NORTHSTAR VARIABLE TRUST
NORTHSTAR GROWTH PORTFOLIO
NORTHSTAR INTERNATIONAL VALUE PORTFOLIO
NORTHSTAR INCOME AND GROWTH PORTFOLIO
NORTHSTAR MULTI-SECTOR BOND PORTFOLIO
NORTHSTAR HIGH YIELD BOND PORTFOLIO
SEMI-ANNUAL REPORT TO SHAREHOLDERS
JUNE 30, 1998
<PAGE>
NORTHSTAR VARIABLE TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1998
Dear Shareholders:
We are pleased to provide you with the semi-annual report of the Northstar
Variable Trust for the six months ended June 30, 1998. We are gratified with
your decision to entrust your assets to the Northstar Funds and are confident
that we can assist you in reaching your financial objectives. Our goal is to
provide you with consistent, long term, attractive returns achieved through
fundamental research, analysis, and traditional investment disciplines.
Following this letter is a summary of the results of each Fund's portfolio by
its respective portfolio manager. We hope you will find it informative.
During the past six months investment returns in the U.S. have continued to be
very positive. The situation in Asia again reached crisis proportions in the
second quarter, but on balance the net impact actually turned out to be
favorable for U.S. financial markets, by further reducing inflation and
stimulating domestic consumption and by keeping interest rates low.
It has been the best of times in the U.S., a period of improvement in Western
Europe, and very difficult times in Asia, OPEC, and many emerging market
countries. After 5 - 10 years of corporate restructuring, investment for
productivity, restraint in government spending, and continued expansion, the
United States is uniquely positioned in the world. Employment is high and with
strong tax receipts and moderate spending, federal and local budget surpluses
have reappeared for the first time in decades. U.S. corporations are currently
operating at the highest profit margins since the 1960's and with very high
levels of free cash flow to reinvest, make acquisitions, or buy back stock.
The global situation has caused money to flow to U.S. financial markets and the
U.S. dollar to remain very strong. The stock market has been driven to
historically high valuation levels by strong investor demand plus high
profitability coupled with very low inflation. The global economic effects of
the Asian crisis have become more pronounced and the impact of a rising U.S.
trade deficit on U.S. manufacturers is more noticeable. A slowdown in domestic
output from the first quarter 5.4% growth rate is expected to have reduced
growth well below 3.0%. With valuations dependent on high profitability and
continued growth, the concern for stock prices is that profits may come under
increasing pressure. Profit growth has already slowed, but overall it is likely
to remain positive and may accelerate in 1999. The market will remain volatile
until the outlook crystallizes. For the next few years, the new opportunities
for growth available to financially strong, well managed corporations in new
markets opening up in Europe, Asia, and South America are very exciting. Those
opportunities along with a very strong and fundamentally improved domestic
economy, continue to support a favorable investment environment.
We note with great conviction that attempts to "time" the market often prove
counterproductive. Investors are strongly urged to focus on the long term.
Consistent disciplined investing is the proven method of achieving attractive
returns and meeting your financial objectives. We continue to support this
philosophy and look forward to serving your investment needs in the future.
Sincerely,
Mark L. Lipson
President
August 1, 1998
<PAGE>
NORTHSTAR VARIABLE TRUST GROWTH PORTFOLIO
THE MARKETS
o During the first half of 1998 the Dow Industrials were up 13.2%, the S&P
500 rose 16.8%, the NASDAQ Composite was up 20.7%, while the Russell 2000
was up 4.7%.
o After a robust first quarter, the stock market faltered a bit in the second
quarter. However, the stock market started to show some strength at the end
of June, particularly in some of the small and mid cap stocks. The NASDAQ
market continued to show more potential than the S&P 500 as institutional
investors rotated toward smaller growth stocks. Smaller companies with less
international exposure than most large cap issues began to perform better
at the end of the period. The recent wave of positive economic reports has
rubbed off on the analyst community, which recently revised small cap
earnings estimates higher to reflect a stronger U.S. economy. A
consistently low interest rate environment also served to generate some
optimism at the end of the second quarter.
THE FUND
o The Fund was up 10.76% compared to the Lipper Small Cap Fund Index which
was up 5.94% and the Russell 2000 Index which was up 4.66% during the first
half of 1998.
o Over the first half of 1998, the Fund became more focused on domestic
businesses, avoiding those companies with greater foreign exposure. As a
result, the Fund rotated into finance, home building and insurance stocks.
Overall, interest rate sensitive securities and retailers were the best
performing stocks for the Fund. Tech stocks continued to falter due to
diminishing overseas sales for many of the larger tech companies resulting
from the increasing strength of the dollar.
o The top performing stocks included: Labor Ready Inc., Catalytica, Dell
Computer and Capital One Financial. Amongst the under-performing stocks
were: MTI Technology (sold), General Nutrition and Information Management
Resources (sold).
CURRENT STRATEGY
o The current period remains similar to the second and third quarters of
1997, when our stocks benefited from strong institutional buying pressure
as institutional investors started to rotate away from large capitalization
stocks due to deteriorating earnings. Since the earnings prospects of the
S&P 500 remain anemic, the institutional exodus from large capitalization
stocks into mid and small capitalization stocks should continue. As the
second quarter earnings announcements commence in early July, we expect
many stocks to "gap" higher. Small-to-mid capitalization domestic companies
have much better earnings growth over the large multi-national companies
that dominate the S&P 500. The stock market's trading volume is rising and
also serving to propel many stocks higher. As a result of these factors,
the focus of the Growth Fund has tilted towards small and mid cap stocks.
The Growth Fund currently has an 8% large cap allocation, 45% mid cap
allocation and 47% small cap allocation.
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 6/30/98) TOTAL NET ASSETS $38,425,819
- ------------------------------------------------------------------------------------------
SEC AVERAGE ANNUAL RATES OF
RETURN
TOP 10 HOLDINGS TOP 5 INDUSTRIES (at maximum applicable sales
NAME %FUND (by percentage of charge)
net assets) ----------------------------
(1)USAirways Group, Inc. 3.2% Insurers 9.3% Inception 1year
--------------------------
(2)Labor Ready, Inc. 3.0 97.65% 12.20%
(3)Lexmark International
Group, Inc. 3.0 Airlines 8.6%
(4)Alaska Air Group, Inc. 2.9
(5)Dell Computer Corp. 2.9 Computer/Video
(6)Maytag Corp. 2.8 Chains 8.6% CUMULATIVE TOTAL RETURN
(7)Tekelec 2.8 (do not reflect sales
(8)Ace, Ltd. 2.6 Medical charge)
(9)Arterial Vascular Specialties 7.6% --------------------------
Engineering, Inc. 2.6 Inception 1year
(10)Lincare Holdings, --------------------------
Inc. 2.4 Building 101.65% 19.20%
Materials 7.1%
-------
28.2%
=======
</TABLE>
2
<PAGE>
NORTHSTAR VARIABLE TRUST GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30,1998
Security Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 100.99%
AEROSPACE - 3.54%
Cordant Technologies, Inc. 12,400 $ 571,950
Gulfstream Aerospace Corp. @ 17,000 790,500
----------
1,362,450
----------
AIRLINES - 8.60%
Alaska Air Group, Inc. @ 20,300 1,107,619
Comair Holdings, Inc. 18,200 561,925
Mesaba Holdings, Inc. @ 18,000 414,000
USAirways Group, Inc. @ 15,400 1,220,450
----------
3,303,994
----------
BANKS - 2.14%
Fifth Third Bancorp. 13,050 822,150
----------
BUILDING MATERIALS - 7.05%
Lone Star Industries, Inc. 4,500 346,781
Martin Marietta Materials, Inc. 12,100 544,500
Southdown, Inc. 9,900 706,612
Texas Industries, Inc. 8,500 450,500
Vulcan Materials Co. 6,200 661,463
----------
2,709,856
----------
CASINOS/GAMBLING - 2.64%
Anchor Gaming Corp. @ 9,900 768,487
Radica Games Ltd. @ 14,700 248,063
----------
1,016,550
----------
CATALOGUE/SPECIALTY DISTRIBUTION - 1.24%
Fingerhut Cos., Inc. 14,400 475,200
----------
CELLULAR TELEPHONE - 1.94%
Vodafone Group PLC ** 5,900 744,064
----------
CLOTHING/SHOE/ACCESSORY STORES - 1.44%
American Eagle Outfitters, Inc. @ 14,400 555,300
----------
3
<PAGE>
NORTHSTAR VARIABLE TRUST GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30,1998
Security Shares Value
- --------------------------------------------------------------------------------
COMPUTER/VIDEO CHAINS - 8.61%
Best Buy Co., Inc. @ 24,200 $ 874,225
Dell Computer Corp. @ 12,000 1,113,750
Tandy Corp. 15,800 838,387
Transport World Entertainment Corp. @ 11,200 483,000
----------
3,309,362
----------
CONSTRUCTION/EQUIPMENT/TRUCKS - 1.75%
Terex Corp. @ 23,600 672,600
----------
CONSUMER ELECTRONICS/APPLIANCES - 2.77%
Maytag Corp. 21,600 1,066,500
----------
DISCOUNT STORES - 1.44%
Ames Department Stores, Inc. @ 21,000 552,563
----------
DIVERSIFIED COMMERCIAL SERVICES - 3.04%
Labor Ready, Inc. @ 38,700 1,168,256
----------
DIVERSIFIED ELECTRONIC PRODUCTS - 1.62%
Gemstar International Group Ltd. @ 16,600 621,462
----------
EDP PERIPHERALS - 1.04%
National Computer Systems, Inc. 16,600 398,400
----------
ENVIRONMENTAL CONTROL - 3.21%
Catalytica, Inc. @ 35,000 686,875
Eastern Environmental Services, Inc. @ 3,300 112,200
US Liquids, Inc. @ 20,000 435,000
----------
1,234,075
----------
FINANCIAL SERVICES - 3.23%
Capital One Financial Corp. 5,400 670,613
Healthcare Financial Partners, Inc. @ 9,300 570,206
----------
1,240,819
----------
4
<PAGE>
NORTHSTAR VARIABLE TRUST GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30,1998
Security Shares Value
- --------------------------------------------------------------------------------
HOMEBUILDERS/HOME CONSTRUCTION - 2.55%
Lennar Corp. 17,800 $ 525,100
Mohawk Industries, Inc. @ 14,300 453,131
----------
978,231
----------
HOTELS/RESORTS - 1.78%
Royal Caribbean Cruises Ltd. 8,600 683,700
----------
INSURANCE - 9.32%
Ace, Ltd. 25,800 1,006,200
Cincinnati Financial Corp. 14,400 552,600
Exel Ltd. 7,700 599,156
Fidelity National Financial, Inc. 16,700 664,869
Harleysville Group, Inc. 19,000 394,250
Orion Capital Corp. 6,500 363,187
-----------
3,580,262
-----------
MEDICAL SPECIALTIES - 7.59%
Arterial Vascular Engineering, Inc. @ 27,700 990,275
Bindley Western Industries, Inc. 19,067 629,200
Lincare Holdings, Inc. @ 22,000 925,375
Safeskin Corp. @ 9,000 370,125
-----------
2,914,975
-----------
METAL FABRICATIONS - 0.52%
Encore Wire Corp. @ 12,300 198,338
-----------
NEWSPAPERS - 1.83%
Tribune Co. 10,200 701,887
-----------
OFFICE EQUIPMENT/SUPPLIES - 2.97%
Lexmark International Group, Inc. @ 18,700 1,140,700
-----------
OIL & GAS - 1.20%
Resource America, Inc. 15,600 462,150
-----------
OTHER CONSUMER SERVICES - 0.91%
Steiner Leisure Ltd. @ 11,550 349,388
-----------
5
<PAGE>
NORTHSTAR VARIABLE TRUST GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30,1998
Security Shares Value
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 1.10%
Theragenics Corp. @ 16,200 $ 422,213
-----------
RECREATIONAL PRODUCTS/TOYS - 1.38%
THQ, Inc. @ 17,200 528,900
-----------
RENTAL/LEASING COMPANIES - 0.82%
Rent-Way, Inc. @ 10,400 317,200
-----------
SAVINGS & LOAN - 0.37%
PDS Financial Corp. @ 16,400 143,500
-----------
SERVICES TO HEALTH INDUSTRY - 1.52%
MedQuist, Inc. @ 20,200 583,275
-----------
SOFT DRINKS - 1.06%
Cadbury Schweppes PLC ** 6,600 406,725
-----------
SPECIALTY CHEMICALS - 1.56%
Millennium Chemicals, Inc. 17,700 599,588
-----------
SPECIALTY STORES - 2.28%
General Nutrition Cos., Inc. @ 28,200 877,725
-----------
TELECOMMUNICATIONS - 5.04%
Century Telephone Enterprises, Inc. 18,950 869,331
Tekelec @ 23,900 1,069,525
-----------
1,938,856
-----------
TEXTILES - 1.89%
WestPoint Stevens, Inc. @ 22,000 726,000
-----------
TOTAL COMMON STOCKS
(cost $34,090,238) 38,807,214
-----------
TOTAL INVESTMENT SECURITIES - 100.99%
(cost $34,090,238) 38,807,214
6
<PAGE>
NORTHSTAR VARIABLE TRUST GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30,1998
Principal
Security Amount Value
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 3.52%
Agreement with State Street Bank and Trust bearing
interest at 5.70% dated 6/30/98 to be repurchased 7/01/98 in the amount of
$1,351,214 and collateralized by $1,175,000 U.S. Treasury Notes, 7.25% due
5/15/16 value $1,380,442
(cost $1,351,000) $1,351,000 $ 1,351,000
LIABILITIES IN EXCESS OF OTHER ASSETS - (4.51%) (1,732,395)
-----------
NET ASSETS - 100.00% $ 38,425,819
==========
@ Non-income producing.
** American Depositary Receipts.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
NORTHSTAR VARIABLE TRUST INTERNATIONAL VALUE PORTFOLIO
THE MARKETS
o World markets were buffeted by the events in Asia during the first half of
1998. Speculators seized on continued economic weakness in Japan to unleash
a speculative onslaught against the yen and pushed the yen to an eight-year
low versus the U.S. dollar. Asian currencies declined as well raising fears
that China would be forced to devalue the Hong Kong dollar.
o European equities continued to benefit from an ongoing economic expansion
and aggressive corporate restructuring, although at a slower pace during
the second quarter. Europe remained the top performing region in the first
half of the year with the MSCI Europe Index returning 26.5%.
THE FUND
o The Fund returned 14.49% during the semi-annual period ending June 30,
1998. The Lipper Index of International Equity Funds returned 15.81% for
the same period.
o European holdings had the largest positive impact on performance for the
period with France, Germany, Italy and the Netherlands providing the
largest contribution. Emerging market holdings were generally down during
the period. Overall, the Automobiles sector was the strongest industry
contributor.
CURRENT STRATEGY
o The bottom-up, value philosophy used in managing the Fund will be
consistently applied to find the best opportunities available in non-U.S.
markets. There is no focus on top-down macroeconomic evaluations or
forecasts in structuring the Fund. Country and industry exposures are
exclusively a residual of the purchase of individual businesses that meet
the strict value criteria.
o The fundamental valuations of the Fund reflect, and will continue to
reflect, significant discounts to the world market averages. This absolute
value focus has performed very favorably in declining market environments
as well as doing well over long-term market cycles.
o The Fund will endeavor to stay fully invested in non-U.S. equities and will
not attempt to anticipate short-term market movements. We will hold the
best values available without bias to either country or industry.
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 6/30/98) TOTAL NET ASSETS $9,555,254
- -----------------------------------------------------------------------------------------
SEC AVERAGE ANNUAL RATES OF
RETURN
TOP 10 HOLDINGS %FUND TOP 5 COUNTRIES (at maximum applicable sales
NAME by percentage of charge)
(net assets) -----------------------------
(1)Groupe Danone 4.8% Japan 16.0% Inception 1year
-----------------------------
(3)Nestle SA 4.1 France 13.2% 7.49% N/A
(4)Deutsche Telekom AG 3.6
(5)Hitachi Ltd. 3.6 United Kingdom 11.6%
(6)PSA Peugeot Citroen SA 3.4 CUMULATIVE TOTAL RETURN
(do not reflect sales
(7)ING Groep N.V. 3.3 Brazil 7.6% charge)
-------------------------------
(8)Mitsubishi Heavy
Industries Ltd. 3.2 Inception 1year
-------------------------------
(9)Hutchison Whampoa Ltd. 3.1 Hong Kong 6.7% 15.97% N/A
(10)Tokio Marine & Fire
Insurance 3.0
-------
36.4%
=======
</TABLE>
8
<PAGE>
NORTHSTAR VARIABLE TRUST INTERNATIONAL VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Security Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 92.72%
AUTOMOBILES - 5.86%
Daimler-Benz AG ( Germany ) 2,390 $ 235,230 0
PSA Peugeot Citroen SA ( France ) 1,510 324,693 0
----------
559,923 0
----------
BANKING - 12.03%
Argentaria SA ( Spain ) 8,000 179,4590
Compagnie Financiere de Paribas @ ( France ) 1,290 138,0530
Den Danske Bank A/S ( Denmark ) 1,700 204,1630
Development Bank of Singapore Ltd. ( Singapore ) 37,260 206,7540
HSBC Holdings PLC @ ( United Kingdom ) 11,200 273,9290
Societe Generale SA ( France ) 710 147,6210
----------
1,149,9790
----------
BEVERAGES/TOBACCO - 5.29%
B.A.T. Industries PLC ( United Kingdom ) 20,700 207,3770
Diageo PLC ( United Kingdom ) 22,291 264,2570
Japan Tobacco, Inc. ( Japan ) 5 33,9550
----------
505,5890
----------
CHEMICALS - 0.73%
BOC Group PLC ( United Kingdom ) 5,100 69,5290
----------
ELECTRICAL & ELECTRONICS - 5.32%
Hitachi Ltd. ( Japan ) 53,000 346,8940
Matsushita Electric Industrial Co. Ltd. ( Japan ) 10,000 161,2780
----------
508,1720
----------
ENERGY - 4.57%
Elf Aquitaine SA ( France ) 1,400 196,8340
Nippon Oil Co. Ltd. ( Japan ) 11,000 35,6400
YPF Sociedad Anonima ** ( Argentina ) 6,780 203,8240
----------
436,2980
----------
FOOD & HOUSEHOLD PRODUCTS - 8.92%
Groupe Danone ( France ) 1,660 457,7170
Nestle SA ( Switzerland ) 184 394,4160
----------
852,1330
----------
9
<PAGE>
NORTHSTAR VARIABLE TRUST INTERNATIONAL VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Security Shares Value
- --------------------------------------------------------------------------------
HEALTH/PERSONAL CARE - 0.50%
Ono Pharmaceutical Co. Ltd. ( Japan ) 2,000 $ 48,0220
----------
INDUSTRIAL COMPONENTS - 2.16%
Kyocera Corp. ( Japan ) 4,200 205,9450
----------
INSURANCE - 6.31%
ING Groep N.V. ( Netherlands ) 4,800 314,5300
Tokio Marine & Fire Insurance Co. ( Japan ) 28,000 288,7680
----------
603,2980
----------
MACHINERY & ENGINEERING - 4.23%
Komatsu ( Japan ) 20,000 97,4900
Mitsubishi Heavy Industries Ltd. ( Japan ) 81,000 306,9650
----------
404,4550
----------
MATERIALS & COMMODITIES - 2.54%
De Beers Centenary AG ( South Africa ) 13,800 242,4890
----------
METALS - STEEL - 0.51%
Pohang Iron & Steel Co. Ltd. ** ( South Korea ) 4,100 49,2000
----------
MULTI - INDUSTRY - 10.40%
BTR PLC @ ( United Kingdom ) 88,293 250,6190
Citic Pacific Ltd. ( Hong Kong ) 51,000 90,1780
First Pacific Co. Ltd. ( Hong Kong ) 32,000 13,4230
Hutchison Whampoa Ltd. ( Hong Kong ) 56,500 298,2510
Jardine Matheson Holdings Ltd. ( Singapore ) 38,400 103,6800
Swire Pacific Ltd. ( Hong Kong ) 63,000 237,8350
----------
993,9860
----------
NON-FERROUS METALS - 0.41%
Rio Tinto PLC @ ( United Kingdom ) 3,500 39,4470
----------
10
<PAGE>
NORTHSTAR VARIABLE TRUST INTERNATIONAL VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Security Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 16.33%
Compania Anonima Nacional Telefonos de Venezuela
** ( Venezuela ) 2,970 $ 74,2500
Deutsche Telekom AG ( Germany ) 12,600 345,1390
Royal PTT Nederland NV ( Netherlands ) 3,850 148,2990
Tele Danmark A/S ( Denmark ) 4,260 409,2870
Telecom Italia SpA ( Italy ) 36,000 265,1250
Telecomunicacoes Brasileiras SA ** ( Brazil ) 1,020 111,3710
Telefonos de Mexico SA ** ( Mexico ) 4,300 206,6690
----------
1,560,1400
----------
TRANSPORTATION - ROAD & RAIL - 1.03%
TNT Post Group NV ( Netherlands ) 3,850 98,4870
----------
UTILITIES - ELECTRICAL & GAS - 5.58%
Centrais Eletricas Brasileiras SA ** ( Brazil ) 15,900 226,5750
Centrais Geradoras do Sul do Brasil SA @ **
( Brazil ) 1,090 7,3980
EVN Energie-Versorgung Niederoesterreich AG
( Austria ) 670 100,3540
Korea Electric Power Corp. ** ( South Korea ) 17,000 121,1250
Union Electrica Fenosa SA ( Spain ) 6,000 77,2740
----------
532,7260
----------
TOTAL COMMON STOCKS
(cost $8,271,762) 8,859,8180
----------
CONVERTIBLE PREFERRED STOCKS - 3.99%
BANKING - 1.06%
Banco Bradesco SA ** ( Brazil ), $0.1356 10,900 100,8250
----------
BEVERAGES/TOBACCO - 1.24%
Companhia Cervejaria Brahma ** ( Brazil ),
$0.1687 9,500 118,7500
----------
ENERGY - 1.69%
Petroleo Brasileiro SA ** ( Brazil ), $0.539 8,700 161,7230
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $438,226) 381,2980
----------
TOTAL INVESTMENT SECURITIES - 96.71%
(cost $8,709,988) 9,241,1160
11
<PAGE>
NORTHSTAR VARIABLE TRUST INTERNATIONAL VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Principal
Security Amount Value
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 5.50%
Agreement with State Street Bank and Trust bearing interest at 5.70% dated
6/30/98 to be repurchased 7/01/98 in the amount of $525,083 and collateralized
by $460,000 U.S. Treasury Notes, 7.25% due 5/15/16 value $540,428
(cost $525,000) $525,000 $ 525,0000
LIABILITIES IN EXCESS OF OTHER ASSETS - (2.21%) (210,862)
----------
NET ASSETS - 100.00% $ 9,555,2540
===========
<TABLE>
<CAPTION>
<S> <C>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30,1998
- -----------------------------------------------------------------------------------------
Contract In Delivery Gross Unrealized
To Deliver Exchange For Date Appreciation
- ------------------------------------------------------------------------------------------
DEM 117,485 USD 64,776 7/01/98 $368
GBP 39,351 USD 65,565 7/06/98 118
JPY 6,965,738 USD 49,148 7/02/98 1,245
SGD 47,904 USD 27,907 7/06/98 514
-------------------
Total Appreciation $2,245
- ------------------------------------------------------------------------------------------
</TABLE>
DEM - Deutsche Mark
GBP - Pound Sterling
JPY - Japanese Yen
SGD - Singapore Dollar
USD - U.S. Dollar
@ Non-income producing security.
** American Depositary Receipts.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
NORTHSTAR VARIABLE TRUST INCOME AND GROWTH PORTFOLIO
THE MARKETS
o For the six months ended June 30 the Dow Industrials gained 13.2%, the S&P
500 16.8%, and the Russell 2000 was up 4.7%. Bonds also rose as the yields
on both the 10 year and 30 year Treasury bonds declined 30 basis points to
yield 5.45% and 5.63%, respectively.
o The U.S. financial markets were supported by strong money supply growth and
foreign buying. The relative performance of the equity indexes reflects the
very strong gains of large cap growth stocks with dominant business
franchises, stable growth prospects, and low exposure to Asia and emerging
market problems.
o Also, the initial impact of the Asian crisis was unexpectedly favorable for
the U.S. economy and financial markets as it further reduced inflation and
stimulated U.S. consumption with low interest rates. Accelerating GDP in
the first quarter helped stocks of domestic consumer cyclicals. As the
negative drag of a widening trade deficit and foreign price competition
became more visible in May and June it put renewed pressure on many global
industrials.
THE FUND
o The return for the portfolio was 4.21% for the first six months of 1998.
This compares to the average balanced fund in Lipper which was up 9.0%. The
average A rated bond fund was up 3.78% and the average U.S. stock fund was
up 15.1%.
o Performance of the Fund was helped by holdings with stable growth prospects
such as the pharmaceuticals, domestic financial services, broadcasting, and
diversified growth (General Electric). However, a number of holdings in
global industrials and oil services did not do well as the foreign crisis
escalated.
o Another negative factor was the general decline in REIT equity prices. At
the beginning of the year prospects for REITS looked promising for an
income plus growth objective with dividend yields over 6% and better than
10% expected growth. However, investor psychology soured on the sector in
general as development picked up and the spread between prices of
acquisitions and the cost of new equity narrowed. Holdings were reduced
from 9.3% to 6.6% while the remainder are selling at historically low
valuations and have excellent, albeit slightly slower, internal growth
prospects.
CURRENT STRATEGY
o After a brief period in the first quarter of guarded optimism that the
Asian crisis might be stabilizing, it instead seriously escalated and its
impact is now slowing the U.S. and Europe's economy. Historically high
equity valuation levels are being supported by rapid money supply growth,
very high corporate profitability and low inflation. With the diminishing
prospect of renewed inflation or a restrictive monetary policy near term,
equity valuations are likely to remain high but very dependent on the
outlook for earnings growth, which in a slowdown is coming under increasing
pressure unevenly across industries.
o About 1/3 of the Funds total equity holdings which were in commodity
related companies, global industrials, tobacco and REITS were sold in the
first half and new purchases were focussed in domestic financial,
healthcare, business and consumer services, retailing, and consumer
durables where continued growth is more likely.
o To further diversify the potential for company specific disappointments the
size of some large holdings are being reduced and the number of holdings
increased.
o The portfolio currently has 50% equities with an average dividend yield of
2.5%, 40% investment grade bonds (average rating A, coupon 6.9%, maturity
9.9 yrs) and cash reserves of 10%.
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 6/30/98) TOTAL NET ASSETS $22,564,813
- -----------------------------------------------------------------------------------------
SEC AVERAGE ANNUAL RATES OF
RETURN
TOP 10 HOLDINGS TOP 5 INDUSTRIES (at maximum applicable sales
NAME %FUND by percentage of net charge)
(assets) ------------------------------
(1)U.S Treasury Notes, 6.50%
due 10/15/06 6.4% U.S Gov't Agency 14.0% Inception 1year
------------------------------
(2)Bristol-Myers Squibb Co. 3.5 12.91% 3.54%
(3)Cendant Corp. 2.7 Real Estate Invest
Trust 7.4
(4)General Electric Co. 2.3
(5)Merck & Co., Inc 2.3 Pharmaceutical 7.3
(6)U.S. Treasury Notes, 6.50%
due 5/31/01 2.3 CUMULATIVE TOTAL RETURN
(do not reflect sales
(7)Philip Morris 2.1 Consumer Products 6.1 charge)
------------------------------
(8)Xerox Corp. 2.0 Inception 1year
------------------------------
(9)A.H. Belo Corp. 1.9 Financial 5.4 69.49% 10.54%
(10) First Union Corp. 1.9
-----
27.4%
======
</TABLE>
13
<PAGE>
NORTHSTAR VARIABLE TRUST INCOME AND GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Security Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 47.27%
AEROSPACE & DEFENSE - 0.95%
Boeing Co. 4,800 $ 213,900
-----------
AUTO PARTS & EQUIPMENT - 1.07%
Magna International, Inc. @@ 3,500 240,188
-----------
BROADCASTING - 0.35%
Meredith Corp. 1,700 79,794
-----------
CAPITAL GOODS MANUFACTURING - 2.26%
General Electric Co. 5,600 509,600
-----------
CHEMICALS - 1.60%
E.I. du Pont De Nemours & Co. 4,845 361,558
-----------
COMPUTERS - 1.41%
Compaq Computer Corp. 11,200 317,800
-----------
CONSUMER PRODUCTS - 4.23%
Kimberly-Clark Corp. 7,490 343,604
Philip Morris Cos., Inc. 12,050 474,468
RJR Nabisco Holdings Corp. 5,700 135,375
-----------
953,447
-----------
ENERGY - 2.07%
El Paso Natural Gas Co. 6,800 260,100
Mobil Corp. 2,700 206,887
-----------
466,987
-----------
FINANCE & BANKING - 4.43%
Citicorp 2,300 343,275
Mellon Bank Corp. 4,600 320,275
NationsBank Corp. 4,400 336,600
-----------
1,000,150
-----------
HEALTHCARE - 3.17%
Healthsouth Corp. @ 13,000 346,937
United Healthcare Corp. 5,800 368,300
-----------
715,237
-----------
14
<PAGE>
NORTHSTAR VARIABLE TRUST INCOME AND GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Security Shares Value
- --------------------------------------------------------------------------------
INSURANCE - 2.44%
Conseco, Inc. 8,500 $ 397,375
Nationwide Financial Services, Inc. 3,000 153,000
-----------
550,375
-----------
MACHINERY - 0.98%
Deere & Co. 4,200 222,075
-----------
OFFICE EQUIPMENT/SUPPLIES - 1.98%
Xerox Corp. 4,400 447,150
-----------
OIL & GAS DRILLING - 0.55%
ENSCO International, Inc. 7,200 125,100
-----------
PETROLEUM SERVICES - 1.98%
Baker Hughes, Inc. 6,000 207,375
Schlumberger Ltd. 3,500 239,094
-----------
446,469
-----------
PHARMACEUTICAL - 5.82%
Bristol-Myers Squibb Co. 6,880 790,770
Merck & Co., Inc. 3,900 521,625
-----------
1,312,395
-----------
REAL ESTATE INVESTMENT TRUST - 7.44%
Boston Properties, Inc. 7,000 241,500
CarrAmerica Realty Corp. 11,500 326,312
Developers Diversified Realty Corp. 5,600 219,450
Felcor Suite Hotels, Inc. 6,700 210,213
Glimcher Realty Trust 5,200 101,075
Spieker Properties, Inc. 6,500 251,875
Starwood Hotels & Resorts 6,800 328,525
-----------
1,678,950
-----------
RETAILING - 1.32%
OfficeMax, Inc. @ 18,100 298,650
-----------
SPECIALTY STORES - 1.05%
General Nutrition Cos., Inc. @ 7,600 236,550
-----------
15
<PAGE>
NORTHSTAR VARIABLE TRUST INCOME AND GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Shares/
Principal
Security Amount Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.66%
AT&T Corp. 2,620 $ 149,668
-----------
TRANSPORTATION - 1.51%
CNF Transportation, Inc. 8,000 340,000
-----------
TOTAL COMMON STOCKS
(cost $9,577,075) 10,666,043
-----------
CONVERTIBLE PREFERRED STOCKS - 2.70%
SERVICES - 2.70%
Cendant Corp., 7.50% 16,300 610,231
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $580,231) 610,231
-----------
DOMESTIC CORPORATE BONDS - 25.80%
AEROSPACE & DEFENSE - 1.12%
Raytheon Co.
6.45%, Notes, 8/15/02 $250,000 252,433
-----------
AIRLINES - 0.70%
Continental Airlines, Inc.
7.82%, Pass-Thru Certificates, 10/15/13 144,164 157,939
-----------
BANKING - 5.16%
Chase Manhattan Corp.
7.25%, Subordinated Notes, 6/01/07 300,000 319,095
First Union Corp.
7.50%, Subordinated Notes, 7/15/06 400,000 431,636
Fleet Financial Group, Inc.
7.19%, Subordinated Notes, 10/02/12 400,000 413,764
-----------
1,164,495
-----------
BROADCASTING & MEDIA - 1.86%
A.H. Belo Corp.
7.125%, Sr. Notes, 6/01/07 400,000 420,652
-----------
16
<PAGE>
NORTHSTAR VARIABLE TRUST INCOME AND GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Principal
Security Amount Value
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS - 1.83%
Avon Products, Inc.
6.55%, Notes, 8/01/07 $400,000 $ 412,508
-----------
ENERGY SERVICES - 1.86%
Smith International, Inc.
7.00%, Sr. Notes, 9/15/07 400,000 419,080
-----------
FINANCIAL - 5.38%
Bear Stearns Co., Inc.
6.75%, Notes, 12/15/07 400,000 410,768
General Motors Acceptance Corp.
6.125%, Notes, 1/22/08 400,000 395,424
Penn Power & Light Capital Funding, Inc.
6.79%, Company Guarantee, 11/22/04 400,000 406,956
-----------
1,213,148
-----------
PHARMACEUTICAL - 1.46%
American Home Products Corp.
7.90%, Notes, 2/15/05 300,000 329,274
-----------
TECHNOLOGY - 1.83%
International Business Machines Corp.
6.45%, Notes, 8/01/07 400,000 412,560
-----------
TELECOMMUNICATIONS - 1.44%
Worldcom, Inc.
7.75%, Notes, 4/01/07 300,000 326,001
-----------
UTILITIES - 3.16%
Enron Corp.
7.00%, Sr. Debentures, 8/15/23 400,000 402,788
IES Utilities, Inc.
6.625%, Debentures, 8/01/09 300,000 311,031
-----------
713,819
-----------
TOTAL DOMESTIC CORPORATE BONDS
(cost $5,630,376) 5,821,909
-----------
17
<PAGE>
NORTHSTAR VARIABLE TRUST INCOME AND GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Principal
Security Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCIES - 14.03%
Federal National Mortgage Association
7.33%, 6/19/07 $400,000 $ 409,064
7.00%, 7/17/07 400,000 406,432
Federal Home Loan Mortgage Corp.
7.05%, 12/03/07 400,000 402,404
U.S. Treasury Notes
6.50%, 5/31/01 500,000 512,625
6.50%, 10/15/06 1,350,000 1,434,092
-----------
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $3,048,006) 3,164,617
-----------
TOTAL INVESTMENT SECURITIES - 89.80%
(cost $18,835,688) 20,262,800
-----------
REPURCHASE AGREEMENT - 11.23%
Agreement with State Street Bank and Trust bearing interest at 5.70% dated
6/30/98, to be repurchased 7/01/98 in the amount of $2,534,401 and
collateralized by $2,205,000 U.S. Treasury Notes, 7.25% due 5/15/16, value
$2,590,531
(cost $2,534,000) 2,534,000 2,534,000
LIABILITIES IN EXCESS OF OTHER ASSETS - (1.03%) (231,987)
-----------
NET ASSETS - 100.00% $ 22,564,813
===========
@@ Foreign security.
@ Non-income producing.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
NORTHSTAR VARIABLE TRUST MULTI-SECTOR BOND PORTFOLIO
THE MARKETS
o Growth in the U.S. economy accelerated to 5.4% and then cooled to a rate
below 3% in the first half of 1998. Consumer spending at first outweighed
the effects of Asia on U.S. growth, but declines in manufacturing has
recently had the stronger impact. Inflation remained well under 2%
throughout those 6 months. Low inflation, slower growth, U.S. budget
surpluses and pursuit of the safety of quality pushed U.S. bond yields to
new lows in the first half. Yields of 10- and 30-year Treasury bonds traded
in about a 50 basis points (bps) range. Their yields ended June at 5.45%
and 5.63%, both down 30 bps. While volatility in economic trends and
expectations in Asia whipsawed markets, bonds and stocks nonetheless rose
during the first half of 1998.
o In the first half of 1998, high yield bonds returned 4.5% compared to 3.8%
for all domestic bonds. In general, lower-rated bonds outperformed
higher-rated bonds in the first quarter, while the opposite was true in the
second quarter. That corresponded to the changing outlook for Asian and the
U.S. rate of growth.
o Emerging market bonds fell 0.3% in the first half, but dropped 5% in the
second quarter. Foot-dragging in Japan, the collapse of Indonesia's economy
and brewing troubles in Russia were the main causes of the drop. The strong
U.S. dollar continues to limit the probability of profitably investing in
foreign currency securities.
THE FUND
o From January through June 1998, the total return of the Portfolio's shares
was 3.28%; the Lipper average for multi-sector bond funds was 2.71%. Net
assets rose 19% from $10.5MM to $12.5MM during the first six months of
1998.
o We increased cash 16 percentage points. To a lesser extent we sold some
U.S. government bonds and foreign bonds, while we increased holdings of
higher-rated domestic high yield bonds. We did not chase the bounce in
emerging market bonds. The net effects of those basically conservative
actions were to protect the Portfolio against volatility and to help it
outperform competitors with similar investment objectives.
o The requirement that the Portfolio have no more than 50% of its assets in
high yield continued to constrain our total returns in 1998, but to a
lesser extent than previously, given investors' heightened credit concerns.
CURRENT STRATEGY
o Continue above-average exposure in non-cyclicals; keep duration at or below
6 years to limit volatility.
o Reduce cash. Increase the credit quality of high-yield holdings. Maintain
portfolio allocations near the permitted limits: 50% high yield; 15% U.S.
government; 35% investment grade.
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 6/30/98) TOTAL NET ASSETS $12,489,825
- -----------------------------------------------------------------------------------------
SEC AVERAGE ANNUAL RATES OF
RETURN
TOP 10 HOLDINGS Top 5 SECTORS (at maximum applicable sales
NAME %FUND (by percentage of charge)
net assets) ----------------------------
(1)U.S. Treasury Notes, 6.1% High Yield 41.4% Inception 1year
5.875%, due 9/30/02 -----------------------------
(2)U.S. Treasury Notes,
6.625%, due 4/30/02 3.1 8.42% -0.76%
(3)U.S. Treasury Strips, 0%,
due 2/15/23 3.0 U.S. Government 20.6%
(4)Empresa Electrica Del Norte
Grande SA 2.9
(5)Paxson Communications Corp. 2.5 Cash/Other
Assets 16.4%
(6)Mego Mortgage Home Loan
Trust 2.3 CUMULATIVE TOTAL RETURN
(7)Superior National Insurance (do not reflect sales
Group, Inc. 2.2 Investment charge)
Grade 13.3% -------------------------------
(8)Federal Home Loan Mortgage
Corp. 2.1 Inception 1year
-------------------------------
(9)Sinclair Broadcast Group,
Inc. 2.1 Equity 5.2% 43.84% 6.10%
(10)U.S. Xchange LLC 2.1
-----
28.4%
======
</TABLE>
19
<PAGE>
NORTHSTAR VARIABLE TRUST MULTI-SECTOR BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30,1998
Principal
Security Amount Value
- --------------------------------------------------------------------------------
INVESTMENT GRADE SECURITIES - 13.27%
DOMESTIC BONDS & NOTES - 4.32%
ELECTRIC UTILITIES - 0.89%
Boston Edison Co.
9.375%, Debentures, 8/15/21 $100,000 $ 111,051
-----------
OIL & GAS - 1.68% PDV America, Inc.
7.875%, Sr. Notes, 8/01/03 200,000 210,026
-----------
TELECOMMUNICATIONS - 1.75% TCI Communications, Inc.
8.00%, Sr. Notes, 8/01/05 200,000 218,974
-----------
TOTAL DOMESTIC BONDS & NOTES 540,051
-----------
FOREIGN BONDS & NOTES - 8.95%
DIVERSIFIED FINANCIAL SERVICES - 1.19%
Guangdong Enterprises Holding Ltd. #
8.875%, Sr. Notes, 5/22/07 200,000 148,174
-----------
ELECTRIC UTILITIES - 2.94%
Empresa Electrica Del Norte Grande SA #
7.75%, Notes, 3/15/06 450,000 367,448
-----------
FOREIGN GOVERNMENT SECURITIES - 4.82%
Poland Government $
3.25/7.00%, due 10/27/24 250,000 181,875
Republic of Columbia
7.25%, due 2/23/04 150,000 139,039
Republic of Indonesia
7.75%, due 8/01/06 150,000 108,750
Republic Of Italy (1)
12.00%, due 5/01/02 245,000,000 172,710
-----------
602,374
-----------
TOTAL FOREIGN BONDS & NOTES 1,117,996
-----------
TOTAL INVESTMENT GRADE SECURITIES
(cost $1,764,574) 1,658,047
-----------
20
<PAGE>
NORTHSTAR VARIABLE TRUST MULTI-SECTOR BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30,1998
Principal
Security Amount Value
- --------------------------------------------------------------------------------
HIGH YIELD SECURITIES - 41.39%
DOMESTIC BONDS & NOTES - 34.63%
AIRLINES - 1.89%
Atlantic Coast Airlines, Inc. #
8.75%, Pass-Thru Certificates, 1/01/07 $238,363 $ 236,413
-----------
BROADCASTING - 2.09%
Sinclair Broadcast Group, Inc.
9.00%, Sr. Subordinated Notes, 7/15/07 250,000 261,250
-----------
CABLE TELEVISION - 1.48%
EchoStar Satellite Broadcasting Corp. $
0/13.125%, Sr. Secured Discount Notes, 3/15/04 200,000 185,000
-----------
CONSUMER PRODUCTS - 0.81%
Packaged Ice, Inc. #
9.75%, Sr. Notes, 2/01/05 100,000 101,250
-----------
ENERGY - 2.04% AES Corp.
8.50%, Sr. Subordinated Notes, 11/01/07 250,000 254,375
-----------
ENTERTAINMENT/FILM - 0.86% Paramount Communications, Inc.
8.25%, Sr. Debentures, 8/01/22 100,000 106,797
-----------
FOOD/BEVERAGE/TOBACCO - 2.04%
Richmont Marketing Specialists, Inc. #
10.125%, Sr. Subordinated Notes, 12/15/07 250,000 255,000
-----------
HEALTHCARE - 0.80%
Fisher Scientific International, Inc.
9.00%, Sr. Subordinated Notes, 2/01/08 100,000 100,000
-----------
HOMEBUILDING - 1.99%
Engle Homes, Inc. #
9.25%, Company Guarantee, 2/01/08 250,000 248,125
-----------
21
<PAGE>
NORTHSTAR VARIABLE TRUST MULTI-SECTOR BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30,1998
Principal
Amount/
Security Units Value
- --------------------------------------------------------------------------------
INSURANCE - 2.99%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 $100,000 $ 103,750
Superior National Insurance Group, Inc.
10.75%, Company Guarantee, 12/01/17 2,500 270,000
-----------
373,750
-----------
OIL & GAS - 1.59%
Lomak Petroleum, Inc.
8.75%, Sr. Subordinated Notes, 1/15/07 200,000 198,500
-----------
SERVICES - 2.34%
Mastec, Inc. #
7.75%, Sr. Subordinated Notes, 2/01/08 200,000 191,500
Sabreliner Corp.
12.50%, Sr. Notes, 4/15/03 96,000 101,280
-----------
292,780
-----------
TELECOMMUNICATIONS - 10.18%
Hyperion Telecommunications, Inc. $
0/13.00%, Sr. Discount Notes, 4/15/03 150,000 112,500
ICG Holdings, Inc. $
0/12.50%, Sr. Secured Discount Notes, 5/01/06 100,000 78,625
ITC Deltacom, Inc.
11.00%, Sr. Notes, 6/01/07 130,000 146,900
RCN Corp. $
0/9.80%, Sr. Discount Notes, 2/15/08 100,000 60,000
RCN Corp.
10.00%, Sr. Notes, 10/15/07 200,000 206,500
U.S. Xchange LLC #
15.00%, Sr. Notes, 7/01/08 250,000 258,125
Viatel, Inc. # (2)
11.25%, Units, 4/15/08 200 211,000
WinStar Communications, Inc. $
0/14.00%, Sr. Discount Notes, 10/15/05 100,000 84,250
WinStar Equipment Corp.
12.50%, Company Guarantee, 3/15/04 100,000 113,500
-----------
1,271,400
-----------
22
<PAGE>
NORTHSTAR VARIABLE TRUST MULTI-SECTOR BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Principal
Security Amount Value
- --------------------------------------------------------------------------------
TEXTILE/APPAREL - 1.94% Fruit of the Loom, Inc.
6.50%, Notes, 11/15/03 $250,000 $ 242,178
-----------
TRANSPORTATION - 1.59%
Sea Containers Ltd.
7.875%, Sr. Notes, 2/15/08 200,000 198,500
-----------
TOTAL DOMESTIC BONDS & NOTES 4,325,318
-----------
FOREIGN BONDS & NOTES - 6.00%
SERVICES - 1.12%
Guangzhou Shenzhen Superhighway Holdings
10.25%, Sr. Notes, 8/15/07 200,000 140,000
-----------
SHIPPING - 1.84%
Equimar Shipholdings Ltd.
9.875%, Company Guarantee, 7/01/07 250,000 230,000
-----------
TELECOMMUNICATIONS - 3.04%
Colt Telecom Group PLC $
0/12.00%, Sr. Discount Notes, 12/15/06 200,000 158,000
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes, 3/15/04 250,000 221,250
-----------
379,250
-----------
TOTAL FOREIGN BONDS & NOTES 749,250
-----------
CONVERTIBLE BONDS - 0.76%
TELECOMMUNICATIONS - 0.76%
SA Telecommunications, Inc. # *
10.00%, Notes, 8/15/06 125,000 18,750
Winstar Communications, Inc. # $
0/14.00%, Sr. Discount Notes, 10/15/05 50,000 76,500
-----------
TOTAL CONVERTIBLE BONDS 95,250
-----------
TOTAL HIGH YIELD SECURITIES
(cost $5,077,781) 5,169,818
-----------
23
<PAGE>
NORTHSTAR VARIABLE TRUST MULTI-SECTOR BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Security Shares Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS - 4.58%
BROADCASTING - 2.49%
Paxson Communications Corp., 12.50% & 2,930 $ 310,580
----------
ENERGY - 0.41%
Enron Capital Resources L.P., 9.00% 2,000 52,000
-----------
SUPERMARKETS - 1.68%
Nebco Evans Holding Co., 11.25% & 2,053 209,919
-----------
TOTAL PREFERRED STOCKS
(cost $544,732) 572,499
-----------
WARRANTS - 0.65%
CONSUMER PRODUCTS - 0.05%
Chattem, Inc., (expires 6/17/99) 50 5,537
-----------
STEEL - 0.01%
Sheffield Steel Corp., (expires 11/01/01) 500 1,000
-----------
SUPERMARKETS - 0.00%
Dairy Mart Convenience Stores, Inc., (expires
12/01/01) 666 500
-----------
TELECOMMUNICATIONS - 0.59%
Clearnet Communications, Inc., (expires 9/15/05) 660 6,435
Colt Telecom Group PLC #, (expires 12/31/06) 200 52,050
Hyperion Telecommunications, Inc., (expires
4/15/01) 150 15,000
UNIFI Communications, Inc. #, (expires 2003) 100 0
-----------
73,485
-----------
TOTAL WARRANTS
(cost $2,000) 80,522
-----------
24
<PAGE>
NORTHSTAR VARIABLE TRUST MULTI-SECTOR BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Principal
Security Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCIES - 20.57%
Cityscape Home Loan Owner Trust, 8.17%, due
7/25/18 $200,000 $ 208,148
Federal Home Loan Mortgage Corp., 7.00%, due
6/18/17 - 4/15/28 1,262,754 425,291
Federal National Mortgage Association Remic,
7.00%, due 2/18/2 500,000 82,969
Mego Mortgage Home Loan Trust, 8.01%, due 8/25/23 300,000 288,921
Resolution Trust Corp., 8.00%, due 6/25/26 43,149 45,275
U.S. Treasury Notes, 5.875%, due 9/30/02 750,000 759,600
U.S. Treasury Notes, 6.625%, due 4/30/02 375,000 388,598
U.S. Treasury Strips, 0%, due 2/15/23 1,500,000 370,305
-----------
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $2,518,080) 2,569,107
-----------
TOTAL INVESTMENT SECURITIES - 80.46%
(cost $9,907,167) 10,049,993
REPURCHASE AGREEMENT - 16.35%
Agreement with State Street Bank and Trust bearing interest at 5.70% dated
6/30/98 to be repurchased 7/01/98 in the amount of $2,042,323 and
collaterallized by $1,775,000 U.S. Treasury Notes, 7.25% due 5/15/16, value
$2,085,348
(cost $2,042,000) 2,042,000 2,042,000
OTHER ASSETS LESS LIABILITIES - 3.19% 397,832
-----------
NET ASSETS - 100.00% $ 12,489,825
===========
===========
# Sale restricted to qualified institutional
investors.
$ Step Bond.
& Payment-in-kind security.
* Defaulted security.
1) The principal amount shown is shown in the respective country's currency.
2) A unit consists of $1,000 par value Sr. Notes, 11.25% due 4/15/08 plus 0.483
shares of preferred stock.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
NORTHSTAR VARIABLE TRUST HIGH YIELD BOND PORTFOLIO
THE MARKETS
o Growth in the U.S. economy accelerated to 5.4% and then cooled to a rate
below 3% in the first half of 1998. Consumer spending at first outweighed
the effects of Asia on U.S. growth, but declines in manufacturing has
recently had the stronger impact. Inflation remained well under 2%
throughout those 6 months. Low inflation, slower growth, U.S. budget
surpluses and pursuit of the safety of quality pushed U.S. bond yields to
new lows in the first half. Yields of 10- and 30-year Treasury bonds traded
in about a 50 basis points (bps) range. Their yields ended June at 5.45%
and 5.63%, both down 30 bps. While volatility in economic trends and
expectations in Asia whipsawed markets, bonds and stocks nonetheless rose
during the first half of 1998.
o In the first half of 1998, high yield bonds returned 4.5% compared to 3.8%
for all domestic bonds. In general, lower-rated bonds outperformed higher
rated bonds in the first quarter, while the opposite was true in the second
quarter. That corresponded to the changing outlook for Asian and the U.S.
rate of growth.
o Emerging market bonds fell 0.3% in the first half, but dropped 5% in the
second quarter. Foot-dragging in Japan, the collapse of Indonesia's economy
and brewing troubles in Russia were the main causes of the drop.
THE PORTFOLIO
o From January through June 1998, the total return of the Portfolio's shares
was 4.21%; the Lipper average for high yield bond funds was 4.39%. A
positive market response to the Portfolio's performance caused net assets
to rise 32% in this period, from $12.6MM to $16.5MM.
o The Portfolio's return reflected the effects of a substantial increase in
bonds rated BB and a reduction in cash holdings. Both of those changes
protected the Portfolio in the second quarter of 1998, but restrained its
returns.
o Many of the stocks and equity rights attached to bonds ("equity kickers")
held by the Portfolio were unable to boost its returns in 1998, but they
are poised to make more contributions as their issuers keep growing.
CURRENT STRATEGY
o Continue above-average exposure in non-cyclical industries and in bonds
that have equity kickers. Focus on investments in undervalued bonds that
have high yields and above-average potential for capital appreciation.
o Given the resumption of significant market volatility and the renewed
flight to quality related to Asia, we will continue to be very selective
about the credit risk that we assume. We will raise cash if our economy
slows.
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------------------
FUND INFORMATION (ALL DATA ARE AS OF 6/30/98) TOTAL NET ASSETS $16,486,922
- ----------------------------------------------------------------------------------------
SEC AVERAGE ANNUAL RATES OF
RETURN
TOP 10 HOLDINGS TOP 5 INDUSTRIES (at maximum applicable sales
NAME %FUND (by percentage of charge)
(net assets) -----------------------------
(1)Viatel 3.2% Telecommunications 23.1% Inception 1 year
-----------------------------
(2)IXC Communications 3.1 10.33% 2.11%
(3)North Atlantic
Trading 3.1 Food,Beverage,
Tobacco 10.4%
(4)RAB Enterprises 3.1
(5)Roma Corp. 3.1 Shipping 7.7%
(6)Tenet Healthcare 3.1 CUMULATIVE TOTAL RETURN
(do not reflect sales
(7)Conproca SA 3.0 Broadcasting 7.1% charge)
------------------------------
(8)Great Central Mines 3.0 Inception 1 year
----------------------
(9)Indesco International 3.0 Oil & Gas 6.8% 54.39% 9.11%
(10)US Xchange LLC 2.5
---
30.2 %
=====
</TABLE>
26
<PAGE>
NORTHSTAR VARIABLE TRUST HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Principal
Amount/
Security Units Value
- --------------------------------------------------------------------------------
DOMESTIC BONDS & NOTES - 62.97%
AIRLINES - 1.15%
Atlantic Coast Airlines, Inc. #
8.75%, Pass-Thru Certificates, 1/01/07 $190,691 $ 189,131
-----------
AUTO PARTS & EQUIPMENT - 0.63%
Titan Wheel International, Inc.
8.75%, Sr. Subordinated Notes, 4/01/07 100,000 103,750
---------
BROADCASTING - 3.94%
Brill Media Co. LLC $ (1)
0/7.50%, Units, 12/15/07 200 189,500
Capstar Broadcasting Partners, Inc.
9.25%, Sr. Subordinated Notes, 7/01/07 100,000 105,250
Sinclair Broadcast Group, Inc.
8.75%, Sr. Subordinated Notes, 12/15/07 200,000 207,000
Unisite, Inc. $ (2)
0/13.00%, Units, 12/15/04 138 147,784
-----------
649,534
-----------
CABLE TELEVISION - 1.31%
EchoStar Satellite Broadcasting Corp. $
0/13.125%, Sr. Secured Discount Notes, 3/15/04 200,000 185,000
Heartland Wireless Communications, Inc. *
13.00%, Sr. Notes, 4/15/03 75,000 30,375
-----------
215,375
---------
CAPITAL GOODS MANUFACTURING - 3.93%
Indesco International, Inc. #
9.75%, Sr. Subordinated Notes, 4/15/08 500,000 495,000
Roller Bearing Co. America, Inc.
9.625%, Company Guarantee, 6/15/07 150,000 152,625
-----------
647,625
-----------
CHEMICALS - 2.75%
Hydrochem Industrial Services, Inc.
10.375%, Company Guarantee, 8/01/07 200,000 205,000
Simcala, Inc. #
9.625%, Sr. Notes, 4/15/06 250,000 247,813
-----------
452,813
-----------
27
<PAGE>
NORTHSTAR VARIABLE TRUST HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Principal
Security Amount Value
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS - 1.84%
Packaged Ice, Inc. #
9.75%, Sr. Notes, 2/01/05 $300,000 $ 303,750
-----------
ENTERTAINMENT/FILM - 1.91% Paramount Communications, Inc.
8.25%, Sr. Debentures, 8/01/22 100,000 106,797
Speedway Motorsports, Inc.
8.50%, Sr. Subordinated Notes, 8/15/07 200,000 208,000
-----------
314,797
-----------
FOOD/BEVERAGE/TOBACCO - 10.35% Aurora Foods, Inc.
9.875%, Sr. Subordinated Notes, 2/15/07 95,000 101,175
Eagle Family Foods, Inc. #
8.75%, Sr. Subordinated Notes, 1/15/08 250,000 244,375
North Atlantic Trading, Inc.
11.00%, Sr. Notes, 6/15/04 500,000 505,000
RAB Enterprises, Inc. #
10.50%, Sr. Notes, 5/01/05 500,000 505,000
Standard Commercial Corp.
8.875%, Company Guarantee, 8/01/05 150,000 149,250
Tom's Foods, Inc.
10.50%, Sr. Notes, 11/01/04 200,000 202,000
-----------
1,706,800
-----------
HEALTHCARE - 3.06%
Tenet Healthcare Corp. #
8.125%, Sr. Subordinated Notes, 12/01/08 500,000 505,000
-----------
HOMEBUILDING - 1.50%
Engle Homes, Inc. #
9.25%, Company Guarantee, 2/01/08 250,000 248,125
-----------
INDUSTRIAL - 1.20%
La Petite Holdings Corp.
9.625%, Sr. Secured Notes, 8/01/01 100,000 103,750
La Petite Holdings Corp.
12.125%, Subordinated Exchange Debenture, 8/01/03 88,423 94,170
-----------
197,920
-----------
28
<PAGE>
NORTHSTAR VARIABLE TRUST HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
Principal
Security Amount Value
- --------------------------------------------------------------------------------
INSURANCE - 0.63%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 $100,000 $ 103,750
-----------
OIL & GAS - 3.78%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 100,000 106,500
Crown Central Petroleum Corp.
10.875%, Sr. Notes, 2/01/05 100,000 105,000
Transamerican Energy Corp. $
0/13.00%, Sr. Secured Discount Notes, 6/15/02 500,000 411,250
-----------
622,750
-----------
RESTAURANTS - 3.09%
Romacorp, Inc. #
12.00%, Sr. Notes, 7/01/06 500,000 510,000
-----------
SERVICES - 0.67%
Allied Waste North America, Inc.
10.25%, Sr. Subordinated Notes, 12/01/06 100,000 110,125
-----------
SHIPPING - 3.27%
International Shipholding Corp.
7.75%, Sr. Notes, 10/15/07 250,000 245,625
Ultrapetrol Bahamas Ltd. #
10.50%, 1st Mortgage Notes, 4/01/08 300,000 294,000
-----------
539,625
-----------
STEEL - 0.63% WCI Steel, Inc.
10.00%, Sr. Notes, 12/01/04 100,000 103,500
-----------
TELECOMMUNICATIONS - 16.13%
Hyperion Telecommunications, Inc. $
0/13.00%, Sr. Discount Notes, 4/15/03 150,000 112,500
ICG Holdings, Inc. $
0/12.50%, Sr. Secured Discount Notes, 5/01/06 100,000 78,625
Intercel, Inc. $
0/12.00%, Sr. Discount Notes, 5/01/06 150,000 117,964
29
<PAGE>
NORTHSTAR VARIABLE TRUST HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30. 1998
Principal
Amount/
Security Units Value
- --------------------------------------------------------------------------------
ITC Deltacom, Inc.
11.00%, Sr. Notes, 6/01/07 $130,000 $ 146,900
IXC Communications, Inc. #
9.00%, Sr. Subordinated Notes, 4/15/08 500,000 503,750
RCN Corp.
10.00%, Sr. Notes, 10/15/07 300,000 309,750
U.S. Xchange LLC #
15.00%, Sr. Notes, 7/01/08 400,000 413,000
Verio, Inc. # (3)
13.50%, Units, 6/15/04 100 144,500
Viatel, Inc. # (4)
11.25%, Units, 4/15/08 500 527,500
Western Wireless Corp.
10.50%, Sr. Subordinated Notes, 6/01/06 100,000 107,000
WinStar Communications, Inc. $
0/14.00%, Sr. Discount Notes, 10/15/05 100,000 84,250
WinStar Equipment Corp.
12.50%, Company Guarantee, 3/15/04 100,000 113,500
-----------
2,659,239
-----------
TRANSPORTATION - 1.20%
Sea Containers Ltd.
7.875%, Sr. Notes, 2/15/08 200,000 198,500
-----------
TOTAL DOMESTIC BONDS & NOTES
(cost $10,118,515) 10,382,109
-----------
FOREIGN BONDS & NOTES - 20.39%
AEROSPACE & DEFENSE - 0.64%
Derlan Manufacturing, Inc.
10.00%, Sr. Notes, 1/15/07 100,000 105,000
-----------
BROADCASTING - 1.23%
Antenna TV SA
9.00%, Sr. Notes, 8/01/07 200,000 202,000
-----------
CABLE TELEVISION - 0.27%
Pratama Datakom Asia BV #
12.75%, Company Guarantee, 7/15/05 125,000 44,375
----------
30
<PAGE>
NORTHSTAR VARIABLE TRUST HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30. 1998
Principal
Amount/
Security Units Value
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS - 0.19%
International Semi-Tech Corp. $
0/11.50%, Sr. Secured Discount Notes, 8/15/03 $100,000 $ 31,500
-----------
METALS & MINING - 2.99%
Great Central Mines Ltd. #
8.875%, Sr. Notes, 4/01/08 500,000 492,500
-----------
OIL & GAS - 3.03%
Conproca SA #
12.00%, Sr. Secured Notes, 6/16/10 500,000 500,000
-----------
PAPER - 0.81%
APP International Finance Co.
11.75%, Company Guarantee, 10/01/05 150,000 132,750
-----------
PRINTING & PUBLISHING - 0.41%
Newsquest Capital PLC
11.00%, Sr. Subordinated Notes, 5/01/06 60,000 68,100
-----------
SERVICES - 3.26%
Autopistas Del Sol SA #
10.25%, Sr. Notes, 8/01/09 200,000 185,250
Intertek Finance PLC
10.25%, Sr. Subordinated Notes, 11/01/06 100,000 105,000
Localiza Rent A Car
10.25%, Notes, 10/01/05 300,000 247,500
-----------
537,750
-----------
SHIPPING - 4.41%
Alpha Shipping PLC #
9.50%, Sr. Notes, 2/15/08 200,000 189,500
Equimar Shipholdings Ltd.
9.875%, Company Guarantee, 7/01/07 400,000 368,000
Navigator Gas Transport # (5)
12.00%, Units, 6/30/07 150 170,250
-----------
727,750
-----------
31
<PAGE>
NORTHSTAR VARIABLE TRUST HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30. 1998
Principal
Amount/
Security Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.15%
Colt Telecom Group PLC $
0/12.00%, Sr. Discount Notes, 12/15/06 $100,000 $ 79,000
Microcell Telecommunications, Inc. $
0/11.125%, Sr. Discount Notes, 10/15/07 250,000 108,304
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes, 3/15/04 150,000 132,750
Rogers Cantel, Inc.
8.80%, Sr. Subordinated Notes, 10/01/07 200,000 199,250
-----------
519,304
-----------
TOTAL FOREIGN BONDS & NOTES
(cost $3,511,984) 3,361,029
-----------
CONVERTIBLE BONDS - 0.58%
TELECOMMUNICATIONS - 0.58%
SA Telecommunications, Inc. # *
10.00%, Notes, 8/15/06 125,000 18,750
WinStar Communications, Inc. #
0/14.00%, Sr. Discount Notes, 10/15/05 50,000 76,500
-----------
95,250
-----------
TOTAL CONVERTIBLE BONDS
(cost $164,071) 95,250
-----------
COMMON STOCKS - 0.21%
BROADCASTING - 0.03%
Pegasus Communications Corp. @ 225 4,725
-----------
CABLE TELEVISION - 0.07%
EchoStar Communications Corp. @ 450 10,828
-----------
DIVERSIFIED FINANCIAL SERVICES - 0.03%
Central Rents, Inc. @ # 100 5,050
-----------
SERVICES - 0.06%
Coinstar, Inc. @ 1,050 9,713
-----------
TELECOMMUNICATIONS - 0.02%
Jordan Telecommunications Products, Inc. 150 4,050
-----------
32
<PAGE>
NORTHSTAR VARIABLE TRUST HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30. 1998
Security Shares Value
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(cost $7,334) $ 34,366
-----------
CONVERTIBLE PREFERRED STOCKS - 1.43%
HEALTHCARE - 1.43%
Intracel Corp., 8.00% 15,271 236,700
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $122,182) 236,700
-----------
PREFERRED STOCKS - 5.62%
BROADCASTING - 1.54%
Paxson Communications Corp., 12.50% & 1,200 127,200
SFX Broadcasting, Inc., 12.625% & 1,063 127,029
-----------
254,229
-----------
CABLE TELEVISION - 1.13%
Echostar Communications Corp., 12.125% & 1,670 185,370
-----------
TELECOMMUNICATIONS - 2.95%
Hyperion Telecommunications, Inc., 12.875% & 3,293 328,444
Jordan Telecommunication Products, Inc., 13.25% & 1,500 158,250
-----------
486,694
-----------
TOTAL PREFERRED STOCKS
(cost $858,620) 926,293
-----------
WARRANTS - 1.03%
BROADCASTING - 0.32%
Benedek Communications Corp., (expires 7/01/07) 1,000 3,250
Spanish Broadcasting Systems, Inc., (expires
6/30/99) 100 49,000
-----------
52,250
-----------
CABLE TELEVISION - 0.00%
Heartland Wireless Communications, Inc., (expires
4/15/00) 450 5
-----------
CONSUMER PRODUCTS - 0.21%
Chattem, Inc., (expires 6/17/99) 50 5,537
Packaged Ice, Inc., (expires 4/15/04) 150 15,000
33
<PAGE>
NORTHSTAR VARIABLE TRUST HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30. 1998
Shares/
Principal
Security Amount Value
- --------------------------------------------------------------------------------
Packaged Ice, Inc. #, (expires 4/15/04) 145 $ 14,500
-----------
35,037
-----------
PAPER - 0.20%
SD Warren Holdings Corp., (expires 12/15/06) 6,400 33,600
-----------
STEEL - 0.01%
Sheffield Steel Corp., (expires 11/01/01) 500 1,000
-----------
SUPERMARKETS - 0.00%
Dairy Mart Convenience Stores, Inc., (expires
12/01/01) 666 500
-----------
TELECOMMUNICATIONS - 0.29%
Clearnet Communications, Inc., (expires 9/15/05) 660 6,435
Colt Telecom Group PLC #, (expires 12/31/06) 100 26,025
Geotek Communications, Inc. #, (expires 6/20/01) 3,000 0
Hyperion Telecommunications, Inc., (expires
4/15/01) 150 15,000
Occidente Y Caribe Celular SA #, (expires 3/15/04) 600 0
UNIFI Communications, Inc. #, (expires 2003) 100 0
-----------
47,460
-----------
TOTAL WARRANTS
(cost $75,833) 169,852
-----------
TOTAL INVESTMENT SECURITIES - 92.23%
(cost $14,858,539) 15,205,599
REPURCHASE AGREEMENT - 9.38%
Agreement with State Street Bank and Trust bearing interest at 5.70% dated
6/30/98, to be repurchased 7/01/98 in the amount of $1,547,245 and
collateralized by $1,345,000 U.S. Treasury Notes, 7.25% due 5/15/16, value
$1,580,165
(cost $1,547,000) $ 1,547,000 1,547,000
LIABILITIES IN EXCESS OF OTHER ASSETS - (1.61%) (265,677)
-----------
NET ASSETS - 100.00% $ 16,486,922
=============
34
<PAGE>
NORTHSTAR VARIABLE TRUST HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30. 1998
# Sale restricted to qualified institutional
investors.
$ Step Bond.
* Defaulted security.
@ Non-income producing security.
& Payment-in-kind security.
1) A unit consists of $1,000 par value Sr. Notes, 7.50% due 12/15/07 and
appreciated notes.
2) A unit consists of $1,000 par value Notes, 13.00% due
12/15/04 and 0.4858 warrants.
3) A unit consists of $1,000 par value Notes,
13.50% due 6/05/04 and 8 warrants.
4) A unit consists of $1,000 par value Sr.
Notes, 11.25% due 4/15/08 and 0.483 shares of Series A preferred.
5) A unitconsists of $1,000 par value 2nd Priority Mortgage Notes, 12.00%
due 6/30/07 and 7.66 warrants.
The accompanied notes are an integral part of to the financial statements.
35
<PAGE>
NORTHSTAR VARIABLE TRUST
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C>
NORTHSTAR NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INTERNATIONAL INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH VALUE GROWTH BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------
ASSETS:
Investments in securities, at value
(cost $34,090,238, $8,709,988, $18,835,688,
$9,907,167, and $14,858,539,
(respectively).......................................$38,807,214 $9,241,116 $20,262,800 $10,049,993 $15,205,599
Repurchase agreements................................ 1,351,000 525,000 2,534,000 2,042,000 1,547,000
Cash................................................. 2,410 842 823 494 147
Foreign cash, at value (cost $0, $7,532, $0, $0, 0 7,286 0 0
and $0, respectively)...............................
Receivable for investments old....................... 59,120 0 538,388 243,172 0
Dividends and interest eceivable..................... 9,778 37,470 190,060 172,093 277,027
Receivable for shares of beneficial interest sold.... 0 35,822 23,847 10,660 9,543
Unrealized appreciation of foreign currency
contracts......................................... 0 2,245 0 0 0
Prepaid expenses..................................... 1,158 118 1,000 762 823
-----------------------------------------------------------------------
Total Assets................................... 40,230,680 9,849,899 23,550,918 12,519,174 17,040,139
-----------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased.................... 1,765,465 273,020 952,772 0 500,000
Management fees payable.............................. 22,380 7,432 14,431 7,701 10,011
Printing fees payable................................ 6,642 778 3,712 465 1,593
Audit fee payable.................................... 6,177 7,232 6,080 6,056 5,788
Administrative services fees payable................. 2,984 743 1,924 1,027 1,335
Custodian & fund accounting fees payable............. 769 4,117 1,434 3,110 2,078
Payable for fund shares repurchased.................. 357 116 4,671 36 12,047
Tax withholding payable.............................. 0 1,192 0 346 0
Income distribution payable.......................... 0 0 0 10,474 19,717
Other liabilities.................................... 87 15 1,081 134 648
-----------------------------------------------------------------------
Total Liabilities............................. 1,804,861 294,645 986,105 29,349 553,217
-----------------------------------------------------------------------
NET ASSETS...........................................$38,425,819 $9,555,254 $22,564,813 $12,489,825 $16,486,922
=======================================================================
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of
beneficial interest, $.01 par value
outstanding (unlimited shares authorized)............$30,812,286 $8,776,792 $19,470,762 $12,528,761 $16,121,070
Undistributed net investment income (loss)........... (7,515) (1,597) 23,361 (50) 0
Accumulated net realized gain (loss) on investments 2,904,072 249,375 1,643,578 (181,689) 18,792
Net unrealized appreciation of investments and
foreign currency.................................. 4,716,976 530,684 1,427,112 142,803 347,060
-----------------------------------------------------------------------
NET ASSETS.................................$38,425,819 $9,555,254 $22,564,813 $12,489,825 $16,486,922
=======================================================================
Net Asset Value Per Share $38,425,819/2,189,523
Shares, $9,555,254/838,837 shares, $22,564,813/
1,693,872 shares $12,489,825/2,437,502 shares,
and, $16,486,922/3,102,319 shares, respectively) $17.55 $11.39 $13.32 $5.12 $5.31
The accompanying notes are an integral part of the financial statements.
</TABLE>
36
<PAGE>
NORTHSTAR VARIABLE TRUST
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C>
NORTHSTAR NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INTERNATIONAL INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH VALUE GROWTH BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of withholding tax of $398,
$16,133, $238, $0, and $1,385, respectively)......$ 94,699 $153,085 $149,379 $ 38,430 $ 67,688
Interest (net of withholding tax of $0, $0, $0,
$1,032, and $0, respectively)..................... 46,507 11,270 340,369 460,399 615,947
-----------------------------------------------------------------------
Total investment
income............................................... 141,206 164,355 489,748 498,829 683,635
-----------------------------------------------------------------------
EXPENSES:
Investment advisory and management fees.............. 131,146 38,448 84,977 43,367 53,431
Administrative services fees......................... 17,486 3,845 11,330 5,782 7,124
Custodian and fund accounting fees................... 12,362 14,638 10,835 13,011 13,300
Audit fees........................................... 6,234 7,625 6,151 6,094 5,817
Printing expense..................................... 3,813 2,997 4,428 1,694 2,546
Trustee fees and expenses............................ 1,399 1,278 1,528 1,292 1,386
Insurance expense.................................... 390 0 281 95 160
Miscellaneous expenses............................... 545 399 507 443 409
-----------------------------------------------------------------------
173,375 69,230 120,037 71,778 84,173
Less expenses reimbursed by investment adviser....... 33,382 38,364 29,326 25,329 26,990
-----------------------------------------------------------------------
Total expenses................................ 139,993 30,866 90,711 46,449 57,183
-----------------------------------------------------------------------
Net investment income................................ 1,213 133,489 399,037 452,380 626,452
-----------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain (loss) on investments.............. 2,595,585 419,017 879,715 (77,968) (8,590)
Net realized gain on foreign currency................ 0 2,231 0 76 0
Net change in unrealized appreciation
(depreciation) of investments..................... 962,408 341,201 (384,394) 26,099 13,390
Net change in unrealized appreciation
(depreciation) of foreign currency................ 0 (196) 0 45 0
-----------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments......................................... 3,557,993 762,253 495,321 (51,748) 4,800
-----------------------------------------------------------------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................................... $3,559,206 $895,742 $894,358 $400,632 $631,252
=======================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
37
<PAGE>
NORTHSTAR VARIABLE TRUST
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C>
NORTHSTAR NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INTERNATIONAL INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH VALUE GROWTH BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------
FROM OPERATIONS:
Net investment income..........................$ 1,213 $ 133,489 $ 399,037 $ 452,380 $ 626,452
Net realized gain (loss) on investments........ 2,595,585 419,017 879,715 (77,968) (8,590)
Net realized gain on foreign currency.......... 0 2,231 0 76 0
Net change in unrealized appreciation
(depreciation) of investments............... 962,408 341,201 (384,394) 26,099 13,390
Net change in unrealized appreciation
(depreciation) of foreign currency........... 0 (196) 0 45 0
-----------------------------------------------------------------------
Increase in net assets resulting from
operations 3,559,206 895,742 894,358 400,632 631,252
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income.......................... (10,927) (137,801) (375,676) (452,430) (626,452)
-----------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares............... 5,540,373 4,879,285 3,615,670 4,569,758 8,457,542
Net asset value of shares issued to
shareholders in reinvestment of dividends.. 10,927 137,801 375,676 455,666 626,000
-----------------------------------------------------------------------
5,551,300 5,017,086 3,991,346 5,025,424 9,083,542
Cost of shares redeemed......................... (2,830,091) (2,156,797) (3,476,071) (3,031,968) (5,207,584)
-----------------------------------------------------------------------
Net increase in net assets derived from capital
share transactions............................ 2,721,209 2,860,289 515,275 1,993,456 3,875,958
-----------------------------------------------------------------------
Net increase in net assets........................... 6,269,488 3,618,230 1,033,957 1,941,658 3,880,758
NET ASSETS:
Beginning of period................................. 32,156,331 5,937,024 21,530,856 10,548,167 12,606,164
-----------------------------------------------------------------------
End of period........................................$38,425,819 $9,555,254 $22,564,813 $12,489,825 $16,486,922
=======================================================================
Undistributed net investment income (loss)........... ($7,515) ($1,597) $23,361 ($50) $0
The accompanying notes are an integral part of the financial statements.
</TABLE>
38
<PAGE>
NORTHSTAR VARIABLE TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
NORTHSTAR NORTHSTAR NORTHSTAR NORTHSTAR
NORTHSTAR INTERNATIONAL INCOME AND MULTI-SECTOR HIGH YIELD
GROWTH VALUE GROWTH BOND BOND
PORTFOLIO PORTFOLIO* PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------
FROM OPERATIONS:
Net investment income......................... $ 175,898 $ 17,434 $ 668,903 $ 725,666 $ 823,845
Net realized gain (loss) on investments........ 614,190 (171,873) 857,103 (31,218) 121,780
Net realized gain (loss) on foreign
currency..................................... 0 308 0 (14,057) 0
Net change in unrealized appreciation
(depreciation) of investments................ 2,581,053 189,681 990,107 (87,510) 34,739
Net change in unrealized depreciation on
foreign currency............................. 0 (2) 0 (68) 0
-----------------------------------------------------------------------
Increase in net assets resulting from
operations................................... 3,371,141 35,548 2,516,113 592,813 980,364
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income.......................... (182,697) (15,027) (668,201) (725,666) (823,845)
Net realized gain on investments............... (345,682) 0 (141,496) (58,611) (89,480)
-----------------------------------------------------------------------
(528,379) (15,027) (809,697) (784,277) (913,325)
-----------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares............... 22,327,151 6,277,674 10,664,273 6,950,510 11,264,988
Net asset value of shares issued to
shareholders in reinvestment of dividends 528,379 15,027 809,697 775,014 902,994
-----------------------------------------------------------------------
22,855,530 6,292,701 11,473,970 7,725,524 12,167,982
Cost of shares redeemed......................... (9,105,693) (376,198) (4,228,685) (3,262,690) (6,248,155)
-----------------------------------------------------------------------
Net increase in net assets derived from
capital share transactions................. 13,749,837 5,916,503 7,245,285 4,462,834 5,919,827
-----------------------------------------------------------------------
Net increase in net assets........................... 16,592,599 5,937,024 8,951,701 4,271,370 5,986,866
NET ASSETS:
Beginning of period.................................. 15,563,732 0 12,579,155 6,276,797 6,619,298
-----------------------------------------------------------------------
End of period........................................$32,156,331 $5,937,024 $21,530,856 $10,548,167 $12,606,164
========================================================================
Undistributed net investment income.................. $2,199 $2,715 $0 $0 $0
</TABLE>
*Commenced operations on August 8, 1997.
The accompanying notes are an intergral part of the financial statements.
39
<PAGE>
<TABLE>
NORTHSTAR VARIABLE TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD
<CAPTION>
<S> <C>
NET ASSET NET REALIZED& DIVIDENDS DISTRIBUTION
VALUE, & UNREALIZED TOTAL FROM DECLARED FROM NET DECLARED FROM
BEGINNING OF NET INVESTMENT GAIN(LOSS)ON INVESTMENT INVEST- NET REALIZED TOTAL
PERIOD ENDED PERIOD INCOME INVESTMENTS OPERATIONS MENT INCOME GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------------
NORTHSTAR GROWTH PORTFOLIO
05/06/94-
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)
12/31/97 14.08 0.09 1.95 2.04 (0.10) (0.17) (0.27)
06/30/98 (2) 15.85 -- 1.71 1.71 (0.01) -- (0.01)
NORTHSTAR INTERNATIONAL VALUE PORTFOLIO
08/08/97-
12/31/97 10.00 0.03 0.10 0.13 (0.03) -- (0.03)
06/30/98 (2) 10.10 0.17 1.29 1.46 (0.17) -- (0.17)
NORTHSTAR INCOME AND GROWTH PORTFOLIO
05/06/94-
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)
12/31/97 11.72 0.44 1.36 1.80 (0.44) (0.08) (0.52)
06/30/98 (2) 13.00 0.23 0.31 0.54 (0.22) -- (0.22)
NORTHSTAR MULTI-SECTOR BOND PORTFOLIO
12/31/94 5.00 0.23 (0.15) 0.08 (0.23) -- (0.23)
12/31/95 4.85 0.42 0.29 0.71 (0.42) -- (0.42)
12/31/96 5.14 0.41 0.21 0.62 (0.41) (0.10) (0.51)
12/31/97 5.25 0.40 (0.08) 0.32 (0.40) (0.03) (0.43)
06/30/98 (2) 5.14 0.19 (0.02) 0.17 (0.19) -- (0.19)
NORTHSTAR HIGH YIELD BOND PORTFOLIO
05/06/94-
12/31/94 5.00 0.28 (0.31) (0.03) (0.28) -- (0.28)
12/31/95 4.69 0.50 0.34 0.84 (0.49) -- (0.49)
12/31/96 5.04 0.45 0.32 0.77 (0.45) (0.09) (0.54)
12/31/97 5.27 0.40 0.07 0.47 (0.40) (0.04) (0.44)
06/30/98 (2) 5.30 0.21 0.01 0.22 (0.21) -- (0.21)
(1) Annualized
(2) Unaudited
The accompanying notes are an integral part of the financial statements.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
RATIO OF
EXPENSE RATIO OF NET
RATIO OF REIMBURSE- INVESTMENT
NET ASSET NET ASSETS, END EXPENSES TO MENT TO INCOME TO
VALUE, END OF OF PERIOD AVERAGE NET AVERAGE NET AVERAGE NET PORTFOLIO
PERIOD TOTAL RETURN (000'S) ASSETS ASSETS ASSETS TURNOVER
- -------------------------------------------------------------------------------------------------------------
$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
14.08 22.99 15,564 0.80 0.90 0.65 161
15.85 14.66 32,156 0.80 0.29 0.70 178
17.55 10.76 38,426 0.80 (1) 0.19 (1) 0.01 (1) 121
10.10 1.30 5,937 0.80 1.81 0.97 5
11.39 14.49 9,555 0.80 (1) 1.00 (1) 3.47 (1) 16
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
11.72 13.80 12,579 0.80 0.60 3.67 129
13.00 15.81 21,531 0.80 0.31 3.72 55
13.32 4.12 22,565 0.80 (1) 0.26 (1) 3.52 (1) 28
4.85 1.41 2,716 1.00 (1) 1.41 (1) 7.03 (1) 29
5.14 14.97 3,766 0.80 1.26 8.52 83
5.25 12.53 6,277 0.80 0.88 8.38 121
5.14 6.15 10,548 0.80 0.56 8.31 163
5.12 3.28 12,490 0.80 (1) 0.44 (1) 7.82 (1) 74
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
5.27 15.75 6,619 0.80 0.93 8.72 159
5.30 9.00 12,606 0.79 0.56 8.44 152
5.31 4.21 16,487 0.80 (1) 0.38 (1) 8.79 (1) 78
The accompanying notes are an integral part of the financial statements.
</TABLE>
41
<PAGE>
NORTHSTAR VARIABLE TRUST
- ------------------------
Notes to Financial Statements-June 30,1998 (Unaudited)
Note 1. Organization and Significant Accounting Policies
ORGANIZATION. The Northstar Variable Trust, is a business trust organized under
the laws of the Commonwealth of Massachusetts on December 17, 1993. The names of
the five investment series which comrise the Trust (the "Funds") and their
respective investment objectives are set forth below.
NORTHSTAR VARIABLE TRUST GROWTH PROTFOLIO ("GROWTH PRTFOLIO") is a deversi-
fied portfolio with an investment objective of long-term growth of capital
through ivestments in common stocks and convetible securities that the
Adviser believes provides above average potential for capital appreciation.
NORTHSTAR VARIABLE TRUST INTERNATIONAL VALUE PORTFOLIO("INERNATIONAL VALUE
PORTFOLIO") is a diversified portfolio with the ivestment objective of
long-term capital appreciation. The Fund invests primarily in foreign
companies with a market valuation greater than $1 billion, but may hold up
to 25% of its assets in companies with smaller market capitalization.
Portfolio managers apply the technique of "value investin".
NORTHSTAR VARIABLE TRUST INCOME AND GROWTH PORTFOLIO ("INCOME AND GROWTH
PORTFOLIO") 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 VARIABLE TRUST MULTI-SECTOR BOND PORTFOLIO ("MULTI-SECTOR
PORTFOLIO") 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, investment Grade Bonds and High Yield
Bonds, each as defined in the Prospectus for the Trust.
NORTHSTAR VARIABLE TRUST HIGH YIELD BOND PORTFOLIO ("HIGH YIELD PORTFOLIO")
is a diversified portfolio whose investment objective is to seek high
income consistent with the preservation of capital. 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 rices are not available, at prices provided by
market makers, or at prices for securities of comparable maturity, quaility 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 directionof the Trustees of the Trust. The books and record 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 an independent pricing service to price the
Funds' securities.
SECURITY TRANSACTION, 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; divided income is recorded on the ex-dividend dates. Dividends from
net and Growth Portfolio; declared daily and paid and paid quarterly by the
Multi-Sector Portfolio and the High Yield Portfolio. Distrubutions of the net
realized capital gains, if any, are declared annually; however, to the extent
that a net realized capital gain can be redued by a capital loss carryover, such
gain will not be distributed. Distributions to shareholders from net investment
income and net realized gain from security transaction are reinvested at net
asset value by each Fund on the exdividend dates. The Funds may periodically
make reclassification 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.
42
<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.
MANAGEMENT'S USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 2. INVESTMENT ADVISER AND ADMINISTRATOR.
Northstar Investment Management Corporation (the "Adviser") serves as such
Fund's investment adviser. The Adviser receives an investment advisory fee
calculated at an annual rate of 0.75% of average daily net assets from the
Growth Portfolio, Income and Growth Portfolio, Multi-Sector Portfolio, and High
Yield Portfolio. The Adviser receives an investment advisory fee calculated at
an annual rate of 1.00% of average daily net assets from the International Value
Portfolio. For the six months ended June 30, 1998, the Adviser earned $351,369
in investment advisory fees. Northstar Administrators Corporation (the
"Administrator"), an affiliate of the Adviser, serves as each Fund's
administrator. Each Portfolio 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, 1998, the Administrator earned $45,567 in administrative fees. The Adviser
has agreed that if a Portfolio's total operating expenses exceed 0.80% of
average net assets on an annual basis, the Adviser will reimburse the Portfolio
for amounts in excess of such limit. For the period ended June 30, 1998, the
Adviser has reimbursed the Growth Portfolio $33,382, the International Value
Portfolio $38,364, Income and Growth Portfolio $29,326, the Multi-Sector
Portfolio $25,329, and the High Yield Portfolio $26,990. Navellier Fund
Management, Inc. ("Navellier"), a registered investment adviser, serves as
subadviser to the Growth Portfolio pursuant to a Subadvisory Agreement dated
February 1, 1996, between the Adviser and Navellier. For its services, Navellier
receives, from the Adviser, an annual fee equal to 0.48% of the average daily
net assets of the Portfolio. For the six months ended June 30, 1998, Navellier
received $83,934 in subadvisory fees from the Adviser. Brandes Investment
Partners, L.P. ("Brandes"), a registered investment advisor, serves as a
subadvisor to the International Value Portfolio pursuant to a Subadvisory
Agreement dated June 24, 1997. For its services, Brandes receives, from the
Adviser, an annual fee equal to 0.50% of the average daily net asset value of
the Portfolio. Brandes has waived their advisory fee until the Portfolio reaches
$50 million in assets.
43
<PAGE>
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, 1998 were
as follows:
<TABLE>
<CAPTION>
International Income and Multi-Sector High Yield
Growth Value Growth Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $45,522,426 $4,118,796 $6,014,363 $9,835,036 $14,600,453
Aggregate sales $41,562,240 $1,196,900 $7,548,861 $7,838,721 $10,299,764
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<CAPTION>
International Income and Multi-Sector High Yield
Growth Value Growth Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $0 $0 $0 $3,403,604 $0
Aggregate sales $0 $0 $1,540,530 $2,440,671 $0
</TABLE>
NOTE 4. PORTFOLIO SECURITIES (TAX BASIS)
The cost of securities for Federal income tax purposes and the aggregate
appreciation and depreciation of securities at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
International Income and Multi-Sector High Yield
Growth Value Growth Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Cost (tax basis) $34,090,238 $8,709,988 $18,835,688 $9,907,167 $14,858,539
----------- ---------- ----------- ---------- -----------
Appreciated
securities 5,798,795 1,460,301 1,811,860 549,674 797,501
Depreciated
securities (1,081,819) (929,173) (387,748) (406,848) (450,441)
----------- ----------- ------------ ---------- -----------
Net unrealized
Appreciation $4,716,976 $531,128 $1,427,112 $142,826 $347,060
----------- ----------- ------------ ---------- -----------
</TABLE>
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the six months ended June 30,
1998 were as follows:
<TABLE>
<CAPTION>
International Income and Multi-Sector High Yield
Growth Value Growth Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Shares sold 328,829 425,645 271,482 884,447 1,557,208
Reinvested
dividends 625 12,143 28,075 88,059 116,872
Shares repurchased (168,275) (186,909) (261,433) (586,298) (970,512)
--------- --------- -------- --------- ----------
Net increase 161,179 250,879 38,124 386,208 732,568
</TABLE>
44
<PAGE>
Transactions in capital shares of each Fund for the year ended December 31,
1997 were as follows:
<TABLE>
<CAPTION>
International Income and Multi-Sector High Yield
Growth Value Growth Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Shares sold 1,496,702 623,938 852,005 1,331,921 2,101,836
Reinvested dividends 34,861 1,453 64,053 148,545 169,530
Shares repurchased (608,428) (37,433) (333,990) (625,037) (1,148,386)
----------- ---------- --------- ----------- -----------
Net Increase 923,135 587,958 582,068 855,429 1,122,980
=========== ========== ========= =========== ===========
</TABLE>
NOTE 6. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Yield Portfolio had
83.95% of it portfolio invested in lower rated and comparable quality and
unrated high yield securities. Investments in higher yielding 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, 1998, the Multi-Sector Portfolio held SA Telecommunications, Inc.; the High
Yield Portfolio held SA Telecommunications, Inc. and Heartland Wireless, Inc.,
securities in default. 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 securities for the
current reporting period.
45
