is shown in the respective country's currency.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
THE MARKETS
(Bullet) Treasury bonds began 1996 with yields below 6%. However, job growth
was much stronger than expected and annualized GDP grew as fast as 4%
during the last six months, causing fears of inflation and rate
increases by the Federal Reserve Board. The yields on both the 10- and
30-year Treasury bonds exceeded 7% in June, but managed to close under
7% by the end of the first half. Strength in corporate profits and in
liquidity supported stock prices against the ill-effects of rising
rates.
(Bullet) High yield bond prices fell the least of all domestic bonds, due to
strong demand for their high coupons and rising stock valuations.
Stronger economic growth limited fears of a recession, so investors
were more willing to buy corporate bonds. Spreads of high yield bonds
over 10-yr. Treasury yields fell to 3.2% and spreads of B-rated bonds'
yields over those of BB-rated bonds fell to 2% in the first half.
(Bullet) We and others still believe that the U.S. economy will sustain annual
GDP growth and CPI inflation rates of 2.5% to 3%. Therefore, the
outlook for domestic debt and equity markets remains positive for the
rest of 1996.
THE FUND
(Bullet) From January through June 1996, the total return of the Fund's shares
was 8.42%; the Lipper average was 4.84%. Net assets rose from $4.8MM
to $4.9MM in the last six months. We expect the Fund's superior
performance to attract additional yet manageable amounts of new cash
to invest.
(Bullet) The Fund's performance in the last six months was enhanced by changes
in portfolio allocations. We reduced investments in consumer products
and cable bonds. We increased investments in the broadcasting, health
care, paper and telecommunications industries. Bonds not formally
rated rose significantly, but most were rated B by us. We continued to
underweight investments in the retail and capital goods and other
cyclical industries.
(Bullet) 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., Intracel and
EchoStar).
CURRENT STRATEGY
(Bullet) Continue above-average exposure in non-cyclical industries and in
bonds that have equity kickers while maintaining a credit rating of at
least B+.
(Bullet) 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. Reduce cash balances.
FUND INFORMATION (ALL DATA ARE AS OF 6/30/96) TOTAL NET ASSETS: $4,863,686
<TABLE>
<CAPTION>
TOP 10 HOLDINGS TOP 5 INDUSTRIES CREDIT QUALITY
NAME % FUND INDUSTRY % FUND RATING % FUND
<S> <C> <C> <C> <C> <C> <C>
1. BCP/Essex Holdings 4.4% 1. Telecommunications 19.1% AAA-A 1.8%
2. Intracel 3.8 2. Broadcasting/Cable 13.2 BBB 1.9
3. APP Int'l Finance 3.2 3. Healthcare 8.9 BB 20.4
4. EchoStar Communication 2.7 4. Paper 7.9 B 46.2
5. Clearnet Communications 2.6 5. Utilities 3.7 CCC 1.3
6. Laroche Industries 2.2 52.8% Not Rated 16.4
7. Dade International 2.1 Internal BB 1.7
8. Benton Oil & Gas 2.1 Internal B 14.3
9. Commodore Media 2.1 Internal CCC/D 0.4
10. Chancellor Radio 2.1 Cash/Other Assets 12.0
27.3% 100.0%
(Average Rating = B+)
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
DOMESTIC CORPORATE BONDS & NOTES - 50.34%
BROADCASTING - 8.62%
Commodore Media, Inc.
7.50%/13.25%, Sr. Subordinated Notes, 5/01/03 $ $100,000 $103,500
Echostar Satellite Broadcasting Corp.
0%/13.125%, Sr. Secured Discount Notes, 3/15/04 $ # 200,000 128,000
Panamsat Corp.
0%/11.375%, Sr. Subordinated Notes, 8/01/03 $ 100,000 87,500
Spanish Broadcasting Systems, Inc.
7.50%/12.50%, Sr. Notes, 6/15/02 $ 100,000 100,250
-------
419,250
CABLE - 1.68%
Heartland Wireless Communications, Inc.
13.00%, Sr. Notes, 4/15/03 75,000 81,750
--------
CONGLOMERATE - 2.22% LaRoche Industries, Inc.
13.00%, Sr. Subordinated Notes, 8/15/04 100,000 107,750
-------
CONSUMER PRODUCTS - 2.05%
Sweetheart Cup, Inc.
10.50%, Sr. Subordinated Notes, 9/01/03 100,000 99,500
--------
ENERGY - 2.13%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 # 100,000 103,500
-------
ENTERTAINMENT - 1.92%
Paramount Communications, Inc.
8.25%, Sr. Debentures, 8/01/22 100,000 93,635
--------
FINANCE - 1.94%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 100,000 94,500
--------
GROCERY - 3.72%
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 100,000 94,000
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 100,000 87,000
--------
181,000
HEALTHCARE - 4.08%
Dade International, Inc.
11.125%, Sr. Subordinated Notes, 5/01/06 # 100,000 104,000
Unilab Corp.
11.00%, Sr. Notes, 4/01/06 100,000 94,500
--------
198,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Principal Amount/
Security Units Value
<S> <C> <C>
HOTELS & GAMING - 2.07%
Trump Atlantic City Funding, Inc.
11.25%, 1st Mortgage Notes, 5/01/06 $100,000 $100,775
-------
MISCELLANEOUS SERVICES - 1.28%
La Petite Holdings Corp.
9.625%, Sr. Secured Notes, 8/01/01 65,000 62,075
--------
RETAIL - 2.07%
Central Rents, Inc.
12.875%, Sr. Notes, 12/15/03 100,000 100,500
-------
STEEL - 3.71%
Acme Metals, Inc.
0%/13.50%, Sr. Secured Discount Notes, 8/01/04 $ 100,000 91,125
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes, 11/01/01 100,000 89,125
--------
180,250
TELECOMMUNICATIONS - 11.77%
Arch Communications Group, Inc.
0%/10.875%, Sr. Discount Notes, 3/15/08 $ 100,000 52,000
Brooks Fiber Properties, Inc.
0%/10.875%, Sr. Discount Notes, 03/01/06 $ # 150,000 80,250
Geotek Communication, Inc.
0%/15.00%, Sr. Discount Notes, 7/15/05 $ 100,000 63,750
Hyperion Communications, Inc.
0%/13.00%, Units, 4/15/03 $ # (1) 150 84,375
Intelcom Group, Inc.
0%/12.50%, Sr. Discount Notes, 5/01/06 $ # 100,000 55,500
Intercel, Inc.
0%/12.00%, Sr. Discount Notes, 5/01/06 $ 150,000 82,500
Pagemart Nationwide, Inc.
0%/15.00%, Sr. Discount Notes, 2/01/05 $ 150,000 97,875
WinStar Communications, Inc.
0%/14.00%, Sr. Discount Notes, 10/15/05 $ 100,000 56,250
--------
572,500
TRANSPORTATION - 1.08%
Burlington Motor Holdings, Inc.
11.50%, Sr. Subordinated Notes, 11/01/03 * 100,000 4,500
Great Dane Holdings, Inc.
12.75%, Sr. Subordinated Debentures, 8/01/01 50,000 48,250
--------
52,750
TOTAL DOMESTIC CORPORATE BONDS & NOTES
(cost $2,513,724) 2,448,235
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Principal Amount/
Security Units/Shares Value
<S> <C> <C>
FOREIGN BONDS & NOTES - 16.22%
CONSUMER PRODUCTS - 1.19%
International Semi-Tech Corp.
0%/11.50%, Sr. Secured Notes, 8/15/03 $ $100,000 $ 58,125
PAPER - 7.14%
APP International Finance Co.
11.75%, Guaranteed Secured Notes, 10/01/05 150,000 153,750
Grupo Industrial Durango SA
12.00%, Notes, 7/15/01 75,000 75,563
Indah Kiat International Finance
12.50%, Guaranteed Sr. Secured Notes, 6/15/06 50,000 53,250
Mallete, Inc.
12.25%, Sr. Secured Notes, 7/15/04 61,000 64,660
--------
347,223
TELECOMMUNICATIONS - 4.15%
Clearnet Communications, Inc.
0%/14.75%, Units, 12/15/05 $ (2) 200 125,000
Occidente Y Caribe Celular SA
0%/14.00%, Units, 3/15/04 $ # (3) 150 76,875
201,875
UTILITIES - 3.74%
CE Casecnan Water and Energy Co.
11.95%, Sr. Notes, 11/15/10 # 100,000 101,125
Invergas SA
12.50%, Sr. Notes, 12/16/99 75,000 80,625
--------
181,750
TOTAL FOREIGN BONDS & NOTES
(cost $755,321) 788,973
-------
CONVERTIBLE BONDS - 0.70%
TELECOMMUNICATIONS - 0.70%
WinStar Communications, Inc.
0%/14.00%, Sr. Discount Notes, 10/15/05 $ # 50,000 34,125
--------
TOTAL CONVERTIBLE BONDS
(cost $30,433) 34,125
------
DOMESTIC PREFERRED STOCK - 14.69%
BROADCASTING/CABLE - 2.11%
Chancellor Broadcasting Co. 12.25% # & 1,000 102,500
CONGLOMERATE - 4.41%
BCP/Essex Holdings 15.00% 7,942 214,434
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
HEALTHCARE - 4.79%
Foxmeyer Health Corp. $4.20 & 1,705 $ 46,035
Intracel Corp. 8.00%, Series A (4) 12,777 186,864
-------
232,899
MISCELLANEOUS SERVICES - 1.31%
La Petite Holdings Corp. 12.125% 2,000 64,000
TELECOMMUNICATIONS - 2.07%
Benedek Communications Corp. 15.00% # 1,000 100,500
TOTAL DOMESTIC PREFERRED STOCK
(cost $602,795) 714,333
-------
DOMESTIC COMMON STOCK - 1.35% @
BROADCASTING - 0.38%
EchoStar Communications Corp. 450 12,712
Pegasus Media & Communications, Inc. # 10 6,000
18,712
ELECTRICAL EQUIPMENT - 0.97%
Berg Electronics Corp. 1,985 47,144
TOTAL DOMESTIC COMMON STOCK
(cost $60,362) 65,856
-------
DOMESTIC WARRANTS - 1.81% @
BROADCASTING/CABLE - 0.40%
Spanish Broadcasting Systems, Inc. (expires 6/30/99) 100 19,250
CABLE - 0.09%
Heartland Wireless Communication, Inc. (expiration 2000) 450 4,275
CONSUMER PRODUCTS - 0.02%
Chattem, Inc. (expires 8/17/99) # 50 812
FINANCE - 0.12%
Central Rents, Inc. (expiration 2003) 100 6,000
PAPER - 0.72%
SDW Holdings Corp. (expiration 2006) # 6,400 35,200
STEEL - 0.03%
Sheffield Steel Corp. (expires 11/01/01) 500 1,625
TELECOMMUNICATIONS - 0.43%
Geotek Communications Inc. (expiration 2000) 3,000 21,000
TOTAL DOMESTIC WARRANTS
(cost $62,500) 88,162
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
TOTAL INVESTMENT SECURITIES - 85.11%
(cost $4,025,135) $4,139,684
---------
REPURCHASE AGREEMENTS - 6.79%
Agreement with State Street Bank and Trust bearing interest at 4.90% dated
6/28/96, to be repurchased 7/01/96 in the amount of $330,135 and collateralized
by $335,000 U.S. Treasury Notes, 6.00% due 8/31/97, value $341,502
(cost $330,000) $330,000 330,000
Other assets less liabilities - 8.10% 394,002
NET ASSETS - 100.00% $4,863,686
==========
</TABLE>
$ Step bond.
# Sale restricted to qualified institutional investors.
* Defaulted security.
@ Non-income producing securities.
& Payment-in-kind security.
(1) A unit consists of $1,000 par value 13.00%, Sr. Discount Notes, 4/15/03 and
1 warrant.
(2) A unit consists of $1,000 par value 14.75%, Sr. Discount Notes, 12/15/05 and
33 warrants.
(3) A unit consists of $1,000 par value 0%/14.00%, Sr. Discount Notes, 3/15/04
and 4 warrants.
(4) Private Placement.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Northstar/NWNL Trust
Statement of Assets and Liabilities (UNAUDITED)
June 30, 1996
<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 securites at value (cost $6,090,497,
$9,123,911,$4,223,204 and $4,025,135, respectively) . . . $6,805,338 $9,546,017 $4,262,094 $4,139,684
Repurchase agreements . . . . . . . . . . . . . . . . . . . 1,322,000 372,000 462,000 330,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 783 697 753
Receivable for investments sold . . . . . . . . . . . . . . 400,812 0 305,790 355,860
Receivable for shares of beneficial interest sold . . . . . 188,700 813 1,472 0
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 1,887 2,141 1,894 1,950
Dividends and interest receivable . . . . . . . . . . . . . 1,343 39,530 57,288 60,725
Receivable due from adviser . . . . . . . . . . . . . . . . 172 179 108 59
_________ _________ _________ _________
Total Assets . . . . . . . . . . . . . . . . . 8,720,578 9,961,463 5,091,343 4,889,031
_________ _________ _________ _________
LIABILITIES:
Payable for investments purchased . . . . . . . . . . . . . 338,391 29,511 0 0
Custodian & fund accounting fees payable . . . . . . . . . 5,579 7,380 4,707 6,403
Management fees payable . . . . . . . . . . . . . . . . . . 4,236 5,986 3,080 2,910
Audit fee payable . . . . . . . . . . . . . . . . . . . . . 3,764 5,098 5,908 5,787
Administrative services fees payable . . . . . . . . . . . 565 798 411 388
Income distribution payable . . . . . . . . . . . . . . . . 0 0 7,070 7,216
Payable for fund shares repurchased . . . . . . . . . . . . 0 0 2,884 0
Other liabilities . . . . . . . . . . . . . . . . . . . . . 644 3,323 2,604 2,641
_________ _________ _________ _________
Total Liabilities . . . . . . . . . . . . . . . 353,179 52,096 26,664 25,345
_________ _________ _________ _________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $8,367,399 $9,909,367 $5,064,679 $4,863,686
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.01 par value out-standing
(unlimited shares authorized), Paid-in-Capital. . . . . . . . $7,195,560 $9,095,583 $4,931,693 $4,634,975
Undistributed net investment income. . . . . . . . . . . . . . 563 5,650 0 0
Accumulated net realized gain on investments. . . . . . . . . . 456,435 386,028 94,096 114,162
Net unrealized appreciation of investments. . . . . . . . . . . 714,841 422,106 38,890 114,549
_________ _________ _________ _________
NET ASSETS. . . . . . . . . . .. . . . . . . . . . . $8,367,399 $9,909,367 $5,064,679 $4,863,686
Net Asset Value Per Share ($8,367,399/596,269 shares,
$9,909,367/851,060 shares, $5,064,679/977,631 shares and
$4,863,686/933,718 shares, respectively). . . . . . . . . . . . . $14.03 $11.64 $5.18 $5.21
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
NORTHSTAR/NWNL TRUST
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<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 $57, $631 ,$0, and
$0, respectively) . . . . . . . . . . . . . . . . . . . . $28,735 $70,911 $6,828 $8,883
Interest . . . . . . . . . . . . . . . . . . . . . . . . 14,634 109,643 206,300 235,422
_________ _________ _________ _________
Total investment income . . . . . . . . . . . . . . . . . 43,369 180,554 213,128 244,305
--------- --------- --------- ---------
EXPENSES:
Investment adivisory and management fees . . . . . . . . 17,590 32,487 15,981 17,756
Custodian and fund accounting fees . . . . . . . . . . . 14,006 16,927 11,462 14,736
Proxy expense . . . . . . . . . . . . . . . . . . . . . . 9,793 0 0 0
Audit fees . . . . . . . . . . . . . . . . . . . . . . . 6,977 4,715 5,524 5,426
Administrative services fees . . . . . . . . . . . . . . 2,345 4,332 2,131 2,367
Printing expense . . . . . . . . . . . . . . . . . . . . 654 915 876 787
Legal fees . . . . . . . . . . . . . . . . . . . . . . . 79 167 83 105
Trustee fees and expenses . . . . . . . . . . . . . . . . 73 156 75 97
Registration fees . . . . . . . . . . . . . . . . . . . . 51 0 0 0
Miscellaneous expenses . . . . . . . . . . . . . . . . . 699 424 421 423
_________ _________ _________ _________
52,343 60,322 36,729 41,785
Less expenses reimbursed by investment adviser . . . . . . 33,591 25,732 19,500 22,864
_________ _________ _________ _________
Total expenses . . . . . . . . . . . . . . . 18,752 34,590 17,229 18,921
--------- --------- --------- ---------
Net investment income . . . . . . . . . . . . . . . . . . 24,617 145,964 195,899 225,384
--------- --------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments . . . . . . . . . . . . 411,798 386,020 107,180 162,143
Net change in unrealized appreciation (depreciation) of
investments . . . . . . . . . . . . . . . . . . . . . . . 365,438 (188,134) (67,726) (7,035)
--------- --------- --------- ---------
Net realized and unrealized gain on investments. . . . . 777,236 197,886 39,454 155,108
--------- --------- --------- ---------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . $801,853 $343,850 $235,353 $380,492
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Northstar/NWNL Trust
Statement of Changes in Net Assets (UNAUDITED)
For the six months ended June 30, 1996
<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 . . . . . . . . . . . . . . . . . . $24,617 $145,964 $195,899 $225,384
Net realized gain on investments . . . . . . . . . . . . 411,798 386,020 107,180 162,143
Net change in unrealized appreciation (depreciation) of
investments . . . . . . . . . . . . . . . . . . . . . . . 365,438 (188,134) (67,726) (7,035)
_________ _________ _________ _________
Increase in net assets resulting from operations . . . . 801,853 343,850 235,353 380,492
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . (27,637) (140,039) (198,681) (229,109)
_________ _________ _________ _________
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares . . . . . . . . . . . . 4,091,122 2,465,827 1,490,820 484,270
Net asset value of shares issued to shareholders in
reinvestment of dividends . . . . . . . . . . . . . . . . 27,637 140,039 191,611 221,893
_________ _________ _________ _________
4,118,759 2,605,866 1,682,431 706,163
Cost of shares redeemed . . . . . . . . . . . . . . . . . (338,870) (310,803) (420,156) (767,329)
_________ _________ _________ _________
Net increase (decrease) in net assets derived from
capital share transactions . . . . . . . . . . . . . . . 3,779,889 2,295,063 1,262,275 (61,166)
_________ _________ _________ ________
Net increase in net assets . . . . . . . . . . . . . . . 4,554,105 2,498,874 1,298,947 90,217
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . 3,813,294 7,410,493 3,765,732 4,773,469
_________ _________ _________ _________
End of period (including undistributed net investment
income: $563, $5,650, $0 and $0, respectively) . . . . . $8,367,399 $9,909,367 $5,064,679 $4,863,686
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
NORTHSTAR/NWNL TRUST
STATEMENT OF CHANGES IN NET ASSETS
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>
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
_________ _________ _________ _________
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 period . . . . . . . . . . . . . . . . . . . 2,700,939 3,594,582 2,716,143 2,588,158
--------- --------- --------- ---------
End of period (including undistributed (overdistributed)
net investment income: $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.
26
<PAGE>
NORTHSTAR/NWNL TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET ASSET NET REALIZED TOTAL DIVIDENDS DISTRIBUTIONS
VALUE, NET & UNREALIZED FROM DECLARED FROM DECLARED
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT NET INVEST- FROM NET TOTAL
PERIOD ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS MENT INCOME REALIZED GAINS DISTRIBUTIONS
- ----------- ---------- ---------- ---------- ---------- ---------- ----------- -------------
<S> <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)
12/31/95 10.04 0.20 2.27 2.47 (0.19) (0.76) (0.95)
6/30/96 (2) 11.56 0.06 2.48 2.54 (0.07) 0.00 (0.07)
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)
12/31/95 9.92 0.37 1.73 2.10 (0.37) (0.26) (0.63)
6/30/96 (2) 11.39 0.18 0.24 0.42 (0.17) 0.00 (0.17)
NORTHSTAR MULTI-SECTOR BOND FUND
5/06/94-
12/31/94 5.00 0.23 (0.15) 0.08 (0.23) 0.00 (0.23)
12/31/95 4.85 0.42 0.29 0.71 (0.42) 0.00 (0.42)
6/30/96 (2) 5.14 0.21 0.04 0.25 (0.21) 0.00 (0.21)
NORTHSTAR HIGH YIELD BOND FUND
5/06/94-
12/31/94 5.00 0.28 (0.31) (0.03) (0.28) 0.00 (0.28)
12/31/95 4.69 0.50 0.34 0.84 (0.49) 0.00 (0.49)
6/30/96 (2) 5.04 0.25 0.17 0.42 (0.25) 0.00 (0.25)
</TABLE>
(1) Annualized
(2) Unaudited
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
EXPENSE RATIO OF NET
NET ASSETS, RATIO OF REIMBURSEMENT INVESTMENT
NET ASSET END OF PERIOD EXPENSES TO TO INCOME TO
VALUE, END TOTAL (000'S) AVERAGE NET AVERAGE NET AVERAGE NET PORTFOLIO AVERAGE
OF PERIOD RETURN __________ ASSETS ASSETS ASSETS TURNOVER COMMISSIONS
- ---------- ---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.04 3.47% $2,701 1.00% (1) 1.45% (1) 2.31% (1) 61% - -
11.56 24.78 3,813 0.80 1.24 1.77 123 - -
14.03 22.08 8,367 0.80 (1) 1.43 (1) 1.05 (1) 116 $0.04
9.92 2.02 3,595 1.00 (1) 1.43 (1) 3.11 (1) 45 - -
11.39 21.39 7,410 0.80 0.94 3.63 74 - -
11.64 3.74 9,909 0.80 (1) 0.59 (1) 3.37 (1) 99 0.06
4.85 1.41 2,716 1.00 (1) 1.41 (1) 7.03 (1) 29 - -
5.14 14.97 3,766 0.80 1.36 8.52 83 - -
5.18 5.04 5,065 0.80 (1) 0.92 (1) 9.19 (1) 60 0.00
4.69 (0.95) 2,588 1.00 (1) 1.55 (1) 8.62 (1) 62 - -
5.04 18.55 4,773 0.80 1.31 10.61 157 - -
5.21 8.42 4,864 0.80 (1) 0.96 (1) 9.52 (1) 91 0.00
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
This page has been left blank intentionally.
<PAGE>
NORTHSTAR/NWNL TRUST
Notes to Financial Statements - June 30, 1996 (UNAUDITED)
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. Effective August 1, 1996, the Trust amended its
Declaration of Trust to change its name to Northstar Variable Trust.
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.
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 markers, 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(s) of financial statements and the reported amounts of
income and expenses during the reporting period(s).
Actual results could differ from those estimates.
SECURITY 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.
29
<PAGE>
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 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.
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
0.75% of average daily net assets. For the six months ended June 30, 1996, the
Adviser earned $83,814 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 0.10% of average daily net assets. For the six months ended June
30, 1996, the Administrator earned $11,175 in administrative fees. The Adviser
has agreed that if a Fund's total operating expenses exceed 0.80% annually, the
Adviser will reimburse the Fund for amounts in excess of such limit. For the six
months ended June 30, 1996, the Adviser has reimbursed the Growth Fund $33,591,
the Income and Growth Fund $25,732, the Multi-Sector Fund $19,500 and the High
Yield Fund $22,864.
NOTE 3. PURCHASES AND SALE OF INVESTMENT SECURITIES
The aggregate cost of purchases, and proceeds from sales of investments
(excluding short-term investments) for the six months ended June 30, 1996 were
as follows:
INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND FUND FUND
Aggregate Purchases $7,683,035 $10,557,420 3,030,279 $3,989,115
Aggregate Sales 5,106,847 8,013,301 2,313,344 4,598,408
U.S. Government Securities included above were as follows:
Aggregate Purchases $0 $0 $0 $0
Aggregate Sales 0 2,132,922 103,375 0
NOTE 4. PORTFOLIO SECURITIES (TAX BASIS)
The cost of securities for federal income tax purposes and the aggregate
appreciation and depreciation of securities at June 30, 1996 were as follows:
INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND FUND FUND
Cost (tax basis) $6,090,497 $9,123,911 $4,223,204 $4,025,135
Appreciated Securities 925,897 680,671 100,627 284,350
Depreciated Securities (211,056) (258,565) (61,737) (169,801)
----------------------------------------------------
Net Unrealized Appreciation $ 714,841 $ 422,106 $ 38,890 $ 114,549
---------------------------------------------------
30
<PAGE>
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the six months ended June 30,
1996 were as follows:
INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND FUND FUND
Shares Sold 292,482 215,437 289,128 93,574
Reinvested Dividends 2,124 12,118 37,164 42,879
Shares Repurchased (28,315) (27,347) (81,320) (149,267)
---------------------------------------------------------
Net Increase (decrease) 266,291 200,208 244,972 (12,814)
---------------------------------------------------------
Transactions in capital shares of each Fund for the twelve months ended December
31, 1995 were as follows:
INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND FUND FUND
Shares Sold 38,726 354,306 189,321 351,466
Reinvested Dividends 25,088 32,124 53,452 79,938
Shares Repurchased (2,987) (97,818) (70,223) (37,102)
--------------------------------------------------------
Net Increase 60,827 288,612 172,550 394,302
-------------------------------------------------------
NOTE 6. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Yield Fund had 64.64%
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 June 30, 1996, the
High Yield Fund held Burlington Motor Holdings, Inc. a security in default. The
value of this security represented $4,500 or 0.09% 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 June 30, 1996, High Yield Fund has 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.
31
