<PAGE>
[LOGO]
NORTHSTAR
Galaxy Trust
NORTHSTAR EMERGING GROWTH PORTFOLIO
NORTHSTAR GROWTH + VALUE PORTFOLIO
NORTHSTAR INTERNATIONAL VALUE PORTFOLIO
NORTHSTAR RESEARCH ENHANCED INDEX PORTFOLIO
NORTHSTAR HIGH YIELD BOND PORTFOLIO
SEMI-ANNUAL REPORT TO SHAREHOLDERS
June 30, 1999
<PAGE>
[PHOTO]
MARK L. LIPSON
NORTHSTAR GALAXY TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1999
[LOGO OF NORTHSTAR]
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Northstar
Galaxy Trust for the six months ended June 30, 1999. 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. Fol-
lowing 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.
The past six months saw a continuation of the recovery that began in late 1998
in the U.S. markets. Investor fears about financial turmoil and a global de-
flationary spiral faded in the wake of interest rate cuts around the globe.
While the U.S. Federal Reserve was the first to cut rates in response to Long
Term Capital Management, we have seen over 151 interest rate cuts worldwide
since September of last year as central banks responded to the crisis by in-
creasing liquidity. These rate cuts had the effect of stabilizing the Asian
economies and as we moved through the first six months of 1999 we saw increas-
ing signs of economic stabilization in commodity prices and economically sen-
sitive companies. While the economic backdrop of the past six months could be
described as "the best of all worlds" for the U.S. financial markets, with
strong GDP growth accompanied by low inflation, the recovery in the rest of
the world did cause interest rates to move up by about 75 basis points. In
more traditional economic cycles, such strong growth might be accompanied by
inflation, but strong improvements in our productivity alleviated inflation
concerns. The combination of strong economic growth, low interest rates, and
good earnings growth from many sectors in the U.S. caused the markets to con-
tinue to rebound and supported historically high valuations in the S&P 500;
the most significant rebound occurred in the technology and industrial sec-
tors, which had been hit the hardest in the correction in the Fall of 1998.
For the six months ended June 30, 1999, the NASDAQ increased 22.5% and the Dow
Jones Industrial Average increased 19.49%, while the S&P 500 returned 12.32%,
the S&P Midcap Index 6.22%, and the Russell 2000 was up 9.28%.
As we moved through 1999, the market began to broaden out significantly as in-
vestors' confidence in a global recovery increased. While the overall backdrop
was favorable for most asset classes, more traditional cyclical stocks, eco-
nomically sensitive issues and traditional riskier asset classes such as U.S.
small capitalization stocks and emerging market issues began to outperform the
larger capitalization S&P 500-type issues which had been a safe haven in times
of financial turmoil. Industrial stocks as represented by the Dow Jones Indus-
trial Average surpassed the S&P 500 in return for the first time in a number
of years. The Spring of 1999 also saw a resurgence in interest in smaller U.S.
stocks, as the Russell 2000 began to significantly outperform the S&P 500. In-
ternational stocks also showed a very strong resurgence, as the Morgan Stanley
International indices significantly outperformed the S&P 500, with returns
ranging from 26.99% to 56.59%. While investor appetite for risk did increase,
certain of the asset classes perceived as riskier or more tied to the credit
cycle, such as high yield bonds, continued to lag through most of the past six
months. Traditional "value" stocks began to outperform "growth" stocks in this
time frame, and commodity prices strengthened as Asia recovered. Most notable
was the sharp recovery in the price of oil, which rose from $12.05 per barrel
to $19.29 per barrel during the first six months of 1999.
While it is too early to state that the market leadership has shifted, we do
believe that the market will continue to broaden out as investors increasingly
focus on companies with the potential to provide strong earnings growth that
sell at reasonable valuations relative to their growth rates. As the global
economy accelerates, the unusual confluence of events that conspired to keep
inflation levels perhaps artificially low will dissipate, and it is logical to
assume that inflation returns to a more normalized "pre-financial crisis"
2.5%-3.0% rate. While we do not expect inflation to accelerate much beyond
that, that move alone represents a significant increase from the 1.5%-2.0%
rate we had seen for most of 1998 and the early part of 1999. While we do not
view the recent Fed interest rate increase of 25 basis points as "the first of
many", as the global economy recovers its equilibrium, it is logical to assume
that interest rates recover to their "pre-crisis" levels, which would put the
yield on long-term rates in the U.S. in the 6%-7% range versus the current
rate of 6.07%. This may put a further cap on the performance of the larger
capitalization S&P 500 stocks. We believe that over the next six to twelve
months, active managers may have an opportunity to outperform the indices as
stock-picking capabilities become increasingly important.
As we move into the next millenium, we see a continuation of the global eco-
nomic recovery leading to stronger profit growth for equities.
The returns for the equity market as measured by the S&P 500 over the past
several years have been significantly outside the historical range of 8-10%
and it is logical to assume that at some point we will return to this histori-
cal range. While returns of the S&P 500 over the next twelve months may be a
bit more subdued than in the recent past, the vast majority of stocks have not
been invited to "join the party" until recently; we believe that we may see
returns in those stocks improve, as we believe that is where most of the
profit improvement will be concentrated.
Pundits say that "bull markets always climb a wall of worry" and this one has
been no different. We continue to face uncertainty on the geopolitical front
with the situation in Kosovo and economic uncertainty about the impact of Y2K.
As of now, we believe that both of those issues are manageable. We do not see
the military action in Kosovo developing into a full-scale war. While it is
possible that the Y2K phenomenon may create some dislocations, this has been
an area of significant investment and focus by corporate America for some pe-
riod of time; given the amount of time, energy and money that has been spent
to ensure that Y2K does not have a catastrophic impact on the American econo-
my, we believe the odds are high that any problems will be manageable.
Many of the positive forces that have driven the U.S. stock market to new
heights are secular, not cyclical. Throughout this decade, U.S. corporations
have improved their efficiency and profitability through strategic investments
in productivity-improving technology and the replacement of labor with tech-
nology; we believe that trend will continue, if not accelerate, as we enter
the next millenium and U.S. corporations begin to exploit the power of the
Internet as a distribution channel and reap the benefits of a recovery in Asia
and the developing world.
We thank you for the trust you have placed in our firm and look forward to
continuing to serve your investment needs in the future.
Sincerely,
/s/ Mark L. Lipson
Mark L. Lipson
President
- ------------------------------------------------------------ ---------
<PAGE>
(This Page Left Blank Intentionally)
<PAGE>
NORTHSTAR GALAXY TRUST
EMERGING GROWTH PORTFOLIO
[LOGO]
The Markets
. After a tumultuous close to 1998, the first six months of 1999 saw the
U.S. equity markets climb in a relatively straightforward manner. The im-
peachment of President Clinton, the devaluation of the Brazilian real, and
a war in the Balkans were unable to derail the stock market's ascent. The
rally in the equity market was one of the broadest in recent history. All
asset classes from small cap to megacap stocks had solid gains, while more
cyclical economic sectors fueled the returns in the second quarter on the
heels of robust economic data.
. The strength of the economy and some rare signs of inflation put pressure
on the bond market, sending the yield on the 30-Year US Treasury bond from
5.08% at the start of the year to 5.99% by the end of June. The April Con-
sumer Price Index turned in its largest monthly increase in nearly nine
years, while Japan's economy appeared to be on the road to recovery as
first quarter GDP grew 1.90%. While this news spelled trouble for the bond
market, the markets largely anticipated the Fed rate hike that came at the
end of June. However, U.S. equity investors took this as a sign that earn-
ings growth would make a comeback sooner than expected.
. The S&P 500 gained 12.32% during the first six months of 1999, while the
Dow Jones Industrials crossed the 10,000 mark for the first time and re-
turned 19.49%. Small cap stocks showed substantial improvement, as the
Russell 2000 Index turned in a gain of 9.28%, while the S&P Midcap earned
6.22%.
The Fund
. Over the first half of the year, the Northstar Emerging Growth Fund shares
returned 34.92%.
. The Fund benefited from a number of market trends and investment strate-
gies. In the rising interest rate environment, financial stocks were
avoided almost completely, while the portfolio broadened its exposure to
more economically, sensitive sectors such as energy and consumer
cyclicals. Second, while the Internet fueled a large part of the Portfo-
lio's early gains, these positions were reduced in favor of semiconductor
and communications stocks.
Current Strategy
. We have maintained the outlook that the U.S. economy was stronger than
most observers had originally thought, and we are now seeing evidence of
this in economic data and in corporate earnings. At the same time, the
global economy is recovering, which has broadened investor interest away
from the megacap and technology stocks, which have been fueling most of
the market's gains during 1998.
. While we have broadened the sector allocations into more cyclical sectors,
we continue to concentrate on the technology and communications trends
that are consuming much of corporate spending. Within these two sectors,
we have allocated capital towards the companies that are providing the
Internet infrastructure, as it remains unclear as to who the winners will
be in the consumer Internet space. Thus, we have increased positions in
semiconductors, networking equipment, and telecommunications.
. The strong performance during the first half of 1999 has caused an even
sharper focus on the valuations of the holdings in the Portfolio. We have
not been afraid to realize gains on some of our best performing stocks,
but we remain encouraged that we can find companies with excellent growth
prospects at reasonable prices in a broad range of economic sectors.
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/99) Total Net Assets 32,095,895
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<S> <C> <C>
1 Lam Research Corp. 1.3%
2 Atmel Corp. 1.1
3 International Business Machine Corp. 1.1
4 Maxim Integrated Products. Inc. 1.1
5 Micrel, Inc 1.1
6 Paine Webber Group Inc. 1.1
7 Taiwan Semiconductor 1.1
Manufacturing Co. Ltd.
8 Teradyne, Inc. 1.1
9 TLC The Laser Center, Inc. 1.1
10 Xilink, Inc. 1.1
----
11.2%
====
</TABLE>
Top 5 Industries
(by percentage of net assets)
Semiconductor 18.4%
Consumer Cyclicals 9.5%
Communication
Service 7.8%
Computer Software 6.1%
Energy 5.9%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<TABLE>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
Inception 5 year 1 year
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
19.90% 20.38% 44.99%
- ------------------------------------------------------------------------------------------------------
</TABLE>
Cumulative Total Return
(do not reflect sales charge)
<TABLE>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
Inception 5 year 1 year
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
157.61% 20.76% 51.99%
- ------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
NORTHSTAR GALAXY TRUST EMERGING GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- ----------------------------------------------------------
Common Stocks -- 99.52%
Basic Material -- 4.11%
Abitibi-Consolidated, Inc. 9,300 $ 105,788
Bemis Co., Inc. 5,900 234,525
Bowater, Inc. 2,000 94,500
H.B. Fuller Co. 3,400 232,475
International Paper Co. 4,000 202,000
Smurfit-Stone Container Corp. @ 14,600 300,212
Weyerhaeuser Co. 2,200 151,250
-----------
1,320,750
-----------
Biotechnology -- 3.25%
Cephalon, Inc. @ 10,000 173,750
COR Therapeutics, Inc. @ 12,200 179,950
IDEC Pharmaceuticals Corp. @ 4,200 323,662
MedImmune, Inc. @ 4,100 277,775
Trimeris, Inc. @ 6,100 88,450
-----------
1,043,587
-----------
Capital Goods -- 4.08%
Advanced Energy Industries, Inc. @ 5,700 231,206
AlliedSignal, Inc. 2,500 157,500
Ingersoll-Rand Co. 1,500 96,938
Millipore Corp. 6,100 247,431
Oak Industries, Inc. 4,300 187,856
Pall Corp. 10,600 235,188
The DII Group, Inc. @ 4,100 152,981
-----------
1,309,100
-----------
Communication Services -- 7.79%
Allegiance Telecom, Inc. @ 4,300 235,962
AT&T Corp. 5,100 284,644
Colt Telecom Group PLC @ ** 900 77,738
Global TeleSystems Group, Inc. @ 2,800 226,800
ICG Communications, Inc. @ 12,700 271,462
Intermedia Communications, Inc. @ 7,500 225,000
Nextel Communications, Inc. @ 6,500 326,219
Powerwave Technologies, Inc. @ 9,700 312,825
Time Warner Telecom, Inc. @ 500 14,500
US LEC Corp. @ 8,100 182,250
VoiceStream Wireless Corp. @ 6,200 176,312
Western Wireless Corp. @ 6,200 167,400
-----------
2,501,112
-----------
Computer Communications -- 4.55%
Adaptec, Inc. @ 6,900 243,656
Applied Micro Circuits Corp. @ 3,600 296,100
Brocade Communications Systems, Inc. @ 2,400 231,450
Extreme Networks, Inc. @ 3,100 179,994
Juniper Networks, Inc. @ 700 104,300
MMC Networks, Inc. 5,700 255,075
Redback Networks, Inc. @ 1,200 150,675
-----------
1,461,250
-----------
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE>
NORTHSTAR GALAXY TRUST EMERGING GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- --------------------------------------------------------------
Computer Software -- 6.12%
Aspect Development, Inc. @ 6,300 $ 116,550
Citrix Systems, Inc. @ 2,900 163,850
Compuware Corp. @ 4,800 152,700
Digital River, Inc. @ 2,000 59,450
Inet Technologies, Inc. @ 8,200 196,800
Micromuse, Inc. @ 6,500 324,187
New Era of Networks, Inc. @ 3,500 153,781
Persistance Software, Inc. @ 8,800 119,900
Rational Software Corp. @ 6,200 204,213
Siebel Systems, Inc. @ 2,900 192,488
Verity, Inc. @ 5,200 281,775
-----------
1,965,694
-----------
Consumer Cyclicals -- 9.53%
American Eagle Outfitters, Inc. @ 4,800 218,400
AnnTaylor Stores Corp. @ 6,000 270,000
Digital Island, Inc. @ 8,500 152,469
Hasbro, Inc. 5,100 142,481
iXL Enterprises, Inc. @ 3,600 96,750
Linens 'n Things, Inc. @ 3,300 144,375
Nielsen Media Research, Inc. 5,800 169,650
Pacific Sunwear of California, Inc. @ 12,450 303,469
Park Place Entertainment Corp. @ 16,200 156,937
SalesLogix Corp. @ 10,300 153,212
Stamps.Com, Inc. @ 9,900 173,250
Sunglass Hut International, Inc. @ 8,100 139,219
Tandy Corp. 6,800 332,350
The Children's Place Retail Stores, Inc. @ 7,200 291,600
Tiffany & Co. 3,300 316,077
-----------
3,060,239
-----------
Consumer Staples -- 3.91%
Buca, Inc. @ 9,900 163,350
Outback Steakhouse, Inc. @ 4,500 176,906
P.F. Changs China Bistro, Inc. @ 8,300 179,488
Radio One, Inc. @ 4,300 199,950
RCN Corp. @ 2,200 91,575
Rubio's Restaurants, Inc. @ 13,400 206,862
Whole Foods Market, Inc. @ 4,900 235,506
-----------
1,253,637
-----------
Diversified Commercial Services -- 0.95%
Dendrite International, Inc. @ 2,200 79,475
Exchange Applications, Inc. @ 5,500 224,125
-----------
303,600
-----------
EDP Peripherals -- 0.68%
Network Appliance, Inc. @ 3,900 217,913
-----------
EDP Services -- 0.66%
Harbinger Corp. @ 9,200 115,000
nFront, Inc. @ 6,400 97,200
-----------
212,200
-----------
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
NORTHSTAR GALAXY TRUST EMERGING GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- --------------------------------------------------------------------
Electronic Data Processing -- 1.05%
International Business Machines Corp. 2,600 $ 336,050
-----------
Electronic Production/Equipment -- 5.85%
Applied Materials, Inc. @ 2,500 184,688
Credence Systems Corp. @ 7,200 267,300
Lam Research Corp. @ 8,600 401,512
Novellus Systems, Inc. @ 4,600 313,950
Taiwan Semiconductor Manufacturing Co. Ltd. @ ** 10,300 350,200
Teradyne, Inc. @ 5,000 358,750
-----------
1,876,400
-----------
Energy -- 5.93%
Anadarko Petroleum Corp. 7,000 257,687
Apache Corp. 3,800 148,200
Basin Exploration, Inc. @ 3,500 70,219
BJ Services Co. @ 11,200 329,700
Global Industries Ltd., Inc. @ 13,600 174,250
Louis Dreyfus Natural Gas Corp. @ 7,000 150,938
Smith International, Inc. 6,500 282,344
Stone Energy Corp. @ 6,500 275,437
Vastar Resources, Inc. 4,100 214,994
-----------
1,903,769
-----------
Financial -- 4.19%
CompuCredit Corp. @ 14,000 266,000
Knight/Trimark Group, Inc. @ 3,800 229,188
Nationwide Financial Services, Inc. 5,900 266,975
Paine Webber Group, Inc. 7,500 350,625
The Charles Schwab Corp. 2,100 230,737
-----------
1,343,525
-----------
Hospital/Nursing Management -- 1.86%
Columbia/HCA Healthcare Corp. 10,300 234,969
LifePoint Hospitals, Inc. @ 14,042 188,689
Triad Hospitals, Inc. @ 12,842 173,367
-----------
597,025
-----------
Internet Services -- 4.52%
AboveNet Communications, Inc. @ 4,400 177,650
AppNet Systems, Inc. @ 10,500 141,094
Ask Jeeves, Inc. @ 500 7,000
Exodus Communications, Inc. @ 2,800 335,825
F5 Networks, Inc. @ 7,600 311,600
Inktomi Corp. @ 2,100 274,181
Ramp Networks, Inc. @ 14,200 203,237
-----------
1,450,587
-----------
Managed Health Care -- 1.60%
Coventry Health Care, Inc. @ 13,100 143,281
Foundation Health Systems, Inc. @ 9,300 139,500
Oxford Health Plans, Inc. @ 14,800 230,325
-----------
513,106
-----------
Medical Electronics -- 0.35%
VISX, Inc. @ 1,400 110,863
-----------
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
NORTHSTAR GALAXY TRUST EMERGING GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- ---------------------------------------------------------
Medical Specialties -- 2.62%
Boston Scientific Corp. @ 6,200 $ 272,412
MiniMed, Inc. @ 3,200 246,200
Xomed Surgical Products, Inc. @ 6,650 323,772
-----------
842,384
-----------
Medical/Nursing Services -- 1.64%
Apria Healthcare Group, Inc. @ 10,700 181,900
TLC The Laser Center, Inc. @ 7,200 345,600
-----------
527,500
-----------
Metal Fabrications -- 0.94%
CommScope, Inc. @ 9,800 301,350
-----------
Pharmaceuticals -- 0.63%
King Pharmaceuticals, Inc. @ 7,800 201,825
-----------
Semiconductor -- 18.42%
Alpha Industries, Inc. 5,200 247,650
Altera Corp. @ 4,400 161,975
Anadigics, Inc. @ 5,500 203,500
Analog Devices, Inc. @ 6,500 326,219
Atmel Corp. @ 13,700 358,769
Broadcom Corp. @ 1,800 260,212
Conexant Systems, Inc. @ 3,700 214,831
Cypress Semiconductor Corp. @ 17,900 295,350
GlobeSpan, Inc. @ 2,500 99,375
Hi/Fn, Inc. @ 3,500 266,437
Lattice Semiconductor Corp. @ 5,300 329,925
Maker Communications, Inc. @ 10,000 310,000
Maxim Integrated Products, Inc. @ 5,500 365,750
Micrel, Inc. @ 4,600 340,400
Micron Technology, Inc. 5,400 217,687
National Semiconductor Corp. @ 7,900 199,969
PMC-Sierra, Inc. @ 5,600 330,050
SDL, Inc. @ 3,000 153,188
Semtech Corp. @ 5,200 271,050
TriQuint Semiconductor, Inc. @ 4,700 267,019
Vitesse Semiconductor Corp. @ 4,900 330,444
Xilinx, Inc. @ 6,300 360,675
-----------
5,910,475
-----------
Services to Health Industry -- 0.13%
Albany Molecular Research, Inc. @ 1,400 41,650
-----------
Telecommunications -- 0.37%
Viatel, Inc. @ 2,100 117,863
-----------
Telecommunications Equipment -- 2.26%
ADTRAN, Inc. @ 5,600 203,700
CIENA Corp. @ 2,200 66,413
Digital Microwave Corp. @ 12,100 154,275
General Instrument Corp. @ 7,100 301,750
-----------
726,138
-----------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
NORTHSTAR GALAXY TRUST EMERGING GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
- -------------------------------------------------------------------------------
Transportation -- 0.88%
Forward Air Corp. @ 10,100 $ 284,063
-----------
Utilities -- 0.65%
El Paso Energy Corp. 5,900 207,606
-----------
Total Common Stocks
(cost $24,973,891) 31,941,261
-----------
Total Investment Securities -- 99.52%
(cost $24,973,891) 31,941,261
Repurchase Agreement -- 0.95%
Agreement with State Street Bank and
Trust bearing interest at 4.70% dated
6/30/99, to be repurchased 7/01/99 in the
amount of $305,040 and collateralized by
$310,000 U.S. Treasury Notes, 6.375% due
1/15/00, value $314,559
(cost $305,000) $305,000 305,000
Liabilities in excess of other assets --
(0.47%) (150,366)
-----------
Net Assets -- 100.00% $32,095,895
===========
</TABLE>
@ Non-income producing security.
**American Depositary Receipts.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
8
<PAGE>
NORTHSTAR GALAXY TRUST
GROWTH + VALUE PORTFOLIO
[LOGO]
The Markets
. The U.S. equity markets continued to exhibit strength during the first
half of 1999. Especially notable was the resurgence of small and mid cap
stocks, during the second quarter the Russell 2000 returned 15.55% and the
S&P Midcap Index returned 14.75%, compared to a return of 7.05% for the
S&P 500.
. Both individual and institutional investors recognized and rewarded the
superior fundamental characteristics that were in place in smaller company
stocks. By providing the needed liquidity, these investors helped push
small company stocks higher and into a market leadership role for the
first time in two years.
. Investors grew cautious mid-way through the second quarter after the long
bond yield surpassed the 6% level and the April Consumer Price Index re-
port (CPI) was much higher than expected. Even though a 25 basis point
rate hike ensued, investors inflationary worries were put at ease follow-
ing a more favorable May CPI figure and some reassuring words from Federal
Reserve Chairman Alan Greenspan, indicating the Federal Reserve was adopt-
ing a neutral stance regarding further rate hikes.
The Fund
. The Northstar Galaxy Trust Gowth + Value portfolio returned 23.54% for the
first half of 1999 while the Russell 2000 returned 9.28% for the same pe-
riod.
. Overall, specialized medical and technology stocks helped lead the Portfo-
lio higher. Some of the strongest performers were Gemstar International,
Ameritrade Holding Corp., MiniMed Inc., Qlogic Corp. and VISX Inc. Those
issues which performed poorly include Amgen, Mindspring Enterprises, CSG
Systems International and Tarrant Apparel Group.
Current Strategy
. The current earnings environment is ideal. Not only are corporate profits
strong, the analyst community continues to forecast that they will con-
tinue to grow through the fourth quarter. With a domestic economy that
continues to grow at a steady pace, combined with a stable interest rate
environment, our long-term market outlook remains strongly bullish.
. Our short-term outlook is not as optimistic. We are entering the time of
year when the market is all too often eager to take profits. With institu-
tional investors locking in many of their gains from the first half of the
year, we expect market volatility to increase substantially in the early
Fall. As usual, technology companies trading at extremely high valuations
will be most vulnerable.
. As a result, our model is getting more selective and thus concentrating
the portfolio into fewer stocks. The average capitalization of the Fund
will continue to decrease as we look to benefit from the markets continued
rotation into smaller company stocks. Our model continues to stress growth
characteristics including earnings surprises, analyst upward revisions,
expanding profit margins, and current quarter verses four quarters prior
growth (to reduce the effect of seasonal variables on earnings growth).
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/99) Total Net Assets $51,381,978
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<C> <S> <C>
1 VISX, Inc. 5.3%
2 American Eagle Outfitters, Inc. 4.8
3 Nokia Corp. 4.4
4 Qlogic Corp. 4.3
5 EMC Corp. 4.2
6 Macromedia, Inc. 4.1
7 The Gap, Inc. 3.7
8 Ameritrade Holding Corp. 3.3
9 MedImmune, Inc. 3.3
10 Citrix Systems, Inc. 3.2
----
40.6%
====
</TABLE>
Top 5 Industries
(by percentage of net assets)
EDP Peripherals 14.1%
Consumer Cyclicals 12.3%
Computer Software 11.1%
Biotechnology 8.9%
Medical Electronics 6.9%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Inception 1 year 5 year
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
22.18% 33.64% 22.86%
- -------------------------------------------------------------------------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Inception 1 year 5 year
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
183.60% 40.64% 183.91%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
NORTHSTAR GALAXY TRUST GROWTH + VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- ------------------------------------------------------------
Common Stocks -- 101.00%
Biotechnology -- 8.86%
Amgen, Inc. @ 22,600 $ 1,375,775
Icos Corp. @ 36,700 1,497,819
MedImmune, Inc. @ 24,800 1,680,200
-----------
4,553,794
-----------
Capital Goods -- 2.07%
Jabil Circuit, Inc. @ 23,600 1,064,950
-----------
Clothing/Shoe/Accessory Stores -- 3.72%
The Gap, Inc. 37,950 1,911,731
-----------
Computer Communications -- 2.89%
Adaptec, Inc. @ 42,100 1,486,656
-----------
Computer Software -- 11.11%
Citrix Systems, Inc. @ 29,500 1,666,750
Clarify, Inc. @ 28,500 1,175,625
Macromedia, Inc. @ 59,900 2,111,475
Mercury Interactive Corp. @ 21,400 757,025
-----------
5,710,875
-----------
Computer/Video Chains -- 2.76%
Best Buy Co., Inc. @ 21,000 1,417,500
-----------
Consumer Cyclicals -- 12.29%
Abercrombie & Fitch Co. @ 21,200 1,017,600
American Eagle Outfitters, Inc. @ 54,000 2,457,000
AnnTaylor Stores Corp. @ 10,200 459,000
Gemstar International Group Ltd. @ 22,200 1,448,550
Tarrant Apparel Group @ 41,000 932,750
-----------
6,314,900
-----------
Diversified Commerical Services -- 3.36%
Catalina Marketing Corp. @ 10,400 971,831
CMGI, Inc. @ 6,600 752,813
-----------
1,724,644
-----------
EDP Peripherals -- 14.13%
Electronics for Imaging, Inc. @ 24,600 1,263,825
EMC Corp. 39,300 2,161,500
Lexmark International Group, Inc. @ 16,800 1,109,850
MTI Technology Corp. @ 41,000 535,562
QLogic Corp. @ 16,600 2,191,200
-----------
7,261,937
-----------
Electronic Components -- 2.53%
Power Integrations, Inc. @ 17,800 1,301,625
-----------
Generic Drugs -- 2.18%
Andrx Corp. @ 14,500 1,118,313
-----------
Health Industry Services -- 0.53%
Priority Healthcare Corp. @ 7,839 270,446
-----------
Insurance Broker/Services -- 2.93%
E.W. Blanch Holdings, Inc. 22,100 1,506,944
-----------
Internet Services -- 2.80%
BroadVision, Inc. @ 19,500 1,438,125
-----------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
NORTHSTAR GALAXY TRUST GROWTH + VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
- -------------------------------------------------------------------------------
Investment Bankers/Brokers/Services --
3.30%
Ameritrade Holding Corp. @ 16,000 $ 1,696,000
-----------
Medical/Dental Distributors -- 0.70%
Bindley Western Industries, Inc. 15,555 358,730
-----------
Medical Electronics -- 6.85%
Colorado MedTech, Inc. @ 37,000 811,688
VISX, Inc. @ 34,200 2,708,212
-----------
3,519,900
-----------
Medical Specialties -- 2.90%
MiniMed, Inc. @ 19,400 1,492,587
-----------
Medical/Nursing Services -- 1.62%
Apria Healthcare Group, Inc. @ 49,000 833,000
-----------
Precision Instruments -- 2.38%
Waters Corp. @ 23,000 1,221,875
-----------
Savings & Loan -- 0.16%
PDS Financial Corp. @ 16,400 80,975
-----------
Semiconductor -- 2.55%
Alpha Industries, Inc. 27,500 1,309,687
-----------
Shoe Manufacturing -- 2.78%
K-Swiss, Inc. 30,700 1,427,550
-----------
Telecommunications Equipment -- 5.60%
Nokia Corp. ** 24,800 2,270,750
RF Micro Devices, Inc. @ 8,100 604,462
-----------
2,875,212
-----------
Total Common Stocks
(cost $39,111,880) 51,897,956
-----------
Total Investment Securities -- 101.00%
(cost $39,111,880) 51,897,956
Repurchase Agreement -- 3.51%
Agreement with State Street Bank and
Trust bearing interest at 4.70% dated
6/30/99, to be repurchased 7/01/99 in the
amount of $1,803,235 and collateralized
by $1,840,000 U.S. Treasury Notes, 6.25%
due 10/31/01 value $1,840,000
(cost $1,803,000) $1,803,000 1,803,000
Liabilities in excess of other assets --
(4.51%) (2,318,978)
-----------
Net Assets -- 100.00% $51,381,978
===========
</TABLE>
@ Non-income producing security.
**American Depositary Receipts.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
NORTHSTAR GALAXY TRUST
INTERNATIONAL VALUE PORTFOLIO
The Markets
. Worldwide, developed equity markets moved modestly higher in the first
half of 1999. For the six months ended June 30, 1999, the Morgan Stanley
Capital International (MSCI) EAFE Index gained 3.97% in U.S. dollar terms.
. Among developed foreign markets, Japanese stocks rose 20.72% in U.S. dol-
lar terms, as the Japanese government proposed to address economic and
banking problems. European markets, however, were generally lower, amid
investor concern about the conflict in Kosovo, prolonged weakness in the
euro, and relatively tepid growth in Germany and Italy. Measured in U.S.
dollars, the MSCI Europe Index fell (2.41%) for the first half of 1999.
. Emerging markets continued their strong recovery. For the six months end-
ing June 30th, the MSCI EMF benchmark rose 39.87% in dollar terms. The
MSCI Pacific Free Index (ex Japan) climbed 22.75% for the same period, led
by strong performances in Indonesia and Thailand. Stocks in Hong Kong and
China also posted solid gains. In Latin America, equity markets rallied on
the back of a surge in energy prices and early signs of an economic recov-
ery in Brazil. Over the semiannual period, the MSCI Free Latin America In-
dex gained 31.02% in U.S. dollars, led by strength in Argentina and Vene-
zuela.
The Fund
. The Fund finished well ahead of the MSCI EAFE benchmark with a return of
20.36%.
. The Lipper Index of International Equity returned 6.90% for the period.
. Geographically, Fund holdings in South Africa, Venezuela, Argentina, and
Mexico put in the strongest performances, while holdings in several Euro-
pean countries finished the period with negative returns. On a sector ba-
sis, Materials and Commodities sectors saw the strongest gains.
Current Strategy
. It has been two years since the global economic crisis first erupted in
Asia. In the meantime, financial markets worldwide have been in a state of
flux and many traditional economic relationships have been turned upside
down. While it is too early to say with certainty that the crisis has
passed, it now appears the global economic environment may be returning to
something approaching "normalcy." This is not to suggest that world stock
prices will not continue to be volatile, or that countries and regions
will not experience the usual economic ups and downs. It also does not en-
sure that the global economy is necessarily out of the woods.
. As value investors, we welcome this return to more normal conditions.
Speculative fervor is never healthy for any nation's economy or markets.
However, we believe that the disruptions caused by the global financial
crisis created abnormally attractive opportunities for investors inter-
ested in buying good businesses at reasonable prices. As such, we expect
above average performance over time for value investors patient enough to
endure this most unusual of global economic environments.
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/99) Total Net Assets $18,139,637
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<C> <S> <C>
1 Deutsche Telecom AG 3.8%
2 Hitachi Ltd. 3.6
3 HSBC Holdings PLC 3.2
4 Development Bank of Singapore 3.1
5 Telefonos de Mexico SA 3.1
6 Alcatel Alsthom SA 3.0
7 Elf Aquitaine SA 2.9
8 Telecom Italia SpA 2.9
9 Kyocera Corp. 2.7
10 Tokio Marine & Fire Insurance 2.6
----
30.9%
====
</TABLE>
Top 5 Countries
(by percentage of net assets)
United
Kingdom 21.0%
Japan 16.4%
France 7.1%
Brazil 6.6%
Denmark 6.6%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<TABLE>
- ------------------------------------------
<CAPTION>
Inception
- ------------------------------------------
<S> <C>
17.46%
- ------------------------------------------
- ------------------------------------------
<CAPTION>
1 year
- ------------------------------------------
<S> <C>
15.92%
- ------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- ------------------------------------------
<CAPTION>
Inception
- ------------------------------------------
<S> <C>
42.55%
- ------------------------------------------
- ------------------------------------------
<CAPTION>
1 year
- ------------------------------------------
<S> <C>
22.92%
- ------------------------------------------
</TABLE>
------------------------------------------------------------ ---------
- --------------------------------------------------------------------------------
12
<PAGE>
NORTHSTAR GALAXY TRUST INTERNATIONAL VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Country Value % of Net Assets
- ----------------------------------------------------------
<S> <C> <C>
Austria $ 102,322 0.56%
Brazil 1,195,175 6.59
Denmark 300,657 1.66
France 1,279,523 7.05
Germany 1,027,975 5.67
Hong Kong 1,032,186 5.69
Italy 874,041 4.82
Japan 2,971,625 16.38
Korea 300,500 1.66
Mexico 565,688 3.12
Netherlands 690,978 3.81
Singapore 762,020 4.20
South Africa 502,428 2.77
Spain 261,970 1.44
Switzerland 233,233 1.29
United Kingdom 3,973,308 21.90
Venezuela 312,558 1.72
Other assets less liabilities 1,753,450 9.67
----------- -------
Net Assets $18,139,637 100.00%
=========== =======
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
NORTHSTAR GALAXY TRUST INTERNATIONAL VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- ----------------------------------------------------------------------------
Common Stocks -- 85.48%
Automobiles -- 2.14%
Bayer Motoren Werk AG (United Kingdom) 250 $ 171,894
Compagnie Generale des Etablissements Michelin (France) 5,300 216,738
-----------
388,632
-----------
Banking -- 9.22%
Argentaria SA (Spain) 9,800 222,756
Den Danske Bank A/S (Denmark) 2,780 300,657
Development Bank of Singapore Ltd. (Singapore) 46,260 565,340
HSBC Holdings PLC @ (United Kingdom) 16,000 583,611
-----------
1,672,364
-----------
Beverages/Tobacco -- 4.61%
British America Tobacco PLC (United Kingdom) 26,600 250,941
Diageo PLC (United Kingdom) 38,691 406,476
Japan Tobacco, Inc. (Japan) 5 55,386
South African Breweries PLC @ (South Africa) 14,100 123,794
-----------
836,597
-----------
Chemicals -- 4.23%
BASF AG (Germany) 7,600 335,706
BOC Group PLC (United Kingdom) 11,800 231,009
Imperial Chemical Industries PLC (United Kingdom) 20,300 200,467
-----------
767,182
-----------
Electrical & Electronics -- 8.50%
Alcatel Alsthom SA (France) 3,800 534,702
Hitachi Ltd. (Japan) 70,000 656,774
Matsushita Electric Industrial Co. Ltd. (Japan) 18,000 349,674
-----------
1,541,150
-----------
Energy -- 5.42%
Elf Aquitaine SA (France) 3,600 528,084
ENI SpA (Italy) 58,000 346,180
Nippon Oil Co. Ltd. (Japan) 26,000 109,614
-----------
983,878
-----------
Food & Household Products -- 1.31%
Reckitt & Colman PLC (United Kingdom) 22,700 237,048
-----------
Industrial Components -- 2.72%
Kyocera Corp. (Japan) 8,400 493,015
-----------
Insurance -- 8.20%
Allied Zurich (United Kingdom) 22,700 285,353
ING Groep NV (Netherlands) 8,254 446,703
Royal & Sun Alliance PLC (United Kingdom) 31,954 286,339
Tokio Marine & Fire Insurance Co. (Japan) 43,100 468,517
-----------
1,486,912
-----------
Machinery & Engineering -- 6.92%
BTR Siebe (United Kingdom) 88,242 417,274
Canon, Inc. (Japan) 4,000 115,070
Komatsu (Japan) 44,000 281,161
Mitsubishi Heavy Industries Ltd. (Japan) 109,000 442,415
-----------
1,255,920
-----------
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
NORTHSTAR GALAXY TRUST INTERNATIONAL VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- ---------------------------------------------------------------------------
Materials & Commodities -- 2.09%
De Beers Centenary AG (South Africa) 15,800 $ 378,635
------------
Merchandising -- 2.19%
Marks & Spencer PLC (United Kingdom) 68,900 397,489
------------
Metals -- Steel -- 2.10%
British Steel PLC (United Kingdom) 147,500 381,876
------------
Multi-Industry -- 6.77%
Citic Pacific Ltd. (Hong Kong) 73,000 232,871
First Pacific Co. Ltd. @ (Hong Kong) 32,454 27,607
Hutchison Whampoa Ltd. (Hong Kong) 41,500 375,760
Jardine Matheson Holdings Ltd. (Singapore) 39,336 196,680
Swire Pacific Ltd. (Hong Kong) 80,000 395,948
------------
1,228,866
------------
Telecommunications -- 14.84%
Compania Anonima Nacional Telefonos de Venezuela **
(Venezuela) 11,470 312,558
Deutsche Telekom AG (Germany) 16,500 692,267
Korea Telecom Corp. @ ** (South Korea) 2,900 116,000
Royal PTT Nederland NV (Netherlands) 5,208 244,274
Swisscom AG @ (Switzerland) 620 233,233
Telecom Italia SpA (Italy) 50,800 527,861
Telefonos de Mexico SA ** (Mexico) 7,000 565,688
------------
2,691,881
------------
Utilities -- 0.68%
National Power PLC (United Kingdom) 17,000 123,531
------------
Utilities -- Electrical & Gas -- 3.54%
Centrais Eletricas Brasileiras SA ** (Brazil) 35,100 311,512
Centrais Geradoras do Sul do Brasil SA @ ** (Brazil) 1,090 4,150
EVN Energie-Versorgung Niederoesterreich AG (Austria) 700 102,322
Korea Electric Power Corp. ** (South Korea) 9,000 184,500
Union Electrica Fenosa SA (Spain) 3,000 39,214
------------
641,698
------------
Total Common Stocks
(cost $13,271,859) 15,506,674
------------
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
NORTHSTAR GALAXY TRUST INTERNATIONAL VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- -------------------------------------------------------------------------------
Preferred Stocks -- 4.85%
Banking -- 1.04%
Banco Bradesco SA ** (Brazil), $0.1356 37,700 $ 189,250
-----------
Beverages/Tobacco -- 1.45%
Companhia Cervejaria Brahma ** (Brazil), $0.1598 23,200 262,450
-----------
Energy -- 1.89%
Petroleo Brasileiro SA ** (Brazil), $0.305344 22,200 341,838
-----------
Telecommunications -- 0.47%
Embratel Participacoes SA ** (Brazil), $0.2304 1,020 14,153
Tele Celular Sul Participacoes SA ** (Brazil), $0.0932 102 2,212
Tele Centro Oeste Celular Participacoes SA ** (Brazil),
$0.3139 340 1,339
Tele Centro Sul Participacoes SA ** (Brazil), $1.02 204 11,322
Tele Leste Celular Participacoes SA ** (Brazil), $0.6731 20 595
Tele Nordeste Celular Participacoes SA ** (Brazil), $0.9942 51 1,377
Tele Norte Celular Participacoes SA ** (Brazil), $0.3101 20 541
Tele Norte Leste Participacoes SA ** (Brazil), $0.3872 1,020 18,934
Telemig Celular Participacoes SA ** (Brazil), $0.3341 51 1,256
Telesp Celular Participacoes ** (Brazil), $0.6552 408 10,914
Telesp Participacoes SA ** (Brazil), $1.21 1,020 23,332
-----------
85,975
-----------
Total Preferred Stocks
(cost $836,855) 879,513
-----------
Total Investment Securities -- 90.33%
(cost $14,108,714) 16,386,187
Other assets less liabilities -- 9.67% 1,753,450
-----------
Net Assets -- 100.00% $18,139,637
===========
</TABLE>
@ Non-income producing security.
**American Depositary Receipts.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
NORTHSTAR GALAXY TRUST
RESEARCH ENHANCED INDEX PORTFOLIO
[LOGO]
The Markets
. During the first half of the year, the S&P 500 rose 12.3% and hit an all
time new high on the last day of June. During this time period, we saw a
shift in performance from growth stocks to value stocks. The S&P Value In-
dex finished the first half of the year up 14%, while the S&P Growth Index
was up only 11% for the same time period. The global economy and interest
rates were the major issues during the time period. The global economy ap-
pears to be gaining strength after experiencing lackluster growth in 1998
and interest rates have risen.12
The Portfolio
. The Portfolio's return of (0.16%) slightly underperformed the S&P 500
Index's return of 3.06% since the Portfolio's change of investment objec-
tive and strategy on April 30, 1999. The U.S. equity market was heavily
impacted in May by the Federal Reserve's decision to adopt a tightening
bias. The market broadened out, however, as investors moved away from the
high multiple growth stocks in favor of more economically-sensitive cycli-
cal stocks. This broadening effect was favorable to the portfolio as it
benefited as much from being underweight to many of the former market
leaders such as GE and Microsoft as it did from being overweight to many
of the formerly overlooked non-Nifty Fifty names. The Portfolio's perfor-
mance was positively impacted by our stock selection decisions, particu-
larly in the Drugs, Services and Consumer Stable industries. We believe
the portfolio remains well positioned in the coming months to take advan-
tage of the valuation correction of the Nifty Fifty stocks.
Current Strategy
. We expect the market broadening that began in the second quarter to con-
tinue. The largest stocks still trade at a very large premium to the rest
of the market. We will continue to maintain our conviction that the market
leaders are over-priced and invest the majority of the Portfolio in the
broader market. As always, we will remain sector and factor neutral rela-
tive to the benchmark and continue to focus solely on stock selection.
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/99) Total Net Assets $24,640,870
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<C> <S> <C>
1 Microsoft Corp. 3.8%
2 General Electric Co. 2.6
3 International Business Machines Corp. 2.5
4 Cisco Systems, Inc. 2.2
5 Intel Corp. 2.1
6 Lucent Technologies, Inc. 2.1
7 Wal-Mart Stores, Inc. 2.1
8 Citigroup, Inc. 1.8
9 MCI WorldCom, Inc. 1.8
10 Bristol-Myers Squibb Co. 1.7
----
22.7%
====
</TABLE>
Top 5 Industries
(by percentage of net assets)
Technology 17.7%
Finance 11.4%
Drugs 8.9%
Telecommunications 7.9%
Multi-Industry 7.7%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
5
Inception years 1 year
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6.40% 7.01% (8.84%)
- -------------------------------------------------------------------------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
5
Inception years 1 year
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
40.47% 36.51% (2.35%)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
NORTHSTAR GALAXY TRUST RESEARCH ENHANCED INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- --------------------------------------------------------
Common Stocks -- 92.54%
Basic Industry -- 2.78%
Alcan Aluminum Ltd. 10 $ 319
Alcoa, Inc. 1,400 86,625
Allegheny Teledyne, Inc. 810 18,326
Bowater, Inc. 120 5,670
Champion International Corp. 100 4,788
E. I. du Pont de Nemours and Co. 500 34,156
Fort James Corp. 600 22,725
Freeport-McMoRan Copper & Gold, Inc. 1,120 20,090
Georgia-Pacific Corp. 200 9,475
IMC Global, Inc. 600 10,575
International Paper Co. 1,100 55,550
Louisiana-Pacific Corp. 250 5,938
Lyondell Chemical Co. 700 14,437
Nalco Chemical Co. 230 11,931
Nucor Corp. 400 18,975
PPG Industries, Inc. 900 53,156
Rohm and Haas Co. 1,300 55,737
Smurfit-Stone Container Corp. @ 590 12,132
Solutia, Inc. 600 12,788
Temple-Inland, Inc. 130 8,873
The Dow Chemical Co. 1,200 152,250
Union Carbide Corp. 700 34,125
USG Corp. 110 6,160
USX-U. S. Steel Group 400 10,800
Weyerhaeuser Co. 300 20,625
-----------
686,226
-----------
Capital Goods -- 1.28%
Cooper Industries, Inc. 400 20,800
Deere & Co. 1,000 39,625
Dover Corp. 700 24,500
Eaton Corp. 300 27,600
Emerson Electric Co. 1,900 119,462
Hubbell, Inc. 200 9,075
Ingersoll-Rand Co. 300 19,388
PACCAR, Inc. 300 16,013
Parker-Hannifin Corp. 400 18,300
W.W. Grainger, Inc. 400 21,525
-----------
316,288
-----------
Cyclical -- 2.21%
Centex Corp. 100 3,756
Dana Corp. 500 23,031
Delphi Automotive Systems Corp. @ 2,059 38,223
Ford Motor Co. 3,600 203,175
General Motors Corp. 2,100 138,600
Genuine Parts Co. 600 21,000
Jones Apparel Group, Inc. @ 400 13,725
Lear Corp. @ 190 9,453
Leggett & Platt, Inc. 600 16,687
Mattel, Inc. 1,300 34,369
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE>
NORTHSTAR GALAXY TRUST RESEARCH ENHANCED INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- ---------------------------------------------------
Cyclical -- continued
The Goodyear Tire & Rubber Co. 500 $ 29,406
The Sherwin-Williams Co. 500 13,875
-----------
545,300
-----------
Drugs -- 8.86%
Abbott Laboratories 3,800 172,900
American Home Products Corp. 4,100 235,750
Amgen, Inc. @ 1,600 97,400
Bristol-Myers Squibb Co. 5,800 408,537
Chiron Corp. @ 600 12,450
Eli Lilly & Co. 3,500 250,687
Forest Laboratories, Inc. @ 300 13,875
Genzyme Corp. @ 300 14,550
Genzyme Surgical Products @ 54 237
Johnson & Johnson 1,400 137,200
MedImmune, Inc. @ 200 13,550
Merck & Co., Inc. 3,400 251,600
Monsanto Co. 2,000 78,875
Pfizer, Inc. 1,600 175,600
Schering-Plough Corp. 2,300 121,900
Warner-Lambert Co. 2,700 187,313
Watson Pharmaceuticals, Inc. @ 300 10,519
-----------
2,182,943
-----------
Energy -- 5.61%
Amerada Hess Corp. 200 11,900
Atlantic Richfield Co. 490 40,946
Chevron Corp. 1,500 142,781
Conoco, Inc. 500 13,937
Cooper Cameron Corp. @ 100 3,706
Diamond Offshore Drilling, Inc. 200 5,675
ENSCO International, Inc. 400 7,975
Exxon Corp. 4,800 370,200
Global Marine, Inc. 460 7,101
Mobil Corp. 2,900 287,100
Phillips Petroleum Co. 700 35,219
R&B Falcon Corp. @ 400 3,750
Royal Dutch Petroleum Co. ** 5,600 337,400
Smith International, Inc. 100 4,344
Texaco, Inc. 1,400 87,500
Tosco Corp. 400 10,375
Ultramar Diamond Shamrock Corp. 200 4,363
Unocal Corp. 220 8,717
-----------
1,382,989
-----------
Finance -- 11.39%
American Express Co. 740 96,292
Associated Banc-Corp. 200 8,300
Associates First Capital Corp. 2,000 88,625
Astoria Financial Corp. 110 4,833
Bank of America Corp. 4,800 351,900
Bank One Corp. 2,700 160,819
BankBoston Corp. 2,000 102,250
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE>
NORTHSTAR GALAXY TRUST RESEARCH ENHANCED INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- ----------------------------------------------------------
Finance -- continued
Charter One Financial, Inc. 500 $ 13,906
Citigroup, Inc. 9,300 441,750
Comerica, Inc. 200 11,888
Commerce Bancshares, Inc. 150 6,038
Compass Bancshares, Inc. 300 8,175
Dime Bancorp, Inc. 300 6,038
Fannie Mae 2,800 191,450
First American Corp. 600 24,937
First Union Corp. 2,700 126,900
FirstMerit Corp. 200 5,613
Franklin Resources, Inc. 620 25,187
Freddie Mac 1,770 102,660
Golden West Financial Corp. 200 19,600
GreenPoint Financial Corp. 300 9,844
Hibernia Corp. 400 6,275
Household International, Inc. 1,240 58,745
Huntington Bancshares, Inc. 400 14,000
KeyCorp 1,200 38,550
M&T Bank Corp. 10 5,500
Mellon Bank Corp. 1,300 47,287
Mercantile Bankshares Corp. 200 7,075
Merrill Lynch & Co., Inc. 1,000 79,937
National City Corp. 800 52,400
National Commerce Bancorp. 300 6,563
North Fork Bancorp., Inc. 380 8,099
Paine Webber Group, Inc. 400 18,700
Peoples Heritage Financial Group, Inc. 170 3,198
PNC Bank Corp. 800 46,100
Regions Financial Corp. 600 23,062
SouthTrust Corp. 500 19,187
Sovereign Bancorp., Inc. 360 4,365
Summit Bancorp. 500 20,906
SunTrust Banks, Inc. 900 62,494
TCF Financial Corp. 200 5,575
The Bear Stearns Cos., Inc. 300 14,025
The Chase Manhattan Corp. 200 17,325
The CIT Group, Inc. 200 5,775
The FINOVA Group, Inc. 200 10,525
The Goldman Sachs Group, Inc. 1,200 86,700
U.S. Bancorp. 2,000 68,000
Union Planters Corp. 400 17,875
Washington Mutual, Inc. 1,670 59,076
Wells Fargo Co. 4,400 188,100
Wilmington Trust Corp. 60 3,443
-----------
2,805,867
-----------
Health Services -- 1.77%
Aetna, Inc. 500 44,719
Baxter International, Inc. 100 6,063
Becton, Dickinson & Co. 900 27,000
Boston Scientific Corp. @ 400 17,575
CIGNA Corp. 700 62,300
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
NORTHSTAR GALAXY TRUST RESEARCH ENHANCED INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- ---------------------------------------------------------------
Health Services -- continued
Columbia/HCA Healthcare Corp. 1,900 $ 43,344
HCR Manor Care, Inc. @ 400 9,675
Health Management Associates, Inc. @ 860 9,675
HEALTHSOUTH Corp. @ 1,700 25,394
Humana, Inc. 600 7,762
Medtronic, Inc. 1,140 88,777
PacifiCare Health Systems, Inc. @ 100 7,194
PE Corp.--PE Biosystems Group 200 22,950
Tenet Healthcare Corp. @ 1,100 20,419
United HealthCare Corp. 410 25,676
Wellpoint Health Networks, Inc. @ 200 16,975
-----------
435,498
-----------
Insurance -- 2.92%
Ambac Financial Group, Inc. 300 17,138
American International Group, Inc. 2,100 245,831
Aon Corp. 900 37,125
Cincinnati Financial Corp. 300 11,269
Marsh & McLennan Cos., Inc. 1,000 75,500
MBIA, Inc. 400 25,900
Mercury General Corp. 200 6,800
Provident Cos., Inc. 1,200 48,000
SAFECO Corp. 200 8,825
The Allstate Corp. 3,020 108,342
The Chubb Corp. 600 41,700
The Equitable Cos., Inc. 300 20,100
The Hartford Financial Services Group, Inc. 400 23,325
The St. Paul Cos., Inc. 800 25,450
Torchmark Corp. 500 17,063
Travelers Property Casualty Corp. 200 7,825
-----------
720,193
-----------
Multi-Industry -- 7.73%
AlliedSignal, Inc. 2,000 126,000
Chattem, Inc. 292 9,289
Eastman Kodak Co. 1,200 81,300
General Electric Co. 5,700 644,100
General Motors Corp. 400 22,500
Harris Corp. 300 11,756
ITT Industries, Inc. 300 11,438
Lockheed Martin Corp. 1,500 55,875
Raytheon Co. 1,300 89,537
Symbol Technologies, Inc. 300 11,063
Tenneco, Inc. 700 16,713
The Boeing Co. 3,800 167,912
The Seagram Co. Ltd. 2,000 100,750
Tyco International Ltd. 3,000 284,250
Waste Management, Inc. 2,200 118,250
Xerox Corp. 2,600 153,562
-----------
1,904,295
-----------
</TABLE>
- --------------------------------------------------------------------------------
21
<PAGE>
NORTHSTAR GALAXY TRUST RESEARCH ENHANCED INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- --------------------------------------------------------------
Retail -- 6.03%
Abercrombie & Fitch Co. @ 400 $ 19,200
Albertson's, Inc. 699 36,058
AutoZone, Inc. @ 500 15,063
Costco Cos., Inc. 310 24,819
Dayton Hudson Corp. 1,600 104,000
Dillard's, Inc. 400 14,050
Federated Department Stores, Inc. @ 800 42,350
Hannaford Brothers Co. 200 10,700
J. C. Penney, Inc. 910 44,192
Kmart Corp. 1,800 29,588
Lowe's Cos., Inc. 140 7,936
Nordstrom, Inc. 500 16,750
Safeway, Inc. @ 1,800 89,100
Sears, Roebuck & Co. 1,400 62,388
The Gap, Inc. 2,700 136,012
The Home Depot, Inc. 2,010 129,519
The Kroger Co. 3,000 83,812
The May Department Stores Co. 1,200 49,050
The TJX Cos., Inc. 1,100 36,644
Tiffany & Co. 40 3,860
Toys 'R' Us, Inc. @ 900 18,619
Wal-Mart Stores, Inc. 10,600 511,450
------------
1,485,160
------------
Services -- 6.17%
America Online, Inc. @ 2,800 309,400
AT&T Corp. -- Liberty Media Group @ 2,500 91,875
Automatic Data Processing, Inc. 1,600 70,400
Cendant Corp. @ 3,600 73,800
Comcast Corp. 3,200 123,000
Electronic Data Systems Corp. 1,300 73,531
Equifax, Inc. 700 24,981
Gannett Co., Inc. 900 64,237
Hilton Hotels Corp. 1,200 17,025
Knight-Ridder, Inc. 400 21,975
Mandalay Resort Group @ 390 8,239
McDonald's Corp. 2,900 119,806
MediaOne Group, Inc. @ 2,600 193,375
Mirage Resorts, Inc. @ 860 14,405
R. R. Donnelley & Sons Co. 600 22,238
Service Corp. International 1,200 23,100
Starwood Hotels & Resorts Worldwide, Inc. 790 24,144
The New York Times Co. 800 29,450
The Times Mirror Co. 300 17,775
The Walt Disney Co. 4,400 135,575
The Washington Post Co. 30 16,133
Time Warner, Inc. 640 47,040
------------
1,521,504
------------
Stable -- 6.80%
Bestfoods 800 39,600
General Mills, Inc. 170 13,664
H.J. Heinz Co. 1,100 55,137
</TABLE>
- --------------------------------------------------------------------------------
22
<PAGE>
NORTHSTAR GALAXY TRUST RESEARCH ENHANCED INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- -----------------------------------------------------------
Stable -- continued
Hershey Foods Corp. 300 $ 17,812
Kellogg Co. 100 3,300
Kimberly-Clark Corp. 1,350 76,950
Nabisco Holdings Corp. 100 4,325
PepsiCo, Inc. 4,400 170,225
Philip Morris Cos., Inc. 7,300 293,369
Ralston-Ralston Purina Group Co. 800 24,350
Sara Lee Corp. 2,100 47,644
The Clorox Co. 300 32,044
The Coca-Cola Co. 4,170 260,625
The Gillette Co. 3,300 135,300
The Pepsi Bottling Group, Inc. 500 11,531
The Procter & Gamble Co. 4,000 357,000
Unilever NV ** 1,900 132,525
-----------
1,675,401
-----------
Technology -- 17.72%
3Com Corp. @ 1,000 26,687
Apple Computer, Inc. 400 18,525
Applied Materials, Inc. @ 1,000 73,875
BMC Software, Inc. @ 600 32,400
Cisco Systems, Inc. @ 8,500 548,250
Computer Associates International, Inc. 1,400 77,000
Dell Computer Corp. @ 6,700 247,900
DoubleClick, Inc. @ 100 9,175
Electronic Arts, Inc. @ 200 10,850
EMC Corp. 2,200 121,000
Exodus Communications, Inc. @ 100 11,994
First Data Corp. 900 44,044
Gateway, Inc. @ 400 23,600
Hewlett-Packard Co. 850 85,425
Intel Corp. 8,700 517,650
International Business Machines Corp. 4,700 607,475
Lucent Technologies, Inc. 7,500 505,781
Microsoft Corp. @ 10,300 928,931
Motorola, Inc. 1,600 151,600
National Semiconductor Corp. @ 400 10,125
Quantum Corp. @ 680 16,405
Seagate Technology, Inc. @ 600 15,375
Sun Microsystems, Inc. @ 2,000 137,750
Texas Instruments, Inc. 1,000 145,000
-----------
4,366,817
-----------
Telecommunications -- 7.92%
Ameritech Corp. 2,100 154,350
AT&T Corp. 4,500 251,156
Bell Atlantic Corp. 4,600 300,725
BellSouth Corp. 1,400 65,625
GTE Corp. 3,000 227,250
Level 3 Communications, Inc. @ 1,100 66,069
MCI WorldCom, Inc. @ 5,000 430,313
Nortel Networks Corp. 100 8,681
</TABLE>
- --------------------------------------------------------------------------------
23
<PAGE>
NORTHSTAR GALAXY TRUST RESEARCH ENHANCED INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
- ---------------------------------------------------------------------------
Telecommunications -- continued
SBC Communications, Inc. 6,300 $ 365,400
U S West, Inc. 1,400 82,250
------------
1,951,819
------------
Transportation -- 0.84%
AMR Corp. 400 27,300
Burlington Northern Santa Fe Corp. 1,300 40,300
CNF Transportation, Inc. 80 3,070
Continental Airlines, Inc. @ 100 3,763
CSX Corp. 600 27,188
Norfolk Southern Corp. 1,010 30,426
Ryder System, Inc. 200 5,200
Southwest Airlines Co. 900 28,012
Union Pacific Corp. 700 40,819
------------
206,078
------------
Utilities -- 2.51%
Allegheny Energy, Inc. 400 12,825
Ameren Corp. 480 18,420
Central & South West Corp. 1,960 45,815
Cinergy Corp. 600 19,200
CMS Energy Corp. 400 16,750
Columbia Energy Group 300 18,806
Consolidated Natural Gas Co. 300 18,225
Constellation Energy Group 600 17,775
Dominion Resources, Inc. 700 30,319
Duke Energy Corp. 1,030 56,006
Edison International 860 23,005
El Paso Energy Corp. 400 14,075
Entergy Corp. 900 28,125
FPL Group, Inc. 700 38,237
NiSource, Inc. 500 12,906
Northeast Utilities 500 8,844
Northern States Power Co. 600 14,513
PG&E Corp. 1,300 42,250
Pinnacle West Capital Corp. 300 12,075
PP&L Resources, Inc. 600 18,450
Public Service Enterprise Group, Inc. 400 16,350
Reliant Energy, Inc. 1,100 30,388
TECO Energy, Inc. 500 11,375
Texas Utilities Co. 1,000 41,250
The Southern Co. 1,560 41,340
Wisconsin Energy Corp. 400 10,025
------------
617,349
------------
Total Common Stocks
(cost $22,318,331) 22,803,727
------------
U.S. Government and Agencies -- 0.41%
U.S. Treasury Notes 5.875%, 2/15/00 $100,000 100,460
------------
Total U.S. Government and Agencies
(cost $100,550) 100,460
------------
</TABLE>
- --------------------------------------------------------------------------------
24
<PAGE>
NORTHSTAR GALAXY TRUST RESEARCH ENHANCED INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- -------------------------------------------------------------------------------
Total Investment Securities -- 92.95%
(cost $22,418,881) $22,904,187
Repurchase Agreement -- 1.99%
Agreement with State Street Bank and Trust
bearing interest at 4.70% dated 6/30/99, to be
repurchased 7/01/99 in the amount of $491,064 and
collateralized by $485,000 U.S. Treasury Notes,
6.375% due 8/15/27, value $502,062
(cost $491,000) $491,000 491,000
Other assets less liabilities -- 5.06% 1,245,683
-----------
Net Assets -- 100.00% $24,640,870
===========
</TABLE>
@Non-income producing.
**American Depositary Receipts.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
NORTHSTAR GALAXY TRUST
HIGH YIELD BOND PORTFOLIO
The Markets
. The six months ended June 30, 1999 closed with continued robust equity
markets and GDP growth rates of approximately 4%. The equity markets' out-
standing performance was primarily due to the strength of the U.S. economy
and the absence of inflation indicators. Additionally, worldwide markets
stabilized, rebounding off their lows. Inflation continued to remain low
at roughly 1.5%, as both lower commodity prices and imports kept prices in
check. During the second quarter 1999, yields of 10- and 30-year Treasury
bonds continued their retreat. Their yields ended the quarter at 5.78% and
5.96%, up 112 bps and 86 bps, respectively, from the first quarter 1999.
The backup in interest rates was primarily due to the continued strength
of the economy, which raised concern among Fed watchers as to the possi-
bility that the Fed might increase rates and if so, by what magnitude. As
it turned out, on June 30th the Federal Reserve tightened rates by 25 ba-
sis points to 5% and returned to a neutral bias. High yield bonds contin-
ued to increase modestly as liquidity concerns diminished, investor confi-
dence in the stock market returned and the domestic economic outlook re-
mained robust.
. The Lehman Brothers U.S. Corporate High Yield Index returned 2.20% for the
six months ended June 30, 1999 compared to (1.37%) for the Lehman Brothers
U.S. Aggregate Bond Index. As economic and financial concerns continued to
diminish during the quarter, high yield bonds continued to show signs of
improvement, outperforming most other fixed income assets in the second
quarter and year-to-date. However, high yield spreads only tightened mod-
estly due to a back up in Treasuries. As of June 30, 1999, high yield
spreads still remained historically wide to Treasuries at 525-650 basis
points. In general, bonds with lower credit ratings continued to
outperform the upper tier of the high yield market.
. The Lehman Brothers Emerging Market Bond Index rose 10.22% for the six
months ended June 30, 1999. The strong performance of the emerging markets
was mainly attributed to the regions' increasing stability and continual
recovery, prompting investors to comb for opportunities from the third
quarter 1998 collapse.
The Portfolio
. From December 31, 1998 through June 30, 1999, the total return of the
Portfolio's shares was 1.16%; the Lipper average for high yield funds was
3.56%.
. The assets of the Portfolio were reallocated during the six-month period.
Distressed and under-performing assets such as Shipping, Oil and Gas and
Emerging Market credits were cut back. As of June 30, 1999, Shipping, Oil
and Gas and Emerging Markets represented 4.6%, 3.6% and 4.3%, respective-
ly, of the Portfolio. As the Portfolio's exposure to more commodity-driven
credits were decreased, weightings in the Cable, Gaming and Telecommunica-
tions sectors were increased. These sectors should provide both growth and
stability to the Portfolio. Furthermore, for much of the six-month period
ended June 30, 1999, the Portfolio held a cash position ranging from 9% to
15%. This cash position contributed to the Portfolio's under performance.
. Many of the stocks and equity rights attached to bonds ("equity kickers")
held by the Portfolio showed little to no gains during first quarter 1999,
however, we do believe that these equity kickers will make contributions
to the NAV within the foreseeable future.
Current Strategy
. We will continue the Portfolio's above-average allocation to non-cyclical
industries. We will maintain positions in bonds that have equity kickers
and will focus on investments in undervalued bonds that have high yields
and above-average potential for capital appreciation.
. The Portfolio will continue to follow the barbell approach, a blend of BB
and upper tier B credits, mitigating the downside of volatility swings as-
sociated with big market moves.
- --------------------------------------------------------------------------------
Fund Information (All data are as of 6/30/99) Total Net Assets $19,787,549
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top 10 Holdings
Name % Fund
<C> <S> <C>
1 EchoStar Communications Corp. 3.9%
2 Allied Waste North America, Inc. 3.1
3 TransAmerican Refining Corp. 2.7
4 Amazon.com, Inc. 2.6
5 Nextlink Communications, Inc. 2.6
6 North Atlantic Trading, Inc. 2.6
7 Star Choice Communications, Inc. 2.6
8 Westinghouse Air Brake Co. 2.6
9 Harrahs Operating Co., Inc. 2.5
10 Waterford Gaming LLC Finance Corp. 2.5
----
27.7%
====
</TABLE>
Top 5 Industries
(by percentage of net assets)
Telecommunications 16.5%
Cable Television 14.7%
Bank Investment
Contracts 11.9%
Food/Beverage/
Tobacco 7.9%
Hotel & Gaming 7.3%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
5
Inception years 1 year
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7.75% 7.79% (9.24%)
- -------------------------------------------------------------------------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
5
Inception years 1 year
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
49.69% 49.31% (3.04%)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------------------------------------------ ---------
- --------------------------------------------------------------------------------
26
<PAGE>
NORTHSTAR GALAXY TRUST HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- -------------------------------------------------------------------------
Domestic Bonds & Notes -- 68.42%
Airlines -- 1.96%
Atlantic Coast Airlines, Inc. #
8.75%, Pass-Thru Certificates, 1/01/07 $ 407,887 $ 388,774
------------
Automotive Manufacturing -- 2.83%
Safelite Glass Corp.
9.875%, Sr. Subordinated Notes, 12/15/06 500,000 465,000
Titan Wheel International, Inc.
8.75%, Sr. Subordinated Notes, 4/01/07 100,000 95,500
------------
560,500
------------
Broadcasting -- 3.16%
Brill Media Company LLC $
7.50/12.00%, Sr. Subordinated Appreciation
Notes, 12/15/07 5,714 177
Brill Media Company LLC $
7.50/12.00%, Sr. Notes, 12/15/07 200,000 161,000
Capstar Broadcasting Partners, Inc.
9.25%, Sr. Subordinated Notes, 7/01/07 100,000 105,000
Sinclair Broadcast Group, Inc.
8.75%, Sr. Subordinated Notes, 12/15/07 200,000 195,500
Unisite, Inc. ++
13.00%, Notes, 12/15/04 138,000 163,323
------------
625,000
------------
Cable Television -- 11.96%
Adelphia Communications Corp.
7.875%, Sr. Notes, 5/01/09 500,000 466,250
Charter Communications Holdings LLC #
8.625%, Sr. Notes, 4/01/09 500,000 480,625
Diva Systems Corp. $
0/12.625%, Sr. Discount Notes, 3/01/08 800,000 236,000
EchoStar Communications Corp. #
9.25%, Sr. Notes, 2/01/06 750,000 768,750
NTL, Inc. $
0/9.75%, Sr. Notes, 4/01/08 600,000 414,000
------------
2,365,625
------------
Capital Goods Manufacturing -- 4.43%
Indesco International, Inc.
9.75%, Sr. Subordinated Notes, 4/15/08 500,000 367,500
Westinghouse Air Brake Co. #
9.375%, Sr. Notes, 6/15/05 500,000 510,000
------------
877,500
------------
Entertainment/Film -- 0.51%
Paramount Communications, Inc.
8.25%, Sr. Debentures, 8/01/22 100,000 101,649
------------
Food/Beverage/Tobacco -- 5.81%
Aurora Foods, Inc.
9.875%, Sr. Subordinated Notes, 2/15/07 95,000 98,800
Eagle Family Foods, Inc.
8.75%, Company Guarantee, 1/15/08 250,000 223,750
</TABLE>
- --------------------------------------------------------------------------------
27
<PAGE>
NORTHSTAR GALAXY TRUST HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- ----------------------------------------------------------------------
Food/Beverage/Tobacco -- continued
North Atlantic Trading, Inc.
11.00%, Company Guarantee, 6/15/04 $ 500,000 $ 512,500
Standard Commercial Tobacco Co., Inc.
8.875%, Company Guarantee, 8/01/05 150,000 126,000
Tom's Foods, Inc.
10.50%, Sr. Secured Notes, 11/01/04 200,000 189,000
------------
1,150,050
------------
Homebuilders/Home Construction -- 1.21%
Engle Homes, Inc.
9.25%, Sr. Notes, 2/01/08 250,000 238,750
------------
Hotel & Gaming -- 7.32%
Harrahs Operating Co., Inc.
7.875%, Company Guarantee, 12/15/05 500,000 486,250
HMH Properties, Inc.
7.875%, Company Guarantee, 8/01/08 500,000 463,750
Waterford Gaming LLC Finance Corp. #
9.50%, Sr. Notes, 3/15/10 500,000 498,750
------------
1,448,750
------------
Insurance -- 0.51%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 100,000 101,500
------------
Oil & Gas -- 3.48%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 100,000 68,500
Crown Central Petroleum Corp.
10.875%, Sr. Notes, 2/01/05 100,000 87,500
TransAmerican Refining Corp. # &
15.00%, Sr. Notes, 12/01/03 534,583 531,910
------------
687,910
------------
Restaurants -- 2.44%
Romacorp, Inc.
12.00%, Company Guarantee, 7/01/06 500,000 482,500
------------
Services -- 5.41%
Allied Waste North America, Inc.
7.875%, Company Guarantee, 1/01/09 650,000 604,500
Protection One, Inc. #
8.125%, Sr. Subordinated Notes, 1/15/09 500,000 465,000
------------
1,069,500
------------
Shipping -- 3.08%
Sea Containers Ltd.
7.875%, Sr. Notes, 2/15/08 200,000 195,000
Simcala, Inc.
9.625%, Sr. Notes, 4/15/06 250,000 170,000
Ultralpetrol Bahamas Ltd.
10.50%, 1st Mortage Notes, 4/01/08 300,000 244,500
------------
609,500
------------
Specialty Retailing -- 2.60%
Amazon.com, Inc. $
0/10.00%, Sr. Discount Notes, 5/01/08 750,000 513,750
------------
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
NORTHSTAR GALAXY TRUST HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- ---------------------------------------------------------------------------
Steel -- 0.52%
WCI Steel, Inc.
10.00%, Sr. Notes, 12/01/04 $ 100,000 $ 102,250
-----------
Telecommunications -- 9.93%
Hyperion Telecommunications, Inc. $
0/13.00%, Sr. Discount Notes, 4/15/03 150,000 126,000
ICG Holdings, Inc. $
0/12.50%, Sr. Secured Discount Notes, 5/01/06 100,000 78,041
Intercel, Inc. $
0/12.00%, Sr. Discount Notes, 5/01/06 150,000 126,966
ITC Deltacom, Inc.
11.00%, Sr. Notes, 6/01/07 130,000 139,750
Nextel Communications, Inc. $
0/10.65%, Sr. Discount Notes, 9/15/07 500,000 367,500
Nextlink Communications, Inc.
10.75%, Sr. Notes, 11/15/08 500,000 516,250
RCN Corp.
10.00%, Sr. Notes, 10/15/07 300,000 301,500
Verio, Inc.
13.50%, Sr. Notes, 6/15/04 100,000 115,500
Western Wireless Corp.
10.50%, Sr. Subordinated Notes, 6/01/06 100,000 105,500
WinStar Communications, Inc. $
0/14.00%, Sr. Discount Notes, 10/15/05 100,000 88,750
-----------
1,965,757
-----------
Utilities -- 1.26%
York Power Funding #
12.00%, Company Guarantee, 10/30/07 250,000 250,000
-----------
Total Domestic Bonds & Notes
(cost $14,119,849) 13,539,265
-----------
Foreign Bonds & Notes -- 11.38%
Aerospace & Defense -- 0.49%
Derlan Manufacturing, Inc.
10.00%, Sr. Notes, 1/15/07 100,000 96,500
-----------
Broadcasting -- 0.96%
Antenna TV SA
9.00%, Sr. Notes, 8/01/07 200,000 189,000
-----------
Cable Television -- 2.64%
Star Choice Communications, Inc.
13.00%, Sr. Notes, 12/15/05 500,000 522,500
-----------
Consumer Products -- 0.09%
International Semi-Tech Corp. $
0/11.50%, Sr. Secured Discount Notes, 8/15/03 100,000 18,500
-----------
Food/Beverage/Tobacco -- 2.06%
Fage Dairy Industries SA
9.00%, Sr. Notes, 2/01/07 450,000 407,250
-----------
Printing & Publishing -- 0.34%
Newsquest Capital PLC
11.00%, Sr. Subordinated Notes, 5/01/06 60,000 67,200
-----------
</TABLE>
- --------------------------------------------------------------------------------
29
<PAGE>
NORTHSTAR GALAXY TRUST HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Principal Amount/Units/Shares Value
<S> <C> <C>
- -------------------------------------------------------------------------------
Services -- 0.84%
Localiza Rent A Car SA
10.25%, Notes, 10/01/05 $ 300,000 $ 166,500
-----------
Shipping -- 1.53%
Equimar Shipholdings Ltd.
9.875%, Company Guarantee, 7/01/07 400,000 262,000
Navigator Gas Transport PLC # (1)
12.00%, Units, 6/30/07 150 41,250
-----------
303,250
-----------
Telecommunications -- 2.43%
Colt Telecom Group PLC $
0/12.00%, Sr. Discount Notes,
12/15/06 100,000 83,500
Microcell Telecommunications, Inc. $
0/11.125%, Sr. Discount Notes,
10/15/07 250,000 104,414
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes,
3/15/04 150,000 92,250
Rogers Cantel, Inc.
8.80%, Sr. Subordinated Notes,
10/01/07 200,000 200,500
-----------
480,664
-----------
Total Foreign Bonds & Notes
(cost $2,671,367) 2,251,364
-----------
Convertible Bonds -- 0.00%
Telecommunications -- 0.00%
SA Telecommunications, Inc. # *
10.00%, Notes, 8/15/06 125,000 0
-----------
Total Convertible Bonds
(cost $125,000) 0
-----------
Common Stocks -- 1.93% @
Broadcasting -- 0.35%
Pegasus Communications Corp. 225 8,873
Spanish Broadcasting Systems, Inc. # 100 60,000
-----------
68,873
-----------
Consumer Staples -- 0.35%
EchoStar Communications Corp. 450 69,047
-----------
Services -- 0.15%
Coinstar, Inc. 1,050 30,122
-----------
Telecommunications -- 1.08%
Jordan Telecommunications Products,
Inc. 150 3,075
Verio, Inc. 1,408 97,856
Viatel, Inc. 2,015 113,092
-----------
214,023
-----------
Total Common Stocks
(cost $21,924) 382,065
-----------
Convertible Preferred Stocks --
1.25%
Healthcare -- 1.25%
Intracel Corp. ++, 8.00% 15,884 246,202
-----------
Total Convertible Preferred Stocks
(cost $131,683) 246,202
-----------
</TABLE>
- --------------------------------------------------------------------------------
30
<PAGE>
NORTHSTAR GALAXY TRUST HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
- -----------------------------------------------------------------------------
Preferred Stocks -- 3.38%
Broadcasting -- 0.63%
Paxson Communications Corp., 12.50% & 1,355 $ 124,660
-----------
Oil & Gas -- 0.11%
TCR Holding Corp., $.053 ++ 14,500 768
TCR Holding Corp., $.056 ++ 5,500 308
TCR Holding Corp., $.060 ++ 10,000 600
TCR Holding Corp., $.063 ++ 30,000 1,890
TransContinental Refining Corp., $.0683 ++ 20,000 18,660
-----------
22,226
-----------
Telecommunications -- 2.64%
Hyperion Telecommunications, Inc., 12.875% & 3,716 332,571
Jordan Telecommunication Products, Inc., 13.25% & 1,850 189,625
-----------
522,196
-----------
Total Preferred Stocks
(cost $689,794) 669,082
-----------
Warrants -- 0.89% @
Broadcasting -- 0.00%
Unisite, Inc. ++, (expires 12/15/04) 67 1
Unisite, Inc. ++, (expires 12/15/04 (second series
warrants)) 1 0
-----------
1
-----------
Cable Television -- 0.15%
Diva Systems Corp., (expires 3/01/08) 2,400 28,800
Heartland Wireless Communications, Inc. #, (expires
4/15/00) 450 4
-----------
28,804
-----------
Consumer Products -- 0.19%
Chattem, Inc., (expires 8/16/99) 50 6,968
Packaged Ice, Inc., (expires 4/15/04) 150 15,000
Packaged Ice, Inc. #, (expires 4/15/04) 145 14,500
-----------
36,468
-----------
Paper -- 0.15%
SD Warren Holdings Corp., (expires 12/15/06) 6,400 30,400
-----------
Steel -- 0.00%
Sheffield Steel Corp., (expires 11/01/01) 500 0
-----------
Supermarkets -- 0.00%
Dairy Mart Convenience Stores, Inc., (expires 1/01/01) 666 400
-----------
Telecommunications -- 0.40%
Clearnet Communications, Inc. @@, (expires 9/15/05) 660 5,610
Colt Telecom Group PLC # @@, (expires 12/31/06) 100 62,630
Geotek Communications, Inc., (expires 6/20/01) 3,000 0
Hyperion Telecommunications, Inc., (expires 4/15/01) 150 11,494
Occidente Y Caribe Celular SA #, (expires 3/15/04) 600 0
UNIFI Communications, Inc. #, (expires 5/01/07) 100 1
-----------
79,735
-----------
Total Warrants
(cost $78,513) 175,808
-----------
Total Investment Securities -- 87.25%
(cost $17,838,130) 17,263,786
-----------
</TABLE>
- --------------------------------------------------------------------------------
31
<PAGE>
NORTHSTAR GALAXY TRUST HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
- -------------------------------------------------------------------------------
Repurchase Agreements -- 11.87%
Agreement with State Street Bank and Trust
bearing interest at 4.70% dated 6/30/99, to be
repurchased 7/01/99 in the amount of $1,830,239
and collateralized by $1,840,000 U.S. Treasury
Notes, 5.75% due 8/15/03, value $1,867,955. $1,830,000 $ 1,830,000
Agreement with State Street Bank and Trust
bearing interest at 4.70% dated 6/30/99, to be
repurchased 7/01/99 in the amount of $519,068 and
collateralized by $530,000 U.S. Treasury Notes,
5.625% due 12/31/99, value $530,994 519,000 519,000
-----------
Total Repurchase Agreements
(cost $2,349,000) 2,349,000
Other assets less liabilities -- 0.88% 174,763
-----------
Net Assets -- 100.00% $19,787,549
===========
</TABLE>
# Sale restricted to qualified institutional investors.
$ Step Bond
++ Private placement
& Payment-in-kind security.
* Defaulted security.
@ Non-income producing security.
@@ Foreign security.
(1) A unit consists of $1,000 par value 2nd Priority Mortgage notes, 12.00% due
6/30/07 and 7.66 warrants.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
NORTHSTAR GALAXY TRUST
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
[LOGO]
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Emerging Growth + International
Growth Value Value
Portfolio Portfolio Portfolio
---------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost $24,973,891,
$39,111,880, $14,108,714, $22,418,881 and $17,838,130,
respectively) $31,941,261 $51,897,956 $16,386,187
Repurchase agreements 305,000 1,803,000 0
Cash 193 415 0
Foreign cash, at value (cost $0, $0, $224,997, $0, and $0,
respectively) 0 0 225,030
Receivable for investments sold 1,492,481 1,090,895 3,610,657
Dividends and interest receivable 4,651 763 79,774
Receivable for shares of beneficial interest sold 3,478 22,462 668,889
Receivable for futures variation margin 0 0 0
Prepaid expenses 465 723 237
<CAPTION>
---------------------------------------
<S> <C> <C> <C>
Total Assets 33,747,529 54,816,214 20,970,774
<CAPTION>
---------------------------------------
<S> <C> <C> <C>
LIABILITIES:
Payable for investments purchased 1,571,488 3,334,003 1,768,035
Payable for fund shares repurchased 33,874 47,238 4,503
Management fees payable 18,309 29,525 14,198
Audit fee payable 8,964 7,233 7,891
Custodian & fund accounting fees payable 8,087 5,699 8,076
Printing fees payable 3,339 5,711 2,357
Administrative services fees payable 2,441 3,937 1,420
Tax withholding payable 95 0 4,681
Due to custodian 0 0 1,013,703
Unrealized depreciation on forward currency contracts 0 0 6,175
Income distribution payable 0 0 0
Other liabilities 5,037 890 98
<CAPTION>
---------------------------------------
<S> <C> <C> <C>
Total Liabilities 1,651,634 3,434,236 2,831,137
<CAPTION>
---------------------------------------
<S> <C> <C> <C>
Net Assets $32,095,895 $51,381,978 $18,139,637
<CAPTION>
=======================================
<S> <C> <C> <C>
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of beneficial interest, $.01
par value outstanding (unlimited shares authorized) $19,399,287 $28,899,580 $14,765,992
Accumulated net investment income (loss) (83,832) (94,774) (28,178)
Accumulated net realized gain (loss) on investments 5,813,073 9,791,096 1,126,893
Net unrealized appreciation (depreciation)of investments 6,967,367 12,786,076 2,274,930
<CAPTION>
---------------------------------------
<S> <C> <C> <C>
Net assets $32,095,895 $51,381,978 $18,139,637
<CAPTION>
=======================================
<S> <C> <C> <C>
Net Asset Value Per Share
($32,095,895/1,685,365 shares, $51,381,978/2,099,052 shares, $18,139,637/1,380,940
shares $24,640,870/5,189,597 shares, and
$19,787,549/4,209,392 shares, respectively) $ 19.04 $ 24.48 $ 13.14
<CAPTION>
Northstar Northstar
Research High Yield
Enhanced Index Bond
Portfolio Portfolio
----------------------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $24,973,891,
$39,111,880, $14,108,714, $22,418,881 and $17,838,130,
respectively) $22,904,187 $17,263,786
Repurchase agreements 491,000 2,349,000
Cash 137 35,334
Foreign cash, at value (cost $0, $0, $224,997, $0, and $0,
respectively) 0 0
Receivable for investments sold 719,635 0
Dividends and interest receivable 18,296 355,991
Receivable for shares of beneficial interest sold 1,130,508 53
Receivable for futures variation margin 12,500 0
Prepaid expenses 238 388
<CAPTION>
----------------------------
<S> <C> <C>
Total Assets 25,276,501 20,004,552
<CAPTION>
----------------------------
<S> <C> <C>
LIABILITIES:
Payable for investments purchased 600,780 34,583
Payable for fund shares repurchased 3,555 116,239
Management fees payable 10,408 11,952
Audit fee payable 8,606 8,830
Custodian & fund accounting fees payable 8,419 6,203
Printing fees payable 2,100 2,974
Administrative services fees payable 1,487 1,594
Tax withholding payable 0 0
Due to custodian 0 0
Unrealized depreciation on forward currency contracts 0 0
Income distribution payable 0 32,707
Other liabilities 276 1,921
<CAPTION>
----------------------------
<S> <C> <C>
Total Liabilities 635,631 217,003
<CAPTION>
----------------------------
<S> <C> <C>
Net Assets $24,640,870 $19,787,549
<CAPTION>
============================
<S> <C> <C>
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of beneficial interest, $.01
par value outstanding (unlimited shares authorized) $25,403,603 $21,398,736
Accumulated net investment income (loss) 3,625 432
Accumulated net realized gain (loss) on investments (1,284,442) (1,037,275)
Net unrealized appreciation (depreciation)of investments 518,084 (574,344)
<CAPTION>
----------------------------
<S> <C> <C>
Net assets $24,640,870 $19,787,549
<CAPTION>
============================
<S> <C> <C>
Net Asset Value Per Share
($32,095,895/1,685,365 shares, $51,381,978/2,099,052 shares, $18,139,637/1,380,940
shares $24,640,870/5,189,597 shares, and
$19,787,549/4,209,392 shares, respectively) $ 4.75 $ 4.70
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
NORTHSTAR GALAXY TRUST
STATEMENT OF OPERATIONS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
Northstar Northstar Northstar Northstar Northstar
Emerging Growth + International Research High Yield
Growth Value Value Enhanced Index Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of
withholding tax of $95,
$1,911, $20,682, $1,782,
and $0, respectively) $ 16,591 $ 34,098 $ 238,225 $ 59,441 $ 68,503
Interest (net of
withholding tax of $0,
$0, $0, $369, and $0,
respectively) 22,713 55,418 8,858 327,528 1,020,055
--------------------------------------------------------------
Total investment income 39,304 89,516 247,083 386,969 1,088,558
--------------------------------------------------------------
EXPENSES:
Investment advisory and
management fees 102,575 172,260 76,453 54,432 79,553
Custodian and fund
accounting fees 21,054 11,323 17,256 13,325 13,652
Administrative services
fees 13,677 22,968 7,645 7,441 10,607
Audit fees 8,043 8,430 10,123 7,264 7,550
Insurance expense 4,726 1,261 0 567 1,385
Printing expense 4,001 6,704 2,534 16,464 2,450
Trustee fees and
expenses 1,835 2,018 1,651 1,825 2,447
Miscellaneous expenses 696 596 846 438 445
--------------------------------------------------------------
156,607 225,560 116,508 101,756 118,089
Less expenses reimbursed
by investment adviser 33,487 41,270 40,024 39,053 33,036
--------------------------------------------------------------
Total expenses 123,120 184,290 76,484 62,703 85,053
--------------------------------------------------------------
Net investment income
(loss) (83,816) (94,774) 170,599 324,266 1,003,505
--------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain (loss)
on investments 4,713,401 9,728,310 1,070,585 (592,719) (1,030,859)
Net realized loss on
foreign currency 0 0 (35,276) 0 0
Net realized loss on
futures contracts 0 0 0 (9,699) 0
Net change in unrealized
appreciation of
investments 3,672,971 2,534,603 1,740,819 609,774 259,739
Net change in unrealized
depreciation of foreign
currency 0 0 (3,706) 0 0
Net change in unrealized
appreciation of futures
contracts 0 0 0 32,778 0
--------------------------------------------------------------
Net realized and
unrealized gain (loss)
on investments 8,386,372 12,262,913 2,772,422 40,134 (771,120)
--------------------------------------------------------------
Increase in net assets
resulting from
operations $8,302,556 $12,168,139 $2,943,021 $364,400 $ 232,385
--------------------------------------------------------------
--------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
NORTHSTAR GALAXY TRUST
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30,1999
[LOGO]
<TABLE>
<CAPTION>
Northstar Northstar Northstar Northstar Northstar
Emerging Growth + International Research High Yield
Growth Value Value Enhanced Index Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
FROM OPERATIONS:
Net investment income
(loss) $ (83,816) $ (94,774) $ 170,599 $ 324,266 $ 1,003,505
Net realized gain (loss)
on investments and
future contracts 4,713,401 9,728,310 1,070,585 (602,418) (1,030,859)
Net realized loss on
foreign currency 0 0 (35,276) 0 0
Net change in unrealized
appreciation of
investments and future
contracts 3,672,971 2,534,603 1,740,819 642,552 259,739
Net change in unrealized
depreciation of foreign
currency 0 0 (3,706) 0 0
--------------------------------------------------------------------
Increase in net assets
resulting from
operations 8,302,556 12,168,139 2,943,021 364,400 232,385
FROM DIVIDENDS TO
SHAREHOLDERS:
Net investment income 0 0 (247,780) (320,641) (1,003,073)
--------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale
of shares 7,514,133 9,699,641 19,007,573 14,094,388 6,499,127
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends 0 0 247,780 320,641 970,366
--------------------------------------------------------------------
7,514,133 9,699,641 19,255,353 14,415,029 7,469,493
Cost of shares redeemed (7,773,548) (12,078,887) (17,575,421) (4,254,554) (8,231,419)
--------------------------------------------------------------------
Net increase (decrease)
in net assets derived
from capital share
transactions (259,415) (2,379,246) 1,679,932 10,160,475 (761,926)
--------------------------------------------------------------------
Net increase (decrease)
in net assets 8,043,141 9,788,893 4,375,173 10,204,234 (1,532,614)
NET ASSETS:
Beginning of period 24,052,754 41,593,085 13,764,464 14,436,636 21,320,163
--------------------------------------------------------------------
End of period $32,095,895 $51,381,978 $18,139,637 $24,640,870 $19,787,549
====================================================================
Accumulated net
investment income (loss) $ (83,832) $ (94,774) $ (28,178) $ 3,625 $ 432
====================================================================
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
NORTHSTAR GALAXY TRUST
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Northstar Northstar Northstar Northstar Northstar
Emerging Growth + International Research High Yield
Growth Value Value Enhanced Index Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------
FROM OPERATIONS:
Net investment income
(loss) $ 667,842 $ (61,191) $ 175,508 $ 943,458 $ 1,434,026
Net realized gain (loss)
on investments 1,369,176 71,906 816,735 (574,364) (6,416)
Net realized gain (loss)
on foreign currency (16) 0 63,776 453 0
Net change in unrealized
appreciation
(depreciation) of
investments 1,482,890 6,496,905 347,006 (241,127) (1,167,753)
Net change in unrealized
appreciation of foreign
currency 0 0 1,132 0 0
---------------------------------------------------------------------
Increase in net assets
resulting from
operations 3,519,892 6,507,620 1,404,157 128,420 259,857
FROM DIVIDENDS TO
SHAREHOLDERS:
Net investment income (668,173) (10,927) (192,996) (945,370) (1,435,446)
Net realized gain on
investments (1,033,036) (308,911) (553,278) (3,863) (27,382)
---------------------------------------------------------------------
(1,701,209) (319,838) (746,274) (949,233) (1,462,828)
---------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale
of shares 5,528,830 8,994,594 14,594,371 8,995,259 20,427,074
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends 1,701,209 319,838 746,274 962,942 1,482,093
---------------------------------------------------------------------
7,230,039 9,314,432 15,340,645 9,958,201 21,909,167
Cost of shares redeemed (6,526,824) (6,065,460) (8,171,088) (5,248,919) (11,992,197)
---------------------------------------------------------------------
Net increase in net
assets derived from
capital share
transactions 703,215 3,248,972 7,169,557 4,709,282 9,916,970
---------------------------------------------------------------------
Net increase in net
assets 2,521,898 9,436,754 7,827,440 3,888,469 8,713,999
NET ASSETS:
Beginning of period 21,530,856 32,156,331 5,937,024 10,548,167 12,606,164
---------------------------------------------------------------------
End of period $24,052,754 $41,593,085 $13,764,464 $14,436,636 $ 21,320,163
=====================================================================
Accumulated net
investment income (loss) $ (16) $ 0 $ 49,003 $ 0 $ 0
=====================================================================
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
NORTHSTAR GALAXY TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST
OUTSTANDING THROUGHOUT EACH PERIOD
[LOGO]
<TABLE>
<CAPTION>
Net Total Dividends Distri- Net
realized & from declared butions Asset Net
Net Asset Net unrealized invest- from net declared Value, Assets, Ratio of
Value, invest- gain (loss) ment invest- from net Total end end of expenses
Period beginning ment on invest- opera- ment realized distri- of Total period net of
ended of period income ments tions income gains butions period return (000's) reimbursement (1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northstar Emerging Growth Portfolio
-----------------------------------
5/06/94-
12/31/94 $10.00 $0.20 ($0.01) $0.19 ($0.20) ($0.07) ($0.27) $9.92 2.02% $3,595 1.00%
12/31/95 9.92 0.37 1.73 2.10 (0.37) (0.26) (0.63) 11.39 21.39 7,410 0.80
12/31/96 11.39 0.40 1.15 1.55 (0.41) (0.81) (1.22) 11.72 13.80 12,579 0.80
12/31/97 11.72 0.44 1.36 1.80 (0.44) (0.08) (0.52) 13.00 15.81 21,531 0.80
12/31/98 13.00 0.39 1.76 2.15 (0.39) (0.64) (1.03) 14.12 17.30 24,053 0.82
6/30/99 14.12 (0.05) 4.97 4.92 0.00 0.00 0.00 19.04 34.92 32,096 0.90
Northstar Growth + Value Portfolio
----------------------------------
5/06/94-
12/31/94 10.00 0.16 0.19 0.35 (0.16) (0.15) (0.31) 10.04 3.47 2,701 1.00
12/31/95 10.04 0.20 2.27 2.47 (0.19) (0.76) (0.95) 11.56 24.78 3,813 0.80
12/31/96 11.56 0.08 2.57 2.65 (0.09) (0.04) (0.13) 14.08 22.99 15,564 0.80
12/31/97 14.08 0.09 1.95 2.04 (0.10) (0.17) (0.27) 15.85 14.66 32,156 0.80
12/31/98 15.85 0.11 3.08 3.19 (0.14) (0.14) (0.28) 18.76 19.32 41,593 0.80
6/30/99 18.76 (0.05) 5.77 5.72 0.00 0.00 0.00 24.48 23.54 51,382 0.80
Northstar International Value Portfolio
---------------------------------------
8/08/97-
12/31/97 10.00 0.03 0.10 0.13 (0.03) 0.00 (0.03) 10.10 1.30 5,937 0.80
12/31/98 10.10 0.21 1.49 1.70 (0.22) (0.50) (0.72) 11.08 16.93 13,764 0.84
6/30/99 11.08 0.13 2.12 2.25 (0.19) 0.00 (0.19) 13.14 20.36 18,140 1.00
Northstar Research Enhanced Index Portfolio
-------------------------------------------
5/06/94-
12/31/94 5.00 0.23 (0.15) 0.08 (0.23) 0.00 (0.23) 4.85 1.41 2,716 1.00
12/31/95 4.85 0.42 0.29 0.71 (0.42) 0.00 (0.42) 5.14 14.97 3,766 0.80
12/31/96 5.14 0.41 0.21 0.62 (0.41) (0.10) (0.51) 5.25 12.53 6,277 0.80
12/31/97 5.25 0.40 (0.08) 0.32 (0.40) (0.03) (0.43) 5.14 6.15 10,548 0.80
12/31/98 5.14 0.36 (0.31) 0.05 (0.36) 0.00 (0.36) 4.83 (5.56) 14,436 0.80
6/30/99 4.83 0.07 (0.08) (0.01) (0.07) 0.00 (0.07) 4.75 (0.16) 24,641 0.84
Northstar High Yield Bond Portfolio
-----------------------------------
5/06/94-
12/31/94 5.00 0.28 (0.31) (0.03) (0.28) 0.00 (0.28) 4.69 (0.95) 2,588 1.00
12/31/95 4.69 0.50 0.34 0.84 (0.49) 0.00 (0.49) 5.04 18.55 4,773 0.80
12/31/96 5.04 0.45 0.32 0.77 (0.45) (0.09) (0.54) 5.27 15.75 6,619 0.80
12/31/97 5.27 0.40 0.07 0.47 (0.40) (0.04) (0.44) 5.30 9.00 12,606 0.79
12/31/98 5.30 0.42 (0.42) 0.00 (0.42) (0.01) (0.43) 4.87 (0.12) 21,320 0.80
6/30/99 4.87 0.23 (0.17) 0.06 (0.23) 0.00 (0.23) 4.70 1.16 19,788 0.80
<CAPTION>
Ratio of
expense Ratio of net
reim- investment
bursement income
Period to average to average Portfolio
ended net assets (1) net assets (1) turnover
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Northstar Emerging Growth Portfolio
-----------------------------------
5/06/94-
12/31/94 1.43% 3.11% 45%
12/31/95 0.94 3.63 74
12/31/96 0.60 3.67 129
12/31/97 0.31 3.72 55
12/31/98 0.32 3.00 161
6/30/99 0.21 0.61 143
Northstar Growth + Value Portfolio
----------------------------------
5/06/94-
12/31/94 1.45 2.31 61
12/31/95 1.24 1.77 123
12/31/96 0.90 0.65 161
12/31/97 0.29 0.70 178
12/31/98 0.14 (0.17) 216
6/30/99 0.18 (0.41) 110
Northstar International Value Portfolio
---------------------------------------
8/08/97-
12/31/97 1.81 0.97 5
12/31/98 0.71 1.55 30
6/30/99 0.52 2.22 48
Northstar Research Enhanced Index Portfolio
-------------------------------------------
5/06/94-
12/31/94 1.41 7.03 29
12/31/95 1.26 8.52 83
12/31/96 0.88 8.38 121
12/31/97 0.56 8.31 162
12/31/98 0.49 7.53 102
6/30/99 0.53 4.36 138
Northstar High Yield Bond Portfolio
-----------------------------------
5/06/94-
12/31/94 1.55 8.62 62
12/31/95 1.31 10.61 157
12/31/96 0.93 8.72 159
12/31/97 0.56 8.44 152
12/31/98 0.43 8.92 135
6/30/99 0.31 9.46 45
</TABLE>
(1) Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
NORTHSTAR GALAXY TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1999 (UNAUDITED)
Note 1. Organization and Significant Accounting Policies
Organization -- The Northstar Galaxy Trust, is a business trust organized
under the laws of the Commonwealth of Massachusetts on December 17, 1993 and
registered under the Investment Company Act of 1940 as a diversified open-end
management investment company. The names of the five investment series, which
comprise the Trust (the "Funds") and their respective investment objectives
are set forth below.
Northstar Galaxy Trust Emerging Growth Portfolio ("Emerging Growth Portfo-
lio") is a diversified portfolio with the investment objective of current in-
come 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 appre-
ciation.
Northstar Galaxy Trust Growth + Value Portfolio ("Growth + Value Portfolio")
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 Galaxy Trust International Value Portfolio ("International Value
Portfolio") is a diversified portfolio with the investment objective of long-
term capital appreciation. The Fund invests primarily in foreign companies
with a market valuation greater than $1 billion, but may hold up to 25% of its
assets in companies with smaller market capitalization. Portfolio managers ap-
ply the technique of "value investing".
Northstar Galaxy Trust Research Enhanced Index Portfolio ("Research Enhanced
Index Portfolio") (formally Multi-Sector Bond Portfolio) is a diversified
portfolio with the investment objective of capital appreciation. The Fund
seeks to achieve its objective by owning a large number of stocks within the
S&P 500 with an emphasis on those that appear undervalued or fairly valued,
and by tracking the industry weightings and other data characteristics of the
S&P 500.
Northstar Galaxy Trust High Yield Bond Portfolio ("High Yield Portfolio") is
a diversified portfolio whose investment objective is to seek high income con-
sistent with the preservation of capital. The Fund invests primarily in a di-
versified group of high yield -- high risk fixed income securities, convert-
ible 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 ba-
sis of last reported sales price, or if no sales are reported, the value is
determined based upon the mean of representative quoted bid and 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 maturates of less than 60
days are valued at amortized cost, unless the Trustees determine that amor-
tized cost does not reflect the fair value of such obligations. Securities for
which market quotations are not readily available are valued at fair value de-
termined 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 an independent pricing
service to price the Funds' securities.
Management's Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual results
could differ from those estimates.
Security Transactions, Investment Income, Expenses-- Security transactions
are recorded on the trade date. Realized gains or losses on sales of invest-
ments are calculated on the identified cost basis. Interest income is recorded
on the accrual basis except when collection is not expected; discounts are ac-
creted, and premiums amortized to par at maturity; dividend income is recorded
on the ex-dividend dates.
- -------------------------------------------------------------------------------
38
<PAGE>
NORTHSTAR GALAXY TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1999 (UNAUDITED)
Distribution to Shareholders -- Dividends from net investment income are de-
clared and paid quarterly by the Emerging Growth Portfolio, Growth + Value
Portfolio, the International Value Portfolio and the Research Enhanced Index
Portfolio; declared daily and paid quarterly by the High Yield Bond Portfolio.
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.
Foreign Currency -- The Funds isolate that portion of the results of opera-
tions resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Net realized gain (loss) on foreign currency transactions represents the
foreign exchange: (1) gains and losses from the sale of holdings of foreign
currencies, (2) gains and losses between trade date and settlement date on in-
vestment securities transactions and forward exchange contracts, and (3) gains
and losses from the difference between amounts of interest and dividends re-
corded and the amounts actually received. Net change in unrealized apprecia-
tion (depreciation) of foreign currency arise from changes in the value of as-
sets and liabilities including investments in securities, resulting from
changes in the exchange rate.
Foreign Currency Forward Contracts -- The Portfolios may enter into foreign
currency forward contracts primarily to hedge against foreign currency ex-
change rate risks on the non-U.S. dollar denominated investment securities.
When entering into a currency forward contract, the Portfolios agree to re-
ceive or deliver a fixed quantity of foreign currency for an agreed-upon price
on an agreed future date. These contracts are valued daily and the Portfolios'
net equity therein, representing unrealized gains or losses on the contracts
and measured by the difference between the forward rates at the reporting
date, is included in the statements of assets and liabilities. Realized and
unrealized gains and losses are included in the statement of operations. These
instruments involve market and/or credit risk in excess of the amount recog-
nized in the statement of assets and liabilities. Risks arise from the possi-
ble inability of counterparties to meet the terms of their contracts from
movement in currency and securities values and interest rates.
Options -- The Portfolios may write (sell) and purchase put call options.
The premium collected or paid by a Portfolio for the sale or purchase of a
call or put option is recorded as an investment and subsequently "marked to
market" to reflect the current market value of the option. If any option,
which a Portfolio has sold or purchased, expires on the stipulated expiration
date, the Portfolio realizes a gain or loss in the amount of the premium re-
ceived or paid for the option.
For written options, the Portfolio's obligation may be discharged in three
ways: (1) the option expires on the stipulated expiration date; (2) the option
holder exercises the right to call (buy) or put (sell) the security, or (3)
the Portfolio enters into a closing transaction. If the option is held until
expiration, the Portfolio recognizes a gain equal to the amount of premium re-
ceived. If the written call option is exercised by the counterparty, the pre-
mium is added to the proceeds from the sale of the underlying security or cur-
rency in determining whether the Portfolio has realized a gain or loss. If the
written put option is exercised by the counterparty, the premium reduces the
cost basis of the securities purchased by the Portfolio. If the Portfolio en-
ters into a closing transaction, a gain or loss is recognized equal to the
difference between the premium received by the Portfolio from the counterparty
and the amount paid by the Portfolio on effecting a closing purchase transac-
tion, including brokerage commissions. As the writer of the options, the Port-
folio bears the market risk of an unfavorable change in the price of the secu-
rity underlying the written option.
Futures Contracts -- The Portfolios may invest in futures contracts solely
for the purpose of hedging its existing portfolio securities, or securities
that the Portfolios intend to purchase, against fluctuations in fair value
caused by changes in prevailing market or interest rates.
Initial margin deposits made upon entering into futures contracts are recog-
nized as assets due from the broker (the Portfolio's agent in acquiring the
futures position). During the period the futures contract is open, changes in
the value of the contract are recognized as
- -------------------------------------------------------------------------------
39
<PAGE>
NORTHSTAR GALAXY TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1999 (UNAUDITED)
unrealized gains or losses by "marking to Market" on a daily basis to reflect
the daily market value of the contract.
Variation margin payments are received or made by the Portfolios each day,
depending upon the daily fluctuations in the fair values of the underlying in-
strument. The Portfolio recognizes a gain or loss equal to the daily variation
margin. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transaction and the Portfolios' basis in the contract.
Should market conditions move unexpectedly, the Portfolios may not achieve
the anticipated benefits of the financial futures contracts and may realize a
loss. The use of futures transactions involves the risk of imperfect correla-
tion in movements in the price of futures contracts, interest rates, and the
underlying hedged assets.
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 ac-
crued interest, is at least equal to the repurchase price. In the event of de-
fault 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 pro-
ceedings 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 provi-
sions 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 or excise tax provision is required.
Organization Costs -- Costs incurred by the Trust in connection with its or-
ganization of each Fund have been deferred and are being amortized over a pe-
riod 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. The Adviser receives an investment advisory fee cal-
culated at an annual rate of 0.75% of average daily net assets for the Emerging
Growth Portfolio, Growth + Value Portfolio, and High Yield Portfolio. The Ad-
viser receives an investment advisory fee calculated at an annual rate 1.00% of
average daily net assets for the International Value Portfolio. For the period
January 1, 1999 through April 30, 1999, the Multi-Sector Bond Portfolio paid
the Adviser a fee calculated at an annual rate equal to 0.75% of the average
daily net assets. For the period May 1, 1999 through June 30, 1999, the Adviser
receives an investment Advisory fee calculated at an annual rate of 0.70% of
average daily net assets for the Research Enhanced Index Portfolio. For the six
months ended June 30, 1999, the Adviser earned $485,273 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, 1999, the Administrator earned
$62,338 in administrative fees. The Adviser has voluntarily undertaken to limit
the expenses of the Growth + Value Portfolio and the High Yield Bond Portfolio
to 0.80% of average daily net assets. The Adviser has voluntarily undertaken to
limit the expenses of the Emerging Growth Portfolio and the International Value
Portfolio to 0.90% and 1.00%, respectively. As of April 30, 1999, the expense
limit for the Research Enhanced Index Portfolio has been increased from 0.80%
to 0.90%. For the six months ended June 30, 1999, the Adviser has reimbursed
the Emerging Growth Portfolio $33,487, the Growth + Value Portfolio $41,270,
the International Value Portfolio $40,024, the Research Enhanced Index Portfo-
lio $39,053, and the High Yield Portfolio $33,036. J.P Morgan Investment Man-
agement, Inc. ("J.P. Morgan"), a registered investment adviser, serves as a
subadvisor to the Research Enhanced Index Portfolio pursuant to a Subadvisory
Agreement dated April 30, 1999. For its services, J.P. Morgan receives, from
the Adviser, an annual fee equal to 0.20% of the average daily net assets of
the Portfolio. For the period May 1, 1999 through June 30, 1999, J.P. Morgan
received $5,415 in subadvisory fees from the Adviser. Navellier Fund
- --------------------------------------------------------------------------------
40
<PAGE>
NORTHSTAR GALAXY TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1999 (UNAUDITED)
Management, Inc. ("Navellier"), a registered investment adviser, serves as
subadvisor to the Growth + Value Portfolio pursuant to a Subadvisory Agreement
dated February 1, 1996 and amended and restated on November 1, 1998, between
the Adviser and Navellier. For its services, Navellier receives, from the Ad-
viser, an annual fee equal to 0.35% of the average daily net assets of the
Portfolio. For the six months ended June 30, 1999, Navellier received $80,391
in subadvisory fees from the Adviser. Brandes Investment Partners. LP ("Bran-
des"), a registered investment adviser, serves as a subadvisor to the Interna-
tional Value Portfolio pursuant to a Subadvisory Agreement dated July 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.
Note 3. Futures Contracts
On June 30, 1999, the Research Enhanced Index Portfolio had a $100,000 prin-
cipal amount of U.S. Treasury obligations pledged as collateral to cover mar-
gin requirements for open future contracts.
Open futures contracts at June 30, 1999, were as follows:
<TABLE>
<CAPTION>
Number of Unrealized
Contract Contracts Month Commitment Appreciation
- ------------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C>
S&P 500 Index 2 September Buy $32,778
</TABLE>
Note 4. Purchases and Sale of Investment Securities
The aggregate cost of purchases, and proceeds from sales of investments (ex-
cluding short-term investments) for the six months ended June 30, 1999, were
as follows:
<TABLE>
<CAPTION>
Emerging Growth + International Research High Yield
Growth Value Value Enhanced Index Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
----------- ----------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Aggregate
purchases $38,289,828 $50,058,296 $8,481,246 $28,252,776 $ 8,764,964
Aggregate
sales $38,219,797 $48,786,329 $6,958,266 $18,168,930 $10,193,302
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<CAPTION>
Emerging Growth + International Research High Yield
Growth Value Value Enhanced Index Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $ 0 $ 0 $ 0 $4,066,487 $ 0
Aggregate sales $ 0 $ 0 $ 0 $9,566,607 $ 0
</TABLE>
Note 5. Portfolio Securities (Tax Basis)
The cost of securities for Federal income tax purposes and the aggregate ap-
preciation and depreciation of securities at June 30, 1999, were as follows:
<TABLE>
<CAPTION>
Emerging Growth + International Research High Yield
Growth Value Value Enhanced Index Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
----------- ----------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Cost (tax
basis) $24,973,891 $39,111,880 $14,108,714 $22,418,881 $17,838,130
----------- ----------- ----------- ----------- -----------
Appreciated
securities 7,278,093 13,523,037 2,556,825 961,665 857,111
Depreciated
securities (310,726) (736,961) (281,895) (443,581) (1,431,455)
----------- ----------- ----------- ----------- -----------
Net
unrealized
appreciation $ 6,967,367 $12,786,076 $ 2,274,930 $ 518,084 $ 574,344
----------- ----------- ----------- ----------- -----------
</TABLE>
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41
<PAGE>
NORTHSTAR GALAXY TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1999 (UNAUDITED)
Note 6. Capital Share Transactions
Transactions in capital shares of each Fund for the six months ended June 30,
1999, were as follows:
<TABLE>
<CAPTION>
Emerging Growth + International Research High Yield
Growth Value Value Enhanced Index Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Shares sold 483,306 463,192 1,532,556 3,038,808 1,337,304
Reinvested
dividends 0 0 20,272 67,979 204,007
Shares repurchased (501,197) (580,822) (1,414,033) (908,649) (1,706,012)
-------- -------- ---------- --------- ----------
Net
increase/decrease (17,891) (117,631) 138,796 2,198,138 (164,701)
======== ======== ========== ========= ==========
</TABLE>
Transactions in capital shares of each Fund for the year ended December 31,
1998, were as follows:
<TABLE>
<CAPTION>
Emerging Growth + International Research High Yield
Growth Value Value Enhanced Index Bond
Portfolio Portfolio Portfolio Portfolio (1) Portfolio
--------- --------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Shares sold 420,651 544,723 1,332,537 1,784,308 4,034,688
Reinvested
dividends 129,106 17,787 67,462 192,789 294,576
Shares
repurchased (502,249) (374,172) (745,812) (1,036,932) (2,333,922)
-------- -------- --------- ---------- ----------
Net increase 47,508 188,338 654,187 940,165 1,995,342
======== ======== ========= ========== ==========
</TABLE>
(1)Formerly Multi-Sector Bond Portfolio
Note 7. Credit risk and Defaulted Securities
Although the Funds have a diversified portfolio, the High Yield Bond Portfo-
lio had 81.05% of its portfolio invested in lower rated and comparable quality
unrated high yield securities. Investments in higher yield securities are ac-
companied 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, 1999, the High Yield Bond Portfolio held SA Telecommunications, Inc., a se-
curity in default. For financial reporting purposes, it is each Fund's account-
ing practice to discontinue accrual of income and provide an estimate for prob-
able losses due to unpaid interest income on defaulted bonds for the current
reporting period.
Note 8. Federal Income Tax -- Capital Loss Carryfoward
At December 31, 1998, the Research Enhanced Index Portfolio and the High
Yield Bond Portfolio had capital loss carryfowards expiring December 31,2006 of
$331,464 and $6,416, respectively.
Note 9. Security Loans
Each Fund may lend its securities to brokers, dealers and other financial in-
stitutions in amounts up to one third of the value of its total assets. The
loans are fully collateralized at all times by cash or liquid high-grade secu-
rities. As with other extensions of credit, the Fund may bear risk of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Fund receives compensation for lending its se-
curities in the form of fees or all or a portion of the income from investments
of the collateral. The Fund also continues to earn income on the securities
loaned. At June 30, 1999, the Funds did not have any securities on loan.
Note 10. Letter of Credit
The Northstar Funds, Northstar Equity Trust, Northstar Galaxy Trust and
Northstar Trust (collectively the "Funds") have entered into an unsecured com-
mitted revolving line of credit agreement (the "Credit Agreement") with State
Street Bank and Trust Company for an aggregate amount of $50,000,000. The pro-
ceeds may be used only to (1) temporarily finance the purchase and sale of se-
curities; (2) finance the redemption of shares of an investor
- --------------------------------------------------------------------------------
42
<PAGE>
NORTHSTAR GALAXY TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1999 (UNAUDITED)
[LOGO]
in the Funds; and (3) enable the Funds to meet other emergency expenses as de-
fined in the Credit Agreement. The Funds pays a commitment fee equal to 0.08%
per annum on the daily unused portion of the committed line amount payable
quarterly in arrears. During the six months ended June 30, 1999, the Funds did
not have any loans outstanding.
Proxy Results (Unaudited)
During the year ended December 31, 1998, Emerging Growth Portfolio share-
holders voted on the following proposal. The proposal was approved at a spe-
cial meeting of shareholders on November 5, 1998.
<TABLE>
<CAPTION>
Shares
Shares Voted
Voted For Against Abstentions
--------- ------- -----------
<S> <C> <C> <C>
1. Proposal to approve a modification of the
investment objective and name of the Portfolio 1,472,805 101,389 121,863
</TABLE>
During the six months ended June 30, 1999, Research Enhanced Index Portfolio
shareholders voted on the following proposals. The proposals were approved at
a special meeting of shareholders on April 8, 1999.
<TABLE>
<CAPTION>
Shares
Shares Voted
Voted For Against Abstentions
--------- ------- -----------
<S> <C> <C> <C>
1. Proposal to approve a modification of the
investment objective and name of the Portfolio 2,558,759 199,377 177,098
2. Proposal to approve a subadvisory agreement 2,614,830 128,446 191,959
</TABLE>
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43
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<PAGE>
[LOGO]
NORTHSTAR
Galaxy Trust
630 ANNSA
