PILGRIM(sm)
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FUNDS FOR SERIOUS INVESTORS
Annual Report
Northstar Galaxy Trust
December 31, 1999
U.S. EQUITY PORTFOLIOS
Northstar Research Enhanced Index
Northstar Growth + Value
Northstar Emerging Growth
INTERNATIONAL EQUITY PORTFOLIO
Northstar International Value
INCOME PORTFOLIO
Northstar High Yield Bond
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Pilgrim
Funds
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TABLE OF CONTENTS
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Chairman's Message.......................................................... 1
Portfolio Managers' Reports:
U.S. Equity Portfolios.................................................... 2
International Equity Portfolio............................................ 8
Income Portfolio.......................................................... 10
Index Descriptions.......................................................... 12
Report of Independent Accountants........................................... 13
Statements of Assets and Liabilities........................................ 14
Statements of Operations.................................................... 15
Statements of Changes in Net Assets......................................... 16
Financial Highlights........................................................ 18
Notes to Financial Statements............................................... 23
Portfolios of Investments................................................... 29
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Pilgrim
Funds
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CHAIRMAN'S MESSAGE
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Dear Shareholder:
We are pleased to present the Annual Report for the Northstar Galaxy Trust. On
October 29, 1999 ReliaStar Financial Corp., the indirect parent company of
Northstar Investment Management Corporation ("Northstar"), acquired Pilgrim
Capital Corporation and its subsidiaries. In conjunction with the acquisition
Northstar, the Adviser to the Trust, changed its name to Pilgrim Advisors, Inc.
At Pilgrim, we are dedicated to providing core investments for the serious
investor. We believe that the key to success is matching quality core
investments to the individual needs of investors. Core investments are the
foundation of every portfolio and the basis of other important investment
decisions. Pilgrim prides itself on providing a family of core investments
designed to help you reach your financial goals. Our goal is for every investor
to have a successful investment experience.SM
Sincerely,
/s/ Robert W. Stallings
Robert W. Stallings
Chairman and Chief Executive Officer
Pilgrim Group, Inc.
February 8, 2000
1
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U.S. Equity
Portfolio
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Portfolio
NORTHSTAR RESEARCH ENHANCED INDEX PORTFOLIO Manager's Report
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Portfolio Management Team: Timothy Devlin, Portfolio Manager; James Wiess, CFA,
Portfolio Manager.
Goal: The Research Enhanced Index Portfolio seeks capital appreciation by
investing primarily in large companies that make up the S&P 500 Index.
Market Overview: The large-cap U.S. equity market continued to tout a very
narrow group of mega-cap stocks, as investors sought out the companies with
positive earnings and price momentum. During the second half of the year,
investors tended to focus on short-term earnings, projecting them forward
indefinitely, which presented a challenge to performance. Because the investment
strategy employed by the Fund focuses on normalized earnings and
intermediate-term growth rates, it tends not to perform as well in a market
environment such as we experienced during the latter part of the year. The Fund
is well diversified and its risk controls are robust. However, during times of
extreme internal market divergence, even the modest exposures to common risk
factors, such as price momentum, can result in out of scale performance results.
Performance: For the one year ended December 31, 1999, the Portfolio's shares,
excluding any sales charges, provided a total return of 5.79% versus 9.95% for
the Index Return which is described on page 3 footnote (2).
Portfolio Specifics: On a stock selection basis, Cisco Systems, the leader in
network equipment, contributed to the fund's performance as it has benefited
from a build-out in networking stemming from the explosion in B2B and B2C
internet transaction shift. October and November saw us challenged by the
market's unconfirmed fear of a potential accounting issue in Tyco International,
a surprising court decision in Phillip Morris and a boost from an announced
takeover of underweighted Sprint by MCI Worldcom. In December, underweight
positions in Oracle and Qualcomm topped the list of names that had astronomical
gains and consequently detracted from performance.
Market Outlook: We remain confident in our investment process and risk controls,
and expect that the historically wide spread between the most and least
attractive names in our universe suggests opportunities ahead. We expect the
market to broaden. Most of the positive performance over the last few years has
come from the "Nifty Fifty" & mega-cap growth stocks. The valuation on these
stocks is much higher than that of the rest of the market. We believe that a
return of global growth will cause investors to look beyond these over priced
stocks to companies that trade at much lower multiples.
2
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Portfolio
Manager's Report NORTHSTAR RESEARCH ENHANCED INDEX PORTFOLIO
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<TABLE>
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5/6/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 4/30/99 12/31/99
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Research Enhanced Index Portfolio 10,000 10,141 11,659 13,120 13,927 14,069 14,477 14,884
S&P 500 Index 14,851 16,484
Lehman Govt/Corp Bond Index 10,000 10,170 12,127 12,479 13,696 14,994 14,851
</TABLE>
Average Annual Total Returns for the
Periods Ended December 31, 1999
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Since Inception
1 Year 5 Year 5/6/94
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Research Enhanced Index Portfolio 5.79% 7.98% 7.28%
Index Return(2) 9.95% 10.14% 9.25%
The Portfolio commenced operations on May 6, 1994 as the Northstar Multi-Sector
Bond Fund with the investment objective of maximizing current income consistent
with the preservation of capital. Effective April 30, 1999 the Portfolio changed
its name to the Research Enhanced Index Portfolio and changed its investment
objective and strategies to invest primarily in equity securities of large
companies that make up the S&P 500 Index. Accordingly, beginning April 30, 1999
the benchmark index for the Portfolio has been changed from the Lehman
Government/Corporate Bond Index to the S&P 500 Index.
Based on a $10,000 initial investment, the graph above illustrates the total
return of Research Enhanced Index Portfolio against the combined S&P 500 Index
and the Lehman Government/Corporate Bond Index as discussed above. The Indices
are unmanaged and have an inherent performance advantage over the Portfolio
since they have no cash in their portfolios, impose no sales charges and incur
no operating expenses. An investor cannot invest directly in an index. The
Portfolio's performance is shown without the imposition of any expenses or
charges which are, or may be, imposed under your annuity contract or life
insurance policy. Total returns would have been lower if such expenses or
charges were included.
Total returns reflect the fact that the Investment Adviser waived certain fees
or expenses without which total return results would have been lower.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
(1) The ending value of the index return is the Lehman Government/Corporate
Bond Index for the period May 6, 1994 to April 30, 1999 and the S&P 500
Index for the period May 1, 1999 to December 31, 1999.
(2) The Index Return showing the 1 year, 5 year and since inception average
annual total returns is a calculation that reflects the Lehman
Government/Corporate Bond Index for the period May 6, 1994 to April 30,
1999 and the S&P 500 Index for the period May 1, 1999 to December 31, 1999.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
See accompanying index descriptions on page 12.
3
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U.S. Equity
Portfolio
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Portfolio
NORTHSTAR GROWTH + VALUE PORTFOLIO Manager's Report
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Portfolio Management: Louis Navellier, Portfolio Manager.
Goal: The Growth + Value Portfolio seeks capital appreciation by investing
primarily in a diversified portfolio of equity securities, including common and
preferred stock, warrants and convertible securities.
Market Overview: During the fourth quarter of 1999 the stock market continued to
make new highs with technology stocks leading the way. Mid Cap stocks outpaced
both small and large company stocks with the Russell Mid Cap Growth Index
surging 39.48%. The Russell 2000 rose 18.44%, the S&P 500 rose 14.88%, while the
tech heavy NASDAQ Composite rose dramatically by 48.18% during the fourth
quarter.
The U.S. economy continued its robust growth pace through the fourth quarter. It
is now growing in excess of a 5% annual pace. The productivity gains in the U.S.
continue to accelerate and are also averaging approximately 5% annual gains. The
market shrugged off the interest rate hikes to end the year at record levels.
The 30 year Treasury bond yield hit a two-year high of 6.5% at the end of the
quarter, as the bond market began to sell off in anticipation of potential first
quarter interest rate hikes by the Fed.
Although growth stocks had spectacular performance over the quarter, value
stocks continued to under-perform the broader market averages. During the fourth
quarter, consumer-related stocks surged as consumer confidence reached new
highs. Housing sales recently soared, which is a clear sign that consumer
spending is accelerating. Consumer spending drives over two thirds of the U.S.
economy and thus fueled the stock market's impressive gains. Investors continued
to be rewarded by investments in technology stocks, which continued to
demonstrate improving earnings momentum. Corporate earnings are also
accelerating at a rate in excess of 20%, compared to last year.
Performance: For the one year ended December 31, 1999, the Portfolio's shares,
excluding any sales charges, provided a total return of 94.98% compared to the
Russell 2000 Index which gained 21.26% for the same period.
Portfolio Specifics: The Portfolio's strong performance relative to most stock
market indices was due to its concentration in technology stocks. As a result of
our focus on technology stocks, more than two thirds of the positions in the
portfolio posted double digit returns.
The Portfolio's heavy concentration in rapidly growing technology stocks was
the reason for its continued strong performance relative to most stock market
indices. The top performing stocks for the fourth quarter of this year
included: Applied Micro Circuits, Titan Corp., Qlogic Corp., Emulex Corp. and
Broad Vision Inc. Amongst the under-performing stocks were: Antec Corp., VISX
Inc., PDS Financial Corp., Waters Corp. and Andrx Corp.
Current Strategy: The Portfolio continues to invest in small and mid cap growth
stocks, as we believe those are the most attractive sectors. Small and mid cap
stocks offer much stronger earnings growth than their larger cap counterparts,
and are also currently trading at much more attractive valuation levels. The
institutional sector is just beginning its rotation into small and mid cap
stocks. We believe that this inflow of institutional funds should continue to
add the needed catalyst that is bringing liquidity to the small and mid cap
rally.
In the first quarter we expect that many stocks will likely surge higher in the
wake of their outstanding fourth quarter earnings announcements. Normally the
first quarter will also have the strongest flow of new funds into the stock
market, which will also serve to propel the market higher. It is very hard for
us to be bearish in the wake of these predictions. However, as the stock market
climbs higher, the probability of a correction also rises.
Due to the increased volatility in the stock market, our quantitative stock
selection filters are turning cautious. The primary reason that our stock
selection filters are becoming increasingly defensive is that we designed these
filters to become more cautious as the overall risk attributable to individual
stocks rises. As we measure risk (i.e., volatility) increasing, we will seek to
adopt counter-measures to combat volatility and try to adjust our portfolios, so
they will not be excessively vulnerable during the next correction.
4
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Portfolio
Manager's Report NORTHSTAR GROWTH + VALUE PORTFOLIO
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<TABLE>
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5/6/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
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<S> <C> <C> <C> <C> <C> <C> <C>
Growth + Value Portfolio 10,000 10,347 12,911 15,879 18,206 21,725 42,358
Russell 2000 Index 10,000 10,027 12,879 15,004 18,359 17,892 21,695
</TABLE>
Average Annual Total Returns for the
Periods Ended December 31, 1999
------------------------------------
Since Inception
1 Year 5 Year 5/6/94
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Growth + Value Portfolio 94.98% 32.56% 29.05%
Russell 2000 Index 21.26% 16.69% 14.66%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Growth + Value Portfolio against the Russell 2000 Index. The Index is
unmanaged and has an inherent performance advantage over the Portfolio since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Portfolio's
performance is without the imposition of any expenses or charges which are, or
may be, imposed under your annuity contract or life insurance policy. Total
returns would have been lower if such expenses or charges were included.
Total returns reflect the fact that the Investment Adviser has waived certain
fees or expenses without which total return results would have been lower.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. The Portfolio invests in smaller companies which may be
more susceptible to price swings and less liquid than larger companies.
See accompanying index descriptions on page 12.
5
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U.S. Equity
Portfolio
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Portfolio
NORTHSTAR EMERGING GROWTH PORTFOLIO Manager's Report
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Portfolio Management: Mary Lisanti, Executive Vice President and Portfolio
Manager.
Goal: The Emerging Growth Portfolio seeks long-term capital appreciation by
investing at least 65% of its total assets in the common stock of smaller,
lesser known U.S. companies that the portfolio manager believes have above
average prospects for growth.
Market Overview: In the final quarter of the year, U.S. equities powered ahead
using the same technology-driven formula responsible for some spectacular gains
in 1999. The economy showed continued strength with third quarter GDP being
revised upwards to 5.7%, but inflation remain subdued as the price index rose a
modest 1.7%. The Federal Reserve resisted the temptation to raise rates for the
fourth time this year, although there is an increased likelihood that rates will
be raised again in February. Economic news continued to be encouraging as
non-farm productivity showed its biggest increase since 1992, while consumer
confidence reached its highest point since 1968.
Technology's impact on the overall market continues to strengthen, as the
technology sector now accounts for more than a quarter of the S&P 500. However,
the market's performance was broader in December than it has been in recent
months. The exception to that broad strength was the financial sector, which was
dragged down by rising bond yields. Healthcare stocks were mixed as large
pharmaceuticals underperformed, but the biotechnology sector was exceptionally
strong.
Outside of the technology-heavy NASDAQ Composite, small cap stocks were the star
performers in the fourth quarter. For the quarter, the NASDAQ Composite soared
48.18%, while the Russell 2000 Index of small cap stocks gained 18.44%, setting
a new record high. The broader market also performed well, as the S&P 500 rose
14.88% in the final quarter, while the S&P Midcap Index earned 17.19%. The Dow
Jones Industrial Average tacked on an additional 11.22%, achieving another
record high.
Performance: For the one year ended December 31, 1999, the Fund's shares,
excluding any sales charges, provided a total return of 141.03% compared to the
Russell 2000 Index which gained 21.26% for the same period.
Portfolio Specifics: While the Portfolio has been overweighted in technology,
stock selection and careful attention to valuation drove performance higher in
the fourth quarter. The themes that had the biggest impact on performance in the
final quarter of 1999 were the "Ubiquitous Semiconductor," "Telecommunications
Explosion," and "Managing the Information Age," while increased weightings in
"Life on the Net" and the "Life Sciences Revolution" also enhanced returns.
Looking at specific equity positions, the stocks with the biggest impact on
performance were Liberate Technologies, Sapient, Art Technology Group,
VoiceStream Wireless, and Applied Micro Circuits. Our biggest weighted themes as
of year end were "The Telecommunications Explosion," "Managing the Information
Age," and "The Ubiquitous Semiconductor."
Market Outlook: Looking out to the year 2000, we continue to see excellent
opportunities for growth stocks. While it is unlikely that the market indices
will repeat the spectacular performance of 1999, there are plenty of companies
with attractive prospects at reasonable valuations. Thus, we believe that active
managers will have the opportunity to outperform their benchmarks significantly
in 2000 as market breadth improves from its recent narrow focus. Technology
stocks should continue to lead the way as companies accelerate spending after
restraining budgets in front of Y2K.
We expect the US economic expansion to continue into 2000, forcing the Federal
Reserve to continue to raise interest rates. Thus, we remain cautious towards
interest rate sensitive stocks, especially financials. However, spending on
communications networks should continue unabated as companies seek to realize
cost reductions from using the Internet and information technology. The
portfolio has focused on companies that provide the network infrastructure or
those that help companies design and implement solutions for their businesses.
We believe the Portfolio is well positioned in the current environment. We have
focused on companies with very strong growth prospects and strong balance sheets
that sell at reasonable multiples relative to their growth rates.
6
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Portfolio
Manager's Report NORTHSTAR EMERGING GROWTH PORTFOLIO
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<TABLE>
<CAPTION>
5/6/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging Growth Portfolio 10,000 10,192 12,372 14,055 16,278 19,094 46,024
Russell 2000 Index 10,000 10,027 12,879 15,004 18,359 17,892 21,695
</TABLE>
Average Annual Total Returns for the
Periods Ended December 31, 1999
--------------------------------------
Since Inception
1 Year 5 Year 5/6/94
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Emerging Growth Portfolio 141.03% 35.19% 30.96%
Russell 2000 Index 21.26% 16.69% 14.66%
Based on a $10,000 initial investment, the graph above illustrates the total
return of Emerging Growth Portfolio against the Russell 2000 Index. The Index is
unmanaged and has an inherent performance advantage over the Portfolio since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Portfolio's
performance is without the imposition of any expenses or charges which are, or
may be, imposed under your annuity contract or life insurance policy. Total
returns would have been lower if such expenses or charges were included.
Total returns reflect the fact that the Investment Adviser has waived certain
fees or expenses without which total return results would have been lower.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. The Portfolio invests in smaller companies which may be
more susceptible to price swings and less liquid than larger companies.
See accompanying index descriptions on page 12.
7
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International
Equity Portfolio
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Portfolio
NORTHSTAR INTERNATIONAL VALUE PORTFOLIO Manager's Report
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Porfolio Management: Charles Brandes, Portfolio Manager; Jeff Busby, Portfolio
Manager.
Goal: The International Value Portfolio seeks long-term capital appreciation by
investing primarily in foreign companies with market capitalizations greater
than $1 billion, but it may hold up to 25% of its assets in companies with
smaller market capitalizations.
Market Overview: For the 12 months ended December 31, 1999, the following
factors contributed to significant gains for international equity markets:
* advances among telecommunications stocks
* evidence of economic strength among developed, non-US countries
* encouraging news regarding corporate restructuring and government reform
measures in Japan
* continued economic recovery in emerging markets
Throughout 1999, robust merger and acquisition activity in Europe reflected
corporate management teams' focus on enhancing shareholder value and improving
competitiveness. While the European Central Bank raised interest rates in the
fall, reversing a 50-basis point easing earlier in the year, stocks demonstrated
resilience. The conflict in Kosovo and prolonged weakness in the Euro restrained
returns for European equities.
In Japan, corporate restructuring and the government's expressed commitment to
economic and business reform measures, especially in the banking industry,
lifted equity prices. Once mired in recession, Japan's economy showed
improvement.
Emerging countries in Asia, many of which have vital trading alliances with
Japan, benefited from the economic rebound in Japan. Export-dependent countries
in Latin America benefited from increasing commodity prices. Concurrently,
rising US interest rates and political uncertainties negatively affected the
region.
Performance: For the one year ended December 31, 1999, the Portfolio, excluding
any sales charges, provided a total return of 50.06% compared to 25.27% return
for the MSCI EAFE Index.
During the period, the MSCI Europe Index gained 15.89%, the MSCI Japan Index was
up 61.53% and the MSCI Emerging Markets Free (EMF) Index climbed 66.41%.
Portfolio Specifics: Stock selection in Japan proved a primary contributor to
the Portfolio's outperformance versus the MSCI EAFE Index. Early in 1998, our
company-by-company research uncovered a number of attractively valued
opportunities in Japan and we increased our exposure on a stock-specific basis.
Increased investor recognition of the solid fundamental traits we identified in
companies such as Kyocera and Hitachi rewarded shareholders in 1999. Solid
returns among holdings in Germany, France and Brazil also positively affected
the Fund's returns during the period. Holdings in Denmark were among the weakest
performers.
Holdings in the telecommunications industry such as Deutsche Telekom (Germany),
Telefonos de Mexico (Mexico) and Konin Royal (Netherlands) were among the best
performers in the period. Electronics holdings including Hitachi and Alcatel
Alsthom (France) also contributed to the Fund's outperformance.
Market Outlook: The Portfolio's outperformance during the period reflects the
benefits of strict adherence to our disciplined investment strategy and a
long-term perspective. Stock-specific allocations in Japan and emerging markets
in 1997 and 1998 -- when most investors were shunning these markets -- were
primarily responsible for the Portfolio's gains in 1999. Despite the strong
gains posted in emerging markets, valuations remain attractive.
While we make no forecasts regarding the future direction of international
markets, we do expect continued volatility -- crises and periods of excessive
optimism. We believe short-term swings in investor sentiment create
opportunities for value investors. The dynamic nature of overseas markets also
underscores the need for individual security selection. We continue to monitor
the fundamental strength of existing holdings and weigh their relative
attractiveness against other candidates.
We appreciate the opportunity to serve you and remain committed to our goal of
providing long-term appreciation by uncovering promising businesses at
temporarily depressed prices outside the United States.
8
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Portfolio
Manager's Report NORTHSTAR INTERNATIONAL VALUE PORTFOLIO
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8/8/97 12/31/97 12/31/98 12/31/99
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International Value Portfolio 10,000 10,130 11,844 17,787
MSCI EAFE Index 10,000 9,036 10,683 13,383
Average Annual Total Returns
for the Periods Ended
----------------------------
Since Inception
1 Year 8/8/97
------ ------
International Value Portfolio 50.18% 27.12%
MSCI EAFE Index 25.27% 12.93%
Based on a $10,000 initial investment, the graph above illustrates the total
return of International Value Portfolio against the MSCI EAFE Index. The Index
is unmanaged and has an inherent performance advantage over the Portfolio since
it has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The
Portfolio's performance is without the imposition of any expenses or charges
which are, or may be, imposed under your annuity contract or life insurance
policy. Total returns would have been lower if such expenses or charges were
included.
Total returns reflect the fact that the Investment Adviser has waived certain
fees or expenses without which total return results would have been lower.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
Principal Risk Factor(s): International investing does pose special risks,
including fluctuation and political risks not found in investments that are
solely domestic. Risks of foreign investing are generally intensified for
investments in emerging markets. The Portfolio invests in smaller companies
which may be more susceptible to price swings and less liquid than larger
companies.
See accompanying index descriptions on page 12.
9
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Income
Portfolio
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Portfolio
NORTHSTAR HIGH YIELD BOND PORTFOLIO Manager's Report
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Portfolio Management: Kevin Mathews, Senior Vice President and Senior Portfolio
Manager
Goals: The High Yield Bond Portfolio seeks to provide high income consistent
with the preservation of capital by investing in a diversified group of high
yield securities.
Market Overview: It was the best of times, it was the worst of times. For the
12-month period ended December 31, 1999, the economy showed strong growth and
subdued inflation. The fixed income markets, however, experienced upward
trending interest rates throughout the year. The Federal Open Market Committee
(FOMC) stepped in during the second half of the year by raising the Federal
Funds Rate from 4.75% to 5.50%. The FOMC acted on the perception that economic
growth was too strong and that if left unchecked, it would ultimately result in
rising inflation.
At the end of 1999, fixed income managers stepped back to assess the damage. The
thirty year Treasury posted its worst return since 1974 while the Lehman
Aggregate Index experienced returns nearly as bad as 1994. The high yield
market, in contrast, escaped the year in better shape. High yield spreads
tightened reflecting high yield bonds' low interest rate sensitivity.
High yield managers were rewarded for being risk adverse in 1999 as high yield
defaults increased. Defaults were driven by company specific issues and did not
reflect upon the overall health of the high yield market. The Merrill Lynch
Triple-C/Double-C/Single-C index underperformed the Single-B index by 7.8% for
the twelve months ended December 31, 1999.
A total of 383 new issues came to the market in 1999, representing $95 billion
dollars. Outflows from mutual funds caused high yield demand and issuance to be
below last year's record setting pace. Even though issuance was down, 1999 was
still the third highest calendar year for new issue volume.
Performance: For the one year ended December 31, 1999, the Portfolio, excluding
any sales charges, provided a total return of -7.45% compared to the Lehman
Brothers High Yield Index, an unmanaged index of high yield bonds, which
returned 2.39%.
Portfolio Specifics: The Portfolio held overweighted positions in the Wireless
and Wireline subsectors of the Communications sector, which helped performance.
An industry underweighting in the Internet subsector of Communications hurt
relative performance. The Internet sector will be reviewed carefully in the
upcoming quarters for possible additions to the portfolio. The Cable and Direct
Broadcast Satellite (DBS) industry was the Portfolio's largest sector exposure,
helping relative performance. DBS continues to have positive fundamentals as
most operators should continue to experience strong subscriber growth.
Our avoidance of emerging market and foreign issues, while helping performance
in past periods, hurt performance in the last six months as these markets
rebounded significantly. Average credit quality was held at Single-B as our
expectation of continued economic growth with low inflation in the domestic
economy was proven correct. Overall, the Portfolio's management feels the credit
quality of the portfolio is good and positioned for outperformance in 2000.
Market Outlook: The FOMC has worked diligently to maintain steady,
non-inflationary growth. In another month, the U.S. economy will surpass the 106
month record for the longest economic expansion ever. There is a high
probability that the FOMC will raise the Federal Funds rate further in the first
half of 2000. The purpose of the increase(s) will be to moderate economic growth
and to prevent any rise in inflation. If the FOMC has continued success in
maintaining non-inflationary growth, interest rates should stabilize. An
environment of stable interest rates and moderate inflation should prove
positive for high yield bonds.
10
<PAGE>
Portfolio
Manager's Report NORTHSTAR HIGH YIELD BOND PORTFOLIO
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<TABLE>
<CAPTION>
5/6/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
High Yield Bond Portfolio 10,000 9,905 11,742 13,592 14,815 14,797 14,355
Lehman High Yield Bond Index 10,000 10,163 12,112 13,487 15,208 15,492 15,862
</TABLE>
Average Annual Total Returns for the
Periods Ended December 31, 1999
------------------------------------
Since Inception
1 Year 5 Year 5/6/94
------ ------ ------
High Yield Bond Portfolio -2.98% 7.70% 6.60%
Lehman Brothers High Yield Bond Index 2.39% 9.31% 8.48%(1)
Based on a $10,000 initial investment, the graph above illustrates the total
return of High Yield Bond Portfolio against the Lehman Brothers High Yield Bond
Index. The Index is unmanaged and has an inherent performance advantage over the
Portfolio since it has no cash in its portfolio, imposes no sales charges and
incurs no operating expenses. An investor cannot invest directly in an index.
The Portfolio's performance is without the imposition of any expenses or charges
which are, or may be, imposed under your annuity contract or life insurance
policy. Total returns would have been lower if such expenses or charges were
included.
Total returns reflect the fact that the Investment Adviser has waived certain
fees or expenses without which total return results would have been lower.
Performance data represents past performance and is no assurance of future
results. Investment return and principal value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their original
cost.
This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
The views expressed in this report reflect those of the portfolio manager, only
through the end of the period as stated on the cover. The manager's views are
subject to change at any time based on market and other conditions.
Portfolio holdings are subject to change daily.
Principal Risk Factor(s): Exposure to financial, market and interest rate risks.
High Yields reflect the higher credit risks associated with certain lower rated
securities in the portfolio and in some cases, the lower market price for those
instruments. International investing does pose special risks, including currency
fluctuation and political risks not found in investments that are soley
domestic. Risks of foreign investing are generally intensified for investments
in emerging markets.
(1) Since inception performance for Index is shown from 5/1/94.
See accompanying index descriptions on page 12.
11
<PAGE>
INDEX DESCRIPTIONS
- --------------------------------------------------------------------------------
The S&P 500 Index is a widely recognized unmanaged index of 500 common stocks.
The Lehman Government/Corporate Bond Index is an unmanaged index of government
bonds and corporate bonds rated Baa3 or better.
The Russell Midcap Growth Index is an unmanged index consisting of securities
with capitalizations between $450 million and $3.8 billion with greater than
average growth orientation.
The Russell 2000 Index is an unmanaged index that measures the performance of
2,000 small companies.
The NASDAQ Composite Index is an unmanaged index that measures all domestic and
non-U.S. based common stocks listed on the NASDAQ stock market. The index is
market-value weighted.
The S&P Midcap Index is an unmanaged index that measures the performance of 800
smaller companies.
The Dow Jones Industrial Average is an unmanaged index comprised of 30 stocks
that are major factors in their industries and widely held by individuals and
institutional investors.
The MSCI EAFE Index is an unmanaged index consisting of more than 1,400
securities in the U.S., Europe, Canada, Australia, New Zealand, and the Far
East. It is a generally accepted index for major overseas markets.
The MSCI Europe Index is an unmanaged index designed to track the broader MSCI
EMU benchmark containing stocks in EMU member countries.
The MSCI Japan Index is an unmanaged index that measures the perfomance of the
Japanese stock market.
The MSCI Emerging Markets Free (EMF) Index is an unmanaged index comprised of
companies representative of the market structure of 22 emerging countries in
Europe, Latin America and the Pacific Rim Basin.
The Lehman Brothers Aggregate Bond Index is an unmanaged index of fixed income
securities.
The Lehman Brothers High Yield Bond Index is an unmanaged index comprised of
non-investment grade bonds with maturities between seven to ten years.
The Merrill Lynch Triple-C/Double-C/Single-C Index, a sub-index of the Merrill
Lynch High Yield Index, is an unmanaged index which measures the performance of
non-investment grade U.S. domestic bonds.
The Merrill Lynch Single-B Index, a sub-index of the Merrill Lynch High Yield
Index, is an unmanaged index which measures the performance of non-investment
grade U.S. domestic bonds.
Investors cannot invest directly in an index.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees
of Northstar Galaxy Trust:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations, and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Northstar Galaxy Trust comprising
Northstar Researched Enhanced Index Portfolio (formerly Northstar Multi-Sector
Bond Portfolio), Northstar Growth + Value Portfolio, Northstar Emerging Growth
Portfolio, Northstar International Value Portfolio and Northstar High Yield Bond
Portfolio, (collectively, the "Trust") at December 31, 1999, the results of each
of their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Trust's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 15, 2000
13
<PAGE>
- -------
Pilgrim
Funds
- -------
STATEMENTS OF ASSETS AND LIABILITIES as of December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Northstar Northstar Northstar Northstar
Research Northstar Emerging International High Yield
Enhanced Index Growth + Value Growth Value Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities at
value (cost $27,230,579,
$47,936,081, $41,175,105,
$17,016,454 and $15,281,777,
respectively) $ 28,937,175 $81,719,293 $69,770,071 $ 23,285,783 $ 13,734,433
Repurchase agreements 754,000 7,880,000 1,696,000 363,000 2,487,000
Cash 407 33 765 810 977
Foreign cash, at value
(cost $0, $0, $0, $60,463
and $0) -- -- -- 60,620 --
Receivable for investments sold -- 984,968 -- -- --
Receivable for shares of
beneficial interest sold 53,168 748,832 740,422 316,867 13,397
Dividends and interest receivable 35,359 2,705 6,708 60,955 256,875
Receivable for futures variation
margin 1,700 -- -- -- --
Receivable due from affiliate 6,221 17,062 10,687 20,348 7,028
Prepaid expenses 59 176 101 58 90
------------ ----------- ----------- ------------ ------------
Total Assets 29,788,089 91,353,069 72,224,754 24,108,441 16,499,800
------------ ----------- ----------- ------------ ------------
LIABILITIES:
Payable for investment securities
purchased -- 1,352,490 610,092 -- --
Unrealized depreciation on forward
foreign currency -- -- -- 90 --
Investment advisory fee payable 17,204 51,059 39,781 18,704 10,333
Payable for shares of beneficial
interest reacquired 6 14 -- -- 13
Distributions payable -- -- -- -- 21,632
Administrative service fees payable 2,458 6,808 5,304 1,870 1,378
Transfer agent fees payable -- -- -- 19,248 --
Accrued expenses 28,926 31,227 37,910 17,629 24,068
------------ ----------- ----------- ------------ ------------
Total Liabilities 48,594 1,441,598 693,087 57,541 57,424
------------ ----------- ----------- ------------ ------------
NET ASSETS $ 29,739,495 $89,911,471 $71,531,667 $ 24,050,900 $ 16,442,376
============ =========== =========== ============ ============
NET ASSETS CONSIST OF:
Paid in capital for shares of
beneficial interest, $0.01 par
value outstanding (unlimited
shares authorized) $ 28,942,863 $55,074,352 $40,089,908 $ 17,861,185 $ 19,704,855
Undistributed net investment -- -- -- 92,815 --
income
Accumulated net realized gain
(loss) on investments, foreign
currency and futures contracts (938,115) 1,053,907 2,846,793 (171,772) (1,715,135)
Net unrealized appreciation
(depreciation) of investments,
foreign currency and futures
contracts 1,734,747 33,783,212 28,594,966 6,268,672 (1,547,344)
------------ ----------- ----------- ------------ ------------
Net Assets $ 29,739,495 $89,911,471 $71,531,667 $ 24,050,900 $ 16,442,376
============ =========== =========== ============ ============
Net Asset Value Per Share
($29,739,495/5,958,584 shares,
$89,911,471/2,993,159 shares,
$71,531,667/2,446,626 shares,
$24,050,900/1,628,010 shares and
$16,442,376/3,822,335, respectively $ 4.99 $ 30.04 $ 29.24 ) $ 14.77 $ 4.30
============ =========== =========== ============ ============
</TABLE>
See Accompanying Notes to Financial Statements
14
<PAGE>
- -------
Pilgrim
Funds
- -------
STATEMENTS OF OPERATIONS for the year ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Northstar Northstar Northstar Northstar
Research Enhanced Northstar Emerging International High Yield
Index Growth + Value Growth Value Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding
tax of $3,085, $781, $359,
$36,654 and $0, respectively) $ 242,470 $ 48,246 $ 46,893 $ 427,743 $ 112,946
Interest 344,596 138,630 47,100 56,655 1,854,703
Other 2,115 6,232 -- -- 12,447
----------- ------------ ------------ ----------- -----------
Total investment income 589,181 193,108 93,993 484,398 1,980,096
----------- ------------ ------------ ----------- -----------
EXPENSES:
Investment advisory fees 150,965 406,374 269,393 180,408 148,822
Administrative service fees 21,231 54,183 35,919 18,041 19,843
Accounting and custodian fees 55,155 26,931 52,848 45,012 27,640
Printing and postage 20,389 14,311 10,366 4,465 4,322
Professional fees 12,956 15,496 13,380 21,480 13,015
Trustee fees 2,560 2,325 2,728 2,487 2,574
Miscellaneous 2,607 4,062 6,922 2,408 3,867
----------- ------------ ------------ ----------- -----------
265,863 523,682 391,556 274,301 220,083
Less expenses reimbursed by
investment advisor (77,764) (89,668) (68,278) (93,862) (61,195)
----------- ------------ ------------ ----------- -----------
Total expenses 188,099 434,014 323,278 180,439 158,888
----------- ------------ ------------ ----------- -----------
Net investment income (loss) 401,082 (240,906) (229,285) 303,959 1,821,208
----------- ------------ ------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments and futures contracts (282,732) 16,690,730 11,492,646 1,964,021 (1,702,623)
Net realized gain (loss) on foreign
currency -- -- -- 50,118 (7,605)
Net change in unrealized appreciation
(depreciation) of investments and
futures contracts 1,859,215 23,531,739 25,300,570 5,728,854 (713,261)
Net change in unrealized appreciation
of foreign currency -- -- -- 2,001 --
----------- ------------ ------------ ----------- -----------
Net realized and unrealized gain (loss)
from investments, foreign currency and
futures contracts 1,576,483 40,222,469 36,793,216 7,744,994 (2,423,489)
----------- ------------ ------------ ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 1,977,565 $ 39,981,563 $ 36,563,931 $ 8,048,953 $ (602,281)
=========== ============ ============ =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
15
<PAGE>
- -------
Pilgrim
Funds
- -------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Northstar Research Enhanced Northstar Growth + Value Northstar Emerging Growth
Index Portfolio Portfolio Portfolio
---------------------------- --------------------------- ---------------------------
Year Ended December 31, Year Ended December 31, Year Ended December 31,
---------------------------- --------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 401,082 $ 943,458 $ (240,906) $ (61,191) $ (229,285) $ 667,842
Net realized gain (loss) on
investments and futures
contracts (282,732) (574,364) 16,690,730 71,906 11,492,646 1,369,176
Net realized gain (loss) on
foreign currency -- 453 -- -- -- (16)
Net change in unrealized
appreciation (depreciation)
of investments and futures
contracts 1,859,215 (241,127) 23,531,739 6,496,905 25,300,570 1,482,890
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 1,977,565 128,420 39,981,563 6,507,620 36,563,931 3,519,892
------------ ------------ ------------ ------------ ------------ ------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income (390,975) (945,370) -- (10,927) -- --
Net realized gains from
investments -- (3,863) (15,458,703) (308,911) (9,516,224) (1,701,209)
------------ ------------ ------------ ------------ ------------ ------------
Total distributions (390,975) (949,233) (15,458,703) (319,838) (9,516,224) (1,701,209)
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale
of shares 21,898,625 8,995,259 31,600,589 8,994,594 32,611,788 5,528,830
Net asset value of shares
resulting from dividend
reinvestments 390,975 962,942 15,453,430 319,838 9,516,224 1,701,209
------------ ------------ ------------ ------------ ------------ ------------
22,289,600 9,958,201 47,054,019 9,314,432 42,128,012 7,230,039
Cost of shares redeemed (8,573,331) (5,248,919) (23,258,493) (6,065,460) (21,696,806) (6,526,824)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from capital
share transactions 13,716,269 4,709,282 23,795,526 3,248,972 20,431,206 703,215
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets 15,302,859 3,888,469 48,318,386 9,436,754 47,478,913 2,521,898
NET ASSETS:
Beginning of year 14,436,636 10,548,167 41,593,085 32,156,331 24,052,754 21,530,856
------------ ------------ ------------ ------------ ------------ ------------
End of year $ 29,739,495 $ 14,436,636 $ 89,911,471 $ 41,593,085 $ 71,531,667 $ 24,052,754
============ ============ ============ ============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements
16
<PAGE>
- -------
Pilgrim
Funds
- -------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Northstar International Value Northstar High Yield Bond
Portfolio Portfolio
----------------------------- -----------------------------
Year Ended December 31, Year Ended December 31,
----------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 303,959 $ 175,508 $ 1,821,208 $ 1,434,026
Net realized gain (loss)
on investments 1,964,021 816,735 (1,702,623) (6,416)
Net realized gain (loss)
on foreign currency 50,118 63,776 (7,605) --
Net change in unrealized
appreciation (depreciation)
of investments 5,728,854 348,138 (713,261) (1,167,753)
Net change in unrealized
appreciation of foreign
currency 2,001 -- -- --
------------ ------------ ------------ ------------
Net increase in net assets
(decrease) resulting from
operations 8,048,953 1,404,157 (602,281) 259,857
------------ ------------ ------------ ------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income (315,993) (192,996) (1,821,208) (1,435,446)
Net realized gains from
investments (2,221,649) (553,278) -- (27,382)
------------ ------------ ------------ ------------
Total distributions (2,537,642) (746,274) (1,821,208) (1,462,828)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale of
shares 73,659,755 14,594,371 10,216,238 20,427,074
Net asset value of shares
resulting from dividend
reinvestments 2,537,642 746,274 1,799,111 1,482,093
------------ ------------ ------------ ------------
76,197,397 15,340,645 12,015,349 21,909,167
Cost of shares redeemed (71,422,272) (8,171,088) (14,469,647) (11,992,197)
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from capital share
transactions 4,775,125 7,169,557 (2,454,298) 9,916,970
------------ ------------ ------------ ------------
Net increase (decrease) in
net assets 10,286,436 7,827,440 (4,877,787) 8,713,999
NET ASSETS:
Beginning of year 13,764,464 5,937,024 21,320,163 12,606,164
------------ ------------ ------------ ------------
End of year $ 24,050,900 $ 13,764,464 $ 16,442,376 $ 21,320,163
============ ============ ============ ============
Undistributed net investment
income $ 92,815 $ 49,003 $ -- $ --
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements
17
<PAGE>
Financial
NORTHSTAR RESEARCH ENHANCED INDEX PORTFOLIO Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1999(2) 1998 1997 1996 1995
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning
of the period $ 4.83 5.14 5.25 5.14 4.85
Net investment income $ 0.11 0.36 0.40 0.41 0.42
Net realized and unrealized
gain (loss) on investments $ 0.16 (0.31) (0.08) 0.21 0.29
Total from investment
operations $ 0.27 0.05 0.32 0.62 0.71
Dividends from net investment
income $ (0.11) (0.36) (0.40) (0.41) (0.42)
Dividends from net realized
gain on investments sold $ -- -- (0.03) (0.10) --
Total distributions $ (0.11) (0.36) (0.43) (0.51) (0.42)
Net asset value, end of the
period $ 4.99 4.83 5.14 5.25 5.14
Total return(1) % 5.79 1.02 6.15 12.53 14.97
Ratios and supplemental data:
Net assets, end of the perio
(000s) $ 29,739 14,437 10,548 6,277 3,766
Ratio of expenses to average
net assets after reimbursement(3) % 0.89 0.80 0.80 0.80 0.80
Ratio of expenses to average
net assets prior to expense
reimbursement % 1.26 1.29 1.36 1.68 2.06
Ratio of net investment income
(loss) to average net assets % 1.89 7.53 8.31 8.38 8.52
Portfolio turnover % 123 93 162 121 83
</TABLE>
- ----------
(1) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(2) Portfolio commenced operations as Northstar Multi-Sector Bond Fund.
Effective April 30, 1999 the Portfolio changed its name to Northstar
Research Enhanced Index Portfolio and changed its investment objective.
(3) As of April 30, 1999, the expense limit increased from 0.80% to 0.90%.
See Accompanying Notes to Financial Statements
18
<PAGE>
Financial
Highlights NORTHSTAR GROWTH + VALUE PORTFOLIO
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning
of the period $ 18.76 15.85 14.08 11.56 10.04
Net investment income (loss) $ (0.08) (0.03) 0.09 0.08 0.20
Net realized and unrealized
gain on investments $ 17.74 3.09 1.95 2.57 2.27
Total from investment
operations $ 17.66 3.06 2.04 2.65 2.47
Dividends from net investment
income $ -- (0.01) (0.10) (0.09) (0.19)
Dividends from net realized
gain on investments sold $ (6.38) (0.14) (0.17) (0.04) (0.76)
Total distributions $ (6.38) (0.15) (0.27) (0.13) (0.95)
Net asset value, end of the
period $ 30.04 18.76 15.85 14.08 11.56
Total return(1) % 94.98 19.32 14.66 22.99 24.78
Ratios and supplemental data:
Net assets, end of the period
(000s) $ 89,911 41,593 32,156 15,564 3,813
Ratio of expenses to average
net assets after reimbursement % 0.80 0.80 0.80 0.80 0.80
Ratio of expenses to average
net assets prior to expense
reimbursement % 0.97 1.02 1.09 1.70 2.04
Ratio of net investment income
(loss) to average net assets % (0.44) (0.17) 0.70 0.65 1.77
Portfolio turnover % 179 216 178 161 123
</TABLE>
- ----------
(1) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
See Accompanying Notes to Financial Statements
19
<PAGE>
Financial
NORTHSTAR EMERGING GROWTH PORTFOLIO Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning
of the period $ 14.12 13.00 11.72 11.39 9.92
Net investment income (loss) $ (0.09) 0.39 0.44 0.40 0.37
Net realized and unrealized
gain on investments $ 19.83 1.76 1.36 1.15 1.73
Total from investment
operations $ 19.74 2.15 1.80 1.55 2.10
Dividends from net investment
income $ -- (0.39) (0.44) (0.41) (0.37)
Dividends from net realized
gain on investments sold $ (4.62) (0.64) (0.08) (0.81) (0.26)
Total distributions $ (4.62) (1.03) (0.52) (1.22) (0.63)
Net asset value, end of the
period $ 29.24 14.12 13.00 11.72 11.39
Total return(1) % 141.03 17.30 15.81 13.80 21.39
Ratios and supplemental data:
Net assets, end of the period
(000s) $ 71,532 24,053 21,531 12,579 7,410
Ratio of expenses to average net
assets after reimbursement(2) % 0.90 0.82 0.80 0.80 0.80
Ratio of expenses to average net
assets prior to expense
reimbursement % 1.09 1.14 1.11 1.40 1.74
Ratio of net investment income
(loss) to average net assets % (0.64) 3.00 3.72 3.67 3.63
Portfolio turnover % 236 161 55 129 74
</TABLE>
- ----------
(1) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(2) As of November 9, 1998, the expense limit increased from 0.80% to 0.90%
See Accompanying Notes to Financial Statements
20
<PAGE>
Financial
Highlights NORTHSTAR INTERNATIONAL VALUE PORTFOLIO
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
Year Ended December 31,
----------------------------------
1999 1998 1997
---- ---- ----
Operating performance:
Net asset value, beginning
of the period $ 11.08 10.10 10.00
Net investment income $ 0.22 0.21 0.03
Net realized and unrealized
gain on investments $ 5.23 1.49 0.10
Total from investment
operations $ 5.45 1.70 0.13
Dividends from net investment
income $ (0.24) (0.22) (0.03)
Dividends from net realized
gain on investments sold $ (1.52) (0.50) --
Total distributions $ (1.76) (0.72) (0.03)
Net asset value, end of the
period $ 14.77 11.08 10.10
Total return(1) % 50.18 16.93 1.30
Ratios and supplemental data:
Net assets, end of the period
(000s) $ 24,051 13,764 5,937
Ratio of expenses to average
net assets after reimbursement(2) % 1.00 0.84 0.80
Ratio of expenses to average
net assets prior to expense
reimbursement % 1.52 1.68 2.61
Ratio of net investment income
(loss) to average net assets % 1.69 1.90 0.97
Portfolio turnover % 84 30 5
- ----------
(1) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
(2) As of November 9, 1998, the expenses limit increased from 0.80% to 1.00%
(3) Annualized
See Accompanying Notes to Financial Statements
21
<PAGE>
Financial
NORTHSTAR HIGH YIELD BOND PORTFOLIO Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of the period $ 4.87 5.30 5.27 5.04 4.69
Net investment income $ 0.44 0.42 0.40 0.45 0.50
Net realized and unrealized
gain (loss) on investments $ (0.57) (0.42) 0.07 0.32 0.34
Total from investment
operations $ (0.13) 0.00 0.47 0.77 0.84
Dividends from net investment
income $ (0.44) (0.42) (0.40) (0.45) (0.49)
Dividends from net realized
gain on investments sold $ -- (0.01) (0.04) (0.09) --
Total distributions $ (0.44) (0.43) (0.44) (0.54) (0.49)
Net asset value, end of the
period $ 4.30 4.87 5.30 5.27 5.04
Total return(1) % (2.98) (0.12) 9.00 15.75 18.55
Ratios and supplemental data:
Net assets, end of the period
(000s) $ 16,442 21,320 12,606 6,619 4,773
Ratio of expenses to average
net assets after reimbursement % 0.80 0.80 0.79 0.80 0.80
Ratio of expenses to average
net assets prior to expense
reimbursement % 1.11 1.23 1.35 1.73 2.11
Ratio of net investment income
to average net assets % 9.19 8.92 8.44 8.72 10.61
Portfolio turnover % 85 135 152 159 157
</TABLE>
- ----------
(1) Assumes dividends have been reinvested and does not reflect the effect of
sales charges.
See Accompanying Notes to Financial Statements
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of December 31, 1999
- --------------------------------------------------------------------------------
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 Research Enhanced Index Portfolio ("Research Enhanced Index
Portfolio") (formerly Multi-Sector Bond Portfolio) is a diversified portfolio
whose investment objective is capital appreciation by investing primarily in
large companies that make up the S&P 500 Index.
Northstar 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 Emerging Growth Portfolio ("Emerging Growth Portfolio") is a
diversified portfolio with the investment objective of long-term capital
appreciation by investing primarily in small to mid-sized companies that the
Adviser feels have above average prospects for growth.
Northstar International Value Portfolio ("International Value Portfolio") is a
diversified portfolio with the investment objective of long-term capital
appreciation by investing primarily in foreign companies with a market valuation
greater than $1 billion, but may hold up to 25% of its assets in companies with
smaller market capitalization. Portfolio managers apply the technique of "value
investing".
Northstar High Yield Bond Portfolio ("High Yield Bond Portfolio") is a
diversified portfolio whose investment objective is to seek high income
consistent with the preservation of capital by investing primarily in a
diversified group of high yield-high risk fixed income securities, convertible
securities, securities issued by U.S. companies in foreign currencies, and
securities issued by foreign governments and companies.
On October 29, 1999 ReliaStar Financial Corp., the indirect parent Company of
Northstar Investment Management Corporation ("Northstar"), acquired Pilgrim
Capital Corporation and its subsidiaries. In conjunction with the acquisition
Northstar, the Adviser to the Trust, changed its name to Pilgrim Advisors, Inc.
Security Valuation. Equity securities are valued daily at closing sales prices
reported on recognized securities exchanges or lacking any sales, at the last
available bid price. Prices of long-term debt securities are valued on the basis
of last reported sales price, or if no sales are reported, the value is
determined based upon the mean of representative quoted bid 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 maturities of less than 60 days
are valued at amortized cost, unless the Trustees determine that amortized cost
does not reflect the fair value of such obligations. Securities for which market
quotations are not readily available are valued at fair value determined in good
faith by or under direction of the Trustees of the Trust. At December 31, 1999,
the High Yield Bond Portfolio contained four securities for which market
quotations were not readily available and which were fair valued pursuant to the
Fund's procedures. The securities had a total value of $195,087 representing
1.2% of the Portfolio's net assets. The books and records of the Funds are
maintained in U.S. dollars. Securities quoted in foreign currencies are
translated into U.S. dollars based on the prevailing exchange rates on that day.
The Adviser uses independent pricing services to price the Portfolios'
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 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 investments are
calculated on the identified cost basis. Interest income is recorded on the
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
accrual basis except when collection is not expected; discounts are accreted,
and premiums amortized to par at maturity; dividend income is recorded on the
ex-dividend dates.
Distribution to Shareholders. Dividends from net investment income are declared
and paid quarterly by the Growth + Value Portfolio, International Value
Portfolio and the Emerging Growth Porfolio; and declared daily and paid
quarterly by the Research Enhanced Index Portfolio and 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.
The Portfolios may periodically make reclassifications among certain of their
capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of net
operating losses and foreign currency transactions. As of December 31, 1999, the
following amounts have been reclassified between undistributed net investment
income, accumulated net realized gain on investments and paid-in-capital:
Accumulated
Undistributed Net Realized
Net Investment Gain on Paid-In-
Income Investments Capital
------ ----------- -------
Research Enhanced
Index Portfolio $ (10,107) $ 26,641 $(16,534)
Growth + Value
Portfolio 240,906 (240,906) --
Emerging Growth
Portfolio 229,301 (229,301) --
International Value
Portfolio 55,846 (55,846) --
High Yield Bond
Portfolio -- 1,509 (1,509)
These restatements did not affect net investment income, net realized gain on
investments, or net assets for the year ended December 31, 1999.
Foreign Currency. The Portfolios isolate that portion of the results of
operations 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 investment
securities transactions and forward exchange contracts, and (3) gains and losses
from the difference between amounts of interest and dividends recorded and the
amounts actually received. Net change in unrealized appreciation(depreciation)
of foreign currency arise from changes in the value of assets and liabilities
including investments in securities at fiscal year end, 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 exchange
rate risks on their non-U.S. dollar denominated investment securities. When
entering into a currency forward contract, the Portfolios agree to receive 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 gain or loss on the contracts as
measured by the difference between the forward foreign exchange rates at the
dates of entry into the contracts and the forward rates at the reporting date,
is included in the statement 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 recognized in the
statement of assets and liabilities. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from movement in
currency and securities values and interest rates.
Options. The Portfolios may write (sell) and purchase put and 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 an 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 received 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
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
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
received. If the written call option is exercised by the counterparty, the
premium is added to the proceeds from the sale of the underlying security or
currency 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 enters
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 transaction,
including brokerage commissions. As the writer of options, the Portfolio bears
the market risk of an unfavorable change in the price of the security underlying
the written option.
Futures contracts. The Portfolios may invest in futures contracts solely for the
purpose of hedging their 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 recognized
as assets due from the broker (the Portfolios' agent in acquiring the futures
position). During the period the futures contract is open, changes in the value
of the contract are recognized as 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 value of the underlying
instrument. The Portfolios recognize a gain or loss equal to the daily variation
margin. When the contract is closed, the Portfolios record 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 correlation in
movements in the price of futures contracts, interest rates, and the underlying
hedged assets.
Repurchase Agreements. The Portfolios' Custodian takes possession of collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to assure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default on the obligation to repurchase, the Portfolios have the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Portfolios may be delayed or
limited.
Federal Income Taxes. The Trust intends to comply with the special provisions of
the Internal Revenue Code available to investment companies and to distribute
all of the taxable net income to respective shareholders. Therefore, no Federal
income tax provision or excise tax provision is required.
NOTE 2 -- INVESTMENT ADVISER AND ADMINISTRATOR
Pilgrim Advisors, Inc. (the "Adviser") (formerly Northstar Investment Management
Corporation) serves as each Portfolio's investment adviser. The Adviser receives
an investment advisory fee calculated at an annual rate of 0.75% of average
daily net assets from the Research Enhanced Index Portfolio, Growth+Value
Portfolio, Emerging Growth Portfolio, and High Yield Bond Portfolio. The Adviser
receives an investment advisory fee calculated at an annual rate of 1.00% of
average daily net assets from the International Value Portfolio. For the year
ended December 31, 1999, the Adviser earned $1,155,962 in investment advisory
fees. Pilgrim Group, Inc. (the "Administrator"), (formerly Northstar
Administrators Corp.) serves as each Portfolio's administrator. Each Portfolio
pays the Administrator a fee calculated at an annual rate of 0.10% of average
daily net assets. For the year ended December 31, 1999, the Administrator earned
$149,217 in administrative fees.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
The Adviser has voluntarily undertaken to limit the expenses of the Research
Enhanced Index Portfolio, Growth + Value Portfolio and High Yield Bond Portfolio
to 0.80% of the average daily net assets and to limit the expenses of the
Emerging Growth Portfolio and International Value Portfolio to 0.90% and 1.00%
of the average daily net assets, respectively. Effective April 30, 1999, the
expense limit for Research Enhanced Index Portfolio increased from 0.80% to
0.90%. For the year ended December 31, 1999, the Adviser has reimbursed the
Research Enhanced Portfolio $77,764, the Growth + Value Portfolio $89,668, the
Emerging Growth Portfolio $68,278, International Value Portfolio $93,862 and the
High Yield Bond Portfolio $61,195.
Navellier Fund Management, Inc. ("Navellier"), a registered investment adviser,
serves as subadviser to the Growth + Value Portfolio pursuant to a Subadvisory
Agreement dated November 1, 1998, between the Adviser and Navellier. For its
services, Navellier receives, from the Adviser, an annual fee equal to 0.35% of
the average daily net assets. For the year ended December 31, 1999, Navellier
received $177,138 in subadvisory fees from the Adviser. Brandes Investment
Partners, L.P. ("Brandes"), a registered investment adviser, serves as a
subadviser to the International 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 in assets.
J.P. Morgan Investment Management Inc. ("J.P. Morgan"), a registered investment
adviser, serves as subadviser to the Research Enchanced Index Portfolio
pursuant to a Subadvisory Agreement dated April 30, 1999, between the Adviser
and J.P. Morgan. For its services, J.P. Morgan receives, from the Adviser, an
annual fee equal to 0.20% of the average daily net assets. For the year ended
December 31, 1999, J.P. Morgan received $32,985 in subadvisory fees from the
Adviser.
NOTE 3 -- PURCHASES AND SALE OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
Research Emerging International High Yield
Enhanced Index Growth + Value Growth Value Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $34,330,474 $96,475,197 $94,245,286 $17,400,712 $15,257,886
Aggregate sales $14,309,704 $93,341,448 $84,753,287 $14,045,994 $18,685,230
</TABLE>
U.S. Government Securities not included above were as follows:
<TABLE>
<CAPTION>
Research Emerging International High Yield
Enhanced Index Growth + Value Growth Value Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $4,066,487 $ -- $ -- $ -- $ --
Aggregate sales $5,511,605 $ -- $ -- $ -- $ --
</TABLE>
NOTE 4 -- CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Portfolio for the year ended December 31,
1999 were as follows:
<TABLE>
<CAPTION>
Research Growth Emerging International High Yield
Enhanced Index + Value Growth Value Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Shares sold 4,702,239 1,238,595 1,483,157 5,601,652 2,153,188
Shares issued as
reinvestments of
dividends 83,063 527,241 337,694 179,821 391,809
Shares redeemed (1,818,177) (989,359) (1,077,481) (5,395,608) (3,096,755)
---------- ---------- ---------- ---------- ----------
Net increase
(decrease) in shares
outstanding 2,967,125 776,477 743,370 385,865 (551,758)
---------- ---------- ---------- ---------- ----------
</TABLE>
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
Transactions in capital shares of each Portfolio for the year ended December 31,
1998 were as follows:
<TABLE>
<CAPTION>
Research Growth Emerging International High Yield
Enhanced Index + Value Growth Value Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Shares sold 1,784,308 544,723 420,651 1,332,537 4,034,688
Shares issued as
reinvestments of
dividends 192,789 17,787 129,106 67,462 294,576
Shares redeemed (1,036,932) (374,172) (502,249) (745,812) (2,333,922)
---------- -------- -------- ---------- ----------
Net increase in shares
outstanding 940,165 188,338 47,508 654,187 1,995,342
---------- -------- -------- ---------- ----------
</TABLE>
NOTE 5 -- CREDIT RISK AND DEFAULTED SECURITIES
Although the Portfolios have a diversified portfolio, the High Yield Bond
Portfolio had 83.53% of its portfolio invested in lower rated and comparable
quality unrated high yield securities. Investments in higher yielding securities
are accompanied by a greater degree of credit risk and such lower rated
securities tend to be more sensitive to economic conditions than higher rated
securities. The risk of loss due to default by the issuer may be significantly
greater for the holders of high yielding securities, because such securities are
generally unsecured and are often subordinated to other creditors of the issuer.
At December 31, 1999, the High Yield Bond Portfolio held SA Telecommunications,
Inc., a security in default. For financial reporting purposes, it is each
Portfolio's accounting practice to discontinue accrual of income and provide an
estimate for probable losses due to unpaid interest income on defaulted
securities for the current reporting period.
NOTE 6 -- FEDERAL INCOME TAX -- CAPITAL LOSS CARRYFORWARD
At December 31, 1999 the Research Enhanced Index Portfolio had capital loss
carryforwards of $331,465 and $527,558 expiring December 31, 2006 and 2007,
respectively. High Yield Bond Portfolio had capital loss carryforwards of $6,416
and $1,520,897 expiring December 31, 2006 and 2007, respectively. During 1999,
no prior year capital loss carryforward amount was utilized.
NOTE 7 -- SECURITY LOANS
The Portfolio may lend its securities to brokers, dealers and other financial
institutions 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
securities. As with other extensions of credit, the Portfolio may bear risk of
delay in recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. The Portfolios receive compensation for
lending its securities in the form of fees or all or a portion of the income
from investments of the collateral. The Portfolios also continue to earn income
on the securities loaned. At December 31, 1999, the Portfolios did not have any
securities on loan.
NOTE 8 -- LETTER OF CREDIT
The Pilgrim Funds (formerly Northstar Funds), Pilgrim Equity Trust (formerly
Northstar Equity Trust), Northstar Galaxy Trust and Pilgrim Mayflower Trust
(formerly Northstar Trust) (collectively the "Funds") have entered into an
unsecured committed revolving line of credit agreement (the "Credit Agreement")
with State Street Bank and Trust Company for an aggregate amount of $50,000,000.
The proceeds may be used only to (1) temporarily finance the purchase and sale
of securities; (2) finance the redemption of shares of an investor in the Funds;
and (3) enable the Funds to meet other emergency expenses as defined in the
Credit Agreement. The Funds pay 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 year ended December 31, 1999, the Funds did not have any loans
outstanding.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
NOTE 9 -- FUTURES CONTRACTS
On December 31, 1999, the Research Enhanced Index Portfolio had $100,000
principal amount of U.S. Treasury obligations pledged as collateral to cover
margin requirements for open futures contracts.
Open futures contracts at December 31, 1999, were as follows:
Number of Unrealized
Contract Contracts Month Commitment Appreciation
-------- --------- ----- ---------- ------------
March 00 S&P 500 Futures 2 December Buy 28,151
NOTE 10 -- FORWARD FOREIGN CURRENCY CONTRACTS
Open Currency to Sell at December 31, 1999 for the International Value
Portfolio:
<TABLE>
<CAPTION>
Currency Settlement Net Unrealized
to Sell Date In Exchange For Value $ Depreciation
------- ---- --------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Euro Dollar EURO 3,303 1/3/00 USD 3,300 3,321 (21)
British Pound GBP 7,986 1/4/00 USD 12,866 12,901 (35)
Hong Kong Dollar HKD 250,360 1/3/00 USD 32,203 32,207 (4)
Japanese Yen JPY 711,026 1/4/00 USD 6,953 6,964 (11)
New Zealand Dollar NZD 5,290 1/5/00 USD 2,745 2,764 (19)
South African Rand ZAR 15,168 1/4/00 USD 2,463 2,463 (0)
------ ------ ---
60,530 60,620 (90)
------ ------ ---
</TABLE>
- ------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
The amount of long-term capital gain paid for the fiscal year ended December 31,
1999 was $2,640,691, $1,494,615, and $1,591,841 for Growth + Value Portfolio,
Emerging Growth Portfolio and International Value Portfolio, respectively.
Net capital and net currency losses incurred after October 31 and within the
taxable year are deemed to arise on the first business day of the Portfolios'
next taxable year. For the period from November 1, 1999 through December 31,
1999, the High Yield Bond Portfolio incurred and elected to defer until January
1, 2000 for U.S. Federal income tax purposes, net capital and current losses of
$185,453.
Of the ordinary distributions made during the fiscal year ended December 31,
1999, the following percentages qualify for the dividends received deduction
available to corporate shareholders: .35%, 48%, and 6% for the Growth + Value
Portfolio, Research Enhanced Index Portfolio, and High Yield Bond Portfolio,
respectively.
The above figures may differ from those cited elsewhere in this report due to
differences in the calculation of income and gains for Securities and Exchange
Commission (book) purposes and Internal Revenue Service (tax) purposes.
28
<PAGE>
Northstar
Research Enhanced
Index Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
COMMON STOCKS: 96.96%
Basic Industry: 2.98%
1,700 Air Products and
Chemicals, Inc. $ 57,056
1,700 Alcoa, Inc. 141,100
200 Bowater, Inc. 10,863
199 E. I. du Pont de Nemours
and Co. 13,109
1,000 Fort James Corp. 27,375
1,300 @ Freeport-McMoRan
Copper & Gold, Inc.
Class B 27,463
600 Georgia-Pacific Corp. 30,450
1,000 IMC Global, Inc. 16,375
1,500 International Paper Co. 84,656
50 Louisiana-Pacific Corp. 713
800 Lyondell Chemical Co. 10,200
500 PPG Industries, Inc. 31,281
400 Praxair, Inc. 20,125
680 @ Quantum Corp. - DLT &
Storage Systems 10,285
600 Reynolds Metals Co. 45,975
1,600 Rohm and Haas Co. 65,100
790 @ Smurfit-Stone Container
Corp. 19,355
900 Solutia, Inc. 13,894
200 @ Sprint Corp. - PCS Group 20,500
300 Temple-Inland, Inc. 19,781
900 Dow Chemical Co. 120,262
1,100 Union Carbide Corp. 73,425
200 USG Corp. 9,425
500 USX - U. S. Steel Group 16,500
---------
885,268
---------
Capital Goods: 1.17%
300 Caterpillar, Inc. 14,119
500 Cooper Industries, Inc. 20,219
1,300 Deere & Co. 56,387
400 Eaton Corp. 29,050
2,200 Emerson Electric Co. 126,225
400 Herman Miller, Inc. 9,200
300 Hubbell, Inc. 8,175
800 Ingersoll-Rand Co. 44,050
400 PACCAR, Inc. 17,725
500 W.W. Grainger, Inc. 23,906
---------
349,056
---------
Cyclical: 1.87%
800 Dana Corp. $ 23,950
2,659 @ Delphi Automotive
Systems Corp. 41,879
4,800 Ford Motor Co. 256,500
1,100 General Motors Corp. 79,956
800 Genuine Parts Co. 19,850
900 Hasbro, Inc. 17,156
600 @ Jones Apparel Group,
Inc. 16,275
400 @ Lear Corp. 12,800
900 Leggett & Platt, Inc. 19,294
2,000 Mattel, Inc. 26,250
700 B.F. Goodrich Co. 19,250
800 Goodyear Tire & Rubber
Co. 22,550
---------
555,710
---------
Drugs: 7.54%
5,700 Abbott Laboratories 206,981
4,600 American Home
Products Corp. 181,413
6,700 Bristol-Myers Squibb Co. 430,056
3,800 Eli Lilly & Co. 252,700
300 @ Forest Laboratories, Inc. 18,431
300 @ Genzyme Corp. 13,500
1,900 Johnson & Johnson 176,938
3,700 Merck & Co., Inc. 248,131
2,200 Monsanto Co. 78,375
5,200 Pfizer, Inc. 168,675
5,000 Schering-Plough Corp. 210,938
3,000 Warner-Lambert Co. 245,812
300 @ Watson Pharmaceuticals,
Inc. 10,744
---------
2,242,694
---------
Energy: 5.53%
900 Baker Hughes, Inc. $ 18,956
2,300 Chevron Corp. 199,237
600 Conoco, Inc. Class A 14,850
2,237 Conoco, Inc. Class B 55,645
200 @ Cooper Cameron Corp. 9,788
700 DTE Energy Co. 21,963
400 ENSCO Int'l, Inc. 9,150
9,988 Exxon Mobil Corp. 804,658
560 @ Global Marine, Inc. 9,310
800 Phillips Petroleum Co. 37,600
600 @ R&B Falcon Corp. 7,950
6,800 Royal Dutch Petroleum
Co. ADR 410,975
200 @ Smith Int'l, Inc. 9,938
100 Texaco, Inc. 5,431
500 Tosco Corp. 13,594
300 Ultramar Diamond
Shamrock Corp. 6,806
800 Union Pacific Resources
Group, Inc. 10,200
---------
1,646,051
---------
See Accompanying Notes to Financial Statements
29
<PAGE>
Northstar
Research Enhanced
Index Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
Finance: 9.67%
140 American Express Co. $ 23,275
1,396 AmSouth Bancorp. 26,960
300 Associated Banc-Corp. 10,275
2,700 Associates First Capital
Corp. 74,081
100 Astoria Financial Corp. 3,044
6,500 Bank of America Corp. 326,219
4,800 Bank One Corp. 153,900
100 CCB Financial Corp. 4,356
800 Charter One Financial,
Inc. 15,300
6,800 Citigroup, Inc. 377,825
600 Comerica, Inc. 28,012
210 Commerce Bancshares,
Inc. 7,114
500 Compass Bancshares,
Inc. 11,156
500 Countrywide Credit
Industries, Inc. 12,625
700 Dime Bancorp, Inc. 10,588
700 @ E*TRADE Group, Inc. 18,288
3,600 Fannie Mae 224,775
500 First Tennessee National
Corp. 14,250
4,100 First Union Corp. 134,531
100 First Virginia Banks, Inc. 4,300
2,900 Firstar Corp. 61,262
400 FirstMerit Corp. 9,200
3,415 Fleetboston Financial
Corp. 118,885
2,870 Freddie Mac 135,069
600 Golden West Financial
Corp. 20,100
500 GreenPoint Financial
Corp. 11,906
700 Hibernia Corp. 7,438
1,800 Household Int'l, Inc. 67,050
860 Huntington Bancshares,
Inc. 20,533
1,900 KeyCorp 42,037
10 M&T Bank Corp. 4,143
200 Marshall & Ilsley Corp. 12,563
300 Mercantile Bankshares
Corp. 9,581
1,500 Merrill Lynch & Co., Inc. 125,250
200 Morgan Stanley Dean
Witter & Co. 28,550
2,200 National City Corp. 52,112
580 North Fork Bancorp.,
Inc. 10,150
600 Paine Webber Group,
Inc. 23,287
270 Peoples Heritage
Financial Group, Inc. 4,067
1,200 PNC Bank Corp. 53,400
900 Regions Financial Corp. 22,612
700 SouthTrust Corp. 26,469
560 Sovereign Bancorp, Inc. 4,174
700 Summit Bancorp. $ 21,438
600 SunTrust Banks, Inc. 41,287
400 TCF Financial Corp. 9,950
2,400 @ TD Waterhouse Group,
Inc. 39,450
525 Bear Stearns Cos., Inc. 22,444
200 Chase Manhattan Corp. 15,538
900 CIT Group, Inc. 19,013
300 FINOVA Group, Inc. 10,650
1,500 Goldman Sachs Group,
Inc. 141,281
3,100 U.S. Bancorp. 73,819
600 Union Planters Corp. 23,662
100 Wachovia Corp. New 6,800
2,470 Washington Mutual, Inc. 64,220
800 Wells Fargo Co. 32,350
60 Wilmington Trust Corp. 2,895
---------
2,875,509
---------
Health Services: 1.61%
800 Aetna, Inc. 44,650
200 Baxter Int'l, Inc. 12,563
1,100 Becton, Dickinson & Co. 29,425
1,600 @ Boston Scientific Corp. 35,000
800 CIGNA Corp. 64,450
2,700 Columbia/HCA
Healthcare Corp. 79,144
200 @ IDEC Pharmaceuticals
Corp. 19,650
1,800 Medtronic, Inc. 65,587
200 PE Corp. - PE Biosystems
Group 24,063
300 St. Jude Medical, Inc. 9,206
1,600 @ Tenet Healthcare Corp. 37,600
700 United HealthCare Corp. 37,187
300 @ Wellpoint Health
Networks, Inc. 19,781
---------
478,306
---------
Insurance: 2.66%
400 Ambac Financial Group,
Inc. $ 20,875
2,400 American Int'l Group,
Inc. 259,500
1,400 Aon Corp. 56,000
1,000 AXA Financial, Inc. 33,875
300 Jefferson-Pilot Corp. 20,475
1,000 Lincoln National Corp. 40,000
100 Marsh & McLennan Cos.,
Inc. 9,569
600 MBIA, Inc. 31,687
200 Mercury General Corp. 4,450
700 SAFECO Corp. 17,413
4,700 Allstate Corp. 112,800
1,300 Hartford Financial
Services Group, Inc. 61,587
1,300 St. Paul Cos., Inc. 43,794
800 Torchmark Corp. 23,250
300 Travelers Property
Casualty Corp. 10,275
1,400 UnumProvident Corp. 44,887
---------
790,437
---------
Multi-Industry: 7.62%
292 Chattem, Inc. 5,548
2,100 Eastman Kodak Co. 139,125
7,500 General Electric Co. 1,160,625
3,600 Honeywell Int'l Inc. 207,675
600 ITT Industries, Inc. 20,063
2,600 Lockheed Martin Corp. 56,875
1,700 Raytheon Co. Class A 42,181
500 Raytheon Co. Class B 13,281
1,300 Boeing Co. 54,031
2,300 @@ Seagram Co. Ltd. 103,356
7,800 Tyco Int'l Ltd. 303,225
3,700 Waste Management, Inc. 63,594
4,300 Xerox Corp. 97,556
---------
2,267,135
---------
Pharmaceutical: 0.11%
100 @ Human Genome
Sciences, Inc. 15,263
400 Pharmacia & Upjohn,
Inc. 18,000
---------
33,263
---------
30
<PAGE>
Northstar
Research Enhanced
Index Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
Retail: 6.46%
500 @ Abercrombie & Fitch Co. $ 13,344
2,000 Albertson's, Inc. 64,500
600 Circuit City Stores, Inc. 27,037
1,000 CVS Corp. 39,937
2,100 Dayton Hudson Corp. 154,219
1,000 @ Federated Department
Stores, Inc. 50,562
1,000 J. C. Penney, Inc. 19,938
2,400 @ K-Mart Corp. 24,150
200 @ Kohl's Corp. 14,438
900 Lowe's Cos., Inc. 53,775
700 Nordstrom, Inc. 18,331
2,500 @ Safeway, Inc. 88,906
1,700 Sears, Roebuck & Co. 51,744
4,200 Gap, Inc. 193,200
3,900 Home Depot, Inc. 267,394
4,000 Kroger Co. 75,500
1,500 May Department Stores
Co. 48,375
1,900 TJX Cos., Inc. 38,831
9,800 Wal-Mart Stores, Inc. 677,425
---------
1,921,606
---------
Services: 7.95%
6,800 @ America Online, Inc. 512,975
3,500 @ AT&T Corp. - Liberty
Media Group 198,625
2,000 Automatic Data
Processing, Inc. 107,750
4,200 @ Cendant Corp. 111,562
4,000 @ Comcast Corp. 202,250
1,500 Electronic Data Systems
Corp. 100,406
800 Equifax, Inc. 18,850
1,500 Gannett Co., Inc. 122,344
1,200 Hilton Hotels Corp. 11,550
400 Knight-Ridder, Inc. 23,800
490 @ Mandalay Resort Group 9,861
4,700 McDonald's Corp. 189,469
4,000 @ MediaOne Group, Inc. 307,250
1,000 @ Mirage Resorts, Inc. 15,313
1,400 Service Corp. Int'l 9,713
900 Starwood Hotels &
Resorts Worldwide,
Inc. 21,150
900 New York Times Co. 44,213
300 Times Mirror Co. 20,100
4,300 Walt Disney Co. 125,775
1,000 Time Warner, Inc. 72,437
2,300 @ Viacom, Inc. 139,006
---------
2,364,399
---------
Stable: 6.01%
1,000 Bestfoods $ 52,563
1,100 General Mills, Inc. 39,325
1,500 H.J. Heinz Co. 59,719
500 Hershey Foods Corp. 23,750
1,800 Kimberly-Clark Corp. 117,450
200 Nabisco Holdings Corp. 6,325
1,400 PepsiCo, Inc. 49,350
9,900 Philip Morris Cos., Inc. 229,556
3,400 Sara Lee Corp. 75,012
1,000 Clorox Co. 50,375
4,900 Coca-Cola Co. 285,425
4,400 Gillette Co. 181,225
4,600 Procter & Gamble Co. 503,987
2,100 Unilever NV ADR 114,319
---------
1,788,381
---------
Technology: 24.88%
600 @ 3Com Corp. 28,200
400 Adobe Systems, Inc. 26,900
450 Allegheny Technologies
Inc. 10,097
1,200 @ Applied Materials, Inc. 152,025
900 @ BMC Software, Inc. 71,944
9,200 @ Cisco Systems, Inc. 985,550
300 @ Citrix Systems, Inc. 36,900
5,200 Compaq Computer Corp. 140,725
900 Computer Associates
Int'l, Inc. 62,944
3,200 @ Dell Computer Corp. 163,200
100 @ DoubleClick, Inc. 25,306
3,800 EMC Corp. 415,150
400 @ Exodus Communications,
Inc. 35,525
1,400 First Data Corp. 69,038
300 @ Guidant Corp. 14,100
1,000 Hewlett-Packard Co. 113,937
9,800 Intel Corp. 806,662
3,000 International Business
Machines Corp. 324,000
400 @ Lexmark Int'l Group, Inc. 36,200
9,100 Lucent Technologies, Inc. 680,794
3,500 @ Microsoft Corp. 1,576,125
2,200 Motorola, Inc. 323,950
500 @ National Semiconductor
Corp. 21,406
400 @ Network Associates, Inc. 10,675
1,000 @ Novell, Inc. 39,938
3,100 @ Oracle Corp. 347,394
700 @ Seagate Technology, Inc. 32,594
5,100 @ Sun Microsystems, Inc. 394,931
5 Teledyne Technologies
Inc. 47
2,600 Texas Instruments, Inc. 251,875
5 Water Pik Tech Inc. 48
600 @ Xilinx, Inc. 27,281
400 @ Yahoo!, Inc. 173,075
---------
7,398,536
---------
Telecommunications: 8.32%
6,500 AT&T Corp. 329,875
3,600 Bell Atlantic Corp. 221,625
1,500 BellSouth Corp. 70,219
2,400 @ Global Crossing Ltd. 120,000
3,500 GTE Corp. 246,969
1,300 @ Level 3 Communications,
Inc. 106,437
9,300 @ MCI WorldCom, Inc. 493,481
3,100 @@ Nortel Networks Corp. 313,100
400 @ QUALCOMM, Inc. 70,450
0,300 SBC Communications,
Inc. 502,125
---------
2,474,281
---------
Transportation: 0.63%
400 AMR Corp. 26,800
1,400 Burlington Northern
Santa Fe Corp. 33,950
100 CNF Transportation, Inc. 3,450
700 CSX Corp. 21,963
1,100 Norfolk Southern Corp. 22,550
200 @ Northwest Airlines Corp. 4,450
200 Ryder System, Inc. 4,888
1,400 Southwest Airlines Co. 22,662
900 Union Pacific Corp. 39,262
200 @ US Airways Group, Inc. 6,413
---------
186,388
---------
31
<PAGE>
Northstar
Research Enhanced
Index Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
Utilities: 1.95%
600 Allegheny Energy, Inc. $ 16,163
100 Ameren Corp. 3,275
1,300 Carolina Power & Light
Co. 39,569
2,400 Central & South West
Corp. 48,000
700 Cinergy Corp. 16,888
500 CMS Energy Corp. 15,594
300 Columbia Energy Group 18,975
300 Consolidated Natural
Gas Co. 19,481
500 Constellation Energy
Group, Inc. 14,500
1,100 Dominion Resources,
Inc. 43,175
760 Edison Int'l 19,902
900 Entergy Corp. 23,175
800 FPL Group, Inc. 34,250
600 GPU, Inc. 17,962
600 NiSource, Inc. 10,725
1,500 Northern States Power
Co. 29,250
1,800 PG&E Corp. 36,900
400 Pinnacle West Capital
Corp. 12,225
700 PP&L Resources, Inc. 16,013
1,300 Reliant Energy, Inc. 29,737
600 TECO Energy, Inc. 11,138
1,300 Texas Utilities Co. 46,231
160 The Southern Co. 3,760
1,300 Unicom Corp. 43,550
500 Wisconsin Energy Corp. 9,625
---------
580,063
---------
Total Common Stocks
(Cost $27,130,471) 28,837,083
----------
Principal
Amount Value
- ------ -----
U.S. TREASURY OBLIGATIONS: 0.34%
U.S. Government and Agencies: 0.34%
$100,000 U.S. Treasury Notes,
5.875% due
02/15/00(1) $ 100,092
-----------
Total U.S. Government
and Agencies
(Cost $100,108) 100,092
-----------
Total Long-Term
Investments
(Cost $27,230,579) 28,937,175
-----------
Principal
Amount Value
- ------ -----
SHORT-TERM INVESTMENTS: 2.54%
Repurchase Agreement: 2.54%
$754,000 State Street Bank & Trust
3.00% due 01/03/00
(Collateralized by
$720,000 U.S. Treasury
Bonds, 8.750% due
11/15/08, Market Value
$770,400) $ 754,000
------------
Total Short-Term
Investments (Cost
$754,000) 754,000
------------
Total Investments
(Cost
$27,984,579)* 99.84% 29,691,175
Other Assets and
Liabilities, Net 0.16% 48,320
------- ------------
Net Assets 100.00% $ 29,739,495
======= ============
- ----------
@ Non-income producing security
@@ Foreign Security
(1) Security has been segregated as collateral for futures contracts.
* Cost for federal income tax purposes is $28,035,520. Net unrealized
appreciation consists of:
Gross Unrealized
Appreciation $ 4,149,187
Gross Unrealized
Depreciation (2,493,532)
------------
Net Unrealized
Appreciation $ 1,655,655
============
See Accompanying Notes to Financial Statements
32
<PAGE>
Northstar
Growth + Value
Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
COMMON STOCKS: 90.89%
Advertising: 1.41%
30,000 @ Valassis
Communications, Inc. $ 1,267,500
-----------
Aerospace: 0.99%
18,900 @ Titan Corp. 890,663
-----------
Biotechnology: 2.90%
15,700 @ MedImmune, Inc. 2,604,238
-----------
Capital Goods: 5.03%
48,000 @ KEMET Corp. 2,163,000
33,300 @ The DII Group, Inc. 2,363,259
-----------
4,526,259
-----------
Communication Services: 5.63%
34,000 @ Powerwave
Technologies, Inc. 1,984,750
46,125 @ Western Wireless Corp. 3,078,844
-----------
5,063,594
-----------
Computer Communications: 9.34%
41,300 @ Adaptec, Inc. 2,059,837
33,200 @ Applied Micro Circuits
Corp. 4,224,700
18,800 @ Emulex Corp. 2,115,000
-----------
8,399,537
-----------
Computer Software: 10.79%
26,000 Adobe Systems, Inc. 1,748,500
39,900 @ Macromedia, Inc. 2,917,687
21,400 @ Mercury Interactive
Corp. 2,309,863
32,400 @ Siebel Systems, Inc. 2,721,600
-----------
9,697,650
-----------
Consumer Cyclicals: 5.72%
44,400 @ Gemstar International
Group Ltd. 3,163,500
22,200 Tiffany & Co. 1,981,350
-----------
5,144,850
-----------
Diversified Commercial
Services: 1.73%
13,400 @ Catalina Marketing Corp. 1,551,050
-----------
EDP Peripherals: 7.73%
36,000 @ Electronics for Imaging,
Inc. 2,092,500
35,900 @ In Focus Systems, Inc. 832,431
25,200 @ QLogic Corp. 4,028,850
-----------
6,953,781
-----------
Electronic Components: 5.17%
57,700 @ Power Integrations, Inc. $ 2,765,994
19,500 @ SanDisk Corp. 1,876,875
-----------
4,642,869
-----------
Electronic Poduction/
Equipment: 1.65%
33,200 Helix Technology Corp. 1,487,775
-----------
Electronics: 1.67%
36,667 @ Three Five Systems, Inc. 1,503,333
-----------
Generic Drugs: .043%
9,100 @ Andrx Corp. 385,044
-----------
Industrial Machinery/
Component: 0.46%
36,400 @ NUR Macroprinters Ltd. 411,775
-----------
Internet Services: 7.43%
39,300 @ BroadVision, Inc. 6,683,456
-----------
Medical Electronics: 1.23%
21,300 @ VISX, Inc. 1,102,275
-----------
Medical Specialties: 2.74%
17,100 @ ArthroCare Corp. 1,043,100
19,400 @ MiniMed, Inc. 1,421,050
-----------
2,464,150
-----------
Metal Fabrications: 2.00%
34,300 @ CommScope, Inc. 1,382,719
19,200 @ Mobile Mini, Inc. 412,800
-----------
1,795,519
-----------
Savings & Loan: 0.03%
16,400 @ PDS Financial Corp. 27,675
-----------
Semiconductor: 7.60%
27,500 @ Alpha Industries, Inc. 1,576,094
51,800 @ Semtech Corp. 2,700,075
23,000 @ TriQuint Semiconductor,
Inc. 2,558,750
-----------
6,834,919
-----------
Telecommunications Equipment: 9.21%
30,000 @ Advanced Fibre
Communications, Inc. $ 1,340,625
26,000 @ ANTEC Corp. 949,000
37,900 @ Harmonic, Inc. 3,598,131
16,200 @ RF Micro Devices, Inc. 1,108,688
23,100 Scientific-Atlanta, Inc. 1,284,937
-----------
8,281,381
-----------
Total Common Stocks
(Cost $47,936,081) 81,719,293
-----------
Total Long-Term
Investments (Cost
$ 47,936,081) 81,719,293
-----------
Principal
Amount Value
- ------ -----
SHORT-TERM INVESTMENTS: 8.76%
Repurchase Agreement: 8.76%
$7,880,000 State Street Bank & Trust
3.00% due 01/03/00
(Collateralized by
$7,845,000 U.S. Treasury
Notes, 6.250% due
01/31/02, Market Value
$8,041,125) $ 7,880,000
------------
Total Short-Term
Investments
(Cost $7,880,000) 7,880,000
------------
Total Investments
(Cost
$55,816,081)* 99.65% 89,599,293
Other Assets and
Liabilities, Net 0.35% 312,178
------- ------------
Net Assets 100.00% $ 89,911,471
======= ============
@ Non-income producing security
* Cost for federal income tax purposes is $55,944,492 Net unrealized
appreciation consists of:
Gross Unrealized
Appreciation $ 34,552,038
Gross Unrealized
Depreciation (897,237)
------------
Net Unrealized
Appreciation $ 33,654,801
============
See Accompanying Notes to Financial Statements
33
<PAGE>
Northstar
Emerging Growth
Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
COMMON STOCKS: 97.54%
Capital Goods: 1.51%
5,700 @ Advanced Energy
Industries, Inc. $ 280,725
4,100 @ The DII Group, Inc. 290,972
4,400 @ Dupont Photomasks, Inc. 212,300
3,000 @ Sanmina Corp. 299,625
----------
1,083,622
----------
Communication Services: 6.65%
7,700 @ AirGate PCS, Inc. 406,175
4,300 @ Allegiance Telecom, Inc. 396,675
6,700 @ Ibasis, Inc. 192,625
5,000 @ Nextel Communications,
Inc. 515,625
5,900 @ Powerwave
Technologies, Inc. 344,413
8,200 SBC Communications,
Inc. 399,750
5,800 @ Telecorp PCS, Inc. 220,400
10,200 @ Tritel, Inc. 323,213
7,200 @ Triton PCS Holdings, Inc. 327,600
8,100 @ US LEC Corp. 261,225
3,100 @ VoiceStream Wireless
Corp. 441,169
8,200 @ Western Wireless Corp. 547,350
13,100 @ Williams
Communications
Group, Inc. 379,081
----------
4,755,301
----------
Computer Communications: 5.98%
6,900 @ Adaptec, Inc. 344,138
7,200 @ Applied Micro Circuits
Corp. 916,200
11,000 @ Cabletron Systems, Inc. 286,000
1,500 @ Cacheflow, Inc. 196,031
9,000 @ Cisco Systems, Inc. 964,125
1,600 @ Emulex Corp. 180,000
3,000 @ Finistar Corp. 269,625
2,300 @ Foundry Networks, Inc. 693,881
2,300 @ JNI Corp. 151,800
800 @ Juniper Networks, Inc. 272,000
----------
4,273,800
----------
Computer Software: 10.97%
6,300 @ Aspect Development,
Inc. $ 431,550
2,000 @ Digimarc Corp. 100,000
2,000 @ E. piphany, Inc. 446,250
4,900 @ Micromuse, Inc. 833,000
5,100 @ Mission Critical Software,
Inc. 357,000
12,900 @ Network Associates, Inc. 344,269
5,200 @ New Era of Networks,
Inc. 247,650
4,500 @ Packeteer, Inc. 319,500
9,700 @ Parametric Technology
Corp. 262,506
5,300 @ Rational Software Corp. 260,363
10,400 @ RAVISENT Technologies,
Inc. 399,750
8,400 @ Sapient Corp. 1,183,875
6,000 @ Serena Software, Inc. 185,625
5,800 @ Siebel Systems, Inc. 487,200
4,700 @ TIBCO Software, Inc. 719,100
200 Virginia Linux Systems,
Inc. 41,325
10,400 @ Verity, Inc. 442,650
9,800 @ Opentv Corp. 786,450
----------
7,848,063
----------
Consumer Cyclicals: 8.24%
12,400 @ Abercrombie & Fitch Co. 330,925
1,600 @ Aether Systems, Inc. 114,600
8,300 @ American Eagle
Outfitters, Inc. 373,500
9,400 @ AnnTaylor Stores Corp. 323,713
9,100 @ Bed Bath & Beyond, Inc. 316,225
13,000 @ Braun Consulting, Inc. 929,500
11,400 Lowe's Cos., Inc. 681,150
2,100 @ Management Network
Group, Inc. 68,513
8,600 @ Mediaplex, Inc. 539,650
11,700 @ The Men's Wearhouse,
Inc. 343,688
18,700 @ Office Depot, Inc. 204,531
13,600 @ Pacific Sunwear of
California, Inc. 433,500
4,200 @ Stamps.Com, Inc. 174,825
18,900 @ Staples, Inc. 392,175
2,400 The Talbots, Inc. 107,100
10,200 Tribune Co. 561,638
----------
5,895,233
----------
Consumer Staples: 4.74%
9,500 @ Acme Communications,
Inc. $ 315,875
----------
9,600 @ Classic Commun., Inc. 351,000
6,200 @ Emmis Communications
Corp. 772,772
15,400 @ Infinity Broadcasting
Corp. 557,288
19,400 @ Korn / Ferry International 705,675
1,700 @ Official Payments Corp. 88,400
4,300 @ Radio One, Inc. 395,600
7,100 @ Radio Unica Corp. 205,013
----------
3,391,623
----------
Diversified Commercial
Services: 0.87%
3,600 @ iXL Enterprises, Inc. 199,800
10,300 @ SalesLogix Corp. 422,944
----------
622,744
----------
EDP Services: 2.92%
6,600 @ CSG Systems
International, Inc. 263,175
15,600 @ Cadence Design Systems,
Inc. 374,400
16,600 @ Lightbridge, Inc. 460,650
6,900 @ QRS Corp. 719,756
6,700 @ Tenfold Corp. 267,581
----------
2,085,562
----------
Electronic Components: 0.27%
6,900 @ Spectrian Corp. 194,925
----------
Electronic Production
Equipment: 6.27%
2,500 @ Applied Materials, Inc. 316,719
11,800 @ Asyst Technologies, Inc. 773,638
12,200 @ Cymer, Inc. 561,200
4,000 @ KLA-Tencor Corp. 445,500
6,800 @ Lam Research Corp. 758,625
4,600 @ Novellus Systems, Inc. 563,644
11,800 @ PRI Automation, Inc. 792,075
8,100 @ Varian Semiconductor
Equipment Associates,
Inc. 275,400
----------
4,486,801
----------
Energy: 1.49%
11,200 @ BJ Services Co. 468,300
5,600 Murphy Oil Corp. 321,300
19,600 @ Spinnaker Exploration
Co. 276,850
----------
1,066,450
----------
See Accompanying Notes to Financial Statements
34
<PAGE>
Northstar
Emerging Growth
Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
Financials: 4.70%
10,000 Citigroup, Inc. $ 555,625
19,200 @ CompuCredit Corp. 739,200
1,700 Dain Rauscher Corp. 79,050
5,900 Freddie Mac 277,669
10,600 First Tennessee National
Corp. 302,100
8,300 The PMI Group, Inc. 405,144
7,200 @ S1 Corp. 562,500
4,400 Zions Bancorp. 260,425
3,400 @@ XL Capital Ltd 176,375
-----------
3,358,088
-----------
Health Care: 9.96%
21,700 @ Aurora Bioscience Corp. 575,050
19,400 @ Boston Scientific Corp. 424,375
9,500 @ Celgene Corp. 665,000
12,200 @ COR Therapeutics, Inc. 327,875
9,100 @ Cytyc Corp. 555,669
17,300 @ Ilex Oncology, Inc. 417,363
3,100 @ Invitrogen Corp. 186,000
14,042 @ LifePoint Hospitals, Inc. 165,858
4,100 @ MedImmune, Inc. 680,088
9,522 Medtronic, Inc. 346,958
7,900 Merck & Co., Inc. 529,794
26,800 @ Oxford Health Plans, Inc. 340,025
9,100 @@ QLT PhotoTherapeutics,
@ Inc. 534,625
5,600 @ Sciquest Common, Inc. 445,200
5,400 @ Sepracor, Inc. 535,613
16,600 @ Trimeris, Inc. 392,175
-----------
7,121,668
-----------
Internet Services: 18.25%
8,500 @ Accrue Software, Inc. $ 460,063
2,100 @ Agile Software Corp. 456,192
300 @ Akamai Technologies,
Inc. 98,288
12,900 @ AppNet Systems, Inc. 564,375
7,600 @ Art Technology Group,
Inc. 973,750
4,900 @ Broadbase Software, Inc. 551,250
7,700 @ C Bridge Internet
Solutions, Inc. 374,413
7,600 @ CyberSource Corp. 393,300
10,700 @ Cysive, Inc. 771,069
4,800 @ Digex, Inc. 330,000
8,200 @ Digital Insight Corp. 298,275
5,000 @ Engage Technologies,
Inc. 300,000
10,600 @ Exodus Communications,
Inc. 941,413
3,100 @ F5 Networks, Inc. 353,400
800 @ Intertrust Technologies
Corp. 94,100
4,700 @ Liberate Technologies,
Inc. 1,207,900
4,100 @ Luminant Worldwide
Corp. 186,550
6,000 @ Netegrity, Inc. 341,625
1,100 @ Ondisplay, Inc. 99,963
12,400 @ Open Market, Inc. 559,550
2,300 @ Pfsweb, Inc. 86,250
3,600 @ Portal Software, Inc. 370,350
1,900 @ Preview Systems, Inc. 123,263
4,700 @ Quest Software, Inc. 479,400
8,000 @ Quintus Corp. 367,000
4,100 @ Software.com, Inc. 393,600
5,400 @ VeriSign, Inc. 1,031,063
5,200 @ Vignette Corp. 847,600
-----------
13,054,002
-----------
Precision Instruments: 1.31%
12,100 @ Agilent Technologies,
Inc. 935,481
-----------
Recreational Products/Toys: 0.22%
6,900 @ THQ, Inc. 159,994
-----------
Semiconductors: 7.04%
6,500 @ Analog Devices, Inc. $ 604,500
21,400 @ Atmel Corp. 632,638
7,400 @ Conexant Systems, Inc. 491,175
9,000 @ Maxim Integrated
Products, Inc. 424,688
5,900 @ Micrel, Inc. 335,931
16,000 @ QuickLogic Corp. 264,000
3,000 @ SDL, Inc. 654,000
2,400 @ Silicon Image, Inc. 168,150
3,500 @ TriQuint Semiconductor,
Inc. 389,375
9,800 @ Vitesse Semiconductor
Corp. 513,888
12,200 @ Xilinx, Inc. 554,719
-----------
5,033,064
-----------
Telecommunications Equipment: 5.50%
7,400 @ Airnet Communication
Corp. 269,175
6,600 @ CIENA, Corp. 379,500
6,300 @ Ditech Communications
Corp. 589,050
4,900 @ MCK Communications,
Inc. 110,250
3,600 Motorola, Inc. 530,100
2,800 @ Next Level
Communications, Inc. 209,650
7,100 @@ Nortel Networks Corp. 717,100
1,600 @ Sycamore Networks, Inc. 492,800
5,950 @ Virata Corp. 177,756
5,800 @ Visual Networks, Inc. 459,650
-----------
3,935,031
-----------
Transportation: 0.33%
5,400 @ Continental Airlines, Inc. 239,625
-----------
Utilities: 0.32%
5,900 El Paso Energy Corp. 228,994
-----------
Total Common Stocks
(Cost $41,175,105) 69,770,071
-----------
Total Long Term
Investments (Cost
$ 41,175,105) 69,770,071
-----------
See Accompanying Notes to Financial Statements
35
<PAGE>
Northstar
Emerging Growth
Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- ------ -----
SHORT TERM INVESTMENTS: 2.37%
Repurchase Agreement: 2.37%
$1,696,000 State Street Bank & Trust
3.00% due 01/03/00
(Collateralized by
$1,605,000 U.S. Treasury
Notes, 7.500% due
11/15/16, Market Value
$1,733,400) $ 1,696,000
------------
Total Short-Term
Investments
(Cost $1,696,000) 1,696,000
------------
Total Investments
(Cost
$42,871,105)* 99.91% 71,466,071
Other Assets and
Liabilities, Net 0.09% 65,596
------- ------------
Net Assets 100.00% $ 71,531,667
======= ============
- ----------
@ Non-income producing security
@@ Foreign issuer
* Cost for federal income tax purposes is $42,903,517. Net unrealized
appreciation consists of:
Gross Unrealized
Appreciation $ 29,236,689
Gross Unrealized
Depreciation (674,135)
------------
Net Unrealized
Appreciation $ 28,562,554
============
See Accompanying Notes to Financial Statements
36
<PAGE>
Northstar
International Value
Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
COMMON STOCKS: 90.96%
Automobiles: 2.93%
11,600 Bayerische Motoren
Werke AG (Germany) $ 354,063
8,900 Compagnie Generale des
Etablissements
Michelin (France) 349,651
-----------
703,714
-----------
Banking: 9.88%
9,800 Argentaria SA ( Spain) 230,314
59,615 DBS Group, Ltd.
(Singapore) 977,178
2,980 Den Danske Bank A/S
(Denmark) 326,679
60,000 HSBC Holdings (Hong
Kong) 841,320
-----------
2,375,491
-----------
Beverages/Tobacco: 3.52%
21,000 Allied Domecq PLC
(United Kingdom) 103,799
37,600 British America Tobacco
PLC (United Kingdom) 212,574
45,191 Diageo PLC (United
Kingdom) 360,605
16,600 @ South African Breweries
PLC (United Kingdom) 167,587
-----------
844,565
-----------
Chemicals: 2.66%
7,500 BASF AG (Germany) 385,312
11,800 BOC Group PLC (United
Kingdom) 254,458
-----------
639,770
-----------
Electrical & Electronics: 11.33%
4,800 Alcatel Alsthom SA
(France) 1,102,443
70,000 Hitachi, Ltd. (Japan) 1,123,618
18,000 Matsushita Electric
Industrial Co., Ltd.
(Japan) 498,581
-----------
2,724,642
-----------
Energy Services: 5.23%
64,700 ENI SpA (Italy) 355,858
46,000 Nippon Oil Co., Ltd.
(Japan) 202,604
5,244 Total Fina (France) 699,937
-----------
1,258,399
-----------
Food & Household Products: 2.64%
1,200 Eridania Beghin Say SA
(France) $ 129,102
120 Nestle SA (Switzerland) 219,833
30,100 Reckitt & Benckiser PLC
(United Kingdom) 284,916
-----------
633,851
-----------
Health/Personal Care: 0.38%
7,000 Daiichi Pharmaceutical
Co., Ltd. (Japan) 91,054
-----------
Industrial Components: 5.93%
5,500 Kyocera Corp. (Japan) 1,426,544
-----------
Insurance: 7.64%
23,700 Allied Zurich
(Switzerland) 279,463
8,292 ING Groep NV
(Netherlands) 500,675
870 Munchener
Rueckversicheruns-
Gesellschaft AG
(Germany) 220,676
31,954 Royal & Sun Alliance
Insurance Group PLC
(United Kingdom) 239,495
51,100 Tokio Marine & Fire
Insurance Co. (Japan) 597,676
-----------
1,837,985
-----------
Machinery & Engineering: 5.37%
4,000 Canon, Inc. (Japan) 158,951
85,342 Invensys PLC (United
Kingdom) 451,206
54,000 Komatsu (Japan) 248,410
130,000 Mitsubishi Heavy
Industries, Ltd. (Japan) 433,885
-----------
1,292,452
-----------
Materials & Commodities: 1.91%
15,800 De Beers Centenary AG
(South Africa) 459,496
-----------
Merchandising: 2.49%
97,000 Marks & Spencer PLC
(United Kingdom) 463,785
39,000 Safeway PLC (United
Kingdom) 135,285
-----------
599,070
-----------
Metals & Steel: 1.59%
147,500 Corus Group (United
Kingdom) 383,593
-----------
Multi-Industry: 4.10%
93,000 Citic Pacific, Ltd. (Hong
Kong) $ 349,341
32,568 @ First Pacific Co., Ltd.
(Hong Kong) 25,347
41,328 Jardine Matheson
Holdings, Ltd. ADR
(Singapore) 162,832
76,000 Swire Pacific, Ltd. (Hong
Kong) 448,756
-----------
986,276
-----------
Telecommunications: 19.67%
14,470 Compania Anonima
Nacional Telefonos de
Venezuela ADR
(Venezuela) 356,324
15,800 Deutsche Telekom AG
(Germany) 1,125,270
8,274 KON KPN NV
(Netherlands) 807,643
2,900 @ Korea Telecom Corp.
ADR (South Korea) 216,775
12,785 Portugal Telecom
(Portugal) 140,252
820 @ Swisscom AG
(Switzerland) 331,646
46,000 Telecom Corp. Of New
Zealand, Ltd. (New
Zealand) 216,315
50,800 Telecom Italia SpA (Italy) 716,427
7,300 Telefonos de Mexico SA
ADR ( Mexico) 821,250
-----------
4,731,902
-----------
Utilities -- Electrical & Gas: 3.69%
47,600 Centrais Eletricas
Brasileiras SA ADR
(Brazil) 524,300
1,090 @ Centrais Geradoras do
Sul do Brasil SA ADR
(Brazil) 5,561
53,000 National Power PLC
(United Kingdom) 305,631
3,000 Union Electrica Fenosa
SA (Spain) 52,402
-----------
887,894
-----------
Total Common Stocks
(Cost $16,127,167) 21,876,698
-----------
See Accompanying Notes to Financial Statements
37
<PAGE>
Northstar
International Value
Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
PREFERRED STOCKS: 5.86%(c)
Banking: 1.23%
37,700 Banco Bradesco SA ADR
(Brazil), $0.1356 $ 295,945
-----------
Beverages/Tobacco: 1.35%
23,200 Companhia Cervejaria
Brahma ADR (Brazil),
$0.1598 324,800
-----------
Energy Services: 2.75%
25,800 Petroleo Brasileiro SA
ADR (Brazil),
$0.305344 661,718
-----------
Telecommunications: 0.53%
1,020 Embratel Participacoes
SA ADR (Brazil),
$0.2304 27,795
102 Tele Celular Sul
Participacoes SA ADR
(Brazil), $0.0932 3,238
340 Tele Centro Oeste
Celular Participacoes
SA ADR (Brazil),
$0.3139 2,210
204 Tele Centro Sul
Participacoes SA ADR
(Brazil), $1.02 18,513
20 Tele Leste Celular
Participacoes SA ADR
(Brazil), $0.6731 850
51 Tele Nordeste Celular
Participacoes SA ADR
(Brazil), $0.9942 2,576
20 Tele Norte Celular
Participacoes SA ADR
(Brazil), $0.3101 859
1,020 Tele Norte Leste
Participacoes SA ADR
(Brazil), $0.3872 26,010
51 Telemig Celular
Participacoes SA ADR
(Brazil), $0.3341 2,356
408 Telesp Celular
Participacoes ADR
(Brazil), $0.6552 17,289
1,020 Telesp Participacoes SA
ADR (Brazil), $1.21 24,926
-----------
126,622
-----------
Total Preferred Stocks
(Cost $889,287) 1,409,085
-----------
Total Long-Term
Investments
(Cost $17,016,454) 23,285,783
-----------
Principal
Amount Value
- ------ -----
SHORT-TERM INVESTMENTS: 1.51%
Repurchase Agreement: 1.51%
$363,000 State Street Bank & Trust
3.00% due 01/03/00
(Collateralized by
$370,000 U.S. Treasury
Notes, 6.25%, due
05/31/00, Market Value
$372,775) $ 363,000
------------
Total Short-Term
Investments (Cost
$363,000) 363,000
------------
Total Investments
(Cost
$17,379,454) 98.33% 23,648,783
Other Assets and
Liabilities, Net 1.67% 402,117
------- ------------
Net Assets 100.00% $ 24,050,900
======= ============
- ----------
@ Non-income producing security
ADR -- American Depository Receipt
(c) Convertible Cost for federal income tax purposes is $17,757,599. Net
unrealized appreciation consists of:
Gross Unrealized
Appreciation $ 6,847,501
Gross Unrealized
Depreciation (956,317)
------------
Net Unrealized
Appreciation $ 5,891,184
============
See Accompanying Notes to Financial Statements
38
<PAGE>
Northstar
International Value
Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
% of
Country Value Net Assets
- ------- ----- ----------
Brazil 1,938,945 8.07%
Denmark 326,679 1.37%
France 2,281,133 9.48%
Germany 2,085,321 8.67%
Hong Kong 823,444 3.42%
Italy 1,072,285 4.46%
Japan 4,781,323 19.88%
Mexico 821,250 3.41%
Netherlands 1,308,318 5.44%
New Zealand 216,315 0.90%
Portugal 140,252 0.58%
Singapore 1,140,010 4.74%
South Africa 627,083 2.61%
South Korea 216,775 0.90%
Spain 282,716 1.18%
Switzerland 830,942 3.45%
United Kingdom 4,036,667 16.78%
United States 363,000 1.51%
Venezuela 356,324 1.48%
Other assets less liabilities 402,117 1.67%
----------- ------
Net Assets $24,050,900 100.00%
=========== ======
See Accompanying Notes to Financial Statements
39
<PAGE>
Northstar
High Yield Bond
Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999
- --------------------------------------------------------------------------------
Principal
Amount Value
- ------ -----
CORPORATE BONDS: 76.99%
Automotive: 0.66%
$500,000 Safelite Glass Corp.,
9.875%, due 12/15/06 $ 27,500
100,000 Titan Wheel Int'l. Inc.,
8.750%, due 04/01/07 81,500
----------
109,000
----------
Broadcasting, Radio &
Television: 2.89%
200,000 @@ Antenna Tv SA, 9.000%,
due 08/01/07 185,000
100,000 Capstar Broadcasting
Partners, Inc., 9.250%,
due 07/01/07 103,500
200,000 Sinclair Broadcast
Group, Inc., 8.750%,
due 12/15/07 187,000
----------
475,500
----------
Business Services: 5.44%
1,000,000 # Allied Waste North
America, Inc.,
10.000%, due
08/01/09 895,000
----------
Cable & DBS: 21.17%
500,000 Adelphia
Communications
Corp., 7.875%, due
05/01/09 453,750
500,000 # Charter Communication
Holdings LLC,
8.625%, due 04/01/09 465,000
800,000 Diva Systems Corp.,
0/12.625%, due
03/01/08 308,000
750,000 Echostar
Communications
Corp., 9.250%, due
02/01/06 759,375
600,000 NTL, Inc., 0/9.750%, due
04/01/08 423,000
500,000 @@ Star Choice
Communications, Inc.,
13.000%, due
12/15/05 507,500
600,000 @@ Telewest PLC,
0/11.000%, due
10/01/07 564,000
----------
3,480,625
----------
Communication -- Wireless: 9.36%
750,000 Crown Castle Int'l Corp.,
0/11.250%, due
08/01/11 $ 472,500
750,000 # Nextel Communications,
Inc., 9.375%, due
11/15/09 740,625
150,000 @@ Occidente Y Caribe
Celular SA,
0/14.000%, due
03/15/04 62,250
138,000 (1) Unisite, Inc., 13.000%,
due 12/15/04 163,358
100,000 Winstar
Communications, Inc.
0/14.000%, due
10/15/05 99,500
----------
1,538,233
----------
Communications -- Wireline: 5.82%
100,000 Colt Telecom Group
PLC, 0/12.000%, due
12/15/06 87,750
150,000 Hyperion
Telecommunications,
Inc., 0/13.000%, due
04/15/03 135,750
100,000 ICG Holdings, Inc.,
0/12.500%, due
05/01/06 77,583
130,000 ITC Deltacom, Inc.,
11.000%, due
06/01/07 135,200
500,000 Nextlink
Communications,
10.750%, due
11/15/08 520,000
125,000 #(c) SA@Telecommunications,
Inc., 10.000% due
08/15/06 0
----------
956,283
----------
Containers, Packaging, Glass: 0.97%
362,000 Indesco Int'l, Inc.,
9.750%, due 04/15/08 159,280
----------
Finance, Insurance, Banking: 2.18%
100,000 Americo Life, Inc.,
9.250%, due 06/01/05 100,500
250,000 #@@ York Power Funding,
12.000%, due
10/30/07 257,500
----------
358,000
----------
Food, Beverage & Tobacco: 5.97%
450,000 @@ Fage Dairy Industries SA,
9.000%, 02/01/07 $ 402,750
500,000 North Atlantic Trading,
Inc., 11.000%, due
06/15/04 457,500
150,000 Standard Commercial
Tobacco Corp.,
8.875%, due 08/01/05 120,750
----------
981,000
----------
Gaming & Lottery: 2.94%
489,000 # Waterford Gaming LLC
Finance Corp.,
9.500%, due 03/15/10 484,110
----------
Homebuilding, Building
Materials: 1.38%
250,000 Engle Homes, Inc.,
9.250%, due 02/01/08 226,250
----------
Hotels, Motels & Inns: 2.75%
500,000 HMH Properties, Inc.,
7.875%, due 08/01/08 452,500
----------
Manufacturing: 3.06%
500,000 Westinghouse Air Brake
Co., 9.375%, due
06/15/05 502,500
----------
Metals & Mining 0.62%
100,000 Wci Steel, Inc.,
10.000%, due
12/01/04 102,500
----------
Oil & Gas -- Refining &
Marketing: 2.69%
100,000 Benton Oil + Gas Co.,
11.625%, due
05/01/03 67,500
58,000 @@ Derlan Manufacturing,
Inc., 10.000% due
01/15/07 57,565
571,781 # Orion Refining Corp.,
10.000%, due
11/15/04 317,338
----------
442,403
----------
Restaurants: 2.81%
500,000 Romacorp, Inc.,
12.000%, due
07/01/06 462,500
----------
Retail: 1.08%
200,000 Toms Foods, Inc.,
10.500%, due
11/01/04 177,000
----------
See Accompanying Notes to Financial Statements
40
<PAGE>
Northstar
High Yield Bond
Portfolio
PORTFOLIO OF INVESTMENTS as of December 31, 1999 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- ------ -----
Shipping: 2.99%
$400,000 @@ Equimar Shipholdings
Ltd., 9.875%, due
07/01/07 $ 242,000
300,000 @@ Ultralpetrol Bahamas
Ltd., 10.500%, due
04/01/08 250,500
------------
492,500
------------
Transportation (Air, Bus, Rail): 2.21%
393,803 # Atlantic Coast Airlines,
Inc., 8.750%, due
01/01/07 364,130
------------
Total Corporate Bonds
(Cost $14,333,005) 12,659,314
------------
Shares Value
- ------ -----
COMMON STOCK: 1.10%
Cable & DBS: 1.07%
1,800 Echostar
Communications Corp. $175,500
---------
Manufacturing: 0.03%
150 Jordan
Telecommunication
Products 4,575
---------
Total Common Stock
(Cost $7,322) 180,075
---------
PREFERRED STOCK: 4.69% (c)
Broadcasting, Radio & Television: 0.87%
1,420 @ Paxson Communications
Corp., 12.500% 145,550
---------
Communications -- Wireline: 2.36%
3,953 @ Adelphia Business
Solutions, 12.875% 387,362
---------
Health Care: 0.04%
15,884 Intracel Corp., 0.000% 5,957
---------
Manufacturing: 1.30%
1,970 Jordan
Telecommunication
Products, 13.250% 213,745
---------
Oil & Gas -- Refining &
Marketing: 0.12%
TCR Holdings, 0.000%
10,000 Class B 100
5,500 Class C 55
14,500 Class D 145
30,000 Class E 300
20,000 Transcontinental, 0.000% 18,660
---------
19,260
---------
Total Preferred Stock
(Cost $862,937) 771,874
---------
Number of
Contracts Value
- --------- -----
WARRANTS: 0.75% @
Cable & DBS: 0.12%
2,400 Diva Systems Corp. $ 19,200
450 # Heartland Wireless
Comm 5
------------
19,205
------------
Communications -- Internet: 0.00%
100 # Unifi Communications,
Inc. 0
------------
Communications -- Wireless: 0.22%
660 Clearnet
Communications, Inc. 10,230
3,000 Geotek Communications,
Inc. 0
600 #@@ Occidente Y Caribe
Celular SA 0
67 (1) Unisite, Inc. 25,025
2 (1) Unisite, Inc. 747
------------
36,002
------------
Communications -- Wireline: 0.16%
150 # Adelphia Business
Solutions 26,250
------------
Food, Beverage & Tobacco: 0.07%
145 # Packaged Ice, Inc. 5,365
150 # Packaged Ice, Inc. 5,550
------------
10,915
------------
Metals & Mining: 0.00%
500 Sheffield Steel Corp. 0
------------
Paper & Forest Products: 0.18%
6,400 # SDW Holdings Corp. 30,400
------------
Retail: 0.00%
666 Dairy Mart Convience
Stores 400
------------
Total Warrants
(Cost $78,513) 123,171
------------
Total Long Term
Investments (Cost
$15,281,777) 13,734,433
------------
Principal
Amount Value
- ------ -----
SHORT-TERM INVESTMENTS: 15.13%
Repurchase Agreement: 15.13%
$2,487,000 State Street Bank & Trust
3.00% due 01/03/00
(Collateralized by
$2,510,000 U.S. Treasury
Notes, 0.000%, due
05/15/05, Market Value
$2,538,237) $ 2,487,000
Total Short-Term
Investments (Cost
$2,487,000) 2,487,000
------------
Total Investments
(Cost
$17,768,777)* 98.66% 16,221,433
Other Assets and
Liabilities, Net 1.34% 220,943
------- ------------
Net Assets 100.00% $ 16,442,376
======= ============
- ----------
@ Non- income producing security
# Securities with purchases pursuant to Rule 144A, under the Securities Act
of 1933 and may not be resold subject to that rule, except to qualified
institutional buyers.
@@ Foreign security
(1) Priced at fair value as determined by the Adviser and approved by the Board
of Trustees.
Cost for federal income tax purposes is $17,771,146. Net unrealized
depreciation consists of:
Gross Unrealized
Appreciation $ 422,277
Gross Unrealized
Depreciation (1,971,990)
------------
Net Unrealized
Depreciation ($ 1,549,713)
============
See Accompanying Notes to Financial Statements
41
<PAGE>
Investment Manager
Pilgrim Advisors, Inc.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
Administrator
Pilgrim Group, Inc.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
Transfer Agent
State Street Bank Transfer Agent Services
1 Heritage Place
North Quincy, MA 02171
Custodian
State Street Bank and Trust
1 Heritage Place
North Quincy, MA 02171
Legal Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
Independent Auditors
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Prospectus containing more complete information regarding the Funds, including
charges and expenses, may be obtained by calling Northstar Galaxy Trust at
1-800-992-0180. Please read the prospectus carefully before you invest or send
money.
GXYANN1299-022900
