NORTHSTAR VARIABLE 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, 1996
<PAGE>
NORTHSTAR FUNDS
ANNUAL REPORT,
December 31, 1996
Dear Shareholders:
We are pleased to provide you with the annual report of the Northstar Funds for
the year ended December 31, 1996. We are gratified with your decision to entrust
your assets to the Northstar Funds and are confident that we can assist you in
reaching your financial objectives. Our goal is to provide you with consistent,
superior investment results through fundamental research, analysis, and
traditional investment disciplines. Following this letter is a summary of the
results of each Fund by their respective portfolio manager. We hope you will
find it informative.
During the past twelve months the U.S. financial markets have been strongly
supported by moderate growth in the economy, higher corporate profits, and
subdued inflation. Concerns that a slowdown late in 1995 would turn into a
recession in 1996 were dispelled as spending for housing and autos remained
strong bolstered by favorable interest rates, mortgage refinancing, increased
consumer borrowing, and tax refunds. The stock market began to reflect this in
February, rising sharply and broadening out to include small capitalization
stocks, not just the short list of blue chips that dominated late 1995 and early
1996. Likewise, the high yield bond market benefited from narrowing yield
spreads over U.S. Treasuries and rising confidence resulting in excellent
relative performance. A mid-year correction occurred, brought on by strong
second quarter growth igniting fears of inflation and profit margin pressure. It
proved short lived as the third quarter returned to a slower growth path with
subdued inflation. Also, the national election results preserved the political
balance reassuring the financial markets that neither extreme tax cuts nor
spending increases would derail progress towards balancing the budget.
Now in January, the Dow and S&P 500 are at record highs and long term
government bond yields have backed up slightly to 6.8%. Recent economic
indicators have been stronger than expected and initial December quarter
earnings reports have been good. The strength in equities since mid-year was
again centered on large-cap blue chips. Looking into 1997 the investment
environment continues to be favorable. There do not appear to be the type of
excesses present which would necessitate either a recession or an overheated
inflationary condition. The political situation suggests further progress
on the federal deficit, restrained spending, and possibly some tax cuts.
Personal incomes are rising and consumer sentiment is favorable. U.S.
trading partners are expected to see faster growth in 1997. Monetary policy
is neutral and could be eased if necessary.
In closing, we reiterate once again that attempts to "time" the market often
prove counterproductive. Investors are strongly urged to focus on the long term.
Consistent disciplined investing is the proven method of achieving attractive
returns and meeting your financial objectives. We continue to support this
philosophy and look forward to serving your investment needs in the future.
Sincerely,
Mark L. Lipson
President
January 1997
<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, 1996, 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.
Northstar Growth Fund
GROWTH
S&P 500 GROWTH
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 12,911
01/31/96 14,777 12,833
02/28/96 14,880 13,223
03/31/96 15,078 13,825
04/30/96 15,280 15,528
05/31/96 15,629 16,705
06/30/96 15,753 15,761
07/31/96 15,032 14,459
08/31/96 15,315 15,031
09/30/96 16,236 16,139
10/31/96 16,660 15,588
11/30/96 17,882 15,869
12/31/96 17,587 15,879
Average Annual Total Return
1-Year 15.99%
Since Inception 17.56%
PROXY RESULTS (UNAUDITED)
During the year ended December 31, 1996, Growth Fund shareholders
voted on the following proposal. The proposal was approved at approved at a
special meeting of shareholders on January 30, 1996.
Shares Shares
Voted For Voted Against Abstentions
- --------------------------------------------------------------------------------
To approve the Sub-Advisory agreement
between Northstar Investment Management
Corp., adviser to the Fund, and
Navellier Fund Management, Inc. 277,193 6,872 45,913
<PAGE>
NORTHSTAR GROWTH FUND
THE MARKETS
o During 1996 the S&P 500 rose 22.94%, Russell 2000 gained 16.54% and the
Dow Industrials was up 28.89%.
o The small cap sector led the way in the first two quarters of 1996. Wall
Street responded very positively to the earnings estimates and reports
posted by the small to mid cap stocks until the end of June. Analysts
were quite pleased with the economic environment until July, when
inflation fears led to a spike in interest rates. This prompted a rapid
selloff in most NASDAQ stocks. Technology and healthcare sectors,
normally the darlings of the small caps were punished and the more common
sectors like financial and energy stocks held their own. Most of the
NASDAQ Composite never recovered from this selloff. The strong returns
posted by the indexes for the year were driven by a relatively small
number of large cap stocks. According to a Bloomberg report, if you
removed the top 100 stocks from the NASDAQ Composite (5,500 issues), it
would have actually declined 2% on the year. Under these conditions,
the strength of the market was seen to be very narrow. We are
optimistic that the market will start to reward strong
earnings and begin to rotate back into growth stocks in 1997.
THE FUNDS
o From 12/31/95 to 12/31/96, the total return for the Fund was 22.99%
compared to 17.50% for the Lipper Growth Fund Index and 22.71%
for the NASDAQ Composite.
o The Fund's performance for the year was led by stocks like
Iomega, PairGain Technologies, Global Marine, Herman Miller,
Inc. and Chesapeake Energy.
CURRENT STRATEGY
o We expect a strong "January Effect" to help boost our stocks as fourth
quarter earnings are released. It is likely that many institutions will
take profits and rotate out of the large cap sector and into small to mid
cap stocks. We anticipate the current favorable economic environment to
continue through the year. It appears that the President is quite
interested in working with Congress to produce a balanced budget
amendment. This would certainly add some confidence to the market and lend
itself to interest rate stability. Although absolute gains for the market
for 1997 may not be higher than 1996, relative gains for growth portfolios
should be much better.
o Currently, our models are favoring the earnings surprise type screens,
such as standardized unexpected earnings (SUE). We are optimistic that
many of our NASDAQ stocks will release very strong earnings that will
drive their prices dramatically higher. We believe that the stocks we are
currently holding in our portfolios have superior fundamental
characteristics relative to the overall market.
<TABLE>
<CAPTION>
FUND INFORMATION (ALL DATA IS AS OF 12/31/96) TOTAL NET ASSETS: $15,563,732
TOP 10 HOLDINGS TOP 5 INDUSTRIES SEC AVERAGE ANNUAL RATES OF RETURN
NAME %FUND (by percentage of net asset) (at maximum applicable sales charges)
-------------------------------------
<S> <C>
(1) Jefferson-Pilot Corp. 2.3% Banks Inception 1 year
--------- ------
(2) Tubos de Acero de Mexico 2.0 17.56% 15.99%
(3) PanEnergy Corp. 2.0 Oil & Gas Exploration
(4) BMC Software, Inc. 1.7 [Bar Graph appears here] CUMULATIVE TOTAL RETURNS
(5) Bristol-Myers Squibb Co. 1.7 Oil (do not reflect sales charge)
(6) Plum Creek Timber Co. 1.7 Inception 1 year
(7) Paychex, Inc. 1.7 Insurance --------- ------
(8) Synetic, Inc. 1.7 58.79% 22.99%
(9) Commerce Bancshares, Inc. 1.6 Pharmaceuticals
(10) Herman Miller, Inc. 1.6
-----
18.0%
=====
</TABLE>
<PAGE>
Northstar Growth Fund
Portfolio of Investments
December 31, 1996
Security Shares Value
- -----------------------------------------------------------------------
COMMON STOCKS - 94.12%
Advanced Medical Devices - 1.71%
Synetic, Inc. @ 5,500 $ 266,750
----------
Aerospace & Defense - 1.87%
AlliedSignal, Inc. 3,200 214,400
Oregon Metallurgical Corp. @ 2,400 77,400
----------
291,800
-----------
Agricultural - 1.16%
Grupo Industrial Maseca SA de CV** 9,400 179,775
----------
Apparel/Fabric - 3.75%
Fruit of the Loom, Inc. @ 5,900 223,462
Jones Apparel Group, Inc. @ 5,900 220,512
St. John Knits, Inc. 3,200 139,200
----------
583,174
----------
Banks - 7.68%
Cal Fed Bancorp, Inc. @ 8,900 218,050
Commerce Bancshares, Inc. 5,415 250,444
Federal Home Loan Mortgage Corp. 2,000 220,250
First of America Bank Corp. 3,800 228,475
Northern Trust Corp. 2,800 101,500
Zions Bancorp. 1,700 176,800
----------
1,195,519
----------
Beverages - 0.82%
Anheuser-Busch Cos., Inc. 3,200 128,000
----------
Chemicals - 1.25%
Cytec Industries, Inc. @ 4,800 195,000
----------
Computer Software - 3.38%
BMC Software, Inc. @ 6,500 268,937
Paychex, Inc. 5,000 257,187
----------
526,124
----------
Data Communication/Networking - 0.60%
Ascend Communications, Inc. @ 1,500 93,188
----------
Diversified Technology - 1.75%
Diebold, Inc. 2,300 144,612
Zoltek Cos., Inc. @ 3,500 127,313
----------
271,925
----------
Education - 0.85%
Apollo Group, Inc. @ 3,950 132,078
----------
Electronics - 1.28%
Hubbell, Inc. 4,600 198,950
----------
<PAGE>
Northstar Growth Fund
Portfolio of Investments
December 31, 1996
Security Shares Value
- -----------------------------------------------------------------------
Financial Services - 2.09%
Alliance Capital Management L.P. 6,600 $ 175,725
Student Loan Marketing Association 1,600 149,000
----------
324,725
----------
Food - 4.23%
Campbell Soup Co. 2,100 168,525
Hershey Foods Corp. 4,500 196,875
Safeway, Inc. @ 2,800 119,700
Vons Cos., Inc. @ 2,900 173,638
----------
658,738
----------
Forest Products - 1.67%
Plum Creek Timber Co. 10,000 260,000
----------
Funeral/Cemetary Services - 0.24%
Stewart Enterprises, Inc. 1,100 37,400
-----------
Heavy Machinery/Construction - 1.02%
Smith International, Inc. @ 3,500 157,063
----------
Household Products - 1.01%
Fort Howard Corp. @ 5,700 157,819
----------
Industrial and Commercial Services - 3.28%
Southdown, Inc. 6,500 202,313
Tubos de Acero de Mexico SA @ ** 19,400 307,975
----------
510,288
----------
Insurance - 6.55%
Allstate Corp. 4,000 231,500
Conseco, Inc. 3,400 216,750
Jefferson-Pilot Corp. 6,400 362,400
Progressive Corp. 3,100 208,862
----------
1,019,512
----------
Lodging - 1.79%
HFS, Inc. @ 2,000 119,500
Prime Hospitality Corp. @ 9,900 159,638
---------
279,138
--------
Media - 0.73%
Infinity Broadcasting Corp. @ 3,400 114,325
---------
Natural Gas - 4.49%
Noble Affiliates, Inc. 3,900 186,712
PanEnergy Corp. 6,800 306,000
Transocean Offshore, Inc. 3,300 206,663
----------
699,375
----------
<PAGE>
Northstar Growth Fund
Portfolio of Investments
December 31, 1996
Security Shares Value
- -----------------------------------------------------------------------
Office Equipment/Supplies - 2.69% 4,800 $ 169,800
Avery Dennison Corp. 4,400 249,150
Herman Miller, Inc. ----------
418,950
----------
Oil - 7.07%
Atlantic Richfield Co. 1,700 225,250
British Petroleum Co. PLC ** 1,600 226,200
ENSCO International, Inc. @ 1,900 92,150
Murphy Oil Corp. 4,000 222,500
Santa Fe Energy Resources, Inc. @ 11,200 155,400
Snyder Oil Corp. 10,300 178,963
----------
1,100,463
----------
Oil & Gas Exploration - 7.62%
Camco International, Inc. 5,300 244,462
Global Marine, Inc. @ 7,700 158,812
Marine Drilling Cos., Inc. @ 5,400 106,313
Nabors Industries, Inc. @ 12,200 234,850
Reading & Bates Corp. @ 7,600 201,400
Tuboscope Vetco International Corp. @ 7,800 120,900
United Meridian Corp. @ 2,300 119,025
----------
1,185,762
----------
Pharmaceutical - 5.87%
American Home Products Corp. 2,600 152,425
Bristol-Myers Squibb Co. 2,400 261,000
Cardinal Health, Inc. 3,700 215,525
Jones Medical Industries, Inc. 5,000 183,125
Rhone-Poulenc Rorer, Inc. 1,300 101,563
-----------
913,638
-----------
Publishing - 1.38%
Houghton Mifflin Co. 3,800 215,175
-----------
Railroad - 1.34%
Conrail, Inc. 2,100 209,212
-----------
Real Estate Investment Trust - 1.43%
General Growth Properties 6,900 225,525
-----------
Recreation Products - 2.29%
Callaway Golf Co. 4,500 129,375
Nike, Inc. 3,800 227,050
-----------
356,425
-----------
Retailers - 1.16%
Nautica Enterprises, Inc. @ 5,200 131,300
Wet Seal, Inc. @ 2,300 49,163
-----------
180,463
-----------
<PAGE>
Northstar Growth Fund
Portfolio of Investments
December 31, 1996
Security Shares/ Value
Principal amount
- -----------------------------------------------------------------------
Semiconductor - 0.79%
Vitesse Semiconductor Corp. @ 2,700 $ 122,850
----------
Tobacco - 1.51%
Universal Corp. 7,300 234,512
----------
Telecommunications - 3.16%
Cascade Communications Corp. @ 2,200 121,275
Compania de Telecomunicaciones de Chile SA ** 2,100 212,362
PairGain Technologies, Inc. @ 5,200 158,275
----------
491,912
----------
Telephone Systems - 1.47%
Cincinnati Bell, Inc. 3,700 228,012
----------
Toys - 0.36%
Galoob Toys, Inc. @ 4,000 56,000
----------
Vehicle Parts & Equipment -1.63%
Gentex Corp. @ 3,500 70,438
Lancaster Colony Corp. 4,000 184,000
----------
254,438
----------
Water Companies - 1.15%
United Water Resources, Inc. 11,500 178,250
----------
Total Common Stocks
(cost $13,475,738) 14,649,253
----------
Total Investment Securities - 94.12%
(cost 13,475,738) 14,649,253
Repurchase Agreement - 7.80%
Agreement with State Street Bank and
Trust bearing interest at 5.10% dated
12/31/96 to be repurchased 1/02/97 in
the amount of $1,214,344 and
collateralized by $1,190,000 U.S.
Treasury Notes, 7.25% due 2/15/98,
value $1,242,063 (cost $1,214,000) $1,214,000 1,214,000
Liabilities in excess of other assets - (1.92)% (299,521)
----------
Net Assets - 100.00% $ 15,563,732
==========
@ Non-income producing security.
** American Depository Receipts.
The accompanying notes are an integral part of the financial statements.
<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, 1996, 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
INCOME & GROWTH
LEHMAN INCOME &
S&P 500 GOVT/CORP GROWTH
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
01/31/96 14,777 12,081 12,437
02/28/96 14,880 11,940 12,372
03/31/96 15,078 11,879 12,462
04/30/96 15,280 11,838 12,604
05/31/96 15,629 11,828 12,801
06/30/96 15,753 11,953 12,834
07/31/96 15,032 11,989 12,459
08/31/96 15,315 11,999 12,735
09/30/96 16,236 12,166 13,097
10/31/96 16,660 12,381 13,453
11/30/96 17,882 12,544 14,031
12/31/96 17,587 12,464 14,055
Average Annual Total Return
1-Year 6.61%
Since Inception 12.12%
PROXY RESULTS (UNAUDITED)
During the year ended December 31, 1996, Income and Growth Fund
shareholders voted on the following proposal. The proposal was approved at
approved at a special meeting of shareholders on July 31 1996.
Shares Shares
Voted For Voted Against Abstentions
- --------------------------------------------------------------------------------
To approve the Sub-Advisory agreement
between Northstar Investment Management
Corp., adviser to the Fund, and
Wilson/Bennett Capital Management, Inc. 796,011 6,979 48,071
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
THE MARKETS
o During 1996 the equity market returns were much stronger than most
forecasters had expected. The Dow Industrials rose 28.89%, the S&P 500
gained 22.94%, and the Russell 2000 was up 16.54%.
o Stock prices benefited from solid growth in the economy, good corporate
earnings increases, and very modest inflation and interest rate increases.
Demand remained strong all year due to mutual fund inflows, corporate buy
backs and some pick up in foreign buying.
o As the economy grew and employment rose, it caused persistent fears of
accelerating inflation. As a result, 10 and 30 year U.S. Treasury bonds
declined somewhat as rates ended the year 70 to 80 basis points higher at
6.42% and 6.64%, respectively. This kept the total return on most bonds
below 4% for the year. Corporate bonds continued to trade at very narrow
spreads versus treasuries offering relatively small incentives for higher
risk.
THE FUND
o For the year, the portfolio had an investment return of 13.80% which
compares favorably with most other balanced funds. For example, the
Lipper Balanced Fund Index was up 13.01%.
o The good performance was paced by over half the portfolio being invested
in equities. Numerous individual holdings were up over 20% for the year.
Examples include: Boeing, Mellon Bank, Philip Morris, Bristol-Myers, and
Merck. This was especially true during the second half of the year, after
the 10% market correction in June and July. Holdings were increasingly
concentrated in high quality, large cap, dividend paying stocks such as
those found in the Dow Industrials.
o Overall, the convertibles returned less than the equities and were
somewhat better than the straight bonds.
CURRENT STRATEGY
o We continue to view the outlook for the financial markets as favorable
going into 1997. While 4th quarter GDP growth may have been close to 4%,
we think it will moderate in 1997 extending the prospects of 2-3% growth
with 3 to 3.5% inflation and no recession.
o The number of equity holdings is being reduced and increasingly
concentrated in high quality blue chips with above average yields and good
earnings potential from international growth, restructuring, cost
reductions, and share buy backs.
o Also, the less liquid convertible preferreds and convertible bonds are
being reduced in favor of higher quality investment grade straight bonds.
This should help the yield somewhat but more importantly reduce the
potential risk that would exist during an economic downturn or equity
market correction.
o The target in early January is 60% large cap dividend paying stocks, 12%
investment grade convertible, and 28% investment grade bonds.
<TABLE>
<CAPTION>
FUND INFORMATION (ALL DATA IS AS OF 12/31/96) TOTAL NET ASSETS: $12,579,155
TOP 10 HOLDINGS SECTOR ALLOCATION SEC AVERAGE ANNUAL RATES OF RETURN
NAME %FUND (by percentage of net asset) (at maximum applicable sales charges)
-------------------------------------
<S> <C>
(1) GNMA 6.50%, 2/15/26 11.9% Equities Inception 1 year
(2) Philip Morris Cos., Inc. 4.6 --------- ------
(3) General Electric Co. 4.4 Convertibles 12.12% 6.61%
(4) Minnesota, Mining & Mfg. 4.3
(5) J.P. Morgan & Co., Inc. 3.8 Bonds [Bar Graph appears here] CUMULATIVE TOTAL RETURNS
(6) Eastman Kodak Co. 3.3 (do not reflect sales charge)
(7) Mobil Corp. 3.2 Cash ---------------------------------
(8) Finova, Inc. 3.1 Inception 1 year
(9) Texaco, Inc. 2.8 --------- ------
(10) Exxon Corp. 2.7 40.55% 13.80%
-----
44.1%
=====
</TABLE>
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Security Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 55.02%
Aerospace - 1.10%
Boeing Co. 1,300 $ 138,288
----------
Automotive - 3.64%
Chrysler Corp. 4,000 132,000
Ford Motor Co. 4,000 127,500
General Motors Corp. 3,550 197,912
----------
457,412
----------
Banking - 7.55%
Bankers Trust New York Corp. 3,100 267,375
Citicorp 500 51,500
J.P. Morgan & Co., Inc. 4,900 478,362
Mellon Bank Corp. 1,200 85,200
NationsBank Corp. 700 68,425
----------
950,862
----------
Chemical - 4.65%
Dow Chemical Co. 1,200 94,050
du Pont (E.I.) De Nemours & Co. 3,410 321,819
Eastman Chemical Co. 3,050 168,512
----------
584,381
----------
Consumer Products - 11.25%
Imation Corp. @ 395 11,109
Kimberly-Clark Corp. 1,790 170,497
Minnesota, Mining & Manufacturing Co. 6,450 534,544
Philip Morris Cos., Inc. 5,100 574,388
RJR Nabisco Holdings Corp. 3,650 124,100
----------
1,414,638
----------
Electrical Equipment - 4.40%
General Electric Co. 5,600 553,700
----------
Healthcare/Pharmaceutical - 2.09%
Bristol-Myers Squibb Co. 1,400 152,250
Merck & Co., Inc. 1,400 110,950
----------
263,200
----------
Oil & Gas - 10.98%
Chevron Corp. 4,400 286,000
Exxon Corp. 3,500 343,000
Mobil Corp. 3,300 403,425
Texaco, Inc. 3,550 348,344
----------
1,380,769
----------
Paper & Forest Products - 1.92%
International Paper Co. 4,575 184,716
Weyerhaeuser Co. 1,200 56,850
----------
241,566
----------
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Security Shares Value
- --------------------------------------------------------------------------------
Photography - 3.32%
Eastman Kodak Co. 5,200 $ 417,300
----------
Retail - 0.99%
Sears, Roebuck & Co. 2,700 124,538
----------
Technology - 0.66%
Lucent Technologies, Inc. 1,798 83,158
----------
Telecommunications - 2.47%
AT&T Corp. 7,150 311,025
----------
Total Common Stocks
(cost $6,037,548) 6,920,837
----------
CONVERTIBLE PREFERRED STOCKS - 16.74%
Broadcasting/Cable TV - 5.32%
Cablevision Systems Corp., 8.50% 5,000 102,500
Merrill Lynch Co. ("Cox Broadcasting"),
6.00%, due 6/01/99 (1) 15,000 333,750
SFX Broadcasting, Inc., 6.50% # 5,000 233,125
----------
669,375
----------
Energy - 5.69%
Enron Corp., 6.25% (2) 2,000 48,000
MCN Corp., 8.75% (3) 10,000 276,250
Noram Financing I, 6.25% 2,000 127,000
Occidental Petroleum Corp., 3.875% # 4,500 264,312
----------
715,562
----------
Finance - 3.13%
Finova, Inc., 5.50% 7,500 393,750
----------
Hotels & Lodging - 2.60%
Host Marriott Corp. Financial Trust,
6.75% # 6,000 326,982
----------
Total Convertible Preferred Stocks
(cost $2,086,643) 2,105,669
----------
EXCHANGEABLE NOTES - 0.68%
Chemicals - 0.68%
Atlantic Richfield Co.
9.00%, Exchangeable Shares, 9/15/97 (4) 4,000 86,000
----------
Total Exchangeable Notes
(cost $111,449) 86,000
----------
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Security Principal Amount Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS - 5.60%
Aerospace - 2.25%
Hexcel Corp.
7.00%, Debentures, 8/01/11 $ 300,000 $ 282,750
----------
Electrical Equipment - 1.11%
Protection One, Inc.
6.75%, Sr. Subordinated Notes, 9/15/03 150,000 139,660
----------
Health Services - 0.58%
Sierra Health Services, Inc.
7.50%, Debentures, 9/15/01 80,000 72,900
----------
Real Estate Investment Trust - 0.87%
Meditrust
7.50%, Debentures, 3/01/01 100,000 109,308
----------
Technology - 0.79%
Apple Computers, Inc.
6.00%, Subordinated Notes, 6/01/01 # 100,000 99,611
----------
Total Convertible Bonds
(cost $705,657) 704,229
----------
CORPORATE BONDS & NOTES - 2.27%
Insurance - 1.03%
Leucadia National Corp.
8.25%, Sr. Subordinated Notes, 6/15/05 125,000 129,550
----------
Transportation - 1.24%
Continental Airlines, Inc.
7.82%, Pass-Thru Certificates, 4/15/15 150,000 155,995
----------
Total Corporate Bonds
(cost $277,509) 285,545
----------
U.S. GOVERNMENT SECURITIES - 11.94%
GNMA, 6.50%, 2/15/26 1,571,561 1,502,145
----------
Total U.S. Government Securities
(cost $1,564,220) 1,502,145
----------
Total Investment Securities - 92.25%
(cost $10,783,026) 11,604,425
<PAGE>
NORTHSTAR INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Security Principal Amount Value
- --------------------------------------------------------------------------------
Repurchase Agreements - 8.49%
Agreement with State Street Bank and
Trust bearing interest at 5.10% dated
12/31/96, to be repurchased 1/02/97
in the amount of $1,068,303 and
collateralized by $995,000 U.S.
Treasury Notes, 7.25% due 8/15/22,
value $1,091,080 (cost $1,068,000) $1,068,000 $ 1,068,000
Liabilities in excess of other
assets - (0.74)% (93,270)
-----------
NET ASSETS - 100.00% $12,579,155
===========
# Sale restricted to qualified institutional investors.
(1) STRYPES - Structured yield product exchangeable for stock.
(2) Mandatory conversion on 12/13/98 into shares of Enron Oil & Gas
common stock.
(3) Mandatory conversion on 4/30/99 into shares of MCN Corp. common stock.
(4) Mandatory conversion on 9/15/97 into shares of Lyondell Petroleum
Co. common stock.
The accompanying notes are an integral part of the financial statements.
<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, 1996, 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.
Northstar Multi-Sector Bond Fund
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
01/31/96 12,081 11,864
02/28/96 11,940 11,728
03/31/96 11,879 11,866
04/30/96 11,838 11,889
05/31/96 11,828 11,982
06/30/96 11,953 12,247
07/31/96 11,989 12,200
08/31/96 11,999 12,200
09/30/96 12,166 12,615
10/31/96 12,381 12,687
11/30/96 12,544 12,880
12/31/96 12,464 13,120
Average Annual Total Return
1-Year 5.53%
Since Inception 9.14%
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
THE MARKETS
o Moderate market interest rates and a federal funds rate that stayed at
5.25% all year helped the U.S. economy maintain both GDP growth and
inflation at about 3% in 1996. However, persistent fears of higher
inflation, caused 10 and 30 year Treasury bond rates to end 1996 at 6.42%
and 6.64%, respectively, 70-80 basis points higher than where they
started. That kept total returns on most bonds below 4%. In contrast,
sustained growth in the U.S. economy and in corporate profits sent stock
prices to record levels throughout 1996; all the major stock averages
returned 18% or more. Rising securities prices here also boosted the value
of the U.S. dollar.
o Total returns for domestic and foreign high yield bonds were very high
last year, exceeding 12% and 28%, respectively. Both of those groups
benefited from broader institutional demand. Emerging market bond prices
also reflected continued economic progress by the issuers. Since the
credit profile of domestic high yield bonds improves with the amount of
equity below them, those bonds' prices were boosted by higher stock
valuations.
o There is a weakening consensus that the U.S. economy will maintain
annual GDP growth and CPI inflation rates below 3%. The short-run
outlook for U.S. debt and equity markets nonetheless remains positive for
1997. The strong U.S. dollar limits the safe harbors among foreign
issuers; even those pursuing economic reforms.
THE FUND
o From 12/31/95 to 12/31/96, the total return of the Fund's shares was
12.53%, the Morningstar average was 3.14%. The Fund's outstanding
performance promoted sales that led its net assets to increase 66% in
1996, from $3.8 million to over $6.3 million.
o The Fund's performance was enhanced by changes in portfolio allocations.
We reduced U.S. Government securities and increased the Fund's holdings of
foreign investment grade and high yield securities, which improved the
Fund's yield, total return and quality simultaneously.
o Bonds issued by foreign companies and governments with improving credit
profiles contributed significantly to the Fund's high returns (e.g., APP,
CE Casecnan, Grupo Durango, Italy, New Zealand and Poland).
CURRENT STRATEGY
o Continue above-average exposure in non-cyclicals. Reduce holdings in cash.
Limit volatility by keeping the Fund's duration between 4 and 6 years.
o Target portfolio allocations for favorable mix of risks and rewards: 50%
high yield; 20% U.S. government; 30% investment grade (especially
high-quality foreign issues with above-average spreads and yields).
<TABLE>
<CAPTION>
FUND INFORMATION (ALL DATA IS AS OF 12/31/96) TOTAL NET ASSETS: $6,276,797
- ------------------------------------------------------------------------------------------------------------------------------------
TOP 10 HOLDINGS SECTOR ALLOCATIONS SEC AVERAGE ANNUAL RATES OF RETURN
NAME %FUND (by percentage of net asset) (at maximum applicable sales charges)
-----------------------------------
<S> <C>
(1) U.S. Treasury Notes 14.6% High Yield Securities Inception 1 year
(2) Globo Comm. e Part. Ltda. 3.2 --------- ------
(3) Trump Altlantic City 3.2 U.S. Gov't & Agencies 9.14% 5.53%
(4) PDV America, Inc. 3.1
(5) Republic of Italy 3.1 Investment Grade Sec. [Bar Graph appears here] CUMULATIVE TOTAL RETURNS
(6) GNMA 3.0 (do not reflect sales charge)
(7) Multicanal Participacoes SA 3.0 Cash -----------------------------
(8) Bar Technologies Ltd. 2.9 Inception 1 year
(9) APP Int'l Finance Co. 2.6 Equities --------- ------
(10) Republic of Poland 2.5 31.20% 12.53%
-----
41.2%
=====
</TABLE>
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Security Principal Amount Value
- --------------------------------------------------------------------------------
DOMESTIC INVESTMENT GRADE SECURITIES - 7.26%
Container - 0.89%
Owens-Illinois, Inc.
11.00%, Sr. Debentures, 12/01/03 $ 50,000 $ 55,875
--------
Entertainment - 1.54%
Paramount Communications, Inc.
8.25%, Sr. Debentures, 8/01/22 100,000 96,505
--------
Oil & Gas - 3.14%
PDV America, Inc.
7.875%, Sr. Notes, 8/1/03 200,000 197,420
--------
Utility - 1.69%
Boston Edison Co.
9.375%, Debentures, 8/15/21 100,000 106,013
--------
Total Domestic Investment Grade Securities
(cost $440,918) 455,813
--------
FOREIGN INVESTMENT GRADE SECURITIES - 10.49%
Food and Beverage - 2.44%
Panamerican Beverages, Inc.
8.125%, Sr. Notes, 4/01/03 150,000 153,160
--------
Foreign Government - 8.05%
Republic of Indonesia, 7.75%, due 8/01/06 150,000 152,175
Republic of Italy, 12.00%, due 5/01/02 (1) 245,000,000 196,549
Republic of Poland, 3.25/5.00%, due 10/27/24 $ 250,000 156,875
--------
505,599
--------
Total Foreign Investment Grade Securities
(cost $613,422) 658,759
--------
DOMESTIC HIGH YIELD SECURITIES - 29.24%
Broadcasting - 4.11%
Commodore Media, Inc.
7.50/13.25%, Sr. Subordinated Notes, 5/01/03 $ 100,000 106,000
EchoStar Satellite Broadcasting Corp.
0/13.125%, Sr. Secured Discount Notes, 3/15/04 $ 200,000 152,000
--------
258,000
--------
Finance - 3.83%
Central Rents, Inc.
12.875%, Sr. Notes, 12/15/03 100,000 104,500
Ocwen Financial Corp.
11.875%, Notes, 10/01/03 125,000 135,625
--------
240,125
--------
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Security Principal Amount Value
- --------------------------------------------------------------------------------
Grocery - 1.56%
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 $100,000 $ 98,000
----------
Hotel & Gaming - 3.17%
Trump Atlantic City Funding, Inc.
11.25%, 1st Mortgage Notes, 5/01/06 200,000 199,000
----------
Insurance - 1.59%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 100,000 100,000
----------
Oil & Gas - 2.10%
TransTexas Gas Corp.
0/13.25%, Sr. Discount Notes, 12/31/03 $ 237,000 131,535
----------
Steel - 2.86%
Bar Technologies Ltd.
13.50%, Company Guarantee, 4/01/01 175,000 179,813
----------
Telecommunications - 10.02%
Adelphia Communications Corp.
12.50%, Sr. Notes, 5/15/02 100,000 102,875
GST USA, Inc.
0/13.875%, Sr. Discount Notes, 12/15/05 $ 225,000 134,437
Hyperion Telecommunications, Inc.
0/13.00%, Sr. Discount Notes, 4/15/03 $ 150,000 85,875
ICG Holdings, Inc.
0/12.50%, Sr. Discount Notes, 5/01/06 $ 100,000 66,938
Intercel, Inc.
0/12.00%, Sr. Discount Notes, 5/01/06 $ 150,000 93,750
Pagemart Nationwide, Inc.
0/15.00%, Sr. Discount Notes, 2/01/05 $ 120,000 83,400
WinStar Communications, Inc.
0/14.00%, Sr. Discount Notes, 10/15/05 $ 100,000 61,624
----------
628,899
----------
Total Domestic High Yield Securities
(cost $1,759,346) 1,835,372
----------
FOREIGN HIGH YIELD SECURITIES - 15.88%
Entertainment - 3.21%
Globo Communicacoes e Participacoes Ltda.
10.50%, Compan Guarantee, 12/20/06 # 200,000 201,750
----------
Paper - 3.88%
APP International Finance Co.
11.75%, Guaranteed Secured Notes, 10/01/05 150,000 162,375
Grupo Industrial Durango SA
12.00%, Notes, 7/15/01 75,000 80,625
----------
243,000
----------
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Principal Amount/
Security Units/Shares Value
- --------------------------------------------------------------------------------
Telecommunications - 6.91%
Clearnet Communications, Inc.
0/14.75%, Sr. Discount Notes, 12/15/05 $ $200,000 $125,250
Colt Telecommunications, Inc.
0/12.00%, Units, 12/15/06 $(2) 200 119,500
Multicanal Participacoes SA
12.625%, Sr. Notes, 6/18/04 # 175,000 189,000
--------
433,750
--------
Utilities - 1.88%
CE Casecnan Water and Energy Co.
11.95%, Sr. Secured Notes, 11/15/10 100,000 118,250
--------
Total Foreign High Yield Securities
(cost $941,458) 996,750
--------
CONVERTIBLE BONDS - 2.45%
Telecommunications - 2.45%
SA Telecommunications, Inc.
10.00%, Notes, 8/15/06 # 125,000 119,375
WinStar Communications, Inc.
0/14.00%, Sr. Discount Notes, 10/15/05 $# 50,000 34,188
--------
Total Convertible Bonds
(Cost $158,875) 153,563
--------
PREFERRED STOCKS - 3.12%
Broadcasting - 2.27%
Paxson Communications Corp., 12.50% & 1,500 142,500
--------
Oil & Gas - 0.85%
Enron Capital Resources L.P., 9.00% 2,000 53,250
--------
Total Preferred Stocks
(cost $200,000) 195,750
--------
WARRANTS - 0.17% @
Consumer Products - 0.02%
Chattem, Inc. (expires 6/17/99) 50 1,013
--------
Grocery - 0%
Dairy Mart Convenience Stores, Inc.
(expires 12/01/01) 666 0
--------
Steel - 0.03%
Sheffield Steel Corp. (expires 11/01/01) 500 1,625
--------
<PAGE>
NORTHSTAR MULTI-SECTOR BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Shares/
Security Principal Amount Value
- --------------------------------------------------------------------------------
Telecommunications - 0.12%
Clearnet Communications, Inc.
(expires 9/15/05) 660 $ 4,785
Hyperion Telecommunications, Inc.
(expires 4/15/01) 150 3,000
----------
7,785
----------
Total Warrants
(cost $2,000) 10,423
----------
U.S. GOVERNMENT & AGENCIES - 18.32%
GNMA, 7.00%, 2/15/26 $194,098 189,851
Resolution Trust Corp.,
8.00%, 6/25/26 45,424 44,371
U.S. Treasury Notes, 6.75%, 5/31/99 900,000 916,002
----------
Total U.S. Government & Agencies
(cost $1,136,398) 1,150,224
----------
Total Investment Securities - 86.93%
(cost $5,252,417) 5,456,654
Repurchase Agreements - 12.43%
Agreement with State Street Bank and Trust
bearing interest at 5.10% dated 12/31/96,
to be repurchased 1/02/97 in the amount of
$780,221 and collateralized by $730,000
U.S. Treasury Notes, 7.25% due 8/15/22,
value $800,491 (cost $780,000) 780,000 780,000
Other assets less liabilities - 0.64% 40,143
----------
NET ASSETS - 100.00% $6,276,797
==========
$ Step Bond.
# Sale restricted to qualified institutional investors.
@ Non-income producing security.
& Payment-in-kind.
(1) The principal amount is shown in the respective country's currency.
(2) A unit consists of $1,000 par value 12.00%, Sr. Discount Notes,
12/15/06 and 1 warrant.
The accompanying notes are an integral part of the financial statements.
<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, 1996, 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.
Northstar High Yield Bond Fund
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
01/31/96 12,081 12,022
02/28/96 11,940 11,999
03/31/96 11,879 12,222
04/30/96 11,838 12,365
05/31/96 11,828 12,580
06/30/96 11,953 12,731
07/31/96 11,989 12,584
08/31/96 11,999 12,584
09/30/96 12,166 13,155
10/31/96 12,381 13,130
11/30/96 12,544 13,255
12/31/96 12,464 13,592
Average Annual Total Return
1-Year 8.75%
Since Inception 10.66%
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
THE MARKETS
o Moderate market interest rates and a federal funds rate that stayed at
5.25% all year helped the U.S. economy maintain both GDP growth and
inflation at about 3% in 1996. However, persistent fears of higher
inflation caused 10 and 30 year Treasury bond rates to end 1996 at 6.42%
and 6.64%, respectively, 70-80 basis points higher than where they
started. That kept total returns on most bonds below 4%. In contrast,
sustained growth in the U.S. economy and in corporate profits sent stock
prices to record levels throughout 1996; all the major stock averages
returned 18% or more. Rising securities prices here also boosted the value
of the U.S. dollar.
o Total returns for domestic and foreign high yield bonds were very high
last year, exceeding 12% and 28%, respectively. Both of those groups
benefited from broader institutional demand. Emerging market bond prices
also reflected continued economic progress by the issuers. Since the
credit profile of domestic high yield bonds improves with the amount of
equity below them, those bonds' prices were boosted by higher stock
valuations.
o There is a weakening consensus that the U.S. economy will maintain
annual GDP growth and CPI inflation rates below 3%. The short-run
outlook for U.S. debt and equity markets nonetheless remains positive for
1997. The strong U.S. dollar limits the safe harbors among foreign
issuers; even those pursuing economic reforms.
THE FUND
o From 12/31/95 to 12/31/96, the total return of the Fund was 15.75%, the
Morningstar average was 12.92%. The Fund's outstanding performance
promoted sales that led its net assets to increase 38% in 1996, from $4.8
million to over $6.6 million.
o The Fund's performance was enhanced by changes in portfolio allocations.
We underweighted investments in cyclical industries (e.g., steel,
chemicals and paper) and cut holdings of zero-coupon bonds. We increased
returns by increasing investments in the telecommunications, broadcasting,
healthcare and misc. service industries and in high-quality emerging
market corporate bonds. We raised cash to avoid year-end losses.
o Bonds issued by companies with improving credit profiles contributed
significantly to the Fund's high returns (e.g., APP, Benton Oil,
Chancellor Broadcasting, EchoStar, Grupo Durango, La Petite and Ocwen).
CURRENT STRATEGY
o Continue to focus on spreads among individual securities with different
risk profiles/ratings, to invest in securities with the best relative
values, to sell securities which reach our objectives and to maintain
above-average exposure in non-cyclical industries.
<TABLE>
<CAPTION>
FUND INFORMATION (ALL DATA IS AS OF 12/31/96) TOTAL NET ASSETS: $6,619,298
- ------------------------------------------------------------------------------------------------------------------
TOP 10 HOLDINGS TOP 5 INDUSTRIES SEC AVERAGE ANNUAL RATES OF RETURN
NAME %FUND (by percentage of net asset) (at maximum applicable sales charges)
-------------------------------------
<S> <C>
(1) Multicanal Participacoes 3.3% Telecommunications Inception 1 year
(2) Intracel Corp. 3.1 --------- ------
(3) Paging Network, Inc. 3.1 Broadcasting 10.66% 8.75%
(4) APP Int'l Finance Co. 2.5
(5) Celestica Int'l, Inc. 2.4 Healthcare [Bar Graph appears here] CUMULATIVE TOTAL RETURNS
(6) U.S. Can Corp. 2.4 (do not reflect sales charge)
(7) EchoStar Satellite Broad. 2.3 Miscellaneous Services --------------------------------
(8) Trump Atlantic City 2.3 Inception 1 year
(9) Ocwen Financial Corp. 2.0 Paper --------- ------
(10) Clearnet Comm. 1.9 35.92% 15.75%
-----
25.3%
=====
</TABLE>
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Security Principal Amount Value
- --------------------------------------------------------------------------------
DOMESTIC CORPORATE BONDS & NOTES - 48.51%
BROADCASTING - 5.31%
Commodore Media, Inc.
7.50/13.25%, Sr. Subordinated Notes, 5/01/03 $ $100,000 $106,000
EchoStar Satellite Broadcasting Corp.
0/13.125%, Sr. Secured Discount Notes, 3/15/04 $ 200,000 152,000
PanAmSat L.P.
0/11.375%, Sr. Subordinated Notes, 8/01/03 $ 100,000 93,250
--------
351,250
--------
CABLE - 1.13%
Heartland Wireless Communications, Inc.
13.00%, Sr. Notes, 4/15/03 75,000 74,625
--------
CONGLOMERATE - 0.76%
Great Dane Holdings, Inc.
12.75%, Sr. Subordinated Debentures, 8/01/01 50,000 50,375
--------
CONSUMER PRODUCTS - 1.57%
Rayovac Corp.
10.25%, Sr. Subordinated Notes, 11/01/06 # 100,000 103,875
--------
ENTERTAINMENT - 1.46%
Paramount Communications, Inc.
8.25%, Sr. Debentures, 8/01/22 100,000 96,505
--------
ENVIRONMENTAL CONTROL - 1.59%
Allied Waste North America, Inc.
10.25%, Sr. Subordinated Notes, 12/01/06 # 100,000 105,250
--------
FINANCE - 3.63%
Central Rents, Inc.
12.875%, Sr. Notes, 12/15/03 100,000 104,500
Ocwen Financial Corp.
11.875%, Notes, 10/01/03 125,000 135,625
--------
240,125
--------
GROCERY - 1.48%
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 100,000 98,000
--------
HEALTHCARE - 3.19%
Dade International, Inc.
11.125%, Sr. Subordinated Notes, 5/01/06 100,000 108,750
Imed Corp.
9.75%, Sr. Subordinated Notes, 12/01/06 # 100,000 102,125
--------
210,875
--------
HOTELS & GAMING - 2.25%
Trump Atlantic City Funding, Inc.
11.25%, 1st Mortgage Notes, 5/01/06 150,000 149,250
--------
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Principal Amount/
Security Units Value
- --------------------------------------------------------------------------------
INSURANCE - 1.51%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 $100,000 $ 100,000
---------
MANUFACTURING - 2.38%
U.S. Can Corp.
10.125%, Sr. Subordinated Notes, 10/15/06 # 150,000 157,875
---------
MISCELLANEOUS SERVICES - 4.30%
Coinstar, Inc.
0/13.00%, Units, 10/01/06 $#(1) 150 106,050
La Petite Holdings Corp.
9.625%, Sr. Secured Notes, 8/01/01 100,000 100,250
Real Time Data, Inc.
0/13.50%, Units, 8/15/06 $#(2) 143 78,650
---------
284,950
---------
OIL & GAS - 1.67%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 # 100,000 110,500
---------
RETAIL & WHOLESALE - 1.27%
Waban, Inc.
11.00%, Sr. Subordinated Notes, 5/15/04 75,000 84,375
---------
STEEL - 1.54%
WCI Steel, Inc.
10.00%, Sr. Notes, 12/01/04 # 100,000 102,250
---------
TELECOMMUNICATIONS - 13.43%
Geotek Communications, Inc.
0/15.00%, Sr. Discount Notes, 7/15/05 $ 100,000 63,500
Hyperion Communications, Inc.
0/13.00%, Sr. Discount Notes, 4/15/03 $ 150,000 85,875
ICG Holdings, Inc.
0/12.50%, Sr. Discount Notes, 5/01/06 $ 100,000 66,938
Intercel, Inc.
0/12.00%, Sr. Discount Notes, 5/01/06 $ 150,000 93,750
Pagemart Nationwide, Inc.
0/15.00%, Sr. Discount Notes, 2/01/05 $ 150,000 104,250
Paging Network, Inc.
10.00%, Sr. Subordinated Notes, 10/15/08 # 200,000 203,250
PriCellular Wireless Corp.
10.75%, Sr. Notes, 11/01/04 # 100,000 104,625
Western Wireless Corp.
10.50%, Sr. Subordinated Notes, 6/01/06 100,000 104,875
WinStar Communications, Inc.
0/14.00%, Sr. Discount Notes, 10/15/05 $ 100,000 61,625
---------
888,688
---------
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Security Principal Amount Value
- --------------------------------------------------------------------------------
TRANSPORTATION - 0.04%
Burlington Motor Holdings, Inc.
11.50%, Sr. Subordinated Notes, 11/01/03 * $100,000 $ 2,375
---------
TOTAL DOMESTIC CORPORATE BONDS & NOTES
(cost $3,147,019) 3,211,143
---------
FOREIGN BONDS & NOTES - 25.45%
CABLE - 3.26%
Multicanal Participacoes SA
12.625%, Company Guarantee, 6/18/04 200,000 216,000
---------
CHEMICALS - 1.49%
Acetex Corp.
9.75%, Sr. Secured Notes, 10/01/03 100,000 98,750
---------
COMPUTER SERVICE - 2.39%
Celestica International, Inc.
10.50%, Sr. Subordinated Notes, 12/31/06 # 150,000 157,875
---------
CONSUMER PRODUCTS - 0.99%
International Semi-Tech Corp.
0/11.50%, Sr. Secured Discount Notes, 8/15/03 $ 100,000 65,250
---------
ENTERTAINMENT - 1.51%
Global Communicacoes e Participacoes Ltda.
9.875%, Company Guarantee, 12/20/04 # 100,000 100,000
---------
MISCELLANEOUS SERVICES - 1.58%
Intertek Finance PLC
10.25%, Sr. Subordinated Notes, 11/01/06 # 100,000 104,500
---------
OIL & GAS - 1.24%
Invergas SA
12.50%, Notes, 12/16/99 # 75,000 82,125
---------
PAPER PRODUCTS - 5.50%
APP International Finance Co.
11.75% Guaranteed Secured Notes, 10/01/05 150,000 162,375
Grupo Industrial Durango SA
12.00% Notes, 7/15/01 75,000 80,625
Indah Kiat International Finance Corp.
12.50%, Guaranteed Secured Notes, 6/15/06 50,000 55,625
Malette, Inc.
12.25%, Sr. Secured Notes, 7/15/04 61,000 65,270
---------
363,895
---------
PRINTING & PUBLISHING - 1.55%
Newsquest Capital PLC
11.00%, Sr. Subordinated Notes, 5/01/06 # 100,000 103,000
---------
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Principal Amount/
Security Units/Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.15%
Clearnet Communications, Inc.
0/14.75%, Sr. Discount Notes, 12/15/05 $ $200,000 $ 125,250
Colt Telecom Group PLC
0/12.00%, Units, 12/15/06 $ (3) 100 59,750
Occidente Y Caribe Celular SA
0/14.00%, Sr. Discount Notes, 3/15/04 $# 150,000 90,000
---------
275,000
---------
UTILITIES - 1.79%
CE Casecnan Water and Energy Co.
11.95% Sr. Secured Notes, 11/15/10 100,000 118,250
---------
TOTAL FOREIGN BONDS & NOTES
(cost $1,602,321) 1,684,645
---------
CONVERTIBLE BONDS - 2.32%
TELECOMMUNICATIONS - 2.32%
SA Telecommunications, Inc.
10.00%, Notes, 8/15/06 # 125,000 119,375
WinStar Communications, Inc.
0/14.00%, Sr. Discount Notes, 10/15/05 $ # 50,000 34,187
---------
TOTAL CONVERTIBLE BONDS
(cost $157,411) 153,562
---------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 3.07% @
HEALTHCARE - 3.07%
Intracel Corp., 8.00% (4) 13,560 203,400
---------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $100,000) 203,400
---------
DOMESTIC PREFERRED STOCKS - 7.36%
BROADCASTING - 4.68%
Benedek Communications Corp., 15.00% # 1,000 102,750
Chancellor Broadcasting Co., 12.25% # & 1,000 112,000
Paxson Communications Corp., 12.50% & 1,000 95,000
---------
309,750
---------
HEALTHCARE - 1.55%
Fresenius Medical Care Capital Trust, 9.00% 100 102,250
---------
MISCELLANEOUS SERVICES - 1.13%
La Petite Holdings Corp., 12.125% 2,000 75,000
---------
TOTAL DOMESTIC PREFERRED STOCKS
(cost $459,000) 487,000
---------
<PAGE>
NORTHSTAR HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Security Shares Value
- --------------------------------------------------------------------------------
DOMESTIC COMMON STOCKS - 0.20% @
BROADCASTING - 0.20%
EchoStar Communications Corp. 450 $ 9,900
Pegasus Media & Communications, Inc. # 10 3,000
---------
TOTAL DOMESTIC COMMON STOCKS
(cost $7,322) 12,900
---------
DOMESTIC WARRANTS - 1.16% @
BROADCASTING/CABLE - 0.36%
Benedek Communications Corp. (expires 7/01/07) 1,000 3,250
Spanish Broadcasting Systems, Inc. (expires 6/30/99) 100 20,500
---------
23,750
---------
CABLE - 0.01%
Heartland Wireless Communication, Inc. (expires 4/15/00) 450 675
---------
CONSUMER PRODUCTS - 0.02%
Chattem, Inc. (expires 6/17/99) 50 1,013
---------
FINANCE - 0.09%
Central Rents, Inc. (expiration 2003) 100 6,000
---------
GROCERY - 0%
Dairy Mart Convenience Stores, Inc. (expires 12/12/01) 666 0
---------
PAPER - 0.48%
SDW Holdings Corp. (expires 1/01/00) # 6,400 32,000
---------
STEEL - 0.02%
Sheffield Steel Corp. (expires 11/01/01) 500 1,625
---------
TELECOMMUNICATIONS - 0.18%
Geotek Communications, Inc. (expiration 2000) 3,000 9,000
Hyperion Communications, Inc. (expires 4/15/01) 150 3,000
---------
12,000
---------
TOTAL DOMESTIC WARRANTS
(cost $62,500) 77,063
---------
FOREIGN WARRANTS - 0.07% @
TELECOMMUNICATIONS - 0.07%
Clearnet Communications, Inc. (expires 9/15/05) 660 4,785
Occidente Y Caribe Celular SA 600 6
---------
TOTAL FOREIGN WARRANTS
(cost $0) 4,791
---------
TOTAL INVESTMENT SECURITIES - 88.14%
(cost $5,535,573) 5,834,504
<PAGE>
Security Principal Amount Value
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 11.21%
Agreement with State Street Bank and Trust
bearing interest at 5.10% dated 12/31/96,
to be repurchased 1/02/97 in the amount of
$742,210 and collateralized by $730,000 U.S.
Treasury Notes, 7.25% due 2/15/98, value
$761,938 (cost $742,000) $742,000 $ 742,000
OTHER ASSETS LESS LIABILITIES - 0.65% 42,794
---------
NET ASSETS - 100.00% $6,619,298
$ Step bond.
# Sale restricted to qualified institutional investors.
* Defaulted Security.
@ Non-income producing security.
& Payment-in-kind security.
(1) A unit consists of $1,000 par value 13.00%, Sr. Subordinated Notes, 10/01/06
and 1 warrant.
(2) A unit consists of $1,000 par value 13.50%, Subordinated Notes, 8/15/06 and
1 warrant.
(3) A unit consists of $1,000 par value 12.00%, Sr. Discount Notes, 12/15/06 and
1 warrant.
(4) Private placement.
The accompanying notes are an integral part of the financial statements.
<PAGE>
NORTHSTAR VARIABLE TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities at value (cost $13,475,738,
$10,783,026, $5,252,417 and $5,535,573, respectively)...... $14,649,253 $11,604,425 $5,456,654 $5,834,504
Repurchase agreements...................................... 1,214,000 1,068,000 780,000 742,000
Cash....................................................... 173 504 610 486
Receivable for shares of beneficial interest sold.......... 399,862 19,972 12,837 0
Dividends and interest receivable.......................... 9,110 64,474 66,814 70,521
Prepaid expenses........................................... 1,463 1,557 1,465 1,480
Receivable for investments sold............................ 0 188,896 0 0
------------------------------------------------------------
Total Assets..................................... 16,273,861 12,947,828 6,318,380 6,648,991
============================================================
LIABILITIES:
Payable for investments purchased.......................... 681,638 25,584 0 0
Custodian and fund accounting fees payable................. 9,688 9,168 7,370 7,903
Management fees payable.................................... 8,850 8,046 3,814 4,075
Audit fees payable......................................... 5,925 5,763 5,804 5,860
Administrative services fees payable ...................... 1,180 1,073 509 543
Payable for fund shares repurchased........................ 18 315,386 17,635 106
Income distribution payable................................ 0 0 4,446 8,934
Other liabilities.......................................... 2,830 3,653 2,005 2,272
------------------------------------------------------------
Total Liabilities................................ 710,129 368,673 41,583 29,693
============================================================
NET ASSETS $15,563,732 $12,579,155 $6,276,797 $6,619,298
============================================================
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of beneficial interest, $.01 par
value outstanding (unlimited shares authorized)............ $14,341,240 $11,710,202 $6,072,471 $6,325,285
Undistributed (overdistributed) net investment income...... 7,314 0 0 0
Accumulated net realized gain (loss) on investments........ 41,663 47,554 89 (4,918)
Net unrealized appreciation of investments................. 1,173,515 821,399 204,237 298,931
------------------------------------------------------------
NET ASSETS....................................... $15,563,732 $12,579,155 $6,276,797 $6,619,298
============================================================
Net Asset Value Per Share ($15,563,732/1,105,209 shares
$12,579,155/1,073,680 shares, $6,276,797/1,195,865
shares, and $6,619,298/1,255,771 shares, respectively)..... $14.08 $11.72 $5.25 $5.27
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NORTHSTAR VARIABLE TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
----------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of $57, $455, $0, and $0,
respectively).............................................. $ 68,144 $ 218,768 $ 5,937 $ 1,438
Interest (net of withholding tax of ($0, $0, $549, $(1,055),
respectively).............................................. 42,609 230,613 449,430 490,488
==========================================================
Total investment income.................................... 110,753 449,381 455,367 491,926
==========================================================
EXPENSES:
Investment advisory and management fees.................... 57,245 75,425 37,217 38,770
Custodian and fund accounting fees......................... 34,984 37,275 27,763 31,567
Audit fees................................................. 13,733 9,975 10,016 10,094
Proxy expense.............................................. 11,143 2,146 0 0
Administrative services fees............................... 7,633 10,057 4,962 5,169
Printing expense........................................... 3,854 4,754 2,309 2,892
Insurance expense.......................................... 211 452 216 281
Trustee fees and expenses.................................. 76 199 176 88
Miscellaneous expenses..................................... 930 785 649 648
==========================================================
129,809 141,068 83,308 89,509
Less expenses reimbursed by investment advisor............. 68,758 60,664 43,785 48,170
==========================================================
Total expenses................................... 61,051 80,404 39,523 41,339
----------------------------------------------------------
Net investment income...................................... 49,702 368,977 415,844 450,587
----------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments........................... 46,193 875,927 125,074 141,662
Net change in unrealized appreciation of investments....... 824,112 211,159 97,621 177,347
----------------------------------------------------------
Net realized and unrealized gain of investments.. 870,305 1,087,086 222,695 319,009
----------------------------------------------------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $920,007 $1,456,063 $638,539 $769,596
==========================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NORTHSTAR VARIABLE TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH FUND GROWTH FUND BOND FUND BOND FUND
-------------------------------------------------------------
<S> <C>
FROM OPERATIONS:
Net investment income................................... $ 49,702 $ 368,977 $ 415,844 $ 450,587
Net realized gain on investments........................ 46,193 875,927 125,074 141,662
Net change in unrealized appreciation of investments.... 824,112 211,159 97,621 177,347
-------------------------------------------------------------
Increase in net assets resulting from operations..... 920,007 1,456,063 638,539 769,596
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income................................... (53,026) (375,181) (418,626) (454,312)
Net realized gain on investments........................ (42,112) (827,993) (111,901) (103,694)
-------------------------------------------------------------
(95,138) (1,203,174) (530,527) (558,006)
-------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares........................ 13,457,465 5,570,265 3,341,543 2,731,211
Net asset value of shares issued to
shareholders in reinvestment of dividends............ 95,138 1,203,174 526,080 549,072
-------------------------------------------------------------
13,552,603 6,773,439 3,867,623 3,280,283
Cost of shares redeemed................................. (2,627,034) (1,857,666) (1,464,570) (1,646,044)
-------------------------------------------------------------
Net increase in net assets derived from capital
share transactions................................... 10,925,569 4,915,773 2,403,053 1,634,239
-------------------------------------------------------------
Net increase in net assets................................. 11,750,438 5,168,662 2,511,065 1,845,829
NET ASSETS:
Beginning of year.......................................... 3,813,294 7,410,493 3,765,732 4,773,469
-------------------------------------------------------------
End of year (including undistributed (overdistributed)
net investment income of $7,314, $0, $0, $0
respectively)........................................ $15,563,732 $12,579,155 $6,276,797 $6,619,298
=============================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NORTHSTAR VARIABLE 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>
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) 0 0
--------------------------------------------------------------
(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 year.......................................... 2,700,939 3,594,582 2,716,143 2,588,158
--------------------------------------------------------------
End of year (including undistributed (overdistributed)
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.
<PAGE>
NORTHSTAR VARIABLE TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DIVIDENDS DISTRIBUTION
VALUE, NET & UNREALIZED TOTAL FROM DECLARED FROM DECLARED
BEGINNING OF INVESTMENT GAIN (LOSS) ON INVESTMENT NET INVEST- FROM NET TOTAL
PERIOD ENDED PERIOD INCOME INVESTMENTS OPERATIONS MENT INCOME REALIZED GAINS DISTRIBUTIONS
- ------------ ------------ ---------- -------------- ---------- ------------- -------------- -------------
<S> <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)
12/31/96 11.56 0.08 2.57 2.65 (0.09) (0.04) (0.13)
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)
12/31/96 11.39 0.40 1.15 1.55 (0.41) (0.81) (1.22)
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)
12/31/96 5.14 0.41 0.21 0.62 (0.41) (0.10) (0.51)
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)
12/31/96 5.04 0.45 0.32 0.77 (0.45) (0.09) (0.54)
</TABLE>
* For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
(1) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
EXPENSE RATIO OF NET
RATIO OF REIMBURSE- INVESTMENT
NET ASSET NET ASSETS, EXPENSES TO MENT TO INCOME TO
VALUE, END END OF PERIOD AVERAGE NET AVERAGE NET AVERAGE NET PORTFOLIO AVERAGE
OF PERIOD TOTAL RETURN (000'S) ASSETS ASSETS ASSETS TURNOVER COMMISSIONS*
- ---------- ------------ ------------- ----------- ----------- ------------ --------- -----------
<S> <C>
$10.04 3.47% $2,701 1.00%(1) 1.45%(1) 2.31%(1) 61% N/A
11.56 24.78 3,813 0.80 1.24 1.77 123 N/A
14.08 22.99 15,564 0.80 0.90 0.65 161 $0.0414
9.92 2.02 3,595 1.00 (1) 1.43 (1) 3.11 (1) 45 N/A
11.39 21.39 7,410 0.80 0.94 3.63 74 N/A
11.72 13.80 12,579 0.80 0.60 3.67 129 0.0401
4.85 1.41 2,716 1.00 (1) 1.41 (1) 7.03 (1) 29 N/A
5.14 14.97 3,766 0.80 1.26 8.52 83 N/A
5.25 12.53 6,277 0.80 0.88 8.38 121 0.00
4.69 (0.95) 2,588 1.00 (1) 1.55 (1) 8.62 (1) 62 N/A
5.04 18.55 4,773 0.80 1.31 10.61 157 N/A
5.27 15.75 6,619 0.80 0.93 8.72 159 0.0547
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NORTHSTAR VARIABLE TRUST
Notes to Financial Statements - December 31, 1996
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. The Northstar Variable Trust, (formerly 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.
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. The funds may periodically make reclassifications among certain of their
capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance with
federal tax regulations which may differ from generally accepted accounting
principles. As of December 31, 1996, the following amounts have been
reclassified:
<TABLE>
<CAPTION>
Undistributed Accumulated Net
Net Investment Income Realized Gain on Investment Paid-in-Capital
--------------------- --------------------------- ---------------
<S> <C>
Growth Fund 7,055 (7,055) 0
Income and Growth Fund 6,479 (388) (6,091)
High Yield Bond Fund 0 5,095 (5,095)
</TABLE>
These reclassifications did not affect net investment income, net realized gain
on investments, or net assets for the year ended December 31, 1996.
<PAGE>
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.
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 year
ended December 31, 1996, the Adviser earned $208,657 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 fiscal year ended December 31, 1996, the Administrator earned
$27,821 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 year ended December 31, 1996, the
Adviser has reimbursed the Growth Fund $68,758, the Income and Growth Fund
$60,664, the Multi-Sector Fund $43,785 and the High Yield Fund $48,170.
Navellier Fund Management, Inc. ("Navellier"), a registered investment adviser,
serves as subadvisor to the Growth Fund pursuant to a Subadvisory Agreement
dated February 1, 1996, between the Adviser and Navellier. For its services,
Navellier receives an annual fee from the advisor equal to 0.48% of the average
daily net assets of the Fund. For the period February 1, 1996 through December
31, 1996, Navellier received $16,648 in subadvisory fees from the Adviser.
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 twelve months ended December 31, 1996
were as follows:
<TABLE>
<CAPTION>
INCOME AND
GROWTH FUND GROWTH FUND MULTI-SECTOR FUND HIGH YIELD FUND
----------- ----------- ----------------- ---------------
<S> <C>
Aggregate Purchases $21,746,287 $15,655,775 $7,004,009 $8,042,616
Aggregate Sales 11,419,253 11,934,716 5,426,095 7,204,585
U.S. Government Securities included above were as follows:
Aggregate Purchases $0 $2,226,299 $2,293,840 $493,554
Aggregate Sales 0 2,752,861 1,335,985 500,000
</TABLE>
NOTE 4. PORTFOLIO SECURITIES (TAX BASIS) The cost of securities for federal
income tax purposes and the aggregate appreciation and depreciation of
securities at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
INCOME AND
GROWTH FUND GROWTH FUND MULTI-SECTOR FUND HIGH YIELD FUND
----------- ----------- ----------------- ---------------
<S> <C>
Cost (tax basis) $13,475,738 $10,783,026 $5,252,417 $5,535,573
----------- ----------- ---------- ----------
Appreciated Securities 1,416,764 1,061,703 249,853 437,044
Depreciated Securities (243,249) (240,304) (45,616) (138,113)
----------- ----------- ---------- ----------
Net Unrealized Appreciation $ 1,173,515 $ 821,399 $ 204,237 $ 298,931
----------- ----------- ---------- ----------
</TABLE>
<PAGE>
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the year ended December 31, 1996
were as follows:
<TABLE>
<CAPTION>
INCOME AND
GROWTH FUND GROWTH FUND MULTI-SECTOR FUND HIGH YIELD FUND
----------- ----------- ----------------- ---------------
<S> <C>
Shares Sold 968,805 476,604 641,205 519,989
Reinvested Dividends 6,917 102,180 100,988 105,109
Shares Repurchased (200,241) (155,956) (278,987) (315,859)
--------- ---------- ----------- ----------
Net Increase 775,481 422,828 463,206 309,239
--------- ---------- ----------- ----------
</TABLE>
Transactions in capital shares of each Fund for the year ended December 31, 1995
were as follows:
<TABLE>
<CAPTION>
INCOME AND
GROWTH FUND GROWTH FUND MULTI-SECTOR FUND HIGH YIELD FUND
----------- ----------- ----------------- ---------------
<S> <C>
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
---------- ---------- ----------- ----------
</TABLE>
NOTE 6. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Yield Bond Fund had
76.28% 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, 1996,
the High Yield Bond Fund held Burlington Motor Holdings, Inc. a security in
default. The value of this security represented $2,375 or 0.036% of the High
Yield Bond 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. 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.
<PAGE>
NORTHSTAR VARIABLE TRUST
Report of Independent Accountants
To The Shareholders and Trustees
of Northstar Variable Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of the Northstar Variable Trust (formerly
Northstar/NWNL Trust), comprising Northstar Growth Fund, Northstar Income and
Growth Fund, Northstar Multi-Sector Bond Fund, and Northstar High Yield Bond
Fund, as of December 31, 1996, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each period
presented. 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 securities owned as of
December 31, 1996, 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 Variable Trust as of December
31, 1996, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, 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, 1997
